S-2 1 FORM S-2 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1996 REGISTRATION NO. 333- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- PAR TECHNOLOGY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 16-1434688 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION INCORPORATION OR ORGANIZATION) NO.) PAR TECHNOLOGY PARK 8383 SENECA TURNPIKE NEW HARTFORD, NEW YORK 13413-4991 (315) 738-0600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- JOHN W. SAMMON, JR. CHAIRMAN OF THE BOARD AND PRESIDENT PAR TECHNOLOGY CORPORATION PAR TECHNOLOGY PARK NEW HARTFORD, NEW YORK 13413-4991 (315) 738-0600 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------- COPIES TO: TIMOTHY C. MAGUIRE, ESQ. STEVEN R. FINLEY, ESQ. TESTA, HURWITZ & THIBEAULT, LLP GIBSON, DUNN & CRUTCHER LLP HIGH STREET TOWER 200 PARK AVENUE 125 HIGH STREET NEW YORK, NY 10166 BOSTON, MASSACHUSETTS 02110 (212) 351-3920 (617) 248-7000 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. --------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: [_] If the registrant elects to deliver its latest annual report to security- holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the following box: [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [_] CALCULATION OF REGISTRATION FEE ------------------------------------------------------------------------------- -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE ---------------------------------------------------------------------------------- Common Stock, $0.02 par value per share... 3,248,750 shares $15.625 $50,761,718 $17,504.04
------------------------------------------------------------------------------- ------------------------------------------------------------------------------- (1) Includes 423,750 shares subject to an over-allotment option granted by the Selling Stockholders to the Underwriters. (2) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based upon the average of the high and low sales prices of such Common Stock as reported by the New York Stock Exchange on May 13, 1996. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MAY 20, 1996 2,825,000 SHARES [LOGO] PAR TECHNOLOGY CORPORATION COMMON STOCK Of the 2,825,000 shares of common stock, $0.02 par value per share (the "Common Stock"), offered hereby, 1,450,000 shares are being offered by PAR Technology Corporation ("PAR" or the "Company") and 1,375,000 shares are being offered by Selling Stockholders. See "Principal and Selling Stockholders." The Company will not receive any of the proceeds from the sale of shares by the Selling Stockholders. The Common Stock is listed on the New York Stock Exchange ("NYSE") under the symbol "PTC." On May 17, 1996, the closing sales price of the Common Stock on the NYSE was $19 per share. See "Price Range of Common Stock and Dividend Policy." FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 6-10. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -----------
Underwriting Proceeds to Price to Discounts and Proceeds to Selling Public Commissions* Company+ Stockholders Per Share....................... $ $ $ $ Total++......................... $ $ $ $
----- * The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." + Before deducting expenses of the offering payable by the Company estimated to be $375,000. ++The Selling Stockholders have granted to the Underwriters a 30-day option to purchase up to 423,750 additional shares of Common Stock on the same terms per share solely to cover over-allotments, if any. If such option is exercised in full, the total price to public will be $ , the total underwriting discounts and commissions will be $ and the total proceeds to the Selling Stockholders will be $ . See "Underwriting." ----------- The Common Stock is being offered by the Underwriters as set forth under "Underwriting" herein. It is expected that the delivery of the certificates therefor will be made at the offices of Dillon, Read & Co. Inc., New York, New York on or about , 1996. The Underwriters include: DILLON, READ & CO. INC. THE ROBINSON-HUMPHREY COMPANY, INC. VOLPE, WELTY & COMPANY The date of this Prospectus is , 1996. Inside Front ------------ The picture at the lower left-hand side of the page illustrates a United States Air Force captain viewing and analyzing image processing data captured by the J/STARS phased ray antenna. Front ----- The picture at the upper right hand side of the page illustrates the Company's open architecture POS III system, including the POS III touch screen configuration as used by an employee of a quick service restaurant. Front ----- The picture at the upper right hand side of the page illustrates individual products comprising the Company's POS III System, including the POS III touch screen configuration in the right foreground of the picture, the POS III keyboard in the left background of the picture, and a wireless hand-held terminal in the upper left foreground of the picture. Food and beverage products of some of the Company's quick service restaurant customers, including Taco Bell, KFC, McDonald's and Chick-fil-A are featured among the POS III System components. Front ----- The picture at the lower left hand side of the page illustrates a third party pen-based data collection device networked through the Company's TPS software application. ---------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements filed by the Company may be inspected and copied at the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 at prescribed rates. In addition, reports, proxy statements and other information concerning the Company (symbol: PTC) can be inspected and copied at the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a Registration Statement on Form S-2 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Stock offered hereby. This Prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement certain parts of which are omitted in accordance with the rules and regulations of the Commission. Copies of the Registration Statement, including all exhibits thereto, may be obtained from the Commission's principal office in Washington D.C. upon payment of the fees prescribed by the Commission or may be examined without charge at the offices of the Commission as described above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, heretofore filed by the Company with the Commission pursuant to the Exchange Act, are incorporated by reference in this Prospectus: (i) Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996; and (iii) Proxy Statement of the Company dated May 13, 1996 for its Annual Meeting of Stockholders to be held on June 4, 1996. Each document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering of the shares of Common Stock shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any document (other than exhibits). Requests for such copies should be directed to Karen E. Sammon, Corporate Counsel, PAR Technology Corporation, PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991; telephone (315) 738-0600. Any statement contained herein or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document that is incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this Prospectus. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Investors should carefully consider the information set forth under the heading "Risk Factors." Certain of the information contained in this summary and elsewhere in this Prospectus are forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under "Risk Factors." THE COMPANY PAR Technology Corporation ("PAR" or the "Company") provides sophisticated integrated transaction information processing ("ITIP") solutions that enable the reliable capture, preservation, processing and management of information throughout a business enterprise. The Company is a leading supplier of ITIP solutions to the quick service restaurant industry and also provides ITIP solutions for manufacturing/warehousing enterprises. The Company's systems- based solutions have been engineered to perform reliably under harsh operating conditions and incorporate high levels of systems integration, in-depth knowledge of the customers' workflow processes, and local and wide-area networking capability. The Company's POS III(TM) restaurant ITIP system solution combines flexible, extendible systems software connecting its open-system architecture hardware platform with ruggedized fixed and wireless order-entry terminals, video monitors and PAR and third-party supplied peripherals networked via Ethernet LAN and accessible to enterprise-wide network configurations. For manufacturing and warehousing enterprises, the Company designs and implements complex ITIP solutions incorporating its TPS(TM) data collection and management software that provide real-time connectivity with multiple host computers, diverse legacy applications software and "best-of-breed" software and data input hardware technologies. PAR further provides extensive systems integration capabilities to design, tailor and implement solutions that enable its customers to manage, from a central location, all aspects of data collection and processing for single or multiple site enterprises. The Company also develops advanced computer-based systems and technologies for government agencies. Through its government-sponsored development work, PAR has generated significant technologies with commercial applications, from the transaction information processing capability underlying its primary business, to advanced vision technology currently being implemented in the Company's proprietary Corneal Topography System ("CTS") for use in ophthalmic diagnoses and surgical procedures. The Company's growth strategies include enhancing its leadership position as an ITIP solutions provider to the quick service restaurant ("QSR") market and further penetrating the automated manufacturing/warehousing market by extending its systems integration capabilities and increasing the software functionality of its ITIP solutions. In addition, the Company seeks to leverage its technology generated from government contracts by developing innovative products serving targeted vertical markets, and then further penetrate that market by providing its systems integration capabilities to address its customers' total systems needs. The Company's net revenues and net income have grown from $78.9 million and $1.5 million, respectively, for the year ended December 31, 1991 to $107.4 million and $4.7 million, respectively, for the year ended December 31, 1995. In 1995, 71.8% of the Company's net revenues were derived from sales to its restaurant customers, 22.4% of net revenues were derived from government contracting and 5.1% of net revenues were derived from the Company's manufacturing/warehousing customers. The Company's significant customers include Taco Bell Corp. ("Taco Bell"), KFC Corp. ( "KFC") and McDonald's Corporation ("McDonald's") in the restaurant market, and Rhone-Poulenc Inc. ("Rhone-Poulenc") and The Goodyear Tire & Rubber Company ("Goodyear") in the manufacturing/warehousing market. The Company, which commenced doing business in 1968, is incorporated under the laws of Delaware. Its principal executive offices are located at PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-4991, and its telephone number is (315) 738-0600. 4 THE OFFERING Common Stock offered by the Company................ 1,450,000 shares Common Stock offered by the Selling Stockholders... 1,375,000 shares Common Stock to be outstanding after the Offering.. 9,211,828 shares(1) Use of proceeds.................................... To fund research and development, marketing, sales and administration of new product lines under development, acquisitions of capital equipment, working capital and general corporate purposes, as well as potential acquisitions. See "Use of Proceeds." New York Stock Exchange symbol..................... PTC
-------- (1) Based on the number of shares outstanding on May 17, 1996. Excludes an aggregate of 794,220 shares of Common Stock reserved for issuance upon the exercise of outstanding stock options. SUMMARY CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, -------------------------- ------------------- 1993 1994 1995 1995 1996 -------- -------- -------- --------- --------- STATEMENT OF INCOME DATA: Net revenues: Product...................... $ 43,835 $ 52,965 $ 58,306 $ 12,342 $ 10,880 Service...................... 19,213 20,823 25,059 5,607 7,677 Contract..................... 18,199 20,742 24,029 6,085 6,937 -------- -------- -------- --------- --------- 81,247 94,530 107,394 24,034 25,494 -------- -------- -------- --------- --------- Costs of sales: Product...................... 25,433 32,527 34,028 7,663 6,778 Service...................... 17,041 17,296 20,807 4,450 6,261 Contract..................... 17,534 19,740 22,492 5,770 6,513 -------- -------- -------- --------- --------- 60,008 69,563 77,327 17,883 19,552 -------- -------- -------- --------- --------- Gross margin............... 21,239 24,967 30,067 6,151 5,942 -------- -------- -------- --------- --------- Operating expenses: Selling, general and administrative expenses..... 13,009 14,211 17,721 4,179 3,744 Research and development..... 4,239 5,009 5,331 1,333 1,351 -------- -------- -------- --------- --------- 17,248 19,220 23,052 5,512 5,095 -------- -------- -------- --------- --------- Income before provision for income taxes.............. 3,991 5,747 7,015 639 847 Provision for income taxes..... 1,462 2,086 2,357 249 296 -------- -------- -------- --------- --------- Net income................. $ 2,529 $ 3,661 $ 4,658 $ 390 $ 551 ======== ======== ======== ========= ========= Earnings per common share...... $ 0.32 $ 0.46 $ 0.58 $ 0.05 $ 0.07 Weighted average number of common shares outstanding..... 7,968 7,992 8,068 8,073 8,190
MARCH 31, 1996 ---------------------- ACTUAL AS ADJUSTED(1) ------- -------------- BALANCE SHEET DATA: Working capital.......................................... $44,498 $70,020 Total assets............................................. 66,364 91,886 Long-term debt........................................... -- -- Stockholders' equity..................................... 53,956 79,477
-------- (1) Adjusted to reflect the sale by the Company of 1,450,000 shares of Common Stock offered hereby, at an assumed offering price of $19.00 per share and the application of the net proceeds therefrom, after deducting estimated underwriting discounts and commissions and offering expenses. See "Use of Proceeds" and "Capitalization." 5 RISK FACTORS In addition to the other information in this Prospectus, prospective investors should consider carefully the following risk factors in evaluating the Company and its business before purchasing shares of the Common Stock offered hereby. CONCENTRATION OF MAJOR CUSTOMERS A small number of customers has historically accounted for a majority of the Company's net revenues in any given fiscal period. For the years ended December 31, 1993, 1994, and 1995, aggregate sales to the Company's top three commercial segment customers amounted to 57.8%, 59.2% and 58.7%, respectively, of net revenues. The Company's top three customers in 1995 and 1994 were Taco Bell, McDonald's and KFC, which accounted for 32.8%, 20.9% and 5.0%, respectively, of net revenues in 1995, and for 27.0%, 24.1% and 8.2%, respectively, of net revenues in 1994. Taco Bell and KFC are both wholly-owned subsidiaries of PepsiCo, Inc. With the exception of certain purchase commitments by Taco Bell, no customer is obligated to make any minimum level of future purchases from the Company or to provide the Company with binding forecasts of product purchases for any future period. In addition, major customers may elect to delay or otherwise change the timing of orders in a manner that could adversely effect quarterly and annual results of operations. There can be no assurance that the Company's current customers will continue to place orders with the Company, or that the Company will be able to obtain orders from new customers. The loss of, or reduced sales to, any one or more of the Company's major customers could materially and adversely affect the Company's business, operating results and financial condition. See "Business -- Customers." FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company has experienced and expects to continue to experience quarterly fluctuations in its net revenues and net income. Due to the dynamics associated with the year-end capital budget planning of many of PAR's restaurant ITIP customers and the preference of some restaurant ITIP customers to install new systems between the busy summer and Christmas seasons, the Company has historically realized a higher amount of its restaurant ITIP systems sales and overall net income during the second half of the year. In 1994 and 1995, the Company realized 81.0% and 78.0%, respectively, of its net income in the final six months of those years. Major restaurant ITIP customers may, however, elect to delay purchases of the Company's products. If for any reason the Company's sales were below seasonal norms during its fourth fiscal quarter, the Company's annual operating results could be adversely affected. The Company's quarterly operating results may also vary as a result of factors such as the timing or cancellation of customer orders, especially major customers, including Taco Bell, delays in order placement on the part of major customers in anticipation of the introduction of new products by the Company, price reductions by competitors or by the Company, the market acceptance of newly introduced products, significant fluctuation in the pricing of components of the Company's products and introductions of new or enhanced competing products. In the first quarter of 1996, the Company's sales to Taco Bell declined in comparison to the 1995 first quarter. This decrease was the result of the timing of Taco Bell's requirements under its sales contract with the Company. In the first quarter of 1995, Taco Bell's demand for systems was high due to the size of a replacement program during that period. The Company will continue providing systems to Taco Bell under its current contract, which runs through March 31, 1997; however, because the timing of replacement programs and store openings is determined by Taco Bell based on its requirements, the volume of systems sales to Taco Bell in any quarter may vary from the prior comparable quarter. Because a high percentage of the Company's costs, including personnel and facilities costs, are relatively fixed, variations in the timing of orders and shipments can cause significant variations in quarterly financial results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quarterly Financial Information." NEW PRODUCT DEVELOPMENT AND RAPID TECHNOLOGICAL CHANGE The products sold by the Company are subject to rapid and continual technological change. Products available from the Company in its current restaurant ITIP and manufacturing/warehousing ITIP markets, as well as from its competitors, have increasingly offered a wider range of features and capabilities. The Company believes that in order to compete effectively in selected commercial segment markets, it must provide upwardly 6 compatible systems incorporating new technologies at competitive prices. There can be no assurance that the Company will be able to continue funding research and development at levels sufficient to enhance its current product offerings or will be able to develop and introduce on a timely basis new products that keep pace with technological developments and emerging industry standards and address the evolving needs of customers. There can also be no assurance that the Company will not experience difficulties that will result in delaying or preventing the successful development, introduction and marketing of new products in its existing markets or that its new products and product enhancements will adequately meet the requirements of the marketplace or achieve any significant degree of market acceptance. Likewise, there can be no assurance as to the acceptance of Company products in new markets, including the Company's CTS and Qscan(R) products, nor can there be any assurance as to the success of the Company's penetration of these markets, or to the revenue or profit margins with respect to these products. The inability of the Company, for any reason, to develop and introduce new products and product enhancements in a timely manner in response to changing market conditions or customer requirements could materially adversely affect the Company's business, operating results and financial condition. See "Business -- Systems and Services." DEPENDENCE ON GOVERNMENT CONTRACTS The Company derived 21.9% and 22.4% of its revenues in 1994 and 1995, respectively, from contracts for the provision of technical products and services to United States government agencies and defense contractors. The Government contracting business is subject to various risks including: (1) unpredictable contract or project termination, reductions in funds available for the Company's projects due to government policy changes and contract adjustments and penalties arising from post-award contract audits and incurred cost audits in which the value of the contract may be reduced; (2) risks of underestimating costs, particularly with respect to software and hardware development, for work performed pursuant to "fixed-price" contracts, where the Company commits to achieve specified deliveries for a predetermined fixed price; (3) limited profitability from "cost-plus" contracts under which the amount of profit attainable is limited to a specified negotiated amount, usually in the range of six to ten percent of estimated costs, although no assurance can be given that such levels will be obtainable on present or future contracts; and (4) unpredictable timing of cash collections of certain unbilled receivables as they may be subject to acceptance of contract deliverables to the customer, and contract close-out procedures, including government approval of final indirect rates. In addition, budgetary constraints and changes in spending priorities in government agencies, including the Department of Defense, have resulted in sudden program changes, reductions or cancellations in the past and such conditions may be expected to continue. As a result, the Company's revenues may fluctuate from year to year and quarter to quarter depending on government procurement activity in the Company's areas of business. In addition, the Company's government contracts are subject to termination for the convenience of the government. If the government terminates on this basis, the Company would be entitled to recover its allowable costs incurred as well as a reasonable profit on the work performed. See "Business -- Customers." DEPENDENCE ON SUPPLIERS FOR KEY COMPONENTS Certain key components used in the Company's products, such as base castings and certain printers and electronic components, are currently being purchased from single sources of supply. Although the Company believes that additional sources are available to it, the inability to obtain sufficient components or subassemblies as required, or to develop alternative sources of supply if and as required in the future, could result in delays or reductions in product shipments that could materially and adversely affect the Company's operating results and damage customer relationships. COMPETITION The Company faces extensive competition in the markets in which it operates. There are currently more than ten suppliers who offer restaurant ITIP systems similar to the Company's. Some of these competitors are larger than the Company and have access to substantially greater financial and other resources than does the Company, and consequently may be able to obtain more favorable terms than the Company for components and subassemblies incorporated into their restaurant ITIP products. The rapid rate of technological change in the 7 restaurant market makes it likely that the Company will face competition from new products designed by companies not currently competing with the Company. Such products may have features not currently available on PAR restaurant ITIP products. The Company believes that its competitive ability depends on its total solution offering, its product development and systems integration capability, its direct sales force and its customer service organization. There is no assurance that the Company will be able to compete effectively in the restaurant ITIP systems market in the future. The Company's manufacturing/warehousing ITIP business is also highly competitive. Some of the Company's competitors in the manufacturing/warehousing ITIP market are much larger than the Company and have access to substantially greater financial and other resources than the Company. There is no assurance that the Company will be able to compete effectively in the manufacturing/warehousing ITIP business. The Company's government contracting businesses compete with a large number of companies, large and small, for government contracts. The Company's government contracting businesses have been focused on niche offerings, primarily signal and image processing and engineering services. There are no assurances that the Company will continue to win government contracts as a prime contractor or subcontractor. Additionally, there are no assurances that the Government will continue to contract for the provision of services in the areas in which the Company has expertise. See "Business -- Competition." INDUSTRY CONCENTRATION AND CYCLICALITY Approximately 71.8% of the Company's net revenues are related to the restaurant industry, particularly the QSR industry. The Company's restaurant ITIP product sales are dependent in large part on the health of this industry, which in turn is dependent on the domestic and international economy, as well as factors such as consumer buying preferences and weather conditions. Although the QSR industry has experienced profitability and growth recently, there can be no assurance that profitability and growth will continue. The QSR market is affected by a variety of factors, including war, global and regional instability, natural disasters and general economic conditions. Adverse developments in the restaurant industry could materially affect the Company's restaurant ITIP business, operating results and financial condition. See "Business -- Integrated Transaction Information Processing." INTERNATIONAL SALES In 1995, the Company's net revenues from sales outside the United States were $17.7 million, accounting for approximately 16.5% of the Company's net revenues. The Company anticipates that international sales will continue to account for a significant portion of sales. The Company intends to continue to expand its operations outside the United States and to enter additional international markets, which will require significant management attention and financial resources. The Company's operating results are subject to the risks inherent in international sales, including, but not limited to, regulatory requirements, political and economic changes and disruptions, transportation delays, difficulties in staffing and managing foreign sales operations, and potentially adverse tax consequences. In addition, fluctuations in exchange rates may render the Company's products less competitive relative to local product offerings, or could result in foreign exchange losses, depending upon the currency in which the Company sells its products. There can be no assurance that these factors will not have a material adverse effect on the Company's future international sales and, consequently, on the Company's operating results. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes to Consolidated Financial Statements. DEPENDENCE ON PROPRIETARY TECHNOLOGY PAR's success and ability to compete is dependent in part upon its ability to protect its proprietary technology. The Company relies on a combination of patent, copyright and trade secret laws and non-disclosure agreements to protect its proprietary technology. The Company generally enters into confidentiality or license agreements with its employees, distributors, customers and potential customers and limits access to and distribution of its software, documents and other proprietary information. There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to prevent misappropriation of its technology or that the Company's competitors will not independently develop technologies that are substantially equivalent or superior to the Company's technology. In addition, the laws of some foreign countries do not 8 protect the Company's proprietary rights to the same extent as do the laws of the United States. The Company is also subject to the risk of adverse claims and litigation alleging infringement of the proprietary rights of other parties. Additionally, the Company periodically reviews recent patents that have been issued to third parties. As a result of such reviews, the Company has from time to time identified and investigated the validity and scope of issued patents for technologies similar to, or related to, the Company's technologies. Although the Company believes that it does not infringe the valid patents of others, there can be no assurance that third parties will not assert infringement claims in the future with respect to the Company's current or future products or that any such claim will not require the Company to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of such claims. No assurance can be given that any necessary licenses will be available or that, if available, such licenses can be obtained on commercially reasonable terms. The failure to obtain such royalty or licensing agreements on a timely basis would have a material adverse effect upon the Company's business, results of operations and financial conditions. See "Business -- Intellectual Property." RELIANCE ON KEY PERSONNEL The Company's future success and potential growth depend in part on its ability to retain its key management and technical and sales personnel and to recruit, train and retain sufficient numbers of other highly qualified managerial, technical and sales personnel on a continuing basis. There can be no assurance that the Company will be able to retain its key management or technical and sales personnel or that it will be able to attract and retain sufficient numbers of other highly qualified managerial, technical and sales personnel. The inability to retain or attract such personnel could materially adversely affect the Company's business, operating results and financial condition. In addition, the Company's ability to manage potential growth successfully will require the Company to attract additional experienced managerial, technical and sales personnel and to continue to improve its operational, management and financial systems and controls. See "Management." PREDOMINANT OWNERSHIP POSITION OF INSIDERS Following this offering, the existing officers and directors of the Company and related parties will control approximately 47.2% of the outstanding Common Stock. As a result, they will be able to exert significant influence on the Company. Dr. John W. Sammon, Jr., Chairman of the Board of Directors and President of the Company, and members of his immediate family will control approximately 41.9% of the outstanding Common Stock. Dr. Sammon will continue to be the largest stockholder and will have significant influence with respect to the election of directors and approval or disapproval of fundamental corporate decisions, which could include a change in control of PAR. See "Principal and Selling Stockholders." ENVIRONMENTAL COMPLIANCE The Company is subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in the manufacturing process. The Company also leases space to Phoenix Systems and Technologies, Inc. ("Phoenix"), a corporation 43.9% owned by the Company that is engaged in contract manufacturing, including printed circuit board assembly services that may also involve the use of hazardous materials. Under applicable law, in the event that Phoenix is found liable for failure to comply with applicable environmental regulations, the Company may be found ultimately liable for Phoenix's obligations. Any failure of the Company to control the use of, or adequately restrict the discharge of, hazardous substances, or otherwise comply with environmental regulations, could subject it to significant future liabilities. In addition, although the Company believes that its past operations, and, to the best of its knowledge, those of Phoenix, conformed with then applicable environmental laws and regulations, there can be no assurance that the Company or Phoenix has not in the past violated applicable laws or regulations, which violations could result in remediation or other liabilities. 9 VOLATILITY OF STOCK PRICE The price of the Common Stock historically has experienced significant volatility due to fluctuations in revenues and earnings, other factors relating to the Company's operations as well as the market's changing expectations for the Company's growth, the limited number of shares available for sale and purchase in the open market, overall equity market conditions and the conditions relating to the market for technology stocks generally, and other factors unrelated to the Company's operations. Such fluctuations are expected to continue. In addition, stock markets have experienced extreme price volatility in recent years. This volatility has had a substantial effect on the market prices of securities issued by many technology companies, often for reasons unrelated to the operating performance of the specific companies. See "Price Range of Common Stock and Dividend Policy." ANTI-TAKEOVER PROVISIONS Certain provisions of the Company's Amended Certificate of Incorporation and By-Laws could discourage potential acquisition proposals and could delay or prevent a change in control of the Company. Such provisions could diminish the opportunities for a stockholder to participate in tender offers, including tender offers at a price above the then current market value of the Common Stock. Such provisions may also inhibit fluctuations in the market price of the Common Stock that could result from takeover attempts. In addition, the Board of Directors, without further stockholder approval, may issue Preferred Stock that could have the effect of delaying, deterring or preventing a change in control of the Company. The issuance of Preferred Stock could also adversely affect the voting power of the holders of Common Stock, including the loss of voting control to others. The Company has no present plans to issue any Preferred Stock. See "Description of Capital Stock -- Certain Provisions of the Charter and By-Laws Affecting Stockholders." SHARES ELIGIBLE FOR FUTURE SALE Sales of a substantial number of shares of Common Stock in the public market following the Offering (pursuant to Rule 144 or otherwise), as well as the issuance of shares upon exercise of employee stock options, could adversely affect the prevailing market price of the Common Stock and impair the Company's ability to raise additional capital through the sale of equity securities. The Company and all of its executive officers and directors who are not Selling Stockholders have agreed that they will not, without the prior written consent of Dillon, Read & Co. Inc., offer, sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of the Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 90 days from the date of the consummation of the offering, except, with respect to the Company, (i) shares of Common Stock issued pursuant to the exercise of outstanding options and (ii) options granted to its employees, officers and directors under its existing employee stock option plans so long as none of such options become exercisable during said 90 day period. Certain stockholders, including the Selling Stockholders, who will hold in the aggregate 4,188,846 shares of Common Stock after the offering, have agreed that they will not, without prior written consent of Dillon, Read & Co. Inc., sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 180 days from the date of the consummation of this offering. See "Shares Eligible for Future Sale." 10 USE OF PROCEEDS The net proceeds to be received by the Company from the sale of 1,450,000 shares of Common Stock offered hereby (the "Offering") are estimated to be approximately $25.5 million assuming a public offering price of $19.00 per share and after deducting estimated underwriting discounts and commissions and offering expenses. The net proceeds of the Offering, together with the Company's existing funds and cash generated from operations are expected to be used for the following purposes: research and development, marketing, sales and administration of new product lines under development, acquisitions of capital equipment, and working capital and general corporate purposes, as well as possible acquisitions of products, technologies or businesses. While the Company continually evaluates potential acquisitions, the Company has no present agreements or commitments with respect to any acquisition, nor are any negotiations regarding any acquisition currently ongoing. Pending such uses, the net proceeds will be invested in investment grade, interest-bearing securities. The Company will not receive any proceeds from the sale of Common Stock by the Selling Stockholders. See "Principal and Selling Stockholders." 11 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Common Stock is listed on the New York Stock Exchange under the symbol PTC. The following table sets forth for the periods indicated the high and low sale prices for the Common Stock on the New York Stock Exchange.
HIGH LOW ---- --- 1994 1st Quarter.................................................... 9 1/4 7 2nd Quarter.................................................... 7 7/8 6 5/8 3rd Quarter.................................................... 7 1/4 6 1/4 4th Quarter.................................................... 8 1/4 6 1/8 1995 1st Quarter.................................................... 9 3/4 5 7/8 2nd Quarter.................................................... 10 3/4 8 3rd Quarter.................................................... 10 3/4 8 1/4 4th Quarter.................................................... 10 1/4 8 5/8 1996 1st Quarter.................................................... 16 7/8 8 1/4 2nd Quarter (through May 17, 1996)............................. 19 7/8 14
The last reported sale price of the Common Stock on the New York Stock Exchange on May 17, 1996 was $19.00 per share. As of May 7, 1996, there were approximately 881 holders of record of the Common Stock. The Company has never declared or paid any dividends on the Common Stock and does not intend to declare any dividends on its Common Stock in the foreseeable future. The Company currently intends to retain future earnings to fund the development and growth of its business. 12 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1996, and as adjusted to give effect to the Offering (assuming an offering price of $19.00 per share and after deducting estimated underwriting discounts and commissions and offering expenses payable by the Company). This table should be read in conjunction with the Company's financial statements and notes thereto appearing elsewhere in this Prospectus.
MARCH 31, 1996 -------------------- ACTUAL AS ADJUSTED ------- ----------- (IN THOUSANDS) Long-term debt............................................ $ -- $ -- Stockholders' equity (1): Preferred Stock, $.02 par value per share; 250,000 shares authorized, none issued and outstanding......... -- -- Common Stock, $.02 par value per share; 12,000,000 shares authorized, 9,177,884 shares issued and 7,747,278 outstanding, 9,197,278 shares issued and outstanding as adjusted (1)............................ 184 184 Additional paid-in-capital................................ 13,901 37,143 Retained earnings......................................... 42,283 42,283 Cumulative translation adjustment......................... (133) (133) Treasury stock, at cost, 1,430,606 shares, 0 shares as ad- justed................................................... (2,279) -- ------- ------- Total stockholders' equity............................ 53,956 79,477 ------- ------- Total capitalization................................ $53,956 $79,477 ======= =======
-------- (1) Excludes 914,770 shares of Common Stock issuable upon the exercise of options outstanding at March 31, 1996, of which options to purchase 555,767 shares were then exercisable. See Note 6 of the Notes to Consolidated Financial Statements appearing elsewhere in this Prospectus. 13 SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA) The following selected consolidated financial data for each of the five years in the period ended December 31, 1995 have been derived from the Company's consolidated financial statements, which have been audited by Price Waterhouse LLP, independent accountants. The selected consolidated financial data presented below for the three months ended March 31, 1995 and 1996 have been derived from unaudited financial statements of the Company and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the quarterly selected financial information. The results for the three months ended March 31, 1996 are not necessarily indicative of the results of operations for the entire fiscal year or any other period. The information set forth below should be read in conjunction with the Company's consolidated financial statements and notes thereto appearing elsewhere in this Prospectus.
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 -------- -------- -------- -------- -------- -------- -------- STATEMENT OF INCOME DATA: Net revenues: Product............... $ 38,803 $ 38,641 $ 43,835 $ 52,965 $ 58,306 $ 12,342 $ 10,880 Service............... 17,951 18,552 19,213 20,823 25,059 5,607 7,677 Contract.............. 22,143 16,078 18,199 20,742 24,029 6,085 6,937 -------- -------- -------- -------- -------- -------- -------- 78,897 73,271 81,247 94,530 107,394 24,034 25,494 -------- -------- -------- -------- -------- -------- -------- Costs of sales: Product............... 22,176 21,027 25,433 32,527 34,028 7,663 6,778 Service............... 16,784 16,108 17,041 17,296 20,807 4,450 6,261 Contract.............. 21,498 15,004 17,534 19,740 22,492 5,770 6,513 -------- -------- -------- -------- -------- -------- -------- 60,458 52,139 60,008 69,563 77,327 17,883 19,552 -------- -------- -------- -------- -------- -------- -------- Gross margin........ 18,439 21,132 21,239 24,967 30,067 6,151 5,942 -------- -------- -------- -------- -------- -------- -------- Operating expenses: Selling, general and administrative expenses............. 11,258 12,296 13,009 14,211 17,721 4,179 3,744 Research and development.......... 4,742 5,253 4,239 5,009 5,331 1,333 1,351 -------- -------- -------- -------- -------- -------- -------- 16,000 17,549 17,248 19,220 23,052 5,512 5,095 -------- -------- -------- -------- -------- -------- -------- Income before provision for income taxes....... 2,439 3,583 3,991 5,747 7,015 639 847 Provision for income taxes.................. 978 1,250 1,462 2,086 2,357 249 296 -------- -------- -------- -------- -------- -------- -------- Net income.......... $ 1,461 $ 2,333 $ 2,529 $ 3,661 $ 4,658 $ 390 $ 551 ======== ======== ======== ======== ======== ======== ======== Earnings per common share.................. $ 0.20 $ 0.30 $ 0.32 $ 0.46 $ 0.58 $ 0.05 $ 0.07 Weighted average number of common shares outstanding............ 7,405 7,885 7,968 7,992 8,068 8,073 8,190
DECEMBER 31, --------------------------------------- MARCH 31, 1991 1992 1993 1994 1995 1996 ------- ------- ------- ------- ------- --------- BALANCE SHEET DATA: Working capital.............. $28,609 $31,373 $34,489 $38,915 $42,976 $44,498 Total assets................. 49,019 53,433 60,449 60,642 68,073 66,364 Long-term debt............... -- -- -- -- -- -- Total shareholders' equity... 39,094 41,858 44,530 48,645 53,132 53,956
14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW PAR Technology Corporation provides sophisticated integrated transaction information processing ("ITIP") solutions that enable the reliable capture, preservation, processing and management of information throughout a business enterprise. The Company is a leading supplier of ITIP solutions to the quick service restaurant industry and also provides ITIP solutions for manufacturing/warehousing enterprises. The Company's systems-based solutions have been engineered to perform reliably under harsh operating conditions and incorporate high levels of systems integration, in-depth knowledge of the customers' workflow processes, and local and wide-area networking capability. The Company also develops advanced computer based systems and technologies for federal and state governmental agencies. Through its government sponsored development work, PAR has generated significant technologies with commercial applications, from the transaction processing capability underlying its primary business, to advanced vision technology currently being implemented in the Company's proprietary Corneal Topography System ("CTS") for use in ophthalmic diagnoses and surgical procedures. The Company's business is divided into two segments -- the commercial segment, which represents all product and service revenues, and the government segment, which represents all contract revenues. Product revenues principally arise from sales of ITIP systems to the restaurant industry and, to a lesser extent, to manufacturing/warehousing enterprises. Service revenues include installation, repairs, help desk and other service integration activities related to the restaurant ITIP business. Revenues from sales of commercial products are generally recorded as the products are shipped, provided that no significant vendor post-contract support obligations remain and the collection of the related receivable is probable. The Company's service revenues are recognized ratably over the related contract period or as the services are performed. Contract revenues include all prime and subcontract activities with the Department of Defense and other governmental agencies. They are derived under a variety of cost reimbursement, time and material and fixed price contracts. Contract revenues, including fees and profits, are recorded as services are performed using the percentage of completion method of accounting, primarily based on contract costs incurred to date compared with estimated costs at completion. Anticipated losses on all contracts and programs in process are recorded in full when identified. Unbilled accounts receivable are stated at estimated realizable value. Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Company and government representatives. Contract revenues have been recorded in amounts that are expected to be realized on final settlement. Selling, general and administrative expenses and research and development attributable to the Company's government businesses are included in costs of contracts. The Company capitalizes certain costs related to the development of computer software under the requirements of Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing feasibility are capitalized and amortized on a product by product basis when the product is available for general release to customers. Annual amortization, charged to cost of sales, is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product, or the straight line method over the remaining estimated economic life of the product. In June 1992, the Company was approved under the Department of Defense Mentor Protege Program as a mentor for a minority owned government contractor, Phoenix Systems and Technologies, Inc. ("Phoenix"). Concurrent with this approval, the Company acquired a 43.9% interest in Phoenix, which is accounted for under the equity method. The Company is a subcontractor to Phoenix on certain engineering service contracts with the United States Government. Phoenix is also a vendor to PAR, providing manufacturing and certain contract services. 15 RESULTS OF OPERATIONS Three Months Ended March 31, 1996 and 1995 The Company reported an increase in net income of 41.3% for the quarter ended March 31, 1996 compared to the same quarter of 1995. Net income was $551,000, or earnings per share of $0.07, on net revenues of $25.5 million for the quarter ended March 31, 1996, compared to net income of $390,000, or earnings per share of $0.05, on net revenues of $24.0 million for the same quarter of 1995. Product revenues decreased 11.8% to $10.9 million in 1996 versus $12.3 million in 1995. This decrease was the result of the timing of Taco Bell's requirements under its sales contract with the Company. In the first quarter of 1995, Taco Bell's demand for systems was high due to the size of a replacement program during that period. The Company will continue providing systems to Taco Bell under its current contract, which runs through March 31, 1997; however, because the timing of replacement programs and new store openings is determined by Taco Bell based on its requirements, the volume of systems sales to Taco Bell in any quarter may vary from the prior comparable quarter. Partially offsetting this decrease was an increase in sales to KFC in several international markets. During the current period, the Company sold 15 systems for use in China and 23 systems for use in Thailand to KFC. Service revenues increased 36.9% to $7.7 million in the first quarter of 1996, compared to $5.6 million for the first quarter of 1995. This increase was due to a greater volume of special integration projects requested by customers in 1996 compared to 1995 and the ongoing activities with Taco Bell under the exclusive service integration contract awarded in 1995. Under this agreement, the Company is responsible for servicing of all restaurant ITIP systems, back office systems and Help Desk and on-site support activities. Contract revenues were $6.9 million in 1996, an increase of 14.0% from $6.1 million reported in 1995. The government segment's software development and systems integration business increased due to its ongoing work in environmental monitoring systems and hazardous materials tracking. Additionally, the Company continues to perform as a subcontractor to Northrop Grumman on the Joint Surveillance Target Attack Radar System Program ("J/STARS"). The Company's engineering services business increased primarily due to the Griffiss Minimum Essential Airfield Contract awarded to Phoenix in 1995. The Company is a subcontractor to Phoenix to operate and maintain Griffiss Air Force Base. Gross margin on product revenues was 37.7% in the first quarter of 1996 virtually unchanged from the 37.9% for the first quarter of 1995. Although the Company has experienced reductions in average selling prices to certain customers during this period as compared to the first quarter of 1995, the impact has been partially mitigated by favorable product mix and cost reduction programs implemented by the Company. Gross margin on service revenues was 18.4% for the three months ended March 1996, versus 20.6% for the same three months of 1995. This decline was primarily the result of lower margins attributable to the special integration projects discussed above. Gross margin on contract revenues was 6.1% in 1996 versus 5.2% in 1995. The improved margins were due to a favorable contract mix in 1996 versus 1995. Selling, general and administrative expenses were $3.7 million in 1996, a decline of 10.4% from the $4.2 million reported in 1995. This decrease was mainly the result of non-recurring charges in 1995 relating to the Company's accounts receivable from and equity interest in Phoenix. This was partially offset by an increase in the restaurant ITIP sales force costs in 1996 over 1995. Research and development expenses increased 1.4% to $1.4 million in 1996 compared to $1.3 million in 1995. Research and development costs attributable to government contracts are included in cost of contract revenues. The Company's effective tax rate was 34.9% in 1996 compared to 39.0% in 1995. This decrease was due to adjustments in prior years' accruals in 1995. 16 Years ended December 31, 1995 and 1994 The Company reported earnings per share of $0.58 for the year ended December 31, 1995, an increase of 26.1% from the $0.46 per share recorded for the year ended December 31, 1994. Net income increased 27.2% to $4.7 million in 1995 compared to $3.7 million for 1994. Net revenues for 1995 were $107.4 million versus $94.5 million for 1994, an increase of 13.6%. Product revenues were $58.3 million for 1995, a 10.1% increase from the $53.0 million recorded in 1994. Most of this increase occurred in the fourth quarter of 1995. This was primarily due to the Company's continuing successful relationship with Taco Bell. In the fourth quarter of 1995, the Company received a $23.0 million order from Taco Bell for restaurant ITIP products. The Company began delivery of this order in 1995, with the majority to be shipped in 1996. The increase is also due to new contract awards from the Chick-fil-A, Inc. ("Chick-fil-A") restaurant chain. Product sales also increased in 1995 due to the growth in the Company's manufacturing/warehousing ITIP business. This business won several new contracts in 1995 and grew 34.0% over 1994. Partially offsetting these increases was a decline in sales to KFC International due to a greater number of new store openings and replacement orders in 1994 than in 1995. Service revenues increased 20.3% to $25.1 million in 1995, compared to $20.8 million for 1994. The growth in service revenues was primarily related to higher installation revenue as a result of the increase in product sales discussed above. Additionally, in the third quarter of 1995 the Company was awarded a service integration contract with Taco Bell. Under this agreement, the Company is responsible for servicing of all restaurant ITIP systems, back office systems and Help Desk and on-site support activities. Certain product enhancement programs for various customers also contributed to this increase in 1995. Contract revenues were $24.0 million for 1995, an increase of 15.8% from the $20.7 million reported in 1994. The government segment's site maintenance and testing activities and its software development business both contributed to this increase. The Company was awarded new site contracts and expanded the scope of other existing contracts during 1995. Additionally, the Company's software development business continues to expand its work in environmental monitoring systems. RRC was awarded a $10.0 million, five-year contract as the prime subcontractor for the Griffiss Minimum Essential Airfield Contract awarded to Phoenix. Under this contract, Phoenix and RRC will provide engineering services to Griffiss Air Force Base. Gross margin on product revenues was 41.6% compared to 38.6% in 1994. Restaurant ITIP margins improved primarily due to certain customer discounts earned in 1994 that did not recur in 1995. Additionally, the Company was able to achieve certain product cost reductions in 1995. Gross margin on service revenues was 17.0% in 1995, versus 16.9% in 1994. Margins benefited from increased revenues, including revenue from certain product enhancement programs. However, this was offset by start-up costs related to the service integration contract with Taco Bell discussed above. Gross margin on contract revenues was 6.4% in 1995, compared to 4.8% in 1994. This margin improvement was the result of higher award fees earned on certain contracts due to high performance ratings and to a favorable contract mix. Selling, general and administrative expenses were $17.7 million in 1995, an increase of 24.7% from the $14.2 million recorded in 1994. This increase is primarily due to the expansion of the Company's worldwide restaurant ITIP sales force and growth in the manufacturing/warehousing ITIP sales force. Also, 1995 expenses included $1.1 million for allowances related to the Company's investment in and receivable from Phoenix. See Note 9 to the Consolidated Financial Statements for further discussion. Research and development expenses were $5.3 million in 1995, an increase of 6.4% from the $5.0 million reported a year ago. The Company is continuing its investment in restaurant ITIP hardware and software products. Additionally, the Company continues to improve the technological performance of its CTS products. 17 The Company's effective tax rate was 33.6% in 1995 compared to 36.3% in 1994. The lower rate is primarily due to the utilization of foreign tax credits in 1995. Years ended December 31, 1994 and 1993 The Company reported earnings per share of $0.46 for the year ended December 31, 1994, an increase of 43.7% from the $0.32 per share recorded for the year ended December 31, 1993. Net income increased 44.8% to $3.7 million in 1994, compared to $2.5 million for 1993. Net revenues for 1994 were $94.5 million versus $81.2 million for 1993, an increase of 16.3%. Product revenues were $53.0 million for 1994, a 20.8% increase from the $43.8 million recorded in 1993. This increase was due to sales to Taco Bell of the Company's third generation point-of-sale system (POS III). Another major factor was sales of the Company's POS II products to McDonald's, KFC and other fast food chains in both domestic and international markets. During 1994, the Company received follow-on purchase orders from Taco Bell totaling $20.0 million. The Company's system integration work related to its manufacturing/warehousing ITIP business also contributed to the increase. Customer service revenues increased 8.4% to $20.8 million in 1994, compared to $19.2 million for 1993. The growth in service revenue was primarily related to higher installation revenue as a result of the increase in product sales discussed above. Contract revenues were $20.7 million for 1994, an increase of 14.0% from the $18.2 million reported in 1993. This growth was due to the success of the Company's site maintenance and testing business. The Company currently has several contracts at different government-owned sites across the country. The government segment software development business also contributed to the increase. In 1994, the Company announced it was successful in winning a $2.5 million, multi-year contract from the National Institute for Environmental Renewal for the development and application of an environmental monitoring and management system for the detection of ground and water contamination. Gross margin on product revenues was 38.6% in 1994, compared to 42.0% in 1993. This decrease in margin was a result of volume discounts earned in 1994 by a major customer in accordance with the terms of its sales agreement with the Company. Partially offsetting this was improved absorption of certain fixed manufacturing costs as a result of increased production in 1994. Gross margin on service revenues was 16.9% in 1994, versus 11.3% in 1993. This increase was the result of increased installation and service contract revenue directly related to the increased restaurant ITIP product revenue discussed above. Gross margin on contract revenues was 4.8% in 1994 compared to 3.7% in 1993. During 1994, the Company controlled its overhead costs, which resulted in improved margins on certain contracts. Selling, general and administrative expenses were $14.2 million in 1994, an increase of 9.2% from the $13.0 million recorded in 1993. This increase was primarily due to the Company's expanded restaurant ITIP sales efforts and to sales and marketing activities associated with the Company's CTS products. Research and development expenses of the Commercial segment were $5.0 million in 1994, an increase of 18.2% from the $4.2 million reported a year ago. The Company's net investment in restaurant ITIP and CTS products increased in 1994 compared to the prior year. 18 QUARTERLY FINANCIAL INFORMATION The following table sets forth unaudited consolidated financial information for the nine quarters ending March 31, 1996. The Company believes that this information has been prepared on the same basis as the audited consolidated financial statements appearing elsewhere in this Prospectus and all necessary adjustments (consisting only of normal recurring adjustments) have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements of the Company and notes thereto appearing elsewhere in this Prospectus. The operating results for any quarter are not necessarily indicative of the results for any future period. See "Risk Factors -- Fluctuations in Quarterly Operating Results."
QUARTER ENDED ---------------------------------------------------------------------------------- MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT 30, DEC. 31, MARCH 31, 1994 1994 1994 1994 1995 1995 1995 1995 1996 -------- -------- --------- -------- -------- -------- -------- -------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Net revenues: Product................ $10,722 $12,959 $13,889 $15,395 $12,342 $11,884 $11,428 $22,652 $10,880 Service................ 4,807 5,205 5,288 5,523 5,607 5,889 6,440 7,123 7,677 Contract............... 5,241 4,959 4,726 5,816 6,085 6,593 6,112 5,239 6,937 ------- ------- ------- ------- ------- ------- ------- ------- ------- 20,770 23,123 23,903 26,734 24,034 24,366 23,980 35,014 25,494 ------- ------- ------- ------- ------- ------- ------- ------- ------- Costs of sales: Product................ 6,690 8,485 8,611 8,741 7,663 6,782 6,539 13,044 6,778 Service................ 4,146 4,241 4,220 4,689 4,450 4,856 4,857 6,644 6,261 Contract............... 4,932 4,730 4,455 5,623 5,770 6,234 5,552 4,936 6,513 ------- ------- ------- ------- ------- ------- ------- ------- ------- 15,768 17,456 17,286 19,053 17,883 17,872 16,948 24,624 19,552 ------- ------- ------- ------- ------- ------- ------- ------- ------- Gross margin.......... 5,002 5,667 6,617 7,681 6,151 6,494 7,032 10,390 5,942 ------- ------- ------- ------- ------- ------- ------- ------- ------- Operating expenses: Selling, general and administrative expenses.............. 3,509 3,635 3,419 3,648 4,179 4,144 3,668 5,730 3,744 Research and development........... 1,121 1,227 1,209 1,452 1,333 1,302 1,187 1,509 1,351 ------- ------- ------- ------- ------- ------- ------- ------- ------- 4,630 4,862 4,628 5,100 5,512 5,446 4,855 7,239 5,095 ------- ------- ------- ------- ------- ------- ------- ------- ------- Income before provision for income taxes................ 372 805 1,989 2,581 639 1,048 2,177 3,151 847 Provision for income taxes................. 145 337 545 1,059 249 412 644 1,052 296 ------- ------- ------- ------- ------- ------- ------- ------- ------- Net income............ $ 227 $ 468 $ 1,444 $ 1,522 $ 390 $ 636 $ 1,533 $ 2,099 $ 551 ======= ======= ======= ======= ======= ======= ======= ======= ======= Earnings per common share................. $ 0.03 $ 0.06 $ 0.18 $ 0.19 $ 0.05 $ 0.08 $ 0.19 $ 0.26 $ 0.07 Weighted average number of common shares outstanding........... 8,022 7,994 7,970 7,976 8,073 8,110 8,082 8,063 8,190
The Company has experienced and expects to continue to experience quarterly fluctuations in its net revenues and net income. Due to the dynamics associated with the year-end capital budget planning of many of PAR's restaurant ITIP customers and the preference of some restaurant ITIP customers to install new systems between the busy summer and Christmas seasons, the Company has historically realized a higher amount of its restaurant ITIP systems sales and overall net income during the second half of the year. In 1994 and 1995, the Company realized 81.0% and 78.0%, respectively, of its net income in the final six months of those years. Major restaurant ITIP customers may, however, elect to delay purchases of the Company's products. If for any reason the Company's sales were below seasonal norms during its fourth fiscal quarter, the Company's annual operating results could be adversely affected. The Company's quarterly operating results may also vary as a result of factors such as the timing or cancellation of customer orders, especially major customers, including Taco Bell, delays in order placement on the part of major customers in anticipation of the introduction of new products by the Company, price reductions by competitors or by the Company, the market acceptance of newly introduced products, significant fluctuation in the pricing of components of the Company's products and introductions of new or enhanced competing products. In the first quarter of 1996, the Company's sales to Taco Bell declined in comparison to the 1995 first quarter. This decrease was the result of the timing of Taco Bell's requirements under its sales contract with the Company. In the first quarter of 1995, Taco Bell's demand for systems was high due to the size of a replacement program during that period. The Company will continue providing systems to Taco Bell under its current contract, which runs through March 31, 1997; however, because the timing of replacement programs and store openings is determined by Taco Bell based on its requirements, the volume of systems sales to Taco Bell in any quarter may vary from the prior comparable quarter. 19 LIQUIDITY AND CAPITAL RESOURCES The Company's primary source of liquidity has been from operations. Cash provided by operating activities was $1.9 million in the first quarter of 1996, compared to $2.4 million in 1995. The Company historically has experienced significant collections of accounts receivable in its first quarter due to the volume of sales generated in the preceding quarter. This is primarily due to the seasonal demands of the Company's restaurant ITIP customers. However, this factor was offset by the build up of restaurant ITIP and service inventory in anticipation of future sales orders and service requirements and the timing of estimated income tax payments in 1996 versus 1995. Cash used in investing activities was $198,000 for the first quarter of 1996, compared to $486,000 in 1995. In 1996, capital expenditures were for internal use computers and other miscellaneous items. In 1995, capital expenditures were primarily for upgrades to internal use software. Cash provided from financing activities was $336,000 for the first quarter of 1996 compared to $67,000 in 1995. This increase was due primarily to the proceeds from the exercise of stock options. Cash used by operating activities in 1995 was $767,000, compared to cash provided by operations of $8.0 million in 1994. The Company's accounts receivable balance grew substantially in 1995 as a result of record fourth- quarter revenues, which increased $8.3 million over the fourth quarter of 1994. During 1994, the Company's net profit and a reduction in accounts receivable were the primary reasons for the positive cash flow. Cash used in investing activities in 1995 was $1.8 million, compared to $2.2 million in 1994. The Company used $1.3 million for capital expenditures in 1995, versus $1.7 million in 1994. In 1995, the Company purchased additional internal use computer hardware and software and upgraded certain communications equipment. Capital expenditures in 1994 were primarily for continued improvements to the Company's headquarters' facility and computer equipment upgrades. Cash flow provided by financing activities in 1995 was $101,000, versus cash used of $3.9 million in 1994. In 1995, cash flow benefited by the proceeds from the exercise of employee stock options and short-term bank borrowings for working capital requirements. This was partially offset by the acquisition of treasury stock during the year. In 1994, the Company used cash provided by operations to pay off all of its short term borrowings with banks. The Company has line-of-credit agreements, which aggregate $27.2 million, with certain banks, of which $383,000 was in use at March 31, 1996. The Company believes that it has adequate financial resources to meet its future liquidity and capital requirements. 20 BUSINESS THE COMPANY PAR Technology Corporation provides sophisticated integrated transaction information processing solutions that enable the reliable capture, preservation, processing and management of information throughout a business enterprise. The Company is a leading supplier of ITIP solutions to the quick service restaurant industry and also provides ITIP solutions for manufacturing/warehousing enterprises. The Company's systems-based solutions have been engineered to perform reliably under harsh operating conditions, and incorporate high levels of systems integration, in-depth knowledge of the customers' workflow processes, and local and wide-area networking capability. The Company's POS III(TM) restaurant ITIP system solution combines flexible, extendible systems software connecting its open-system architecture hardware platform with ruggedized fixed and wireless order-entry terminals, video monitors and PAR and third-party supplied peripherals networked via an Ethernet LAN and accessible to enterprise-wide network configurations. For manufacturing and warehousing enterprises, the Company designs and implements complex integrated ITIP solutions incorporating its TPS(TM) data collection and management software that provide real-time connectivity with multiple host computers, diverse legacy applications software and "best-of-breed" software and data input hardware technologies. PAR further provides extensive systems integration capabilities to design, tailor and implement solutions that enable its customers to manage, from a central location, all aspects of data collection and processing for single or multiple site enterprises. The Company also develops advanced computer-based systems and technologies for government agencies. Through its government-sponsored development work, PAR has generated significant technologies with commercial applications, from the transaction information processing capability underlying its primary business to the advanced vision technology currently being implemented in the Company's proprietary Corneal Topography System ("CTS") for use in ophthalmic diagnoses and surgical procedures. INTEGRATED TRANSACTION INFORMATION PROCESSING Businesses worldwide are increasingly focused on the means to more effectively obtain, preserve, manage and utilize information related to the processes by which their products are produced and sold. Automated capture and analysis of certain information, including cost, price, volume, throughput and other data, enable businesses to improve production efficiencies and gain competitive advantages. Consequently, business managers increasingly require ITIP solutions -- integrated computerized systems that enable the reliable capture, preservation, integration, processing and management of business- critical information throughout the enterprise. In complex systems environments, ITIP solutions include the ability to communicate and share information among disparate hardware and software platforms across local site and enterprise-wide data networks. ITIP solutions are increasingly required by managers to provide real-time access to operational data from local and remote company sites for operational and strategic decision-making. Many businesses have turned to third-party suppliers and systems integrators to assist in the design, implementation and support of ITIP systems, as the complexity of total systems solutions and rapid technological change require a broad range of specialized capabilities. An ITIP solutions provider must possess strong and diverse technical knowledge of open systems architectures, multiple device and software interfaces, data formats, wireless communications and local and wide-area networking. In addition, in order to effectively design an ITIP solution that meets a particular customer's specific needs, the ITIP provider must thoroughly understand the operational aspects and work process flow requirements of its customer's business. Systems integration, including the ability to design and implement reliable and extendible ITIP solutions that enable data transmission and communication among disparate hardware devices, multiple software applications, different host computers and diverse operating systems, is a critical competency required of the solutions provider. Finally, an ITIP solutions provider must commit to providing full life-cycle support and service to meet the customer's needs for consistent, reliable operation under rigorous conditions. 21 The Company markets its ITIP solutions to two vertical markets -- the restaurant industry and automated manufacturing/warehousing enterprises. The Company's ITIP systems solutions incorporate its experience and competencies in designing and integrating hardware and software into complex systems that meet the rigorous operating requirements of its target markets. Restaurant ITIP Restaurants increasingly require real-time information access and management that permit employees to increase the speed and accuracy of taking an order, preparing the food, and filling the order, while simultaneously providing real-time access to operational data for decision support in areas such as inventory control, personnel management, cash management, menu modification and market trend analysis. This need for information systems capable of capturing, preserving, processing and managing data from a large number of time-critical transactions for effective operational decision-making and efficient revenue generation has created a significant opportunity for the implementation of ITIP solutions. Quick service restaurant chains were early adopters of ITIP solutions. Quick service restaurant ITIP solutions must accommodate numerous concurrent customer orders at multiple counter-top and drive-through locations. Multiple order input devices, such as wireless, hand-held terminals and touch screen monitors, may be required to handle high order volumes at peak busy periods. Order information must be communicated to and shared with food preparers and order assemblers by video monitors. Printers for customer receipts, change machines and cash boxes, as well as other peripherals must be networked within the system to enable efficient throughput of customers and orders, which is critical to fast-food operations. Additionally, the captured transaction data must be shared not only with store management for accurate and real-time access to data for back-office decision-making, such as inventory management and employee work scheduling, but also across wide area networks with the QSR chain's regional and national headquarters for market information and trend analysis. The successful implementation of a quick service restaurant ITIP solution poses significant technical, environmental and business challenges. The solution must reflect an in-depth understanding of the business dynamics of the QSR industry and the customer's specific needs. The system design must meet the high-transaction rate workflow process of the business, yet be flexible and extendible to accommodate market needs such as menu changes and special promotions. A solution provider must have connectivity and open- systems architecture expertise in order to solve the multiple interfacing and data formatting complexities arising from the need to enable local and remote interconnection and communication among multiple diverse hardware devices and software applications, while maintaining high system reliability and integrity. The ability to engineer ruggedized hardware to withstand the hostile environment of spills, grease, heat and misuse common to QSR sites, as well as to implement user interfaces that are understandable to a low-skill, high-turnover employee base, is critical to system useability and reliability. Additionally, the solutions provider must be able to commit to rapid global service and support, as the ITIP system, once implemented, serves a critical function in the restaurant as well as throughout the QSR chain. Manufacturing/Warehousing ITIP The manufacturing and warehousing industries are increasingly subjected to competitive pressures to increase individual worker productivity, manage inventory controls effectively and optimize the use of fixed assets. Over time, companies have made significant investments in technology to improve particular process inefficiencies, creating "islands of automation," such as in the shipping or receiving department, rather than developing an integrated solution that automates an entire workflow process. Managers increasingly recognize that substantial cost savings and production efficiencies can be obtained, both within the manufacturing or warehouse site and throughout a multiple site enterprise, by implementing an integrated ITIP solution that automates data collection, storage, retrieval and processing. 22 A complex manufacturing operation typically includes multiple data collection networks with efficient, paperless data capture devices at critical points in the production line, including stationary, hard-wire input terminals as well as wireless devices for flexible monitoring and data capture, inventory control devices, including barcode printers and scanners for inventory tracking, security and order management in a just-in-time structure, and other tailored data input and collection devices. An ITIP solution for such a complex manufacturing site must be designed to enable information sharing, distributed data processing, and seamless integration into plant-wide and enterprise-wide data networks to permit real-time access to events and trends, so that managers can respond flexibly and quickly, both to problems within the manufacturing process and to market opportunities that become available. Implementation of an effective ITIP solution for a complex, often multiple site manufacturing/warehousing enterprise requires a systems provider to understand the complexity of the customer's workflow processes, as well as to be able to provide consultation on industry best practices. The ITIP system must be designed to seamlessly and reliably integrate the enterprise's legacy data collection hardware and applications software with new technology, requiring sophisticated understanding of the multiple interfaces among mainframe and mid-range host computers from a variety of vendors, incompatible operating systems and applications software, as well as diverse peripheral devices. Systems integration by the ITIP solutions provider requires in-depth knowledge of data formatting to collect, process and share information among the disparate hardware and software elements of the system, and the engineering capability to implement a robust solution that is reliable, flexible and extendible. An ITIP solutions provider must further possess the competency to deliver, install and implement the system and to train the customer's personnel on its use and the commitment to maintain and enhance the ITIP system throughout its life cycle. THE PAR SOLUTION PAR currently offers fully integrated ITIP solutions that satisfy the specific needs of its targeted vertical markets. The PAR solution incorporates the following features: . INDUSTRY KNOWLEDGE. PAR applies its in-depth industry knowledge and understanding of the workflow and production process needs of its restaurant and manufacturing/warehousing customers to integrate software, hardware and services into a flexible, user friendly solution to its customers. PAR's industry expertise has been developed over its 19 years of experience servicing the needs of the QSR restaurant market and over its eight years of experience servicing manufacturing/warehousing enterprises. . SYSTEMS INTEGRATION EXPERTISE. PAR utilizes its systems integration capabilities to design and implement open-systems architecture ITIP solutions that solve the interfacing and data formatting challenges inherent in systems incorporating a variety of hardware devices and both legacy and new software applications, and which must communicate and share data over local and enterprise-wide networks. . OPERATING ENVIRONMENT EXPERTISE. PAR's software solution for the QSR market is tailored for ease-of-use by a low-skill, high-turnover QSR employee base, while its manufacturing/warehousing software is robustly structured to address the rigorous demands of complex, transaction intensive workflow processes. PAR manufactures ruggedized hardware that can survive the harsh environmental conditions of a QSR restaurant, while at the same time being cost-effective for the customer over the life of the system. . SERVICE COMMITMENT. PAR offers a complete solution to its customers' ITIP systems service needs, including the ability to provide ongoing services and support for ITIP systems on a global basis. PAR has offices in eight countries and 19 cities in the U.S., and provides 24 hour a day, seven day a week hotline support for domestic restaurant customers through a call center in its Boulder, Colorado office. For the restaurant market, PAR's POS III ITIP system combines flexible, extendible systems software connecting PAR's open-system architecture hardware platform with PAR's ruggedized order-entry terminals, video monitors, and other PAR and third-party peripherals networked via an Ethernet LAN and accessible to enterprise-wide network configurations. PAR's solution further includes extensive systems integration capabilities to design, tailor and implement its customer's total data collection, preservation, processing and management requirements. 23 For manufacturing/warehousing enterprises, PAR's solution entails extensive systems integration services coupled with its TPS(TM) data collection and management enabling software. PAR designs and implements complex integrated ITIP solutions offering concurrent connectivity with multiple host computers, diverse legacy applications software, and "best-of-breed" software and hardware technologies, providing its customers the ability to manage, from a central location, all aspects of data collection and processing for single and multiple site enterprises. GROWTH STRATEGY The Company's business objective is to be a leading supplier of innovative systems solutions for targeted ITIP applications and to provide value-added systems integration capabilities for selected vertical markets. In addition, the Company seeks out commercial applications for its advanced technologies developed under sponsored government research projects. The Company pursues this objective by following the growth strategies listed below. MAINTAIN ITIP TECHNOLOGY LEADERSHIP. The Company intends to maintain its leadership position by enhancing ease of use in its current ITIP solutions in the automated manufacturing/warehousing market, as well as broadening the base of platforms supported, and by developing modular, object-oriented software for its restaurant ITIP solutions, thus providing customers with increased maintainability, upgradeability, extendibility and configurability, while improving price/performance and time-to-market. The Company believes that migration to a technologically advanced object-oriented software platform will enable it to penetrate new QSR accounts, as well as upgrade its installed base of QSR customers by incorporating new features and functionality. LEVERAGE SYSTEMS INTEGRATION CAPABILITIES. The Company seeks to expand its business opportunities within its targeted vertical markets by leveraging its complete systems integration capabilities for current and new end-user customers. In addition to developing modular hardware and software ITIP products for the restaurant industry, the Company has been able to add significant value for its QSR customers by configuring and integrating its own and third-party peripheral products, such as configurable touch screens, wireless hand-held order-entry terminals, video display monitors and printers into an integrated, networked system that meets particular customer requirements based on restaurant configuration or operational demands. The Company believes that it can address additional systems integration opportunities in the restaurant ITIP market by extending the capabilities of the ITIP network to provide real-time decision support for restaurant and headquarters-based management. In the automated manufacturing/warehousing market, the Company intends to enhance design, configuration and implementation services to further develop integrated data collection and management solutions. EXPLOIT RESTAURANT ITIP OPPORTUNITIES. The Company intends to further penetrate the major QSR chains and to expand into the pizza and full service restaurant sectors. A substantial part of growth expected by QSR chains in the near future is represented by international expansion and the introduction of "satellite" facilities (such as those interspersed throughout an airport terminal). In order to exploit this opportunity, the Company intends to support additional country-specific versions of its ITIP systems, as well as to increase its worldwide sales, systems integration and service capabilities. In addition, the Company has introduced its pizza/full service software platform to pursue opportunities in these sectors, which it has not serviced in the past. This software enables custom configuration of ITIP solutions which meet the different operational and data capture requirements of both pizza and full-service restaurants. ENHANCE AUTOMATED MANUFACTURING/WAREHOUSING MARKET PRESENCE. The Company intends to expand and leverage strategic partnering relationships to further penetrate the automated manufacturing/warehousing market, as well as to develop relationships with value added resellers to increase its market presence. In addition to its direct, consultative sales focus, the Company teams with leading data collection hardware suppliers, including Intermec Corporation and Telxon Corporation, to offer total systems solutions to its customers, and with the management consulting division of Ernst and Young LLP, which provides business consulting services through over 10,000 consultants to a wide variety of industries, including manufacturing, consumer products and others. 24 LEVERAGE EXISTING CLIENT BASE. The Company believes it can sustain growth in its existing ITIP markets by continuing to establish and maintain long-term client relationships. In addition to providing upgrade opportunities within its significant customer base, the access and goodwill offered by customer relationships provide the Company with significant advantages over its competitors in marketing additional services and solutions to its clients. The Company also believes its long-term client relationships and ability to address its clients' needs throughout the life cycle of their ITIP systems distinguish the Company from many of its competitors, and provide the opportunity to become a preferred provider of ITIP solutions for a broad range of its existing and new clients. EXPAND INTERNATIONAL SALES AND SUPPORT. The Company intends to leverage its relationships with its customers and expand its sales and support capabilities to enable it to increase international sales. The Company expects that international sales will continue to be a significant portion of its total revenues. In the restaurant ITIP market, the Company's QSR customers anticipate international growth at rates higher than domestic growth over the next several years. Currently, the Company's products are installed in customer sites in 62 countries outside of the United States. The Company's strategy has been to partner with high-quality local service and support providers upon first entering a new geographic market, and to transition to providing direct support as the market for its products and services evolves. The Company currently intends to open offices in China and Latin America, in addition to its current sales and service offices located in Australia, Canada, France, the Netherlands, Singapore, South Africa, Spain and the United Kingdom. CONTINUE TO EXPAND SUPPORT AND SERVICE OFFERINGS. In addition to its systems integration capabilities, the Company understands that full-service support to customers' operations is critical to long-term success. The Company is able to serve as a single service provider to customers in the restaurant market, supporting and maintaining all the customer's computer-based products in its restaurants. The Company believes that its capability to provide one-stop shopping to its customers for all their systems service and support needs maintains and strengthens long-term customer relationships, as well as providing cross-selling opportunities for systems integration and other product offerings. The Company has contracted with Taco Bell, the Company's largest customer in fiscal 1995, to serve as the exclusive service integrator for ITIP systems, back office computer systems, hand-held data entry devices and other computer-based equipment, whether Company or third-party supplied, in all company-owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants in the United States, Canada and Puerto Rico. The Company believes that its ability to address all support and maintenance requirements for a customer's ITIP network provides it with a competitive advantage. COMMERCIALIZE PROPRIETARY TECHNOLOGY GENERATED FROM SPONSORED RESEARCH. The Company focuses its product development and marketing efforts on identifying commercial applications for implementing technologies generated by and developed under the Company's sponsored research pursuant to contracts with governmental agencies. The Company's competencies in ITIP, developed in connection with government contract work, has led to the growth of its restaurant and manufacturing/warehousing ITIP businesses. More recent work in the area of computerized digital image processing has led to the Company's development of its CTS ophthalmic diagnostic and surgical support product, which measures the topography of the human cornea, including elevation, in real-time in both clinical and surgical environments. The Company has also used its telecommunications and signal processing expertise in the development of its HAZMAT system, which enables computerized tracking of hazardous materials in transit. Further, the Company has commenced development on products targeting complex document management and full-text retrieval applications, and intends to continue to exploit technology transfers from ongoing government development projects. SYSTEMS AND SERVICES The Company has targeted two vertical markets for its transaction information processing solutions--the restaurant market and the automated manufacturing/warehousing market. Each of these markets requires equipment that performs reliably under adverse environmental conditions and the stress of numerous concurrent transactions, while being operated by an often unsophisticated and inexperienced workforce. The Company's governmental systems business focuses its efforts on governmental agencies, including the U.S. Department of Defense, or prime contractors operating under government contracts. In addition, the Company markets its CTS corneal topography system to the ophthalmic diagnostic and surgical market. 25 RESTAURANT ITIP SYSTEMS The Company's primary focus in the restaurant market has been the QSR segment of the top 100 chains. The demands of the major quick service chains include rugged, reliable point of sale systems capable of recording, transmitting and coordinating large numbers of orders for quick delivery. The Company's modular, integrated solutions permit its QSR customers to configure their restaurant ITIP systems to meet their order-entry, menu, food preparation and delivery coordination requirements while recording all aspects of the transaction at the site. The current offerings are the result of the Company's 19 years of experience in and an in-depth understanding of the QSR market. This knowledge and expertise is reflected in its product design, manufacturing capability and systems integration skills. The Company's current offerings include the POS III, McDonald's and Pizza and Full Service software applications, the POS II system, the POS III hardware, and PAR and third-party peripherals, as well as system customization and integration services. Software. The Company's software was originally developed as a proprietary application for the POS I and POS II systems. The Company's latest version, POS III, has been written in the C programming language, operates under Microsoft DOS, is compatible with QNX real-time operating systems and supports a distributed processing environment across an Ethernet LAN. The features and functions of the software are extensive and incorporate a high degree of flexibility for the routing and displaying of orders in real-time and for the design and configurability of the Company's display data-entry terminals. In 1995, PAR introduced a new software application which enables the Company to expand its offerings beyond QSR to the full service and pizza restaurant markets. This software application incorporates custom features, including automatic customer retrieval by phone number, automatic delivery-time calculation, time-displayed order entry, printed condiment totals for packaging, street grid database support, dispatch, delivery, coupon tracking and the ability to record an historical record of customer buying habits, in order to address the specific needs of pizza and full service restaurants. The software also supports in-store communications between terminals, remote printers and displays, and back office PCs through an Ethernet LAN. In 1994, PAR, Olivetti and Panasonic assisted McDonald's in creating a PC- based software application for use throughout all of McDonald's restaurants. This development effort, referred to as the Alliance, resulted in a software application which was released for sale in August 1995. The Company's domestic McDonald's corporate and franchise customers use its open architecture POS III hardware platform with this software. McDonald's licenses the Company, Olivetti and Panasonic to market the software to its corporate and franchise restaurants, in return for royalty payments. The Company continually introduces new features and functions in its software and generally introduces a major release once a year. The Company is currently developing its next generation restaurant ITIP software applications. This new software will use object-oriented design techniques and will incorporate the expertise gained during nearly two decades of creating and supporting restaurant computer systems. New features such as mirror imaging of critical data, on-line graphical help, intelligent/interactive diagnostics and extensive graphical user interfaces, will enhance the reliability and ease of use for which the Company's software is known. Hardware. PAR's restaurant ITIP systems have been designed to exceed the requirements of the Company's customers. PAR's current systems have evolved from its original proprietary systems, the POS I, and the POS II, which were state of the art at the time of their release and surpassed the then-current reliability and speed-of-service requirements of the large QSR chains. The POS III system, first installed in 1994, is an open architecture hardware platform with industry standard components. The POS III hardware supports a distributed processing environment and incorporates an advanced restaurant ITIP system, utilizing Intel microprocessors, standard PC expansion slots, Ethernet LAN and standard Centronics printer ports. The system augments its industry standard components with features for QSR applications such as multiple video ports. The POS III system utilizes distributed processing architecture to integrate a broad range of PAR and third-party peripherals and is designed to withstand the harsh QSR environment. The system has a favorable price-to-performance ratio over the life of the system as a result of its PC compatibility, ease of expansion and use and high reliability design. 26 Display terminals process and track customer orders, process employee timekeeping records, and provide on-screen production and labor scheduling. Registers may be configured with a touch screen rather than a fixed position keyboard, allowing greater flexibility in menu design. The POS III touch screen configuration allows a restaurant manager to easily reconfigure or change the menu to add new food items or provide combination meals without reprogramming the system. Wireless hand-held terminals permit restaurant employees to take orders while customers are waiting or in drive-thru lines, thus increasing the speed of service, as the customer's food order is complete by the time he or she reaches the counter and pays for the order. Video monitors display upcoming food orders in the food preparation areas. Multiple monitors used in the kitchen, at drink stations and in the final assembly area help assure that the order is properly completed. Printers are incorporated to print customer receipts or to produce management reports, while various other devices such as change dispensers and personal computers can be added to a LAN, which permits the sharing of transaction information generated by the restaurant ITIP system. The manager can use a standard microcomputer to collect and report on store-generated data. Systems Integration. The Company utilizes its systems integration and engineering expertise in developing functions and interfaces for its restaurant ITIP products to meet diverse customer requirements. The Company works closely with its customers to identify and accommodate the latest developments in restaurant technology by developing interfaces to equipment, including innovations such as automated cooking and drink dispensing devices, customer-activated terminals and order display units located inside and outside of the restaurant. The Company provides systems integration to interface specialized components, such as television monitors, coin dispensers and non-volatile memory for journalizing transaction data, as may be required in some international applications. The Company also integrates the restaurant manager's back office computer, as well as corporate home office computers, as management information requirements dictate. MANUFACTURING/WAREHOUSING ITIP SYSTEMS The Company's manufacturing/warehousing information processing systems business provides enabling and applications software and systems integration services to manufacturing and warehousing end users through distributed enterprise networks. The Company's primary product offering to the manufacturing/warehousing industry is its TPS data collection enabling software package. TPS is an open platform, middleware application that provides connectivity across multiple non-compatible host computers, including those manufactured by International Business Machines Corporation, Hewlett- Packard Company, and Digital Equipment Corporation. TPS also provides connectivity among diverse MRP, MRP II and MES programs (such as Manman and SAP) and fixed-base and hand-held RF data collection terminals on the factory floor, including those sold by Intermec Corporation, Telxon Corporation, Burr- Brown Corporation, and Zebra Technologies Corp. The Company is currently developing support for Norand Corporation and Symbol Technologies data collection devices. TPS offers simplified system use and operations while maintaining system speed in complex transaction processing environments. TPS provides a flexible and highly functional platform for on-line transaction processing applications such as distribution time and attendance, inventory control, warehousing, job status, scheduling and quality control. Data can be directly read from and written to host databases, as well as forwarded to managers, who can respond quickly to production deviations based on real-time information. The Company's additional data collection products include CIMport(TM) and CIMprint(TM), a series of application software products used with Telxon portable hand-held terminals to collect data without fixed-wire attachment. TPS enables radio-frequency and store-and-forward portable terminals to be used in data collection environments that previously could not support this capability. CIMprint is a barcode document printing software package designed for demanding client/server environments, which can be used for printing tags, labels, employee badges and other documents with any combination of text barcode, graphic images, and optical character reading fonts. CIMprint is fully integrated into the TPS platform. 27 The Company offers system integration services for implementing data collection hardware and its TPS software for its clients. PAR's team of systems engineers, application developers, and product support personnel have experience in providing optimal system integration solutions, and work closely with customer personnel to define requirements, identify solutions, and implement solutions based on the customer's needs. GOVERNMENT CONTRACTING The Company's two wholly-owned subsidiaries in the government business segment, PAR Government Systems Corporation ("PGSC") and Rome Research Corporation ("RRC"), provide the Department of Defense ("DOD") and other federal and state government organizations with a wide range of technical products and services. PGSC is engaged in the design, development and implementation of state-of-the-art data handling systems and advanced research and development for high-technology projects. RRC provides engineering services, software development and testing, and operation and maintenance for government facilities. PGSC provides high technology research and development to address problems associated with large real- time data sets and to provide decision support software systems. PGSC's principal focus involves the development of image and signal processing systems that are able to collect and analyze complex and massive sensor data associated with radar and infrared sensor systems. PGSC's telecommunications programs address the movement of large data sets and the adaptation of data to meet user needs for system control, mission planning and decision support. These projects have been undertaken in order to improve environmental and transportation safety, reduce record-keeping costs and improve efficiency. RRC provides professional and engineering services to operate and maintain DOD laboratories, ranges and related facilities. At these sites, Company personnel plan, execute, and evaluate experiments involving new or advanced radar systems, electronic countermeasures systems and communications systems, and operate training and operational communications equipment. RRC also offers software engineering support. OPHTHALMIC DIAGNOSTIC AND SURGICAL MARKET PAR's Vision System Corporation's Corneal Topography System is a current example of the Company's ability to develop a commercial product from technology developed under contract for the U.S. Government. With the growth of refractive surgery to change the shape of the cornea, the foreseeable introduction of the excimer laser for photorefractive keratotomy ("PRK") and the desire to develop customized contact lenses, PAR recognized a need for a corneal topography system which could directly measure the true elevation/shape of the cornea and created CTS. CTS uses PAR patented technology and complex proprietary algorithms and software to provide the eye care professional with true elevation, curvature and refractive power data across the entire cornea. PAR CTS makes no assumptions regarding the shape of the cornea and is able to image irregular and damaged corneas. This represents a significant advantage in measuring post-surgical corneas. PAR Vision Systems Corporation currently offers eye care professionals two products, including a Clinical Diagnostic System which is sold as a stand-alone unit or as an attachment to a variety of manufacturers' slit lamps. PAR also offers an FDA-approved Intra- Operative System which attaches to a number of different operating microscopes and is the only corneal topographer currently available for usage during surgical procedures. The Company's focus market for its CTS products is the eye care industry, including ophthalmologists, optometrists, excimer laser centers, refractive surgery centers, hospitals, eye banks, custom contact lens labs, research centers and university medical schools. Corneal topography has important applications in diagnostics, inpatient screening, preoperative surgical planning, postoperative evaluation, patient follow-up, patient co-management, and contact lens fitting and design. In addition, corneal topography is an effective patient education and marketing tool. 28 With the recent U.S. FDA approvals of PRK in December 1995, industry sources estimated that during the period 1996 through 1999, 2.8 million to 4.8 million excimer refractive procedures will be performed in the U.S., virtually all of which will include one or more corneal topography examinations. CUSTOMER SERVICE The Company offers a range of maintenance and support services as part of its total solutions for its targeted transaction processing markets. In the North American restaurant ITIP market, the Company provides comprehensive maintenance and upgrade services for its own and third-party equipment and systems through a 24-hour central telephone customer support and diagnostic service in Boulder, Colorado and a field service network consisting of 60 locations offering factory, on-site, and depot maintenance and spare unit rentals. When a restaurant ITIP system is installed, PAR employees train the restaurant employees and managers to ensure efficient use of the system. If a problem occurs, PAR's current software products allow a service technician to diagnose the problem by telephone, greatly reducing the need for on-site service calls. The Company has contracted with Taco Bell, the Company's largest customer in fiscal 1995, to serve as the exclusive service integrator for restaurant ITIP systems, back office computer systems, hand-held data entry devices and other computer-based equipment in all company-owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants in the United States, Canada and Puerto Rico. The Company will provide Taco Bell with telephone diagnostic support, on-site service and parts depot capabilities for all such equipment, whether Company- or third party-supplied. The Company believes that its ability to address all support and maintenance requirements for a customer's restaurant ITIP network provides it with a competitive advantage. Restaurant ITIP services generated $25.0 million in revenue in fiscal 1995, representing 32.4% of total restaurant ITIP revenues. As of March 31, 1996, 226 employees were engaged in providing restaurant ITIP services. In the manufacturing/warehousing market, the Company offers technical support through an experienced product support staff available in the field or by telephone. The Company also provides training classes, led by experienced and highly qualified personnel, on its products and implementations, including both hands-on experience with use of software and operation of hardware. The Company offers ongoing maintenance and enhancements. RESEARCH AND DEVELOPMENT The Company engages in the research and development ("R&D") of new technologies under government contracts and through internally funded projects. A total of 77 Company employees were engaged in internally funded R&D as of March 31, 1996, and total expenditures on internally funded R&D totaled $4.2, $5.0 and $5.3 million in fiscal 1993, 1994 and 1995, respectively. RESTAURANT ITIP. The Company is currently developing its next generation restaurant ITIP software applications, based on an open architecture system and object-oriented software technology, which will incorporate new features including mirror imaging of critical data, on-line graphical help, intelligent/interactive diagnostics and extensive graphical user interfaces. The Company also focuses R&D for the restaurant ITIP market on enhancing its ability to integrate third-party software and continuing development of systems integration and software improvements to its flexible open architecture POS III system. The Company believes that such improvements will enable it to increase its penetration of the pizza and full service restaurant markets. MANUFACTURING/WAREHOUSING ITIP. The Company is currently developing a Windows NT-based version of its TPS system. In addition, the Company continues its improvement of its TPS software to enhance its ability to interface with various host-based modular business packages and hardware. CTS. The Company is developing an excimer laser-compatible system with an application for planning, monitoring and simulating the topographic and refractive changes that occur as a result of excimer surgical procedures such as PRK, PTK and LASIK. In addition, the Company is currently testing a contact lens fitting product that utilizes elevation-based data to create a contact lens that provides an optimal fit on a patient's cornea. 29 OTHER. The Company is engaged in R&D for commercial applications based on a variety of other technologies. These include technologies in the fields of data/text retrieval and environmental testing. The Company is developing two systems in the field of document management, Insight, a desktop data manager that allows an individual user to organize, categorize, search and review large quantities of textual information, and Hawkeye, a real-time data classifier that evaluates incoming documents and categorizes them according to user-specified or automatically generated criteria. In the field of environmental monitoring, the Company is developing a system to detect underground contaminants, and a system of computerized links to track hazardous materials in transit. CUSTOMERS The following are included among the customers of the Company:
MANUFACTURING/ RESTAURANT ITIP WAREHOUSING ITIP GOVERNMENT --------------- ------------------------------------ ---------- Arby's American Boa, Inc. Advanced Research Project Agency Chick-fil-A, Inc. Goodyear National Institute for Environmental Renewal Hungry Bunny Integrated Systems, Inc. Northrop-Grumman KFC Mercedes Benz of North America, Inc. U.S. Air Force Rome Laboratory McDonald's Nissan Motor Co. Ltd. U.S. Air Force Special Operations Command MOS Burger Rhone-Poulenc U.S. Army Topographic Engineering Pizza Hut Teepack, Inc. Center Taco Bell Whirlpool Corporation Taco Cabana Wendy's International, Inc.
In the restaurant ITIP market, the Company has established long-term relationships with several of the largest QSR corporations based on its ability to provide a total system solution, including highly flexible and functional software, worldwide service and support, ruggedized hardware and systems integration of third-party products. Typically, the Company markets its products at the corporate level to obtain approved vendor status for sales to company-owned restaurants and then markets to both individual franchisees and company-owned locations. Franchisees generally purchase from corporate- approved vendors, but are not required to do so, and may purchase from other suppliers. The Company is the sole approved vendor of restaurant ITIP equipment to Taco Bell, KFC International and Chick-fil-A, and is one of three approved vendors to McDonald's. Taco Bell, KFC and Pizza Hut are wholly owned subsidiaries of PepsiCo, Inc. Taco Bell accounted for 32.8% of the Company's revenue for fiscal 1995, and KFC and its franchisees and Pizza Hut franchisees accounted for 5.0% and 0.6%, respectively. Sales to McDonald's and its franchisees accounted for 20.9% of net revenues in 1995. There can be no assurance that any of the Company's current customers will continue to place orders with the Company. The loss of any one or more of the Company's major customers could materially and adversely affect its business, operating results and financial condition. See "Risk Factors -- Concentration of Major Customers." SALES AND MARKETING RESTAURANT ITIP. Sales in the restaurant ITIP market are generally generated by first gaining the approval of the restaurant chain as an approved vendor. Upon approval, marketing efforts are then directed to franchisees of the chain. Sales efforts are also directed toward franchisees of chains for which the Company is not an approved vendor. The Company employs direct sales personnel in five sales groups that together employed 73 persons as of March 31, 1996. The National Accounts Group (13 employees) works with major restaurant chain customers. The North and South America Sales Group (24 employees) targets franchisees of the major restaurant chain customers, as well as franchisees of other major chains, as well as smaller chains. The International Sales Group (12 employees) seeks sales to major customers with restaurants overseas and to international chains that do not have a presence in the United States. The New Accounts Group seeks sales to major new corporate accounts. 30 MANUFACTURING/WAREHOUSING ITIP. The Company's direct sales efforts in the manufacturing/warehousing ITIP market are generally focused on the highest level of the customer's executive management. Substantial lead time is required in sales efforts due to the fact that automation equipment is normally fitted into the manufacturing or warehousing environment as a plant is constructed. The Company has also entered into strategic marketing relationships with several companies, including Intermec Corporation, Norand Corporation and Telxon Corporation, and Ernst and Young LLP. CTS. The Company currently utilizes a direct sales force of six employees to market CTS. The Company intends to expand this sales force. The Company also has created an international dealer network of 10 dealers in Europe, Asia, South America, Australia and Canada in order to address the wide geographical scope of the market. COMPETITION Competition in the restaurant ITIP and manufacturing/warehousing ITIP markets is based primarily on functionality, reliability, quality, performance and price of products, and service and support. The Company believes that its principal competitive advantages include its focus on a total solution offering, its advanced development capabilities, its industry knowledge and experience, product reliability, its direct sales force, the quality of its support and quick service response, and, to a lesser extent, price. Competition in the ophthalmic imaging market is based primarily on functionality, sales and marketing strength, and pricing. The Company believes that its principal competitive advantages include the superior functionality of its product and the quality of its service and support. Competition for government contracts is based primarily on customer relationships, price and technical capability. The Company believes that its principal competitive advantages include the long-term strength of its customer relationships, competitive pricing, and proven capability. The markets in which the Company competes are highly competitive. There are currently more than 10 suppliers who offer some form of sophisticated restaurant ITIP system similar to the Company's. The Company competes with other vendors of ITIP systems and the internal efforts of its current or prospective customers. Major competitors include Panasonic, International Business Machines Corporation, NCR and Micros Systems Inc. The Company believes that the manufacturing/warehousing ITIP market is highly fragmented. In the CTS market, competitors include EyeSys Technologies Inc., Tomey Technology, Inc., Alcon Laboratories, Inc. and Humphrey Instruments (a division of Carl Zeiss, Inc.). In its government contracting business, the Company competes with many larger companies such as Lockheed Martin Corporation, Science Applications International Corporation, and TRW Inc., as well as many smaller companies that target particular segments of the government contracting market. Many of the Company's competitors in each of these markets have substantially greater financial resources than the Company. There can be no assurance that the Company will be able to compete effectively in any of its markets. INTELLECTUAL PROPERTY The Company principally relies on copyright and trademark protection, trade secrets and proprietary know-how to protect its intellectual property. The Company enters into confidentiality agreements with its key employees, consultants and strategic partners, restricts access to the Company's facilities, and identifies and secures confidential documents. The confidentiality agreements between the Company and its employees restrict the disclosure by such employees of any confidential information and assign to the Company the rights to inventions made during their employment with the Company. While the Company relies on certain patents covering certain of its products, it does not believe that patents are material to its business in its entirety. To date, the Company has not experienced any material litigation or been subjected to any material patent office interference proceedings with respect to patents. There can be no assurance, however, that third parties will not assert claims against the Company with respect to existing or future products or technologies. In the event of litigation to determine the validity of any third-party claims, such litigation, whether or not determined in favor of the Company, could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel from productive tasks. In the event of an adverse ruling in such litigation, the Company might be required to discontinue the use of certain processes, 31 cease the manufacture, use and sale of infringing products, expend significant resources to develop non-infringing technology or obtain licenses to the infringed technology. There can be no assurance that such licenses would be available on commercially reasonable terms, or at all, with respect to any disputed third-party technology. In the event of a successful claim against the Company and the Company's failure to develop or license a substitute technology at a reasonable cost, the Company's business, financial condition and results of operations could be materially and adversely affected. See "Risk Factors -- Dependence on Proprietary Technology." BACKLOG The Company's backlog of unfilled orders in the restaurant ITIP and manufacturing/warehousing ITIP businesses at March 31, 1996 was approximately $15.6 million as compared to $10.2 million the previous year. Orders in both the restaurant ITIP and manufacturing/warehousing ITIP businesses are generally of a short-term nature and are usually booked and shipped in the same fiscal year. The dollar value of existing government contracts at March 31, 1996, net of work performed to that date, was approximately $29.1 million, of which approximately $8.2 million was funded. At March 31, 1995, the comparable amount was approximately $18.1 million, of which $9.3 million was funded. Funded amounts reflect amounts committed under contract by Government agencies and prime contractors. The March 31, 1996 government contract backlog of $29.1 million represents firm, existing contracts. Approximately $15.1 million of this amount will be completed over the next twelve months. EMPLOYEES At March 31, 1996, the Company had 864 employees. Approximately 575 employees are engaged in its ITIP businesses. Approximately 208 persons are employed by Rome Research Corporation and PAR Government Systems Corporation, 22 by PAR Vision Systems, and the remainder are corporate and administration employees. The Company is not a party to any collective bargaining agreements. The Company considers its employee relations to be good. FACILITIES The Company's headquarters and principal business facility are located in a 148,000 square foot facility in New Hartford, New York, located in central New York State. The Company also maintains a 17,500 square foot service center in Boulder, Colorado and additional R&D, sales and service facilities totaling 33,300 square feet serving its ITIP businesses in Norcross, Georgia; Arlington, Texas; San Antonio, Texas; Irvine, California; and Sydney, Australia. The Company also maintains facilities totaling 23,400 square feet in Rome, New York and La Jolla, California in connection with its work under government contracts. The Company owns its principal facility and adjacent space in New Hartford, NY. All of the other facilities are leased for varying terms. Substantially all of the Company's facilities are fully utilized, well maintained, and suitable for use. The Company believes its present and planned facilities and equipment are adequate to service its current and immediately foreseeable business needs. LEGAL PROCEEDINGS The Company is not currently subject to any material legal proceedings. 32 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The directors and executive officers of the Company are as follows:
NAME AGE POSITION ---- --- -------- Dr. John W. Sammon, Jr.(1)(3)(4)........... 57 Chairman of the Board, President and Director Charles A. Constantino(1)(3)(4)... 56 Executive Vice President and Director J. Whitney Haney........ 61 President, PAR Microsystems and Director Sangwoo Ahn(1)(2)(3).... 57 Director Dr. James C. Castle(2).. 59 Director Albert Lane, Jr......... 54 President, Rome Research Dr. John P. Retelle, Jr..................... 50 President, PAR Government Systems Ronald J. Casciano...... 42 Vice President, Chief Financial Officer and Treasurer
-------- (1) Member of Executive Committee. (2) Member of Audit Committee. (3) Member of Compensation Committee. (4) Member of Stock Option Committee. JOHN W. SAMMON, JR. is the founder of the Company and has been the President and a director since its incorporation in 1968. Dr. Sammon graduated from the United States Naval Academy in 1960 with a B.S.E.E. in Astronautics and Aeronautics. He attended Massachusetts Institute of Technology, graduating with a S.M. in 1962. Dr. Sammon received his Ph.D. in Electrical Engineering from Syracuse University in 1966. He has written several papers in the field of Artificial Intelligence and Pattern Recognition and is a Fellow of the Institute of Electronic Engineers. Dr. Sammon's term as director will expire at the 1998 Annual Meeting of Shareholders. CHARLES A. CONSTANTINO has been a vice president and a director of the Company since its inception in 1971 and has held the position of Executive Vice President since 1974. Mr. Constantino received a B.S. in Mathematics from St. John Fisher College in Rochester, New York and a M.S. in Applied Mathematics from the University of Rochester. Mr. Constantino's term as director will expire at the 1998 Annual Meeting of Shareholders. J. WHITNEY HANEY has been a director of the Company and President of PAR Microsystems Corporation since April 1988. Mr. Haney graduated from The Citadel in 1956 with a B.S. in Electrical Engineering. He attended the University of Maine and the University of Pennsylvania from 1957-1962 pursuing graduate studies in Electrical Engineering. Prior to joining the Company, Mr. Haney was employed by Xerox Corporation as the President Operations, Development & Artificial Intelligence from 1985 to 1988. From 1973 until 1985, Mr. Haney was employed by Harris Corporation where he held many positions, including the Vice President of Development & MIS. Mr. Haney's term as director will expire at the 1997 Annual Meeting of the Shareholders. SANGWOO AHN was appointed a director of the Company in March 1986. He has been a partner of Morgan, Lewis, Githens and Ahn, L.P. (investment banking) since 1982. Mr. Ahn also serves as a director of Haynes International, Inc., Kaneb Pipe Line Partners, LP Quaker Fabric Corporation, ITI Technologies, Inc., Kaneb Services, Inc. and Stuart Entertainment, Inc. Mr. Ahn's term as director will expire at the 1997 Annual Meeting of the Shareholders. DR. JAMES C. CASTLE was appointed a director of the Company in December 1989. Dr. Castle has been the Chairman and the Chief Executive Officer of U.S. Computer Services Corporation since August 1992. Prior to assuming that position, he was the Chief Executive Officer of Teredata Corporation from August 1991 to April 1992. He also held the position of Chairman of the Board, President and Chief Executive Officer of Infotron Systems Corporation from October 1987 to August 1991. Dr. Castle's term as director will expire at the 1996 33 Annual Meeting of the Shareholders. Dr. Castle also serves as a director of Leasing Solutions, Inc. and ADC Telecommunications, Inc. ALBERT LANE, JR. has served as President of Rome Research Corporation since 1988. He received a B.S. in Economics and Business Administration and an M.S. in Business Administration from Chapman College. Mr. Lane also received an M.S. in Systems Management from the University of Southern California and a Ph.D., Business Administration from the United States International University. DR. JOHN P. RETELLE, JR. has served as President of PAR Government Systems Corporation since November 1993. From July 1993 until November 1993, Dr. Retelle served as Vice President, Advanced Business Development of the Company. From June 1990 until July 1993, Dr. Retelle served as the Program Manager, Advanced Computing Laboratory, R&D Division, of the Lockheed Missiles & Space Company. Dr. Retelle earned a B.S. in aeronautics from the U.S. Air Force Academy in 1963 and a M.S. in 1969 and Ph.D. in 1978, both from the University of Colorado in aerospace engineering sciences. He also completed a Master of Business Administration from Golden Gate University in 1971. Dr. Retelle is a registered Professional Engineer. MR. RONALD J. CASCIANO, C.P.A. serves as the Company's Chief Financial Officer, Vice President, and Treasurer. Mr. Casciano joined the Company in 1983 as Corporate Controller. Mr. Casciano joined PAR from Price Waterhouse where he was an Audit Manager. He is a member of the Financial Executives Institute and has served as President of the Syracuse chapter. Mr. Casciano graduated from LeMoyne College in 1975 with a B.S. in Accounting. CERTAIN TRANSACTIONS In December 1991, PAR Microsystems granted Mr. J. Whitney Haney, President of PAR Microsystems and a director of the Company, a loan for $60,000 with interest at the prime rate, adjusted monthly, and which is due on January 2, 1997. In January 1992, PAR Microsystems granted Mr. Haney an additional loan that totaled $540,000, with interest at the prime rate, adjusted monthly, which is also due on January 2, 1997. The total principal amount of $600,000 of the loan was secured by a Deed to Secure Debt on real estate owned by Mr. Haney and his wife. As of May 17, 1996, the total principal and interest outstanding was $817,831. Pursuant to an agreement approved by the Board of Directors of the Company on April 17, 1996, Mr. Haney exercised options on May 17, 1996 to buy 106,000 shares of Common Stock at an exercise price of $3.00 per share. Mr. Haney immediately surrendered such shares to the Company as payment in full of the outstanding principal and interest of the loans and, in addition received $491,269 in cash from the Company, substantially all of which was withheld for the payment of taxes. Such shares were surrendered at a price of $15.35 per share, which represented the average closing price of the Common Stock over the prior one-month period. 34 PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth information with respect to the beneficial ownership of the Company's Common Stock as of May 17, 1996 and as adjusted to reflect the offering, by (i) each person known by the Company to be the beneficial owner of more than 5% of the outstanding Common Stock, (ii) each director of the Company, (iii) all officers and directors as a group and (iv) the Selling Stockholders. Unless otherwise indicated below, to the knowledge of the Company, all persons listed below have sole voting and investment power with respect to their shares of Common Stock, except to the extent authority is shared by spouses under applicable law.
SHARES BENEFICIALLY SHARES TO BE OWNED PRIOR BENEFICIALLY OWNED TO OFFERING(1) NUMBER OF AFTER OFFERING(1)(2) ---------------------- SHARES ----------------------- NUMBER PERCENT OFFERED(2) NUMBER PERCENT ----------- -------------------- ------------ ---------- DIRECTORS, OFFICERS AND 5% STOCKHOLDERS: Dr. John W. Sammon, Jr. and Deanna D. Sammon(3).... 5,035,885 64.88% 1,175,000(11) 3,860,885 41.91% Charles A. Constantino(4)......... 527,961 6.80% 200,000 327,961 3.56% J. Whitney Haney(5)..... 173,200 2.18% -- 173,200 1.85% Sangwoo Ahn(6).......... 53,500 * -- 53,500 * Albert Lane, Jr.(7)..... 14,845 * -- 14,845 * Dr. John R. Retelle, Jr.(8)................. 10,150 * -- 10,150 * Dr. James C. Castle(9).. 12,500 * -- 12,500 * All Directors and Executive Officers as a Group (8 persons)(10)........... 5,851,691 72.95% 1,375,000 4,476,691 47.27%
-------- *Represents less than 1% (1) Except as otherwise noted, each individual has sole voting and investment power with respect to all shares. (2) Assumes that the Underwriters' over-allotment option is not exercised. (3) Of the shares held by Dr. and Mrs. Sammon, Dr. Sammon has sole voting and investment power as to 4,100,200 shares and Mrs. Sammon has sole voting and investment power as to 935,685 shares. Includes 77,700 held by Dr. Sammon as trustee for the benefit of his daughter under a trust agreement dated July 5, 1983. Includes 158,175 shares held by Mrs. Sammon as custodian for her children. Also includes 600,000 shares currently held by Mrs. Sammon and to be contributed prior to the commencement of the offering to the John W. and Deanna D. Sammon Charitable Trust (the "Charitable Trust"), of which Dr. and Mrs. Sammon are the sole trustees and will share voting and dispositive power over such shares. (4) Does not include 8,800 shares owned by Mr. Constantino's wife, Elaine Constantino. Mr. Constantino disclaims beneficial ownership of such shares. (5) Includes 170,700 shares that Mr. Haney has or will have the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (6) Includes 32,500 shares that Mr. Ahn has the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (7) Represents shares Mr. Lane has or will have the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (8) Represents shares Dr. Retelle has or will have the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (9) Includes 7,500 shares which Dr. Castle has or will have the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (10) Includes 259,345 shares that such persons have the right to acquire within 60 days of May 17, 1996 pursuant to the Company's stock option plans. (11) Of the shares offered, 600,000 will be sold by the Charitable Trust, 397,490 will be sold by Dr. Sammon and 177,510 will be sold by Mrs. Sammon. The address for Dr. John W. Sammon, Jr., Deanna D. Sammon and Charles A. Constantino is c/o PAR Technology Corporation, PAR Technology Park, 8383 Seneca Turnpike, New Hartford, NY 13413-4991. 35 DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 12,000,000 shares of Common Stock and 250,000 shares of Preferred Stock, $0.02 par value per share ("Preferred Stock"). The Board of Directors has recommended for stockholder approval at the Company's Annual Meeting of Stockholders to be held on June 4, 1996, a proposal to increase the Company's authorized capital stock to 20,000,000 shares of Common Stock and 500,000 shares of Preferred Stock. COMMON STOCK Holders of Common Stock are entitled to one vote per share on matters to be voted upon by the stockholders. Holders of Common Stock do not have cumulative voting rights. Accordingly, holders of a majority of the shares of Common Stock can elect all of the directors standing for election. Holders of Common Stock are entitled to receive dividends when and as declared by the Board of Directors and to share ratably in the assets of the Company legally available for distribution to stockholders in the Company. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of Common Stock are subject to, and may be adversely affected by, the rights of holders of shares of any series of Preferred Stock that the Company may designate and issue in the future. All outstanding shares of Common Stock are, and the shares to be sold in the Offering, upon issuance and payment therefor, will be, validly issued, fully paid and nonassessable. As of May 7, 1996, there were 7,752,178 shares of Common Stock outstanding, held by 881 stockholders of record. PREFERRED STOCK The Board of Directors is authorized to issue the Preferred Stock in different series and classes and to fix the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), liquidation preferences and other rights and preferences of the Preferred Stock not in conflict with the Company's Certificate of Incorporation or Delaware law. There are currently no shares of Preferred Stock outstanding. The Board of Directors, without stockholder approval, can issue Preferred Stock with voting and conversion rights that could adversely affect the voting power of holders of Common Stock. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company. The Company has no present plans to issue any shares of Preferred Stock. CERTAIN PROVISIONS OF THE CHARTER AND BY-LAWS AFFECTING STOCKHOLDERS The Company's Amended and Restated Certificate of Incorporation (the "Charter") provides for the division of the Board of Directors into three classes as nearly equal in size as possible with staggered three-year terms. Subject to the rights of holders of any series of Preferred Stock, any director may be removed, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all shares of the Company entitled to vote generally in the election of directors, voting together as a single class. The By-Laws of the Company may be amended or repealed, and new By-Laws adopted, at any time on either the vote of 66 2/3% of the stockholders entitled to vote generally for the election of directors, or the vote of a majority of directors present at a meeting of the Board of Directors, except that amendments of certain By-Laws always requires the vote of 66 2/3% of the stockholders. These By-Laws include provisions dealing with special meetings of stockholders, notice and order of business of stockholder meetings, nominations and elections of directors, and special meetings of the Board of Directors. In addition, amendment of certain provisions of the Charter concerning special meetings of stockholders, unanimous consents of stockholders, number of directors and classification of the Board of Directors, and indemnification of directors require the affirmative vote of holders of at least 66 2/3% of all the shares entitled to vote generally in the election of directors, voting as single class. 36 The Charter contains certain provisions permitted under the Delaware General Corporation Law relating to the liability of directors. These provisions eliminate the directors' liability for monetary damages for a breach of fiduciary duty, except in certain circumstances involving wrongful acts, including the breach of a director's duty of loyalty or acts or omissions which involve intentional misconduct or a knowing violation of a law. The Company's Certificate of Incorporation also contains provisions to indemnify its directors and officers to the fullest extent permitted by the Delaware General Corporation Law. CERTAIN PROVISIONS OF DELAWARE LAW The Company is subject to the provisions of Section 203 of Delaware General Corporation Law. That section generally provides, with certain exceptions, that a Delaware corporation may not engage in any of a broad range of business combinations with a person or affiliate, or associate of such person, who is an "interested stockholder" for a period of three years from the date that such person became an interested stockholder unless the transaction is approved in a prescribed manner. An "interested stockholder" is defined as any person that is (i) the owner of 15% or more of the outstanding voting stock of the corporation or (ii) an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. TRANSFER AGENT The Transfer Agent and the Registrar for shares of the Company's Common Stock is Registrar and Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016. SHARES ELIGIBLE FOR FUTURE SALE Upon consummation of the Offering, the Company will have 9,211,828 shares of Common Stock outstanding and, based on options outstanding at May 17, 1996, approximately 794,220 shares will be issuable upon exercise of outstanding employee stock options. The Company and all of its executive officers and directors who are not Selling Stockholders have agreed that they will not, without the prior written consent of Dillon, Read & Co. Inc., offer, sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of the Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 90 days from the date of the consummation of the offering, except, with respect to the Company, (i) shares of Common Stock issued pursuant to the exercise of outstanding options and (ii) options granted to its employees, officers and directors under its existing employee stock option plans so long as none of such options become exercisable during said 90 day period. Certain stockholders, including the Selling Stockholders, who will hold in the aggregate 4,188,846 shares of Common Stock after the offering, have agreed that they will not, without prior written consent of Dillon, Read & Co. Inc., sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 180 days from the date of the consummation of this offering. The Company can make no predictions as to the effect, if any, that sales of shares or the availability of shares for sale will have on the market price for the Common Stock prevailing from time to time. Nevertheless, sales of substantial amounts of Common Stock in the public market could adversely affect prevailing market prices. 37 UNDERWRITING The names of the Underwriters of the shares of Common Stock offered hereby and the aggregate number of shares that each has severally agreed to purchase from the Company and the Selling Stockholders (subject to the terms and conditions specified in the Underwriting Agreement) are as follows:
UNDERWRITER NUMBER OF SHARES ----------- ---------------- Dillon, Read & Co. Inc. .................................... The Robinson-Humphrey Company, Inc. ........................ Volpe, Welty & Company...................................... --------- Total..................................................... 2,825,000 =========
The Managing Underwriters are Dillon, Read & Co. Inc., The Robinson-Humphrey Company, Inc. and Volpe, Welty & Company. If any shares of Common Stock offered hereby are purchased by the Underwriters, all such shares will be so purchased. The Underwriting Agreement contains certain provisions whereby if any Underwriter defaults in its obligation to purchase such shares and if the aggregate obligations of the Underwriters so defaulting do not exceed 10% of the shares offered hereby, some or all of the remaining Underwriters must assume such obligations. The shares of Common Stock offered hereby are being offered severally by the Underwriters for sale at the price set forth on the cover page hereof, or at such price less a concession not to exceed $ per share on sales to certain dealers. The Underwriters may allow, and such dealers may reallow, a concession not to exceed $ per share on sales to certain other dealers. The offering of the shares of Common Stock is made for delivery when, as, and if accepted by the Underwriters and subject to prior sale and to withdrawal, cancellation or modification of the offer without notice. The Underwriters reserve the right to reject any order for the purchase of the shares. After the shares are released for sale to the public, the public offering price, the concession and the reallowance may be changed by the Managing Underwriters. The Selling Shareholders have granted to the Underwriters an option, which must be exercised within 30 days after the date of this Prospectus, to purchase up to an additional 423,750 shares of Common Stock to cover over- allotments, if any, on the same terms per share. To the extent the Underwriters exercise this option, each Underwriter will be obliged, subject to certain conditions, to purchase the number of additional shares proportionate to such Underwriter's initial commitment. The Company and all of its executive officers and directors who are not Selling Stockholders have agreed that they will not, without the prior written consent of Dillon, Read & Co. Inc., offer, sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of the Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 90 days from the date of the consummation of the offering, except, with respect to the Company, (i) shares of Common Stock issued pursuant to the exercise of outstanding options and (ii) options granted to its employees, officers and directors under its existing employee stock option plans so long as none of such options become exercisable during said 90 day period. Certain stockholders, including the Selling Stockholders, who will hold in the aggregate 4,188,846 shares of Common Stock after the offering have agreed that they will not, without prior written consent of Dillon, Read & Co. Inc., sell, contract to sell, transfer or otherwise dispose of, directly or indirectly, any shares of Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or warrants or other rights to purchase Common Stock, prior to the expiration of 180 days from the date of the consummation of this offering. 38 The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act, or to contribute to payments that the Underwriters may be required to make in respect thereof. The Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority. Dillon, Read & Co. Inc. has provided financial advisory services to the Company during the past 12 months for which Dillon, Read & Co. Inc. received fees in the amount of $50,000. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain legal matters in connection with this offering will be passed upon for the Underwriters by Gibson, Dunn & Crutcher LLP, New York, New York. EXPERTS The consolidated financial statements of the Company as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 39 PAR TECHNOLOGY CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants......................................... F-2 Consolidated Balance Sheet as of December 31, 1994 and 1995, and March 31, 1996 (unaudited)......................................................... F-3 Consolidated Statement of Income for the Years Ended December 31, 1993, 1994 and 1995, and the Three Months Ended March 31, 1995 and 1996 (unau- dited)................................................................... F-4 Consolidated Statement of Changes in Shareholders' Equity for the Years Ended December 31, 1993, 1994, and 1995 and the Three Months Ended March 31, 1996 (unaudited)..................................................... F-5 Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995, and the Three Months Ended March 31, 1995 and 1996 (unaudited).............................................................. F-6 Notes to Consolidated Financial Statements................................ F-7
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of PAR Technology Corporation. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of PAR Technology Corporation and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Syracuse, New York February 13, 1996 F-2 PAR TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEET (IN THOUSANDS EXCEPT SHARE AMOUNTS)
DECEMBER 31, MARCH 31, ---------------- ----------- 1994 1995 1996 ------- ------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash....................................... $ 2,912 $ 458 $ 2,448 Accounts receivable -- net (Note 2)........ 28,103 36,474 29,151 Inventories (Note 3)....................... 16,467 17,801 20,921 Deferred income taxes (Note 7)............. 1,034 1,303 1,129 Other current assets....................... 1,460 1,090 2,470 ------- ------- ------- Total current assets..................... 49,976 57,126 56,119 Property, plant and equipment -- net (Note 4)........................................ 7,716 7,580 7,281 Other assets............................... 2,950 3,367 2,964 ------- ------- ------- $60,642 $68,073 $66,364 ======= ======= ======= LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Notes payable (Note 5)..................... $ -- $ 286 $ 383 Accounts payable........................... 3,632 4,925 4,051 Accrued salaries and benefits.............. 3,874 4,186 3,475 Accrued expenses........................... 1,237 1,534 766 Deferred service revenue................... 2,010 2,214 2,606 Income taxes payable (Note 7).............. 308 1,005 340 ------- ------- ------- Total current liabilities................ 11,061 14,150 11,621 ------- ------- ------- Deferred income taxes (Note 7)............... 936 791 787 ------- ------- ------- Shareholders' Equity (Note 6): Common stock, $.02 par value, 12,000,000 shares authorized; 9,030,787, 9,113,031 and 9,177,884 shares issued 7,656,320, 7,682,425 and 7,747,278 outstanding....... 181 182 184 Preferred stock, $.02 par value, 250,000 shares authorized......................... -- -- -- Capital in excess of par value............. 13,268 13,664 13,901 Retained earnings.......................... 37,074 41,732 42,283 Cumulative translation adjustment.......... (181) (167) (133) Treasury stock, at cost, 1,374,467, 1,430,606 and 1,430,606 shares............ (1,697) (2,279) (2,279) ------- ------- ------- Total shareholders' equity................. 48,645 53,132 53,956 ------- ------- ------- $60,642 $68,073 $66,364 ======= ======= ======= Contingent liabilities (Note 10)
The Accompanying Notes are an Integral Part of the Financial Statements F-3 PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------ ------------------- 1993 1994 1995 1995 1996 ------- ------- -------- --------- --------- (UNAUDITED) Net revenues: Product........................ $43,835 $52,965 $ 58,306 $ 12,342 $ 10,880 Service........................ 19,213 20,823 25,059 5,607 7,677 Contract....................... 18,199 20,742 24,029 6,085 6,937 ------- ------- -------- --------- --------- 81,247 94,530 107,394 24,034 25,494 ------- ------- -------- --------- --------- Costs of sales: Product........................ 25,433 32,527 34,028 7,663 6,778 Service........................ 17,041 17,296 20,807 4,450 6,261 Contract....................... 17,534 19,740 22,492 5,770 6,513 ------- ------- -------- --------- --------- 60,008 69,563 77,327 17,883 19,552 ------- ------- -------- --------- --------- Gross margin................. 21,239 24,967 30,067 6,151 5,942 ------- ------- -------- --------- --------- Operating expenses: Selling, general and adminis- trative....................... 13,009 14,211 17,721 4,179 3,744 Research and development....... 4,239 5,009 5,331 1,333 1,351 ------- ------- -------- --------- --------- 17,248 19,220 23,052 5,512 5,095 ------- ------- -------- --------- --------- Income before provision for in- come taxes...................... 3,991 5,747 7,015 639 847 Provision for income taxes (Note 7).............................. 1,462 2,086 2,357 249 296 ------- ------- -------- --------- --------- Net income....................... $ 2,529 $ 3,661 $ 4,658 $ 390 $ 551 ======= ======= ======== ========= ========= Earnings per common share........ $ .32 $ .46 $ .58 $ .05 $ .07 ======= ======= ======== ========= ========= Weighted average number of common shares outstanding.............. 7,968 7,992 8,068 8,073 8,190 ======= ======= ======== ========= =========
The Accompanying Notes are an Integral Part of the Financial Statements F-4 PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK CAPITAL IN CUMULATIVE TREASURY STOCK ------------- EXCESS OF RETAINED TRANSLATION --------------- SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENT SHARES AMOUNT ------ ------ ---------- -------- ----------- ------ ------- Balance at December 31, 1992................... 8,907 $178 $12,727 $30,884 $(256) (1,371) $(1,675) Net income.............. 2,529 Issuance of common stock upon the exercise of stock options (Note 6) ....................... 69 2 296 Translation adjust- ments.................. (155) ----- ---- ------- ------- ----- ------ ------- Balance at December 31, 1993................... 8,976 180 13,023 33,413 (411) (1,371) (1,675) Net income.............. 3,661 Issuance of common stock upon the exercise of stock options (Note 6)..................... 55 1 245 Translation adjust- ments.................. 230 Acquisition of treasury stock.................. (3) (22) ----- ---- ------- ------- ----- ------ ------- Balance at December 31, 1994................... 9,031 181 13,268 37,074 (181) (1,374) (1,697) Net income.............. 4,658 Issuance of common stock upon the exercise of stock options (Note 6)..................... 82 1 396 Translation adjust- ments.................. 14 Acquisition of treasury stock.................. (57) (582) ----- ---- ------- ------- ----- ------ ------- Balance at December 31, 1995................... 9,113 182 13,664 41,732 (167) (1,431) (2,279) Net income (unaudited).. 551 Issuance of common stock upon the exercise of stock options (Note 6) (unaudited)............ 65 2 237 Translation adjustments (unaudited)............ 34 ----- ---- ------- ------- ----- ------ ------- Balance at March 31, 1996 (unaudited)....... 9,178 $184 $13,901 $42,283 $(133) (1,431) $(2,279) ===== ==== ======= ======= ===== ====== =======
The Accompanying Notes are an Integral Part of the Financial Statements F-5 PAR TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------- -------------------- 1993 1994 1995 1995 1996 ------- ------- ------- --------- --------- (UNAUDITED) Cash flows from operating ac- tivities: Net income................... $ 2,529 $ 3,661 $ 4,658 $ 390 $ 551 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortiza- tion..................... 3,027 2,683 2,414 610 655 Provision for obsolete in- ventory.................. 1,227 1,834 2,072 341 62 Translation adjustments... (155) 230 14 200 34 Increase (decrease) from changes in: Accounts receivable-net... (5,595) 1,337 (8,371) 3,012 7,323 Inventories............... (3,680) (1,994) (3,406) (1,491) (3,182) Other current assets...... (103) (189) 370 (162) (1,380) Other assets.............. (193) (57) (907) 328 245 Accounts payable.......... 496 267 1,293 (749) (874) Accrued salaries and bene- fits..................... 703 560 312 (403) (711) Accrued expenses.......... 601 (874) 297 21 (768) Deferred service revenue.. 20 325 204 259 392 Income taxes payable...... (459) 28 697 526 (665) Deferred income taxes..... 48 231 (414) (448) 170 ------- ------- ------- --------- --------- Net cash provided (used) by operating activities......... (1,534) 8,042 (767) 2,434 1,852 ------- ------- ------- --------- --------- Cash flows from investing ac- tivities: Capital expenditures......... (1,220) (1,726) (1,288) (346) (102) Capitalization of software costs....................... (1,047) (448) (500) (140) (96) ------- ------- ------- --------- --------- Net cash used in investing ac- tivities..................... (2,267) (2,174) (1,788) (486) (198) ------- ------- ------- --------- --------- Cash flows from financing ac- tivities: Net borrowings (payments) under line-of-credit agreements.................. 3,106 (4,087) 286 -- 97 Proceeds from the exercise of stock options............... 298 246 397 67 239 Acquisition of treasury stock....................... -- (22) (582) -- -- ------- ------- ------- --------- --------- Net cash provided (used) by financing activities......... 3,404 (3,863) 101 67 336 ------- ------- ------- --------- --------- Net increase (decrease) in cash and cash equivalents.... (397) 2,005 (2,454) 2,015 1,990 Cash and cash equivalents at beginning of period.......... 1,304 907 2,912 2,912 458 ------- ------- ------- --------- --------- Cash and cash equivalents at end of period................ $ 907 $ 2,912 $ 458 $ 4,927 $ 2,448 ======= ======= ======= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest.................... $ 588 $ 69 $ 20 $ 9 $ 20 Income taxes, net of re- funds...................... 1,418 1,759 1,940 131 764
The Accompanying Notes are an Integral Part of the Financial Statements F-6 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of PAR Technology Corporation and its wholly owned subsidiaries (PAR Microsystems Corporation, PAR Government Systems Corporation, Rome Research Corporation and PAR Vision Systems Corporation), collectively referred to as the "Company." All significant intercompany transactions have been eliminated in consolidation. REVENUE RECOGNITION Revenues from sales of commercial products are generally recorded as the products are shipped, provided that no significant vendor and post-contract support obligations remain and the collection of the related receivable is probable. Costs relating to any remaining insignificant vendor and post- contract obligations are accrued. The Company's service revenues are recognized ratably over the related contract period or as the services are performed. Billings in advance of the Company's performance of such work are reflected as deferred service revenue in the accompanying consolidated balance sheet. The Company's contract revenues result primarily from contract services performed for the United States Government under a variety of cost- reimbursement, time-and-material and fixed-price contracts. Contract revenues, including fees and profits, are recorded as services are performed using the percentage-of-completion method of accounting, primarily based on contract costs incurred to date compared with estimated costs at completion. Anticipated losses on all contracts and programs in process are recorded in full when identified. Unbilled accounts receivable are stated at estimated realizable value. Contract costs, including indirect expenses, are subject to audit and adjustment through negotiations between the Company and government representatives. Contract revenues have been recorded in amounts that are expected to be realized on final settlement. The Company follows accepted industry practice and records amounts retained by the government on contracts as a current asset. STATEMENT OF CASH FLOWS For purposes of reporting cash flows, the Company considers all highly liquid investments, purchased with a remaining maturity of three months or less, to be cash equivalents. The effect of changes in foreign-exchange rates on cash balances is not material. INVENTORIES Inventories are valued at the lower of cost or market, cost being determined on the basis of the first-in, first-out (FIFO) method. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost and depreciated using the straight-line or an accelerated method over the estimated useful lives of the assets, which range from three to twenty years. Expenditures for maintenance and repairs are expensed as incurred. WARRANTIES A majority of the Company's products are under warranty for defects in material and workmanship for various periods of time. The Company establishes an accrual for estimated warranty costs at the time of sale. F-7 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INCOME TAXES The provision for income taxes is based upon pretax earnings with deferred income taxes provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. FOREIGN CURRENCY The assets and liabilities for the Company's international operations are translated into U.S. dollars using year-end exchange rates. Income statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as a separate component of shareholders' equity. Exchange gains and losses on intercompany balances of a long-term investment nature are also recorded as a translation adjustment. Foreign currency transaction gains and losses, which historically have been immaterial, are included in net income. RESEARCH AND DEVELOPMENT COSTS The Company capitalizes certain costs related to the development of computer software under the requirements of Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing feasibility, are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. The unamortized computer software costs included in other assets amounted to $1,801,000 and $1,311,000 at December 31, 1994 and 1995, respectively. Annual amortization, charged to cost of sales, is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product, or the straight-line method over the remaining estimated economic life of the product. Amortization of capitalized software costs amounted to $1,231,000 $1,076,000, and $990,000, in 1993, 1994, and 1995, respectively. EARNINGS PER SHARE Earnings per share are based upon the weighted average number of shares outstanding plus common stock equivalents under the Company's stock option plans. RECLASSIFICATIONS Certain revenues and related costs relating to systems integration activity which previously were reflected as service revenues and costs have been reclassified to product sales and costs. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities and revenues and expenses (as well as disclosures of contingent liabilities) during the reporting period. Actual results could differ from those estimates. INTERIM FINANCIAL DATA The interim financial data is unaudited; however, in the opinion of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. F-8 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2 -- ACCOUNTS RECEIVABLE The Company's accounts receivable consist of:
(UNAUDITED) DECEMBER 31, MARCH 31, --------------- ------------------- 1994 1995 1996 ------- ------- ----------- (IN THOUSANDS) Government segment: United States Government Billed.................................... $ 2,673 $ 2,522 $ 2,414 Unbilled.................................. 2,009 1,474 1,438 ------- ------- ------- 4,682 3,996 3,852 ------- ------- ------- Other -- Billed.................................... 2,898 2,947 3,343 Unbilled.................................. 1,148 681 839 ------- ------- ------- 4,046 3,628 4,182 ------- ------- ------- Commercial segment: Trade accounts receivable-net............... 19,375 28,850 21,117 ------- ------- ------- $28,103 $36,474 $29,151 ======= ======= =======
Included in billed amounts at December 31, 1995 are retentions totaling $95,000. Of these retentions, $39,000 is expected to be collected in 1996. Retained amounts are collectible upon contract completion and the acceptance of costs incurred. At December 31, 1994 and 1995, the Company had recorded a reserve for doubtful accounts of $818,000 and $768,000, respectively, against trade accounts receivable. Trade accounts receivable are primarily with major fast-food corporations or their franchisees. NOTE 3 -- INVENTORIES Inventories are used primarily in the manufacture, maintenance, and service of commercial systems. Inventories are net of related reserves. The components of inventory are:
(UNAUDITED) DECEMBER 31, MARCH 31, --------------- ------------------- 1994 1995 1996 ------- ------- ----------- (IN THOUSANDS) Finished goods.............................. $ 3,891 $ 4,427 $ 5,904 Work in process............................. 1,697 3,337 2,575 Component parts............................. 5,411 3,979 5,459 Service parts............................... 5,468 6,058 6,983 ------- ------- ------- $16,467 $17,801 $20,921 ======= ======= =======
F-9 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment are:
(UNAUDITED) DECEMBER 31, MARCH 31, --------------- ------------------- 1994 1995 1996 ------- ------- ----------- (IN THOUSANDS) Land...................................... $ 253 $ 253 $ 253 Building and improvements................. 8,356 8,371 8,371 Furniture and equipment................... 21,515 21,952 21,929 ------- ------- ------- 30,124 30,576 30,553 Less accumulated depreciation and amortization............................. 22,408 22,996 23,272 ------- ------- ------- $ 7,716 $ 7,580 $ 7,281 ======= ======= =======
The Company has constructed certain facilities at a cost of approximately $216,000 on land it leases from an officer. The terms of the related lease provide that title to the facility will pass to the officer at the end of the lease in 1996. The Company leases office space under various operating leases. Rental expense on these operating leases was approximately $845,000, $817,000 and $879,000 for the years ended December 31, 1993, 1994, and 1995, respectively. Future minimum lease payments under all noncancelable operating leases are (in thousands): 1996............................................................... $ 716 1997............................................................... 287 1998............................................................... 252 1999............................................................... 248 2000............................................................... 180 Thereafter......................................................... 308 ------ $1,991 ======
NOTE 5 -- NOTES PAYABLE The Company has an aggregate of $27,200,000 in bank lines of credit. Certain lines totaling $23,000,000 allow the Company to choose among unsecured borrowings which bear interest at the prime rate (8.5% at December 31, 1995), banker's acceptance borrowings which bear interest at a rate below the prime rate or other bank negotiated rates below prime. These lines are negotiated annually. The remaining line of $4,200,000 is unsecured, bears interest at the prime rate, requires a compensating balance and expires on June 30, 1996. At December 31, 1995, $286,000 was outstanding under these lines at an interest rate of 6.6%. NOTE 6 -- COMMON STOCK The Company had reserved 2,052,500 shares of common stock for issuance under its Stock Option Plans. By November 30, 1994, these Plans had expired. In 1995, the Company reserved 500,000 shares under the 1995 Stock Option Plan. Options under this Plan may be incentive stock options or nonqualified options. Stock options are nontransferable other than upon death and are not exercisable prior to six months from date of grant. A summary of the stock options follows: F-10 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NO. OF SHARES OPTION PRICE TOTAL (IN THOUSANDS) PER SHARE (IN THOUSANDS) -------------- --------------- -------------- Outstanding at December 31, 1992........................... 911 $2.00 -- $15.00 $2,987 Granted....................... 76 4.00 -- 6.06 372 Exercised..................... (69) 3.00 -- 5.00 (228) Forfeited..................... (55) 3.00 -- 11.00 (249) --- ------ Outstanding at December 31, 1993........................... 863 2.00 -- 15.00 2,882 Granted....................... 72 6.50 -- 7.25 476 Exercised..................... (55) 3.00 -- 5.00 (169) Forfeited..................... (21) 3.00 -- 15.00 (110) --- ------ Outstanding at December 31, 1994........................... 859 2.00 -- 13.00 3,079 Granted....................... 38 9.31 -- 10.19 372 Exercised..................... (82) 3.00 -- 5.81 (269) Forfeited..................... (5) 5.25 -- 13.00 (56) --- ------ Outstanding at December 31, 1995........................... 810 2.00 -- 11.25 3,126 Granted (unaudited)........... 181 9.25 -- 9.25 1,670 Exercised (unaudited)......... (65) 3.00 -- 11.25 (242) Forfeited (unaudited)......... (11) 6.50 -- 9.31 (95) --- ------ Outstanding at March 31, 1996 (unaudited).................... 915 $2.00 -- $11.25 $4,459 === ====== Shares remaining available for grant at March 31, 1996 (unaudited)..... 291 === Total shares vested and exercisable as of March 31, 1996 (unaudited)..... 556 ===
NOTE 7 -- INCOME TAXES The provision for income taxes consists of:
(UNAUDITED) YEAR ENDED DECEMBER 31, MARCH 31, ----------------------- ----------- 1993 1994 1995 1996 ------- ------- ------- ----------- (IN THOUSANDS) Current tax expense: Federal............................... $ 826 $ 1,219 $ 2,248 $ 53 State................................. 250 457 542 46 Foreign............................... 161 150 (11) 28 ------- ------- ------- ----- 1,237 1,826 2,779 127 ------- ------- ------- ----- Deferred income tax: Federal............................... 225 260 (422) 169 ------- ------- ------- ----- Provision for income taxes.............. $ 1,462 $2,086 $2,357 $ 296 ======= ======= ======= =====
F-11 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred tax liabilities (assets) are comprised of the following at:
(UNAUDITED) YEAR ENDED DECEMBER 31, MARCH 31, ------------------------- ----------- 1993 1994 1995 1996 ------- ------- ------- ----------- (IN THOUSANDS) Depreciation.......................... $ 712 $ 730 $ 744 $ 731 Software development expense.......... 826 612 446 392 Other................................. 79 136 -- -- ------- ------- ------- ------- Gross deferred liabilities............ 1,617 1,478 1,190 1,123 ------- ------- ------- ------- Reserves.............................. (1,444) (1,132) (1,250) (1,023) Capitalized inventory costs........... (98) (90) (84) (89) Wage and salary accruals.............. (311) (314) (342) (337) Other................................. (93) (40) (26) (16) ------- ------- ------- ------- Gross deferred tax assets............. (1,946) (1,576) (1,702) (1,465) ------- ------- ------- ------- $ (329) $ (98) $ (512) $ (342) ======= ======= ======= =======
Total income tax provision differed from total tax expense as computed by applying the statutory U.S. federal income tax rate to income before taxes. The reasons were:
(UNAUDITED) YEAR ENDED DECEMBER 31, MARCH 31, ------------------------- ----------- 1993 1994 1995 1996 ------- ------- ------- ----------- (IN THOUSANDS) Statutory U.S. federal tax rate...... 34.0% 34.0% 34.0% 34.0% State taxes net of federal benefit... 2.5 5.2 5.1 3.6 Foreign income taxes................. 4.0 2.6 0.8 -- FSC benefit.......................... (1.6) (1.4) (2.6) (2.0) Adjustment to prior years' accrual... -- 2.5 1.8 -- Foreign tax credits.................. (2.1) (6.5) (7.7) -- Other................................ (0.2) (0.1) 2.2 (.7) ------- ------- ------- ---- 36.6% 36.3% 33.6% 34.9% ======= ======= ======= ====
The provision for income taxes is based on income before income taxes as follows:
(UNAUDITED) YEAR ENDED DECEMBER 31, MARCH 31, ----------------------- ----------- 1993 1994 1995 1996 ------- ------- ------- ----------- Domestic operations..................... $ 3,953 $ 5,519 $ 7,697 $1,202 Foreign operations...................... 38 228 (682) (355) ------- ------- ------- ------ Total................................. $ 3,991 $ 5,747 $ 7,015 $ 847 ======= ======= ======= ======
NOTE 8 -- EMPLOYEE BENEFIT PLANS The Company has a deferred profit-sharing retirement plan that covers substantially all employees. The Company's annual contribution to the plan is discretionary. The contributions to the plan in 1993, 1994 and 1995 were approximately $626,000 $749,000 and $824,000, respectively. The plan also contains a 401(K) provision that allows employees to contribute a percentage of their salary. The Company also maintains an incentive compensation plan. Participants in the plan are key employees as determined by executive management. Compensation under the plan is based on the achievement of predetermined financial performance goals of the Company and its subsidiaries. Awards under the plan are F-12 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) payable in cash. For the years ended December 31, 1993, 1994 and 1995, the Company expensed approximately $506,000, $764,000 and $628,000, respectively, in cash awards under the plan. NOTE 9 -- INVESTMENT IN AFFILIATE In June 1992, the Company was approved under the Department of Defense Mentor-Protege Program as a mentor for a minority-owned government contractor, Phoenix Systems and Technologies, Inc. (Phoenix). Concurrent with this approval, the Company acquired a 43.9% interest in Phoenix which is accounted for under the equity method. The Company is a subcontractor to Phoenix on certain engineering service contracts with the United States Government. Additionally, Phoenix rents its office space from the Company. Phoenix is also a vendor to PAR providing manufacturing and some contract services. As a result of this business relationship, PAR had a net receivable from Phoenix of $1,000,000 at December 31, 1994. During 1995, $450,000 of this amount was paid and the Company recorded an allowance for the remainder. During 1995, PAR billed Phoenix approximately $1.6 million and Phoenix billed PAR $1.1 million in connection with the above activities. At December 31, 1995, the Company had recorded $957,000 of receivables relating to 1995 activities. This amount is net of a $282,000 allowance and is included in other assets in the consolidated balance sheet. The Company determined that allowances were necessary as a result of delays in new contract starts, Phoenix exiting certain unprofitable manufacturing activities and the settlement of a contracting claim with the federal government. Also during 1995, as a result of the Company's equity in Phoenix's losses, the Company's remaining investment of $264,000 was written off. During the three months ended March 31, 1996, the Company billed Phoenix $1.0 million for work performed and was paid a total of $803,000. At March 31, 1996, the net receivable due the Company from Phoenix was $1.2 million. In connection with the Mentor-Protege program discussed above, Company management assisted Phoenix in the development of their business plan for 1996 and beyond. This plan, which Phoenix believes to be achievable, anticipates the development of a profitable manufacturing business and continued profitable services business. The plan provides for payment of the amount due the Company over the next three years. The Company has also guaranteed a $1,000,000 line-of-credit borrowing of Phoenix at December 31, 1995. As of March 31, 1996, the guaranteed line of credit was reduced to $900,000. If Phoenix is unable to successfully execute its business plan, the Company could incur additional losses. NOTE 10 -- CONTINGENCIES The Company is subject to legal proceedings which arise in the ordinary course of business. Additionally, Government contract costs are subject to periodic audit and adjustment. In the opinion of Management, the ultimate liability, if any, with respect to these actions will not materially affect the financial position of the Company. NOTE 11 -- INDUSTRY SEGMENTS The Company, through its separate operating subsidiaries, operates in two principal segments: a Commercial segment and a Government segment. The Commercial segment designs, develops, manufactures, sells, installs and services point-of-sale terminal systems for the restaurant industry, industrial data collection systems for manufacturing industries, and image processing systems for the ophthalmic and food-processing industries. The Government segment designs and implements advanced technology computer software systems primarily for military and intelligence agency applications, and provides services for operating and maintaining certain U.S. Government- owned test sites, and for planning, executing and evaluating experiments involving new or advanced radar systems. Inter-segment sales and transfers are not material. F-13 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information as to the Company's operations in these two segments is set forth below:
YEAR ENDED DECEMBER 31, -------------------------- 1993 1994 1995 ------- ------- -------- (IN THOUSANDS) Revenues: Commercial segment United States.................................. $57,636 $67,079 $ 76,984 Europe......................................... 4,352 5,579 6,335 Australia...................................... 3,372 4,299 2,654 Other Non U.S.................................. 1,869 3,190 3,432 Eliminations................................... (4,181) (6,359) (6,040) Government segment.............................. 18,199 20,742 24,029 ------- ------- -------- Total......................................... $81,247 $94,530 $107,394 ======= ======= ======== Income before provision for income taxes: Commercial segment United States.................................. $ 2,104 $ 2,930 $ 4,880 Europe......................................... 395 783 1,047 Australia...................................... 549 840 260 Other Non U.S.................................. 331 215 164 Government segment.............................. 645 1,020 1,389 Corporate....................................... (33) (41) (725) ------- ------- -------- Total........................................ $ 3,991 $ 5,747 $ 7,015 ======= ======= ======== Identifiable assets: Commercial segment United States.................................. $43,826 $39,574 $ 50,186 Europe......................................... 2,335 3,227 3,263 Australia...................................... 1,341 1,341 1,195 Other Non U.S.................................. 1,339 2,920 2,511 Government segment.............................. 9,935 9,834 10,730 Corporate....................................... 1,673 3,746 188 ------- ------- -------- Total......................................... $60,449 $60,642 $ 68,073 ======= ======= ======== Depreciation and amortization: Commercial segment............................. $ 2,609 $ 2,304 $ 1,959 Government segment............................. 232 182 210 Corporate...................................... 186 197 245 ------- ------- -------- Total......................................... $ 3,027 $ 2,683 $ 2,414 ======= ======= ======== Capital expenditures: Commercial segment............................. $ 895 $ 1,051 $ 1,063 Government segment............................. 119 295 137 Corporate...................................... 206 380 88 ------- ------- -------- Total......................................... $ 1,220 $ 1,726 $ 1,288 ======= ======= ========
F-14 PAR TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Customers comprising 10% or more of the Company's Commercial segment sales are summarized as follows:
1993 1994 1995 ---- ---- ---- Taco Bell Corporation........................................ 34% 34% 42% McDonald's Corporation....................................... 31 31 27 KFC.......................................................... 9 10 6 All Others................................................... 26 25 25 --- --- --- 100% 100% 100%
Substantially all revenues derived by the Government segment arise from Federal government contracts, or subcontracts related thereto, virtually all of which are with the Department of Defense. NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments consist of the following:
DECEMBER 31, 1995 -------------- CARRYING FAIR VALUE VALUE -------- ----- (IN THOUSANDS) Cash and cash equivalents........................................ $458 $458 Long-term receivables and other investments...................... 957 957 Notes Payable.................................................... 286 286
Fair value of financial instruments classified as current assets or liabilities approximate carrying value due to the short-term maturity of the instruments. Fair value of long-term receivables and other investments was based on discounted cash flows. NOTE 13--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED -------------------------------- SEPT. 1994 MARCH 31 JUNE 30 30 DEC. 31 ---- -------- ------- ------- ------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net revenues.................................. $20,770 $23,123 $23,903 $26,734 Gross margin.................................. 5,002 5,667 6,617 7,681 Net income.................................... 227 468 1,444 1,522 Earnings per common share..................... $ .03 $ .06 $ .18 $ .19 QUARTER ENDED -------------------------------- SEPT. 1995 MARCH 31 JUNE 30 30 DEC. 31 ---- -------- ------- ------- ------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) Net revenues.................................. $24,034 $24,366 $23,980 $35,014 Gross margin.................................. 6,151 6,494 7,032 10,390 Net income.................................... 390 636 1,533 2,099 Earnings per common share..................... $ .05 $ .08 $ .19 $ .26
F-15 Back ---- The picture at the upper portion of the page illustrates the Company's manufacturing/warehousing information processing system by means of an Intermec portable hand-held data collection terminal, which includes the Company's CIMport/TM/ and CIMprint/TM/ appplication software products. Back ---- The picture at the lower right hand side of the page illustrates two ophthalmologists performing corneal surgery on a patient utilizing the Company's intra-operative corneal topography system. Back ---- The picture at the lower left hand side of the page illustrates the Company's employees manufacturing open architecture POS III touch screen systems. ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA- TION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPEC- TUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO- RIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. --------------- TABLE OF CONTENTS
PAGE ---- Available Information.................................................... 3 Incorporation of Certain Documents by Reference.......................... 3 Prospectus Summary....................................................... 4 Risk Factors............................................................. 6 Use of Proceeds.......................................................... 11 Price Range of Common Stock and Dividend Policy.......................... 12 Capitalization........................................................... 13 Selected Consolidated Financial Data..................................... 14 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 15 Business................................................................. 21 Management............................................................... 33 Certain Transactions..................................................... 34 Principal and Selling Stockholders....................................... 35 Description of Capital Stock............................................. 36 Shares Eligible for Future Sale.......................................... 37 Underwriting............................................................. 38 Legal Matters............................................................ 38 Experts.................................................................. 38 Index to Consolidated Financial Statements............................... F-1
------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- PAR TECHNOLOGY CORPORATION --------------- 2,825,000 SHARES COMMON STOCK PROSPECTUS , 1996 --------------- DILLON, READ & CO. INC. THE ROBINSON-HUMPHREY COMPANY, INC. VOLPE, WELTY & COMPANY ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Estimated expenses (other than underwriting discounts and commissions), all of which will be borne by the Registrant, payable in connection with the sale of the Common Stock offered hereby are as follows: Registration Fee................................................... $ 17,504 NASD Filing Fee.................................................... 5,576 Printing and Engraving Expenses.................................... 80,000 Legal Fees and Expenses............................................ 175,000 Accounting Fees and Expenses....................................... 25,000 Blue Sky Fees and Expenses (including legal fees).................. 15,000 Miscellaneous...................................................... 56,920 -------- Total............................................................ $375,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of Delaware empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that the or she is or was a director, officer, employee or agent of the corporation or another enterprise if serving at the request of the corporation. Depending on the character of the proceeding, a corporation may indemnify against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding if the person indemnified acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action by or in the right of the corporation, no indemnification may be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that despite the adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses that the court shall deem proper. Section 145 further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to above, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him or her in connection therewith. The Registrant's Certificate of Incorporation provides that the Registrant shall, to the fullest extent permitted by law, indemnify all directors, officers, employees and agents of the company. The Certificate of Incorporation also contains a provision eliminating the liability of directors of the Registrant to the Registrant or its stockholders for monetary damage, except under certain circumstances. The Certificate of Incorporation also permits the Registrant to maintain insurance to protect itself and any director, officer, employee or agent against any liability with respect to which the Corporation would have the power to indemnify such persons under the Delaware General Corporation Law. The Registrant maintains an insurance policy insuring its directors and officers against certain liabilities. II-1 ITEM 16. EXHIBITS. 1.1* Form of Underwriting Agreement. 3.1 Certificate of Incorporation, as amended. 3.2 Form of Certificate of Amendment to the Certificate of Incorporation. 3.3 By-laws, as amended. 4 Specimen Certificate representing the Common Stock. 5* Opinion of Testa, Hurwitz & Thibeault, LLP. 10.1+ Agreement between Taco Bell Corporation and PAR Microsystems Corporation, dated December 18, 1995. 10.2+ Service Integration Agreement between Taco Bell and PAR Microsystems Corporation, dated September 12, 1995. 11 Statement re: Computation of Earnings per Share. 23.1 Consent of Price Waterhouse LLP. 23.2* Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5). 24 Power of Attorney (see page II-3).
-------- * To be filed by amendment. + Confidential treatment requested as to certain portions. ITEM 17. UNDERTAKINGS. The registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where appropriate, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN NEW HARTFORD, NEW YORK ON MAY 20, 1996. PAR TECHNOLOGY CORPORATION: /s/ John W. Sammon By:__________________________________ POWER OF ATTORNEY AND SIGNATURES We, the undersigned officers and directors of PAR Technology Corporation hereby severally constitute and appoint Dr. John W. Sammon, Jr., Gregory T. Cortese and Ronald J. Casciano true and lawful attorneys with full power to each of them singly, to sign for us and in our names in the capacities indicated below, the Registration Statement on Form S-2 filed herewith and any and all pre-effective and post-effective amendments to said Registration Statement, and, in connection with any registration of additional securities pursuant to Rule 462(b) under the Securities Act of 1933, to sign any abbreviated registration statement and any and all amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, in each case, with the securities and Exchange Commission, and generally to do all such things in our names and on our behalf in our capacities as officers and directors to enable PAR Technology Corporation to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Registration Statement and any and all amendments thereto. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE(S) DATE /s/ John W. Sammon Chairman of the May 20, 1996 ------------------------------------- Board of Directors DR. JOHN W. SAMMON, JR. and President /s/ Charles A. Constantino Executive Vice May 20, 1996 ------------------------------------- President and CHARLES A. CONSTANTINO Director /s/ J. Whitney Haney President, PAR May 20, 1996 ------------------------------------- Microsystems and J. WHITNEY HANEY Director /s/ Sangwoo Ahn Director May 20, 1996 ------------------------------------- SANGWOO AHN /s/ James C. Castle Director May 20, 1996 ------------------------------------- DR. JAMES C. CASTLE II-3 EXHIBIT INDEX
EXHIBITS PAGE -------- ---- 1.1* Form of Underwriting Agreement. 3.1 Certificate of Incorporation, as amended. 3.2 Form of Certificate of Amendment to the Certificate of Incorporation. 3.3 By-laws, as amended. 4 Specimen Certificate representing the Common Stock. 5* Opinion of Testa, Hurwitz and Thibeault, LLP. 10.1+ Agreement between Taco Bell Corporation and PAR Microsystems Corporation, dated December 18, 1995. 10.2+ Service Integration Agreement between Taco Bell and PAR Microsystems Corporation, dated September 12, 1995. 11 Statement re: Computation of Earnings per Share. 23.1 Consent of Price Waterhouse LLP. 23.2* Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5). 24 Power of Attorney (See page II-3).
-------- * To be filed by amendment. + Confidential treatment requested as to certain parties. EX-3.1 2 CERTIFICATE OF INCORPORATION, AS AMENDED EXHIBIT 3.1 CERTIFICATE OF MERGER MERGING PAR TECHNOLOGY CORPORATION, a New York corporation INTO PAR TECHNOLOGY CORPORATION, a Delaware corporation Pursuant to Section 252 of the General Corporation Law of the State of Delaware ------------------------------------------------------------------------------- Pursuant to the provisions of Section 252 of the General Corporation Law of the State of Delaware, It is hereby certified that: 1. The constituent business corporations participating in the merger herein certified are: (i) PAR Technology Corporation ("Old PAR"), which is incorporated under the laws of the State of New York; and, (ii) PAR Technology Corporation ("PAR Technology Corporation"), which is incorporation under the laws of the State of Delaware and is the surviving corporation. 2. An Agreement and Plan of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 252 of the General Corporation Law of the State of Delaware, to wit, by Old Par in accordance with the laws of the State of its incorporation and by PAR Technology Corporation in the same manner as provided in Section 252 of the General Corporation Law of the State of Delaware. 3. The name of the surviving corporation in the merger herein certified is PAR Technology Corporation, which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the General Corporation Law of the State of Delaware. 4. The Certificate of Incorporation of PAR Technology Corporation, as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the General Corporation Law of the State of Delaware. 5. The executed Agreement and Plan of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows: 220 Seneca Turnpike New Hartford, NY 13413 6. A copy of the aforesaid Agreement and Plan of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations. 7. The authorized capital stock of Old PAR consists of (a) 25,000,000 shares of Common Stock, par value $.02 per share, of which (A) 7,547,037 shares are issued and outstanding on the date hereof, and (B) 902,246 shares are issuable from time to time upon exercise of outstanding stock options. IN WITNESS WHEREOF, the undersigned have caused this Certificate of Merger to be executed as of the 15th of April, 1993. PAR TECHNOLOGY CORPORATION, a Delaware corporation Attest: /s/ Gregory T. Cortese By: /s/ John W. Sammon ---------------------- ------------------ Gregory T. Cortese, John W. Sammon Secretary President and CEO CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION PAR Technology Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of PAR Technology Corporation be amended by changing Section 1. of the Fourth Article thereof so that, as amended, said Section and Article shall be and read as follows: The Corporation shall have authority to issue twelve million two hundred fifty thousand (12,250,000) shares of stock, par value $.02 per share consisting of twelve million (12,000,000) shares of Common Stock and two hundred fifty thousand (250,000) shares of Preferred Stock, par value $.02 per share. SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said PAR Technology Corporation has caused this certificate to be signed by John W. Sammon, Jr. its President and Chairman of the Board of Directors and attested by Gregory T. Cortese, its Secretary, this 17 day of -- March, 1993. PAR Technology Corporation By /s/ John W. Sammon ---------------------------------------------- President & Chairman of the Board of Directors ATTEST: By /s/ Gregory T. Cortese -------------------------- Secretary CERTIFICATE OF INCORPORATION OF PAR TECHNOLOGY CORPORATION ---------------------------------------------------------- FIRST The name of the Corporation is PAR Technology Corporation (the "Corporation"). SECOND The address of the registered office of the Corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at that address is The Corporation Trust Company. THIRD The purpose of the Corporation is to engage in any lawful act or activity for which a Corporation may be organized under the General Corporation Law of the State of Delaware. FOURTH 1. The Corporation shall have authority to issue thirty-five million (35,000,000) shares of stock, par value $.02 per share consisting of 30,000,000 shares of common stock and five million (5,000,000) shares of Preferred Stock, par value $.02 per share. 2. The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, prior to issuance of any series of Preferred Stock, to fix by resolution or resolutions providing for the issue of such series the number of shares included in such series and the voting powers, designations, preferences, and relative, participating, optional and other special rights, and the qualifications, limitations of restrictions thereof. Pursuant to the foregoing general authority vested in the Board of Directors, but not in limitation of the powers conferred on the Board of Directors thereby and by Delaware Law, the Board of Directors is expressly authorized to determine with respect to each series of Preferred Stock: (a) the designation or designations of such series and the number of shares (which number from time to time may be decreased by the Board of Directors, but not below the number of such shares then outstanding, or may be increased by the Board of Directors, but not in excess of the number of such shares then authorized, unless otherwise provided in the resolution creating such series) constituting such series; (b) the rate or amount and times at which, and the preferences and conditions under which, dividends shall be payable on shares of such series, the status of such dividends as cumulative or noncumulative, the date or dates from which dividends, if cumulative, shall accumulate, and the status of such shares as participating or nonparticipating after the payment of dividends as to which such shares are entitled to any preference. -2- (c) the rights and preferences, if any, of the holders of shares of such series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which amount may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and the status of the shares of such series as participating or nonparticipating after the satisfaction of any such rights and preferences; (d) the full or limited voting rights, if any, to be provided for shares of such series, in addition to the voting rights provided by law; (e) the times, terms and conditions, if any, upon which shares of such series shall be subject to redemption, including the amount the holders of shares of such series shall be entitled to receive upon redemption (which amount may vary under different conditions or at different redemption dates) and the amount, terms, conditions and manner of operation of any purchase, retirement or sinking fund to be provided for the shares of such series; (f) the rights, if any, of the Corporation or the holders of shares of such series to convert such shares into, or to exchange such shares for, shares of any other class or classes or of any other series of the same class or other securities of the Corporation, the prices or rates of conversion or exchange, and adjustments thereto, and any other items and conditions applicable to such conversion or exchange; (g) the limitations, if any, applicable while such series is outstanding on the payment of dividends or making of distributions on, or the acquisition or redemption of, Common Stock or any other class of shares ranking junior, either as to dividends or upon liquidation, to the shares of such series; (h) the conditions or restrictions, if any, upon the issue of any additional shares (including additional shares of such series or of any other class) ranking on a parity with or prior to the shares of such series either as to dividends or upon liquidation; and (i) any other relative powers, preferences and relative, participating, optional or other special rights, and qualification, limitations or restrictions thereof, of shares of such series; In each case, so far as not inconsistent with the provisions of this Certificate of Incorporation or Delaware Law. All shares of Preferred Stock shall be identical and of equal rank except in respect to the particulars that may be fixed by the Board of Directors as provided above, and all shares of each series of Preferred Stock shall be identical and of equal rank except as to the times from which cumulative dividends, if any, thereon shall be cumulative. 3. Shares of any series of Preferred Stock which have been acquired by the Corporation, whether by purchase or redemption or by their having been converted into or exchanged for other shares of the Corporation, shall upon their acquisition and without any other action by the Corporation resume the status of authorized but unissued shares of Preferred Stock -3- and may be reissued as shares of the series of which they were originally a part or may be issued as shares of a new series or as shares of any other series. 4. Except as otherwise provided by Delaware Law or by any resolution adopted by the Board of Directors fixing the powers, preferences and rights, the qualifications, limitations or restrictions, of the Preferred Stock, the entire voting power of the shares of the Corporation for the election of Directors and for all other purposes, as well as all other rights pertaining to shares of the Corporation, shall be vested exclusively in the Common Stock. Each share of Common Stock shall have one vote upon all matters to be voted on by the holders of the Common Stock and share ratably, subject to the rights and preferences of the Preferred Stock, in all assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, or upon any distribution of the assets of the Corporation. 5. Shares of capital stock of the Corporation may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors, and shares issued for such consideration shall be fully paid and non-assessable. FIFTH The duration of the Corporation is to be perpetual. SIXTH Except as required by law, and subject to the rights of holders of any series of Preferred Stock, established pursuant to Article Fourth of this Certificate of Incorporation, a special meeting of shareholders may be called at any time by the Board of Directors, the Chairman or the President, and shall be called only by the Board of Directors or the Chairman or the President pursuant to a resolution approved by a majority of the then authorized number of Directors of the Corporation. Any such call must specify the matter or matters to be acted upon at such meeting and only such matter or matters shall be acted upon thereat. Any such meeting shall be at such time and at such place, within or without the State of Delaware, as shall be set forth in the Board of Directors' resolution calling for such meeting. SEVENTH Any action required or permitted to be taken by the shareholders of the Corporation must be effected at an annual or special meeting of shareholders of the Corporation, and no action required to be taken or that may be taken at any annual or special meeting of shareholders of the Corporation may be taken without a meeting except by the unanimous written consent of all shareholders entitled to vote on such action. -4- EIGHTH 1. The number of directors of the Corporation shall be fixed in accordance with the By-Laws of the Corporation, and may be increased or decreased from time to time in such a manner as may be prescribed in the By-Laws of the Corporation. 2. Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot. 3. The directors, other than those who may be elected by the holders of any series of preferred stock, voting as a separate class, shall be divided into three classes, as nearly equal in number as possible. One class of directors shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1993, another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1994, and another class shall be initially elected for a term expiring at the annual meeting of shareholders to be held in 1995. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the shareholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected, in accordance with the By-Laws of the Corporation, to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. NINTH No contract or other transaction of the Corporation shall be void, voidable, fraudulent or otherwise invalidated, impaired or affected, in any respect, by reason of the fact that any one or more of the officers, directors or shareholders of the Corporation shall individually be a party or parties thereto or otherwise interested therein or shall be officers, directors or shareholders of any other Corporation or corporations which shall be a party or parties thereto or otherwise interested therein; provided that such contract or other transaction shall be duly authorized or ratified by the Board of Directors, with the asserting vote of a majority of the disinterested directors then present, or, if only one such is present, with his assenting vote. TENTH The By-Laws of the Corporation or any of them may be amended or repealed, in any respect, and new By-laws may be adopted, at any time, either (i) by an affirmative vote of 66 2/3% of the shareholders entitled to vote generally for the election of directors or (ii) by an affirmative vote of a majority of the directors present at a meeting of the Board of Directors, in each case, in accordance with the terms of the By-Laws. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, Section 3 ("Special Meetings") or Section 7 ("Order of Business") of Article II ("Meeting of Stockholders") of the By-Laws Section 2, ("Number, Election and Terms") or Section 3 ("Nominations of Directors, Elections") or Section 6 ("Special Meetings") of Article III ("Directors") of the By-Laws, or the final sentence of Article XII ("Amendments") of the By-Laws shall not be amended or repealed and no provision, inconsistent with any thereof shall be adopted without the affirmative vote of the -5- 66 2/3% of the shareholders entitled to vote generally for the election of directors, voting together as a single class. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the 66 2/3% of the shareholders entitled to vote generally for the election of directors, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, any provision of this Article TENTH. ELEVENTH 1. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, Articles Sixth, Seventh, Eighth and Twelfth hereof shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 66 2/3% of all of the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 66 2/3% of all of the shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal or adopt any provision inconsistent with this paragraph (1) of Article Eleventh. 2. The Corporation reserves the right to amend, alter, change or repeal any provision contained in its Certificate of Incorporation, or any amendment thereof, in the manner now or thereafter prescribed by the laws of the State of Delaware of this Certificate of Incorporation, and all rights conferred upon the shareholders of the corporation are granted subject to this reservation. TWELFTH 1. A Director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve international misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. 2. If, after approval of this Article by the shareholders of the Corporation, the Delaware General Corporation Law is amended to authorize the further elimination or limitation of the liability of directors, the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. 3. Any repeal or modification of this Article by the shareholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification. -6- THIRTEENTH The name and mailing address of the incorporator is as follows: Gregory T. Cortese Vice President, General Counsel & Secretary PAR Technology Corporation 220 Seneca Turnpike New Hartford, NY 13413 /s/ Gregory T. Cortese ----------------------------- Gregory T. Cortese Incorporator EX-3.2 3 FORM OF AMENDMENT TO CERTIFICATE OF INCORPORATION EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION PAR Technology Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of PAR Technology Corporation be amended by changing Section 1. of the Fourth Article thereof so that, as amended, said Section and Article shall be and read as follows: The Corporation shall have authority to issue twenty million five hundred thousand (20,500,000) shares of stock, par value $.02 per share consisting of twenty million (20,000,000) shares of Common Stock and five hundred thousand (500,000) shares of Preferred Stock, par value $.02 per share. SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said PAR Technology Corporation has caused this certificate to be signed by John W. Sammon, Jr. its President and Chairman of the Board of Directors and attested by Gregory T. Cortese, its Secretary, this___day of _______, 1996. PAR Technology Corporation By -------------------------------------------- President & Chairman of the Board of Directors ATTEST: By ---------------------- Secretary EX-3.3 4 BY-LAWS OF PAR TECHNOLOGY, AS AMENDED EXHIBIT 3.3 BY-LAWS OF PAR TECHNOLOGY CORPORATION ARTICLE I OFFICES Section 1. Delaware Office. The office of PAR Technology Corporation (the "Corporation") within the State of Delaware shall be in the City of Wilmington, County of New Castle. Section 2. Other Offices. The Corporation may also have an office or offices and keep the books and records of the Corporation, except as otherwise may be required by law, in such other place or places, either within or without the State of Delaware, as the Board of Directors of the Corporation may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place of Meetings. All meetings of holders of shares of capital stock of the Corporation shall be held at the office of the Corporation in the State of Delaware or at such other place, within or without the State of Delaware, as may from time to time be fixed by the Board. Section 2. Annual Meetings. An annual meeting of shareholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting (an "Annual Meeting) shall be held on such date and at such time as may be fixed by the Board. If the Annual Meeting shall not be held on the day designated, the Board shall call a special meeting of shareholders as soon as practicable for the election of directors. Section 3. Special Meetings. Except as required by law, and subject to the rights of holders of any series of Preferred Stock, established pursuant to Article Fourth of the Certificate of Incorporation, a special meeting of shareholders may be called at any time by the Board of Directors, the Chairman or the President, and shall be called only by the Board of Directors or the Chairman or the President pursuant to a resolution approved by a majority of the then authorized number of Directors of the Corporation (as determined in accordance with Section 2 of Article III of these By-Laws). Any such calls must specify the matter or matters to be acted upon at such meeting and only such matter or matters shall be acted upon thereat. Section 4. Notice of Meetings. Except as otherwise may be required by law, notice of each meeting of shareholders, whether an Annual Meeting or a special meeting, shall be in writing, shall state the purpose or purposes of the meeting, the place, date and hour of the meeting and, unless it is an Annual Meeting, shall indicate that the notice is being issued by or at the direction of the person or persons calling the meeting, and a copy thereof shall be delivered or sent by mail, not less than 10 nor more than 60 days before the date of said meeting, to each shareholder at his address as it appears on the stock records of the Corporation, unless he shall have filed with the Secretary a written request that notices to him be mailed to some other address, in which case it shall be directed to him at such other address. Notice of an adjourned meeting need not be given if the time and place to which the meeting is to be adjourned was announced at the meeting at which the adjournment was taken, unless (i) the adjournment is for more than 30 days or (ii) the Board shall fix a new record date for such adjourned meeting after the adjournment. Whenever any notice is required to be given under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws, a waiver thereof, signed by the shareholder entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a shareholder at the meeting shall be deemed equivalent to a written waiver of notice of such meeting. Section 5. Quorum. At each meeting of shareholders of the Corporation, the holders of shares having a majority of the voting power of the capital stock of the Corporation issued and outstanding and entitled to vote thereat shall be present or represented by proxy to constitute a quorum for the transaction of business, except as otherwise provided by law. Section 6. Adjournments. In the absence of a quorum at any meeting of shareholders or any adjournment or adjournments thereof, holders of shares having a majority of the voting power of the capital stock present or represented by proxy at the meeting may adjourn the meeting from time to time until a quorum shall be present or represented by proxy, any business may be transacted which might have been transacted at the meeting as originally called if a quorum had been present or represented by proxy thereat. Section 7. Order of Business. (a) At the Annual Meeting, only such business shall be conducted as shall have been brought before the Annual Meeting (i) by or at the direction of the Board of Directors of (ii) by any shareholder who complies with the procedures set forth in this Section 7. At any special meeting, only such business shall be conducted as shall have been set forth in the notice of such meeting. (b) For business properly to be brought before an Annual Meeting by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the Annual Meeting; provided, however, that if the event that less than 70 days' notice or prior public disclosure of the date of the Annual Meeting is given or made to shareholders, notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure was made. To be in proper written form, a shareholder's notice to the Secretary shall be set forth in writing as to each matter the shareholder proposes to bring before the Annual Meeting: (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business; (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder; and (iv) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the Annual Meeting of shareholders except in accordance with the procedures set forth in this Section 7. The chairman of an Annual Meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the Annual Meeting in accordance with the provisions of this Section 7 and, if he should so determine, he shall so declare to the Annual Meeting and any such business not properly brought before the Annual Meeting shall not be transacted. Section 8. Voting. Except as otherwise provided in the Certificate of Incorporation of the Corporation or in a resolution of the Board of Directors adopted pursuant to the Certificate of Incorporation establishing a series of Preferred Stock of the Corporation ("Preferred Stock"), at each meeting of shareholders, every shareholder of the Corporation entitled to vote at a meeting of shareholders shall be entitled to one vote for every share outstanding in his name on the stock records of the Corporation (i) at the time fixed pursuant to Section 6 of Article Vll of these By-Laws as the record date for the determination of shareholders entitled to vote at such meeting, or (ii) if no such record date shall have been fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given. At each meeting of shareholders, all matters (except as otherwise provided in Section 3 of Article III of these By-Laws and except in cases where larger vote is required by law or by the Certificate of Incorporation of the Corporation or these By- Laws) shall be decided by a majority of the votes cast at such meeting by the holders of shares of capital stock present or represented by proxy and entitled to vote thereon, a quorum being present. Section 9. Proxies. Any shareholder entitled to vote at any meeting of the shareholders or to express consent to or dissent from corporate action without a meeting may authorize another person or persons to vote at any such meeting and express such consent or dissent for him by proxy. A shareholder may authorize a valid proxy by executing a written instrument signed by such shareholder, or by causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature, or by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent. No such proxy shall be voted or acted upon after the expiration of three years from the date of such proxy, unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where applicable law provides that a proxy shall be irrevocable. A shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by fling another duly executed proxy bearing a later date with the Secretary. Proxies by telegram, cablegram or other electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the shareholder. Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. Section 10. Inspectors of Elections. Preceding any meeting of the shareholders, the Board of Directors shall appoint one or more persons to act as Inspectors of Elections, and may designate one or more alternate inspectors. In the event no inspector or alternate is able to act, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of an inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall: (a) ascertain the number of shares outstanding and the voting power of each; (b) determine the shares represented at a meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (e) certify his or her determination of the number of shares represented at the meeting, and his or her count of all votes and ballots. The inspector may appoint or retain other persons or entities to assist in the performance of the duties of inspector. When determining the shares represented and the validity of proxies and ballots, the inspector shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 9 of these By-Laws, ballots and the regular books and records of the Corporation. The inspector may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers or their nominees or a similar person which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the shareholder holds of record. If the inspector considers other reliable information as outlined in this section, the inspector, at the time of his or her certification pursuant to (e) of this section shall specify the precise information considered, the person or persons from whom the information was obtained, when this information was obtained, the means by which the information was obtained, and the basis for the inspector's belief that such information is accurate and reliable. Section 11. Opening and Closing of Polls. The date and time for the opening and the closing of the polls for each matter to be voted upon at a shareholder meeting shall be announced at the meeting. The inspector of the election shall be prohibited from accepting any ballots, proxies or votes nor any revocations thereof or changes thereto after the closing of the polls, unless the Court of Chancery upon application by a shareholder shall determine otherwise. ARTICLE III DIRECTORS Section 1. Powers. The business of the Corporation shall be managed under the direction of the Board. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law or otherwise directed or required to be exercised or done by the shareholders. Section 2. Number, Election and Terms. The authorized number of directors may be determined from time to time by a vote of a majority of the then authorized number of directors; provided, however, that such number shall not be less than a minimum of three nor more than a maximum of fifteen; and provided, further, that such number and such minimum and maximum may be increased or decreased pursuant to resolution of the Board. Subject to Sections 9 and 10 of Article lll of these By-Laws, the directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1993 Annual Meeting of Shareholders, the term of office of the second class to expire at the 1994 Annual Meeting of Shareholders and the term of office of the third class to expire at the 1995 Annual Meeting of Shareholders. Each director shall hold office until his respective successor has been duly elected and qualified. At each Annual Meeting of Shareholders, commencing with the 1993 Annual Meeting, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Shareholders after their election, with the directors to hold office until their respective successor shall have been duly elected and qualified. Vacancies and newly created directorships resulting from any increase in the authorized number of directors, and any vacancies on the Board resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board, or by a sole remaining directors, and the directors so chosen shall hold office, subject to Sections 9 and 10 of Article lll of these By-Laws until the next Annual Meeting of shareholders and until their respective successors are elected and qualified. No decrease in the number of directors constituting the Board shall shorten the terms of any incumbent director. Section 3. Nominations of Directors, Elections. Nominations for the election of directors may be made by the Board or a committee appointed by the Board, or by any shareholder entitled to vote generally in the election of directors who complies with the procedures set forth in this Section 3. Directors shall be at least 21 years of age. Directors need not be shareholders. At each meeting of shareholders for the election of directors at which a quorum is present, the persons receiving a plurality of the votes cast shall be elected directors. All nominations by shareholders shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper written form, such shareholder's notice shall set forth in writing (i) as to each person whom the shareholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitation of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or any successor regulation or law including, without limitation, such person's written consent to being named in the proxy statement as a nominee and to serving as director if elected; and (ii) as to the shareholder giving the notice, (x) the name and address, as they appear on the Corporation's books, of such shareholder and (y) the class and number of shares of the Corporation which are beneficially owned by such shareholder. In the event that a shareholder seeks to nominate one or more directors, the Secretary shall appoint two inspectors, who shall not be affiliated with the Corporation, to determine whether a shareholder has complied with this Section 3. If the Inspectors shall determine that a stockholder has not complied with this Section 3, the inspectors shall direct the chairman of the meeting to declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By-Laws of the Corporation, and the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Section 4. Place of Meetings. Meetings of the Board shall be held at the Corporation's office in the State of Delaware or at such other place, within or without such State, as the Board may from time to time determine or as shall be specified or fixed in the notice or waiver of notice of any such meeting. Section 5. Regular Meetings. Regular meetings of the Board shall be held in accordance with a yearly meeting schedule as determined by the Board; or such meetings may be held on such other days and at such other times as the Board may from time to time determine. Notice of regular meetings of the Board need not be given except as otherwise required by these By-Laws. Section 6. Special Meetings. Special meetings of the Board may be called by the Chairman or the President and shall be called by the Secretary at the request of any two of the other directors. Section 7. Notice of Meetings. Notice of each special meeting of the Board and of each regular meeting for which notice shall be required), stating the time, place and purposes thereof, shall be mailed to each director, addressed to him at his residence or usual place of business, or shall be mailed to each director, addressed to him at his residence or usual place of business, or shall be sent to him by telex, cable or telegram so addressed, or shall be given personally or by telephone on 24 hours' notice. Section 8. Quorum and Manner of Acting. The presence of at least a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business at any meeting of the Board. If a quorum shall not be present at any meeting of the Board, a majority of the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Except where a different vote is required or permitted by law or these By-Laws or otherwise, the act of a majority of the directors present at any meeting at which a quorum shall be present shall be the act of the Board. Any action required or permitted to be taken by the Board may be taken without a meeting if all the directors consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consent thereto by the directors shall be filed with the minutes of the proceedings of the board. Any one or more directors may participate in any meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall be deemed to constitute presence in person at a meeting of the Board. Section 9. Resignation. Any director may resign at any time by giving written notice to the Corporation; provided, however, that written notice to the Board, the Chairman of the Board, the President or the Secretary shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Section 10. Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock any director may be removed from office, with or without cause, by the affirmative vote of the holders of a majority of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Section 11. Compensation of Directors. The Board may provide for the payment to any of the directors, other than officers or employees of the Corporation, of a specified amount for services as director or member of a committee of the Board, or of a specified amount for attendance at each regular or special Board meeting or committee meeting, or of both, and all directors shall be reimbursed for reasonable expenses of attendance at any such meeting; provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 12. Waiver of Notice. Whenever any notice is required to be given under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-laws, a waiver thereof, signed by the director entitled to such notice, whether before or after the time stated herein, shall be deemed equivalent thereto. Attendance of a director at a meeting shall be deemed equivalent to a written waiver of notice of such meeting. ARTICLE IV COMMITTEES OF THE BOARD Section 1. Appointment and Powers of Executive Committee. The Board may, by resolution adopted by the affirmative vote of majority of the authorized number of directors, designate an Executive Committee of the Board which shall consist of such number of members as the Board shall determine. Except as provided by Delaware law, during the interval between the meetings of the Board, the Executive Committee shall possess and may exercise all the power of the Board in the management and direction of all the business and affairs of the Corporation (except the matters hereinafter assigned to any other Committee of the board) in such manner as the Executive Committee shall deem in the best interests of the Corporation in all cases in which specific directions shall not have been given by the Board. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business by the committee and the act of a majority of the members of the committee present at a meeting at which a quorum shall be present shall be the act of the committee. Either the Chairman or the Board or the Chairman of the Executive Committee may call the meetings of the Executive Committee. Section 2. Appointment and Powers of Audit Committee. The Board may, by resolution adopted by the affirmative vote of a majority of the authorized number of directors, designate an Audit Committee of the board, which shall consist of such members as the Board shall determine. The Audit Committee shall (i) make recommendations to the Board as to the independent accountants to be appointed by the Board; (ii) review with the independent accountants the scope of their examination; (iii) receive the reports of the independent accountants and meet with representatives of such accountants for the purpose of reviewing and considering questions relating to their examination and such reports; (iv) review, either directly or through the independent accountants, the internal accounting and auditing procedures of the Corporation; and (v) perform such other functions as may be assigned to it from time to time by the Board. The Audit Committee may determine its manner of acting and fix the time and place of its meetings, unless the Board shall otherwise provide. A majority of the members of the Audit Committee shall constitute a quorum for the transaction of business by the committee and the act of a majority of the members of the committee present at a meeting which a quorum shall be present shall be the act of the committee. Section 3. Other Committees. The Board may, by resolution adopted by the affirmative vote of a majority of the authorized number of directors, designate members of the Board to constitute such other committees of the Board as the Board may determine. Such committees shall in each case consist of such number of directors as the board may determine, and shall have and may exercise, to the extent permitted by law, such powers as the Board may delegate to them, in the respective resolutions appointing them. Each such committee may determine its manner of acting and fix the time and place of its meeting, unless the Board shall otherwise provide. A majority of the members of any such committee present at a meeting at which a quorum shall be present shall be the act of the Committee. Section 4. Action by Consent: Participation by Telephone or Similar Equipment. Unless the Board shall otherwise provide, any action required or permitted to be taken by any committee may be taken without a meeting if all members of the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the committee shall be filed with the minutes of the proceedings of the committee. Unless the Board shall otherwise provide, any one or more members of any such committee may participate in any meeting of the committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another. Participation by such means shall constitute presence in person at a meeting of the committee. Section 5. Changes in Committees: Resignations, Removals. The Board shall have power, by the affirmative vote of a majority of the authorized number of directors, at any time to change the members of, to fill vacancies in, and to discharge any committee of the Board. Any member of any such committee may resign at any time by giving notice to the Corporation; provided, however, that notice to the Board, the Chairman of the Board, the President, the chairman of such committee or the Secretary shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Any member of any such committee may be removed at any time, either with or without cause, by the affirmative vote of a majority of the authorized number of directors at any meeting of the Board called for that purpose. ARTICLE V OFFICERS Section 1. Number and Qualification. The Corporation shall have such officers as may be necessary or desirable for the business of the Corporation. There shall be elected by the Board of Directors persons having the titles and exercising the duties (as prescribed by the By-Laws or by the Board) of the Chairman of the Board, President, one or more Vice President, any of whom, upon his or her election, may be designated an Executive Vice President or Senior Vice President, Treasurer and Secretary, and such other persons having such other titles and such other duties as the Board may prescribe. The same person may hold more than one office. The Chairman of the Board shall be elected from among the directors. The Chairman of the Board may appoint one or more deputy, associate or assistant officers, or such other agents as may be necessary or desirable for the business of the corporation. In case one or more deputy, associate or assistant officers shall be appointed, the officer such appointee assists may delegate to him the authority to perform such of the officer's duties as the officer may determine. Unless otherwise determined by the Board, the officers of the Corporation shall be elected by the Board at the annual meeting of the Board, and shall be elected to hold office until the next succeeding meeting of the Board. In the event of the failure to elect officers at such annual meeting, officers may be elected at any regular or special meeting of the Board. Each officer shall hold office until his successor has been elected and qualified, or until his earlier death, resignation or removal. Section 2. Resignations. Any officer may resign at any time by giving written notice to the Corporation; provided, however, that notice to the Board, the Chairman of the Board, the President or the Secretary shall be deemed to constitute notice to the Corporation. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3. Removal. Any officer or agent may be removed, either with or without cause, at any time, by the Board at any meeting called for that purpose; provided, however, that the Chairman of the Board may remove any agent appointed by him. Section 4. Vacancies. Any vacancy among the officers, whether caused by death, resignation, removal or other cause, shall be filled in the manner prescribed for election or appointment to such office. Section 5. Chairman of the Board. The Chairman of the Board shall be the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have the direction and control of the business, affairs and property of the Corporation and be responsible for the coordination of the corporate and financial policies and the day-to-day operations of the Corporation, and shall cause all orders and resolutions of the Board of Directors to be carried into effect. The Chairman of the Board shall if present, preside at all meetings of the Board and of the shareholders. He shall perform the duties incident to the office of the Chairman of the Board and have such other powers and perform all such other duties as are specified in these By-Laws or as shall be assigned to him from time to time by the Board of Directors. He shall perform the duties incident to the office of the President and all such other duties as are specified in these By-Laws or as shall be assigned to him from time to time by the Board. Section 6. President. The President shall be the Chief Operating Officer of the Corporation and shall, subject to the control of the Chairman of the Board, be responsible for the day-to-day operations of the Corporation. In the absence of the Chairman of the Board or if there shall be no such officer, the President shall preside at all meetings of the shareholders and of the Board of Directors at which he is present. Section 7. Vice President. Each Vice President shall perform such duties and exercise such powers as may be assigned to him from time to time by a resolution of a majority of the Board of Directors, the Chairman of the Board or the President. The Vice President designated by the Board of Directors (or, in the absence of such designation, by the Chairman of the Board) shall, at the request of the Chairman of the Board or the President, or in the event of the absence or disability of both of such officers, perform all the duties of the Chairman of the Board of Directors or the President. When so acting, such designated Vice President shall have the powers of and be subject to all the restrictions upon the Chairman of the Board of Directors or the President or both, as the case may be. Section 8. Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation, shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, shall deposit all moneys and other valuable to the credit of the Corporation in such depositories as may be designated pursuant to these By-Laws, shall receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever, shall disburse the funds of the Corporation and shall render to all regular meetings of the Board, or whenever the Board may require, an account of all his transactions as Treasurer. He shall, in general, perform all the duties incident to the office of Treasurer and all such other duties as may be assigned to him from time to time by the Board of Directors, Chairman of the Board, President or such other officer to whom the Treasurer reports. Section 9. Secretary. The Secretary shall, if present, act as secretary of, and keep the minutes of all meetings of the Board, the Executive Committee and other committees of the Board and the shareholders in one or more books provided for that purpose, shall see that all notices are duly given in accordance with these By-Laws and as required by law, shall be custodian of the seal of the Corporation and shall affix and attest the seal to all documents to be executed on behalf of the Corporation under its seal. He shall, in general, perform all the duties incident to the office of Secretary and all such other duties as may be assigned to him from time to time by the Board of Directors, Chairman of the Board, President or such other officer to whom the Secretary reports. Section 10. Additional Officers. The Board of Directors may by resolution appoint such other officers and agents as it may deem appropriate, and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors. The Board of Directors from time to time may delegate to any officer or agent the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any such officer or agent may remove any such subordinate officer or agent appointed by him, with or without cause. Section 11. Bonds of Officers. If required by the Board, any officer of the Corporation shall give a bond for the faithful discharge of his duties in such amount and with such surety or sureties as the Board may require. ARTICLE VI CONTRACTS, CHECKS, LOANS, DEPOSITS, ETC. Section 1. Contracts. The Chairman of the Board or President may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. In addition, the Board may authorize any officer or officers, agent or agents, in the name and on behalf of the Corporation, to enter into any contract or to execute and deliver any instrument, which authorization may be general or confined to specific instances; and, unless so authorized by the Board, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or for any amount. Section 2. Checks, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation in such manner as shall from time to time be authorized by the Board, which authorization may be general or confined to specific instances. Section 3. Loans. No loan shall be obtained or contracted for by or on behalf of the Corporation, and no negotiable paper shall be issued in its name, unless authorized by the Board, which authorization may be general or confined to specific instances. Any officer or agent of the Corporation thereunto so authorized may obtain loans and advances for the Corporation, and for such loans and advances may make, execute and deliver promissory notes, bonds, or other evidences of indebtedness of the Corporation and may pledge, hypothecate or transfer as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, any and all stocks, bonds, other personal property, securities or receivables at any time owned by the Corporation or to which it is or will be at any time entitled, and to the end may endorse, assign and deliver the same and do every act and thing necessary or proper in connection therewith. Section 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as may be selected by or in the manner designated by the Board or as may be selected or in a manner designated by any officer or officers authorized so to do by the Board. The Board or its designees may make such special rules and regulations with respect so such bank accounts, not inconsistent with the provisions of the Certificate of Incorporation or these By-Laws, as they may deem advisable. Section 5. Proxies. Proxies to vote with respect to shares of stock of other corporations owned by or standing in the name of the Corporation may be executed and delivered from time to time on behalf of the Corporation by the Chairman of the Board or the President, or any Vice President or other person or persons thereunto authorized by the Board of Directors. ARTICLE VII CAPITAL STOCK Section 1. Stock Certificates. Each shareholder shall be entitled to have, in such form as shall be approved by the Board, a certificate or certificates signed by the Chairman of the Board or the President, and by either the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary (except that, when any such certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or an employee of the Corporation, the signatures of any such officers may be facsimiles, engraved or printed), which may be sealed with the seal of the Corporation.(which seal may be a facsimile, engraved or printed), certifying the number of shares of capital stock of the Corporation owned by such shareholder. In the event any officer who has signed or whose facsimile signature has been placed upon any such certificate shall have ceased to be such officer before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. Section 2. List of Shareholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make or cause to be prepared or made, at least 10 days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting arranged in alphabetical order, and showing the address of each shareholder and the number of shares of capital stock registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting for the duration thereof, and my be inspected by an yshareholder of the Corporation who is present. Section 3. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list required by Section 2 of this Article VII or the books of the Corporation, or to vote in person or by proxy at any meeting of shareholders. Section 4. Transfers of Capital Stock. Transfers of shares of capital stock of the Corporation shall be made only on the stock ledger of the Corporation by the holder of record thereof, by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, or by the transfer agent of the Corporation, and only on surrender of the certificate or certificates representing such shares, properly endorsed or accompanied by a duly executed stock transfer power. The Board may make such additional rules and regulations as it may deem advisable concerning the issue and transfer of certificates representing shares of the capital stock of the Corporation. Section 5. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 6. Fixing of Record Date. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividends or other distributions or allotments of any rights, or entitled to exercise any rights in respect to any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 7. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have express or other notice thereof, except as otherwise provided by law FISCAL YEAR The Corporation's fiscal year shall coincide with the calendar year. ARTICLE IX INDEMNIFICATION Section 1. Nature of Indemnity. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer, of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe his conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) such indemnification shall be limited to expenses (including - attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made - in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. The termination of any action, suit or proceeding by judgment, order settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Successful Defense. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 hereof or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 3. Determination That Indemnification is Proper. Any indemnification of a director or officer of the Corporation under Section 1 hereof (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the director or officer is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Section 1 hereof. Any indemnification of an employee or agent of the corporation under Section 1 hereof (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 hereof. Any such determination shall be made (1) by the Board of Directors by a majority - vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the shareholders. - Section 4. Advance Payment of Expenses. Expenses (including attorneys' fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. The Board of Directors may authorize the Corporation's counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 5. Procedure for Indemnification of Directors and Officers. Any indemnification of a director or officer of the Corporation under Section 1 and 2, or advance of costs, charges and expenses to a director or officer under Section 4 of this Article, shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved such request. If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and to enforce a claim for the advance of costs, charges and expenses under Section 4 of this Article where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 1 of this Article, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 of this Article, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel, and its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 6. Survival; Preservation of Other Rights. The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the Delaware Corporation Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a "contract right" may not be modified retroactively without the consent of such director, officer, employee or agent. The indemnification provided by this Article IX shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7. Insurance. The Corporation shall purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors. Section 8. Severability. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE X SEAL The Corporate seal shall be circular in form and shall bear the name of the Corporation and words and figures denoting Its organization under the laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board of Directors. ARTICLE XI WAIVER OF NOTICE Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws to be given to any director, member of a committee or shareholder, a waiver thereof in writing, signed by the person entitled to such notice, whether signed before or after the time stated in such written waiver, shall be deemed equivalent to such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when such person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the shareholders, directors, or members of a committee of directors need be specified in any written waiver of notice. ARTICLE XII AMENDMENTS These By-laws or any of them may be amended, repealed, in any respect, and new By-laws adopted at any time, either (i) at any annual or special shareholders' meeting, by an affirmative vote of 66 2/3% of the shareholders of the Corporation entitled to vote generally in the election of directors provided that any amendment, repeal or new By-Laws proposed to be acted upon at any such meeting shall have been described or referred to in the notice of such meeting or (ii) by an affirmative vote of a majority of the directors present at any organizational, regular, or special meeting of the Board of Directors provided that any amendment, repeal or new by-Law proposed to be acted upon at any such meeting shall have been described or referenced to in the notice of such meeting or an announcement with respect thereto shall have been made at the last previous board meeting. Notwithstanding the foregoing and anything contained in these By-Laws to the contrary, Section 3 ("Special Meetings") or Section 7 ("Order of Business") of Article II ("Meeting of Shareholders") of the By-Laws; Section 2 ("Number, Election and Terms"), Section 3 ("Nominations of Directors, Elections") or Section 6 ("Special Meetings") of Article III ("Directors") of the By-Laws; or Article XII ("Amendments") of the By-Laws shall not be amended or repealed and no provision inconsistent with any thereof shall be adopted without the affirmative vote of the 66 2/3% of the shareholders entitled to vote generally for the election of directors, voting together as a single class. Notwithstanding anything contained in these By-Laws to the contrary, the affirmative vote of the 66 2/3% of the shareholders entitled to vote generally for the election of directors, voting together as a single class shall be required to amend or repeal, or adopt any provision inconsistent with, any provision or this Article XII. ARTICLE XIII CONSTRUCTION In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of the Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such certificate of incorporation shall be controlling. EX-4 5 SPECIMEN CERTIFICATE REPRESENTING COMMON STOCK EXHIBIT 4 ----------- NUMBER ----------- COMMON STOCK COMMON STOCK PAR VALUE $.02 PAR VALUE $.02 THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NY OR CRAWFORD, NJ. [SYMBOL OF PAR TECHNOLOGY CORPORATION APPEARS HERE] PAR Technology Corporation INCOPORATED UNDER THE LAWS OF THE STATE OF DELAWARE This is to certify that is the owner of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF PAR Technology Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrant. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: Countersigned and Registered: NY of New York REGISTRAR AND TRANSFER COMPANY New Jersey Transfer Agent and Registrar [SIGNATURES APPEAR HERE] Authorized Signature Secretary President ----------- SHARES ----------- [SEAL OF PAR TECHNOLOGY APPEARS HERE] The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM --as tenants in common UNIF GIFT MIN ACT--......Custodian...... (Cust) (Minor) TEN ENT --as tenants by the entireties under Uniform Gifts to Minors JT TEN --as joint tenants with right of survivorship and not as tenants Act.................... in common (State) Additional abbreviations may also used not in the above list. For value received________hereby sell, assign, and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OR ASSIGNEE --------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------Shares represented by the within Certificate and do hereby irrevocably constitute and appoint --------------------------------------------------------------------- -------------------------------------------------------------------------------- Attorney to transfer the said shares on the books of the within named Corporation with full power of substitution in the provisions Dated ---------------------- ------------------------------ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR REARRANGEMENT OR ANY CHANGE WHATEVER. EX-10.1 6 AGREEMENT BETWEEN TACO BELL AND PAR MICROSYSTEMS EXHIBIT 10.1 [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. AGREEMENT BETWEEN TACO BELL CORPORATION & PAR MICROSYSTEMS CORPORATION DECEMBER 18, 1995 ----------------- AGREEMENT THIS AGREEMENT is made as of 18th day of December 1995 by and between -- Taco Bell Corp., a California corporation, having a principal place of business at 17901 Von Karman, Irvine, CA (hereinafter referred to as "Buyer") and PAR Microsystems Corporation, having a principal place of business at PAR Technology Park, 8383 Seneca Turnpike, New Hartford, New York 13413-1191 (hereinafter referred to as "Vendor"). WITNESSETH: WHEREAS, Vendor designs, develops and manufactures microprocessor based computer restaurant point of sale ("POS") equipment, WHEREAS, Buyer wishes to purchase certain Vendor POS equipment for use in Buyer's Taco Bell and Hot'n Now restaurants and in any other restaurants, where Vendor has designed the equipment to be used, which may be subsequently purchased by Buyer (collectively hereinafter referred to as "Buyer's restaurants"), WHEREAS, Vendor desires to sell such POS equipment to Buyer for use in Buyer's restaurants, and WHEREAS, the Parties now wish to enter into an agreement for the purchase of such POS equipment. NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND OF THE MUTUAL PROMISES HEREIN CONTAINED AND INTENDING TO BE LEGALLY BOUND HEREBY THE PARTIES DO HEREBY AGREE AS FOLLOWS: 1. DEFINITIONS: ----------- For purposes of this Agreement including all Exhibits attached hereto, the following words shall have the following definitions: A. Components - Means those individual units of POS ---------- equipment/hardware or accessories as set forth in Exhibit A including, but not limited to, Counter and/or Drive-Thru POS Terminals, CRT Videos, Printers and other POS peripherals as may be sold or purchased under this Agreement. B. Programs - Means all computer programs and integrated groups -------- of programs and microcode (including but not limited to those relating to communications and operating systems) which Vendor integrates with its hardware components to form Vendor's computerized POS III system. "Programs" shall not include source code. 1 of 19 C. Documentation - Means all listings, descriptions, manuals, ------------- specifications, coding (including object code in machine readable format), layouts, instructions, and like materials. "Documentation" shall not include source code. D. System(s) - Means all Components including those set forth in --------- Exhibit A hereto, along with related Programs making up Vendor's keyboard or touch LCD POS III System product. The parties understand that a System may be comprised of a varying mix of different configurations of Components depending upon the sales volume, sales mix and physical layout of each Taco Bell or Hot'n Now Restaurant. E. Days - Means calendar days unless otherwise noted. ---- F. Escrowed Material - means all necessary information, including but ----------------- not limited to (i) the Programs and associated Documentation, (ii) the source code, (iii) the Component parts list and supplier list, and (iv) any and all other System/Component specifications which Vendor uses to maintain and support the Systems/Components and/or Programs. G. Delivery or Deliver - Means shipment by Vendor to either a ------------------- segregated area within Vendor's facility or to another facility of Vendor's choice (hereinafter collectively referred to as a "Vendor facility") or to a location designated by Buyer, F.O.B. Vendor's facility, New Hartford, New York. 2. TERM OF AGREEMENT: ----------------- This Agreement shall become effective as of the date first set forth above and shall terminate [CONFIDENTIAL TREATMENT REQUESTED] (hereinafter referred to as the "Term"). 3. TERRITORY: --------- During the Term and subject to Vendor's good faith determination that it has the capability and that it is commercially practical, in any particular country outside the United States, to obtain the necessary approvals/certifications to deliver the Components/Systems, Programs and associated Documentation into such country and to meet the governmental laws and regulations of such country, Vendor agrees to provide Components/Systems and license Programs and Documentation to Buyer worldwide (hereinafter the "Territory"), which in any event shall include the United States, Canada and the islands of the Caribbean. 4. AGREEMENT TO PURCHASE: --------------------- A. (1) Subject to and in accordance with the terms and conditions set forth in this Agreement, Buyer, through its designee or its purchasing agent PFS, agrees to purchase and take Delivery from Vendor of a minimum of [CONFIDENTIAL TREATMENT REQUESTED] for the restaurants in which the Systems are to [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 2 of 19 be installed (hereinafter collectively the "Minimum Purchase Commitment"). In satisfying the Minimum Purchase Commitment obligation, Buyer, through its designee or its purchasing agent PFS, agrees to purchase and take Delivery from Vendor of a minimum of [CONFIDENTIAL TREATMENT REQUESTED]. (2) Taco Bell can, in satisfying its Minimum Purchase Commitment, purchase such Systems through a purchasing agent other than PFS (i.e. a third party leasing company) provided: (i) such third party understands and agrees that it is purchasing such Systems as an agent for Taco Bell, that such third party agrees to be bound by all the terms and conditions of the Agreement, and that all sales will be made in accordance with the specific terms and conditions set forth in this Agreement, and (ii) Taco Bell understands and agrees that it will not be relieved of its obligations under this Agreement and will comply with all terms and conditions of such. B. Vendor's Programs and associated Documentation may, at Buyer's discretion, be licensed by Buyer to be used in accordance with the license provisions of this Agreement. There is no required minimum quantity of copies of the Programs and associated Documentation which must be licensed by Buyer. C. All Systems, Components, and/or Programs purchased/licensed by Buyer under this Agreement shall be purchased or licensed for use only in Buyer's or Buyer's franchisees' restaurants. 5. ORDERS, DELIVERY, AND INSTALLATION: ---------------------------------- A. (1.) Using its best efforts to issue such not later than Sixty (60) Days prior to a requested installation date, Buyer shall issue separate order releases (hereinafter "Order(s)") or "Release(s)") against this Agreement, specifying to Vendor the Systems/Components it wishes to order and the date and place each such item is requested to be installed. (2.) If Buyer issues its Release for an order at least sixty (60) Days prior to Buyer's requested installation date then such requested date shall become the scheduled installation date. If Buyer fails to issue its Release for an particular order at least sixty (60) Days prior to the requested installation date for such order then Vendor shall promptly notify Buyer of the date it has scheduled for installation. If the date differs from that requested by Buyer in its Release and if Buyer objects to the date Vendor has scheduled for installation the parties shall mutually agree upon a scheduled installation date. B. (1) At the time of signing this Agreement and again on the same date of each month thereafter during the Term, Buyer should look forward a minimum [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 3 of 19 of six (6) months and provide Vendor with a schedule which reflects the total number of Systems/Components which are projected by Buyer to be required for installation in Buyer's or Buyer's franchisee's restaurants over such next six months (hereinafter the "Total System Projection"). The parties agree that the first three (3) months of each monthly Total System Projection shall be fixed and once provided, absent Vendor's consent, shall not be subsequently modified by Buyer. (2) Parties agree that at any time during the Term, Vendor may rely upon such total number of Systems/Components which are projected to be required for installation in Buyer's or Buyer's franchisee's restaurants over the then next three (3) months (hereinafter "Next 3 Month's Systems/Components") and elect, in its good faith discretion, to the extent the Next 3 Month's Systems/Components projections exceeds the quantity of Buyer's Systems/Components which have been Delivered and are then stored in Vendor's facility, to (a.) batch produce the remainder of such Next 3 Month's Systems/Components, (b.) ship such Systems/Components to either the location designated by Buyer on any outstanding Releases, or if no location is designated by Buyer prior to the date Vendor is ready to ship such Systems/Components to a Vendor facility, and (c.) invoice Buyer for such shipped Systems/Components under payment terms, net thirty (30) Days from Buyer's receipt of invoice and Buyer shall be deemed to have taken Delivery of such Systems/Components with legal and equitable title passing to Buyer upon such shipment; provided however, the Next 3 Month's Systems/Components projection shall in no event entitle Vendor to produce or Deliver any Systems in excess of the Minimum Purchase Commitment, unless Buyer expressly orders additional Systems/Components. C. For all Systems/Components Delivered pursuant to this Agreement to a Vendor facility then, notwithstanding the fact that legal and equitable title to such Systems/Components shall have passed to Buyer upon Vendor's shipment to such locations, Vendor, as bailee, will bear the cost of shipment to such facility, cost of storage and risk of loss for those Systems/Components shipped to such locations and shall provide appropriate proof of adequate insurance (with an aggregate deductible no greater than $5,000) to Buyer's benefit until such Systems are actually shipped to a location designated by Buyer. Vendor shall use all of Buyer's stored Systems/Components to fulfill shipments to locations designated Buyer in its Releases prior to using any Systems/Components subsequently produced. Buyer shall incur a reasonable storage charge payable monthly for all Systems/Components which continue to be stored at a Vendor facility, due to causes outside Vendor's reasonable control, [CONFIDENTIAL TREATMENT REQUESTED]. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 4 of 19 D. Within seven (7) working Days after the end of each calendar month during the Term hereof, Vendor shall send to Buyer a Shipment Report in the form attached hereto as Exhibit C and incorporated herein by reference with respect to shipments of Systems/Components and/or Programs made during such calendar month. Such Shipment Report shall be sent via fax as follows: Taco Bell Purchasing Department Attn: Director of Equipment Purchasing (714) 863-2274 E. (1) Throughout the United States, Canada, islands of the Caribbean and all portions of the Territory where Vendor has determined pursuant to Paragraph 3 of this Agreement to sell and install Systems/Components, Vendor, or a third party contracted by Vendor, shall install all Systems/Components hereunder in accordance with Exhibit D (hereinafter "Basic Installation"). At the request of Buyer, Vendor shall also provide, at the time of installation, basic training and monitoring as set forth in Exhibit D. In addition to the Basic Installation, Vendor shall, at the request of Buyer and pursuant to terms and conditions to be negotiated by the parties, offer non-basic/customized installation, training and/or monitoring services (i.e. rollouts, deinstallation of existing POS systems, etc.) in such portions of the Territory. (2) Buyer shall designate on the applicable Release whether or not it wants Vendor to perform training and/or monitoring at the time the Systems/Components are installed in Buyer's restaurants. (3) If Vendor plans to contract with a third party to perform the installation, training and/or monitoring on Vendor's behalf, Vendor shall notify Buyer of the name of the third party it intends to contract with. F. Buyer shall be responsible for assuring that each restaurant has completed all of the requirements set out in the Vendor "Pre-Installation Guide/Instructions" as set out in Exhibit E to this Agreement. For those situations where the Pre-Installation Guide/Instructions does not accurately reflect all of the requirements (i.e. Hot'n Now) the parties will cooperate to modify the Guide's requirements to accommodate such situations. Any reasonable, additional costs incurred by Vendor as a result of Buyer's failure to complete all of the requirements of this Pre-Installation Guide shall be borne by Buyer if such cost would have been avoided by reasonable compliance with the instructions set froth in the Pre-Installation Guide. G. (1.) For Basic Installations as defined in Exhibit D attached hereto, performed directly by Vendor or its designated agent, should Vendor or its designated agent fail to complete an installation, due to causes within its reasonable control, within five (5) Days of the date the parties mutually agreed the installation was to be completed and such delay either causes a delay in the planned opening of a restaurant or has a significant economic detrimental effect on the operation of a restaurant, then Vendor will reduce the applicable Basic Installation price for such late installation [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 5 of 19 and if the installation is not completed within ten (10) Days of the date the parties mutually agreed the installation was to be completed, then Buyer may either (i) revoke its acceptance of the Systems/Components and receive a full refund of the monies paid for such Systems/Components and then go into the marketplace and purchase substantially similar Systems/Components from a third party with the difference between what Buyer actually pays and the applicable purchase price stated in this Agreement, to the extent such difference does not exceed [CONFIDENTIAL TREATMENT REQUESTED], to be paid by Vendor to Buyer; or (ii) may obtain the services of a third party to install the Systems/Components and Vendor will reimburse Buyer for the reasonable cost of such installation. Even if Buyer chooses to revoke and purchase a third party's system/components for such location the Systems/Components revoked shall count towards the satisfaction of Buyer's applicable purchase commitment so as not to reduce the discount to which Buyer would otherwise be entitled to. (2.) Failure by Vendor or Vendor's designated agent on [CONFIDENTIAL TREATMENT REQUESTED] of the date the parties mutually agreed the installation was to be completed shall constitute a material breach of this Agreement. H. (1.) If due to causes within Buyer's reasonable control, Buyer causes a delay which results in the inability to complete an installation on the date the parties mutually agreed the installation was to be completed or Buyer shall reschedule an installation within two weeks of a Scheduled Installation Date, then Vendor shall invoice Buyer for all reasonable additional travel, lodging, meals and other related expenses incurred by Vendor as a result of such delay. (2.) Also, if on the date the installation was to be performed, Buyer causes a delay which results in the inability of the installation personnel to commence the installation within [CONFIDENTIAL TREATMENT REQUESTED] of the time they arrive at the site, then in addition to any additional travel, lodging, meals and other related expenses incurred by Vendor as a result of such delay, [CONFIDENTIAL TREATMENT REQUESTED]. I. Unless shipping instructions are specifically set forth by Buyer on its Release or communicated in writing to Vendor prior to Vendor making actual shipment commitments, Vendor shall have the responsibility of selecting the particular route and carrier for the shipment of the equipment to Buyer. Except as otherwise provided herein, risk of loss shall pass to buyer upon shipment. J. In the event Buyer intends to install Systems/Components in a country other than the United States, Canada or the Islands of the Caribbean, Buyer will provide Vendor within [CONFIDENTIAL TREATMENT REQUESTED] of the anticipated [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 6 of 19 installation date written notice of such intention. Upon receipt of such notice, Vendor will within sixty (60) Days notify Buyer of whether or not in Vendor's opinion i is possible and practical for vendor to perform such installation. K. Legal and equitable title to the Systems/Components free and clear of all liens, security interests, or encumbrances shall automatically pass from Vendor to Buyer upon Delivery. Parties agree that Vendor will receive a purchase money security interest in the Components upon shipment which shall be extinguished promptly upon payment by Buyer. L. Vendor shall assist Buyer with the shipping of the purchases, filing freight claims, finding and locating lost shipments, and in other actions with respect to shipping customs work which are necessary and reasonable at the request of Buyer. Vendor will utilize adequate shipping containers and packaging. 6. PRICES: ------ A. Subject to Subparagraph 6B. below, the net purchase price to be invoiced by Vendor and to be paid by Buyer for (1.) the Minimum Purchase Commitment (excluding the Programs and Documentation) shall be the price determined by [CONFIDENTIAL TREATMENT REQUESTED] the List Prices set forth in Exhibit B hereto, and (2.) the Programs and Documentation licenses purchased by Buyer shall be the price determined by [CONFIDENTIAL TREATMENT REQUESTED] the List Prices set forth in exhibit B hereto. B. All prices stated hereunder are FOB New Hartford, New York and are stated in United States dollars. Unless otherwise agreed to in writing by the parties, Buyer is responsible for all applicable shipping charges and insurance associated with shipment of the Systems/Components to the location designated by Buyer, sales, use, or any similar tax or any import or export duties, tariffs or other costs incurred to obtain the necessary approvals/certifications to deliver the Systems/Components into a country outside the United States and to meet the governmental laws and regulations of such country. Thus, in addition, to the prices so specified in this Agreement, the amounts of any such present or future taxes or other charges or fees applicable to the purchase, export and/or import of the Systems/Components, Programs or services, to be provided under this Agreement shall be paid by Buyer. C. Subject to Subparagraph 6B. of this Agreement above, the Systems/Components, basic Installation, training and monitoring prices set forth in Exhibit B attached hereto shall be fixed for the Term of this Agreement. [CONFIDENTIAL TREATMENT REQUESTED]. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 7 of 19 7. PAYMENT: ------- A. Payment in full for the Minimum Purchase Commitment for all applicable Program and Documentation licenses, and for all freight insurance, import and/or export duties and any other applicable fees, taxes and/or charges directly incurred therewith, is due and payable thirty (30) Days from the date of Buyer's receipt of invoice. B. Payment for, installation, monitoring, and training and any other applicable fees and/or charges shall be invoiced by Vendor upon completion of installation and shall be due and payable thirty (30) Days from the date of Buyer's receipt of invoice. C. Interest on overdue amounts shall be payable at the rate of twelve percent (12%) per annum commencing thirty (30) Days after its due date. All payments shall be made in United States dollars. D. Vendor will invoice Buyer upon Delivery. 8. SOFTWARE DEVELOPMENT: -------------------- A. From time to time during the Term of this Agreement, modifications and/or enhancements to the Programs and Documentation may be requested by Buyer. Buyer's requests shall define the exact functions, features, and/or requirements of such modifications or enhancements. Vendor shall review such requests and if not unreasonable shall submit a proposal to Buyer within thirty (30) Days of receipt of the request setting forth the development time frames and pricing. Upon mutual agreement to applicable terms and conditions for such software development Vendor will use its best efforts to develop and provide such modifications and/or enhancements to Buyer. B. Subject to Subparagraph 8A. above, Vendor agrees to develop any modifications and/or enhancements to the Programs and Documentation which may be necessary in order to comply with local government financial, revenue and/or tax reporting requirements of any country outside the United States where Vendor determines that it has the capability and it is commercially practical to deliver, install and service the Components/Systems within such country. 8 of 19 9. SYSTEM IMPROVEMENTS: ------------------- Vendor agrees to make available and sell or license to Buyer such improvements, releases, enhancements, extensions, options, upgrades and other changes (collectively referred to as "improvements") to the Components and/or Programs as they are made available for distribution to any other customers of Vendor, except those improvements which are proprietary to such customers at a price which shall be no greater than that given, in the normal course of business to other customers of Vendor purchasing a like system in the same volume and under substantially the same terms and conditions as Buyer has hereunder. In addition, except as may be required by Subparagraph 15A.(2)d below, Vendor agrees that it will provide Buyer with six (6) months prior written notice of any plan to modify the Systems/Components and/or Programs which will be sold to Buyer under this Agreement if such intended modification will significantly affect either (i) the Buyer's operation of the Component and/or Program, (ii) the operation of the restaurant or (iii) the functionality of the Systems provided, however, this shall not impair Buyer's right to purchase from Vendor during the Term and under the provisions of this Agreement, the specific Systems/Components and/or Programs Buyer has contracted for to the extent of Buyer's Minimum Purchase Commitment or any Optional Purchase Commitment. 10. LICENSE OF PROGRAMS: ------------------- A. Notwithstanding any provision herein to the contrary, title to any Programs and Program Documentation (including any copies thereof) shall remain vested in Vendor. Subject to the terms and conditions of this Agreement, Vendor hereby grants to Buyer, its successors in interest and the franchisees and licensees of its restaurant or food service formats, a nontransferable, nonexclusive, royalty free limited License to use the Programs, in machine readable form and associated Program Documentation in conjunction with the Systems purchased from Vendor under the terms of this Agreement solely for the processing of Buyer's internal business data in the operation of its restaurant business and shall not be transferred to or in any manner or form used on any other point of sale hardware equipment other than hardware equipment purchased directly from Vendor. A separate copy of the Programs and Documentation must be licensed/purchased from Vendor for each Vendor System which Buyer intends to use the Programs on. This license and the rights granted hereunder shall terminate with respect to each copy of the Programs which is licensed by Buyer for use with a System/Component on the date Buyer permanently removes such System/Component from installation in one of Buyer's or Buyer's franchisee's restaurants. B. Except for any portions of the Programs which are unique to Buyer's restaurant operational procedures and which were integrated into the Programs by Vendor in response to Buyer's written specification (e.g. certain screen layouts and specific menu item key identification, etc.). Buyer recognizes that the Programs and associated Program Documentation supplied to Buyer are proprietary to Vendor and are a valuable asset of Vendor and that their use and disclosure must 9 of 19 be carefully and continuously controlled. The Programs and associated Program Documentation supplied to Buyer under this Agreement or any authorized copies made thereof shall be held in confidence and shall not be disclosed in any manner or made available in any form to any persons or entities without the express written consent of Vendor, provided however that Buyer shall be permitted to disclose relevant aspects of the Programs and associated Program Documentation to its employees to the extent such disclosure is reasonably necessary to Buyer's use of the Programs and associated Program Documentation, and provided that Buyer advises its employees of their confidential nature and takes all reasonable steps to ensure that the Programs and/or associated Program Documentation is not used, disclosed, and/or duplicated in contravention of the provisions of this Subparagraph 10B. C. Buyer agrees that it will not, except as is expressly authorized in this Agreement (a) copy or duplicate, or permit anyone else to copy or duplicate in whole or in part any physical or magnetic version of the Programs or associated Program Documentation furnished by Vendor under this agreement, or (b) create or attempt to create, or permit others to create or attempt to create, by reverse engineering, assembly or otherwise, the source programs or any part thereof from the object program or from other information made available under this Agreement or otherwise (whether oral, written, tangible or intangible) provided, however that Buyer shall be permitted to make one (1) copy of the Programs for backup purposes for each System purchased. D. If Buyer attempts to use, copy, license, disclose or convey the Programs and/or associated Program Documentation supplied by Vendor hereunder, in a manner contrary to the terms of this Agreement or in derogation of Vendor's proprietary rights, whether those rights are explicitly stated herein, determined by law or otherwise, Vendor shall have, in addition to any other remedies available to it, the right to injunctive relief enjoining such wrongful actions, Buyer hereby acknowledging that other remedies are inadequate. 11. CONFIDENTIAL INFORMATION: ------------------------ A. Buyer and Vendor agree that all confidential and proprietary information concerning the parties and their respective operations and procedures shall be maintained on a confidential basis for each other's benefit. Buyer and Vendor shall not disclose to others any of the respective technical data or proprietary information acquired from each other without the other party's prior written consent. Buyer and Vendor agree further to execute and abide by the Confidentiality Agreements which are attached hereto and incorporated herein by reference as Exhibit F1 and F2. This section and Exhibits F1 and F2 shall survive the termination of this Agreement. B. Notwithstanding any provisions to the contrary in this agreement or the Confidentiality Agreements, the obligations or confidentiality of the parties hereto shall not apply with respect to any information which (i) is known by the party receiving such information hereunder at the time of disclosure (whether or not such 10 of 19 disclosure was made prior to or after the date hereof), or (ii) is or becomes known to the public generally through no fault or other action of the party receiving such information hereunder, or (iii) is obtained lawfully from a third party who is not believed or suspected by the party receiving such information hereunder to have obtained such information under an obligation to hold such information confidential, or (iv) is developed by the party receiving such information, employees, agents or representatives as a result of their own efforts and not as a direct or indirect result of the disclosure of the same information by the party disclosing such information. 12. WARRANTIES & REPRESENTATIONS: ---------------------------- A. Vendor warrants to Buyer that: (1.) each System/Component purchased by Buyer under this Agreement (excluding the associated Programs and Documentation) hereinafter "Hardware" shall be free from defects in material and workmanship under normal use and service for a period commencing upon Delivery of the System/Components to Buyer (i.e. the earlier of, the date the Systems/Components are shipped by Vendor to a Vendor facility or to a location designated by Buyer) and terminating [CONFIDENTIAL TREATMENT REQUESTED] from the date of completion of installation; (2.) to the best of Vendor's knowledge, Vendor is the author of, and has full and exclusive right, title and interest in and to the Programs and/or has the right to grant to Buyer the licenses and other rights granted hereunder. (3.) the Systems/Components and Programs do not infringe any United States patent issued and existing as of the date of this Agreement is executed by Vendor, or any United States copyright or trademark; (4.) except as may be otherwise agreed to by the parties, the Programs and Documentation to be licensed and provided to Buyer after the effective date of this Agreement shall be substantially the same Programs and Documentation as that which was licensed and provided by Vendor in association with the last System Delivered to Buyer prior to the effective date of this Agreement. These Vendor warranties are in addition to and do not supersede Buyer's rights under any on-site service agreement which may be in effect between the parties. With the except of any implied warranty or merchantability the foregoing Vendor warranties are in lieu of all other warranties, expressed or implied, including but not limited to the implied warranty of fitness for a particular purpose. B. Vendor and Buyer repent and warrant to each other that: (1.) Each has full right and authority to enter into this Agreement on the terms specified herein. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 11 of 19 (2.) The execution, delivery, and performance of this Agreement is not prohibited by and will not be in violation of any Agreement to which it is a party, and will not be in violation of its certificate of incorporation or by- laws. (3.) There is no material litigation, proceeding or investigation filed or pending or threatened in any Court or before any regulatory commission, board or other administrative or governmental agency against it which may in any way affect its full and complete performance under this Agreement. C. Except as provided in Subparagraph 12A.(2.) and (3.) above, the Programs are provided "as is" without warranty of any kind, either express or implied, as to any matter whatsoever, including but not limited to, the implied warranties of merchantability and fitness for a particular purpose. 13. LIMITATION OF LIABILITY: ----------------------- Except as otherwise expressly provided elsewhere in this Agreement and except due to the extent of fraud by a party, in no event shall either party be ----------- liable to the other party for any damages arising from the interruption or loss of: use, service, data, incorrect data, revenues or profits (except Vendor's profits in the event Buyer breaches its purchase commitment obligations), or for any indirect, special, consequential or incidental damages arising out of a breach of any provision of this Agreement, or in any way related to the performance or non-performance by the other party under said Agreement regardless of the form in which any legal or equitable action may be brought (i.e. breach of warranty, contract, strict liability or otherwise). The foregoing shall apply without regard to whether the party sought to be held accountable had knowledge of the possibility of such damages. 14. FORCE MAJEURE: ------------- Neither party will be liable to the other for any delay or for failure to perform its obligations hereunder resulting from any cause beyond that party's reasonable control, including, but not limited to: fires; explosions; floods; strikes; work stoppages or slowdowns; or other industrial disputes; accidents; riots; or civil disturbances; acts of civil or military authorities; export or import authorization; inability, for those portions of the Territory outside the United States, to obtain any license or consent necessary; and any abnormal delays or shortages by critical material suppliers. Provided that if Vendor cannot perform under this Agreement due to such Force Majeure for more than ninety (90) Days, Buyer shall have the option to terminate its obligation under this Agreement. 15. BREACH & REMEDIES: ----------------- A. Buyer's Remedies: (1.) For breach of the express warranty set forth in Subparagraph ------------------------------------------------------------ 12A.(1.) and for breach of any implied warranty of merchantability: ------------------------------------------------------------------- 12 of 19 a. Subject to Subparagraph 5.G. of this Agreement, Vendor's sole liability and Buyer's exclusive remedy shall be limited to Vendor, at Vendor's sole option, promptly either (a) supplying at its expense a replacement, or (b) repairing such defective hardware at its facility and at its expense. Vendor shall not be responsible for malfunction, defects or damage to the Hardware cause by negligence of Buyer's or Buyer's franchisee's employees/agents; vandalism; adjustments, maintenance or repairs made by persons other than Vendor's personnel or persons, firms or corporations authorized by Vendor; operation and use not within specifications or in an unacceptable environment; or other cause not arising out of defects in material or workmanship. The notice of breach shall be by telephone with confirmation in writing posted or faxed within five (5) Days and shall specify the facts constituting the alleged breach of warranty. If the breach is not discovered within the warranty period or if Vendor has not received written notification of a breach within five (5) Days after termination of this warranty period the claim for breach is waived by Buyer. The purpose of this exclusive remedy shall be to provide Buyer with free repair and replacement of defective parts in the manner provided for herein. b. Notwithstanding Subparagraph 15A.(1.)a. above, if a defect covered by said warranty is discovered within the warranty period in a particular item of Hardware which significantly and detrimentally affects the performance of the System and the operation of the restaurant in which it is installed and Vendor is unable to repair or replace the defective item of Hardware within fifteen (15) Days of Vendor's receipt of the defective Hardware at its facility for those portions of the Territory which are not covered by a Vendor on-site field service contract or Vendor's receipt of Buyer's notice for those portions of the Territory which are covered by a Vendor on-site service contract, then Vendor shall remove the defective System and shall provide Buyer with a refund of the purchase price and installation price plus all associated freight, duties and taxes paid by Buyer to Vendor for such System provided however, the System will continue to be considered as a purchase for the purpose of satisfying Buyer's Minimum or Optional Purchase Commitment. c. Notwithstanding Subparagraph 15A.(1.)a. above, Buyer is not required to return the defective Hardware to Vendor's facility for repair in those portions of the Territory where Buyer and Vendor have an on-site field service contract in effect at the time the warranty defect is discovered. For those portions of the Territory where Buyer and Vendor do not have such on-site field service contract, all Hardware required to be returned to Vendor pursuant to Subparagraph 15A.(1.)a. above shall be shipped at Vendor's expense by the most reasonable and practical means to the repair location designated by Vendor. Upon repair or replacement, Vendor shall ship prepaid such repaired or replacement Hardware to the address specified by Buyer. Unless otherwise agreed, Buyer shall be responsible for obtaining governmental approvals and documentation required for international shipment of returned Hardware. Buyer shall be responsible for the proper packing of the defective Hardware in accordance with instructions provided by Vendor. 13 of 19 d. In the event of a fire, explosion or other physical consequence of such defect, Vendor shall compensate Buyer for any damage or injury to property or persons proximately caused by such defect. (2.) For breach of the express warranties set forth in Subparagraph -------------------------------------------------------------- 12A.(2.) and (3.) above: ----------------------- a. Vendor's sole liability and Buyer's exclusive remedy shall be limited to Vendor, at its sole expense, defending any action brought against Buyer based on a claim that any Component and/or Program infringes any United States patent issued and existing as of the date this Agreement is executed by Vendor, or United States copyright or trademark and will pay all reasonable costs and damages finally awarded against Buyer in any such action which are attributable to such claim, provided that: (1) Buyer shall promptly notify Vendor in writing of notice of any such claim or allegation of infringement; and (2) Buyer allows Vendor to have sole control of the defense of any such claim, including, without limitation, all communications with claimant, all settlement negotiations, and the conduct of all litigation; and (3) Buyer will cooperate with Vendor and will provide Vendor with such assistance in such defense as Vendor may reasonably request. Except in the event Vendor has not assumed the defense within a reasonable period of time after Vendor's receipt of Buyer's notice of the alleged infringement or ceases to defend Buyer, Vendor shall not be responsible for any litigation expenses (including attorney's fees) incurred by Buyer or settlements entered into by Buyer unless Vendor agrees to them in writing which agreement shall not be unreasonably withheld. b. Vendor shall have no liability to Buyer hereunder, or otherwise, with respect to any claims of infringement which are based on the use of any Component or Program or combination of Components or Programs with equipment, programs or supplies not supplied by Vendor where such infringement would not occur in the absence of such combination, nor shall Vendor have any liability with respect to any claim of infringement based on use of any Component and/or Program in a manner other than in accordance with this Agreement and/or any License granted to Buyer under this Agreement, nor shall Vendor have any liability to Buyer hereunder, or otherwise with respect to any claims for infringement due to the Components and/or Programs being made or modified either (i) by Buyer or others without the prior written authorization from Vendor or (ii) by Vendor at Buyer's specific directions or instructions. c. This Subparagraph 15A.(2.) states Vendor's entire liability to Buyer under this Agreement or otherwise with respect to infringement of third parties' patents, copyrights, trademarks, designs, trade secrets or other proprietary rights. d. If Vendor should become aware of a potential infringement problem, Vendor shall promptly notify Buyer of the situation, and to avoid a potential infringement of patent, trademark, copyright, design, trade secret or other proprietary right, even if not alleged. Vendor may, at its sole option and at its own expense, procure for Buyer the right to continue using the alleged infringing item, or 14 of 19 modify or replace such item with a comparable item to Buyer and/or Buyer's reasonable satisfaction so as to avoid the infringement or remove the infringing item. If the infringing item is removed by Vendor, Vendor shall promptly provide a refund to Buyer of the purchase price and installation price plus all associated freight, duties and taxes paid by Buyer to Vendor for such item as depreciated on a eight (8) year straight line basis. (3.) For breach of the express warranties set forth in Subparagraph -------------------------------------------------------------- 12A.(4.) or if Program errors/bugs are discovered in a System/Component ----------------------------------------------------------------------- installed by Vendor or its authorized representative: ---------------------------------------------------- a. Notwithstanding Subparagraph 12D. above, Vendor will, at its sole expense, [CONFIDENTIAL TREATMENT REQUESTED]. Vendor shall commence its efforts to correct such Errors upon its own discovery or upon receipt of notice from Buyer of Errors, whichever is earlier. Both parties understand that Vendor's ability to correct Errors in a reasonable amount of time is heavily dependent upon the specific characteristics of the Errors. Therefore, if Buyer reports Errors to Vendor, Buyer agrees that Vendor shall also be furnished, to the extent reasonably possible, a general description of the Errors and a detailed account of the context in which the Errors arise sufficient to allow the Vendor to reproduce such Errors and to verify correction. For those Errors which are: (i) critical (i.e. significantly affecting the operation of a restaurant) and for which there is no alternative solution (as described in Subparagraph 15A.(3.)(b.) below) Vendor will, upon correction of the Errors, provide, at Vendor's expense, such correction to all restaurants which are using the Program release in which the Errors appeared, and (ii) noncritical (i.e. not significantly affecting the operation of the restaurant) and for which there is no alternative solution (as described in Subparagraph 15A.(3.)(b.) below) Vendor will, upon correction of the Errors, include, at Vendor's expense, such correction in Vendor's next general Program release. b. Notwithstanding any provision of this Agreement to the contrary, whenever Vendor is obligated by this Agreement to provide corrections to Errors or to use its best efforts to correct Errors in the microcode or Programs, if, in Vendor's reasonable opinion, the Errors would require an inordinate amount of programming effort on the part of Vendor to correct and the result of the problem caused by the Errors is such that it can be avoided through reasonable procedural or other means, Vendor may, in lieu of correcting the Errors, provide Buyer with an alternative solution to the problem provided however that such alternative solution is practical to implement and is reasonably acceptable to Buyer. c. This Subparagraph 15A.(3.) states Vendor's entire liability to Buyer and Buyer's exclusive remedy under this Agreement for any Errors discovered in the Programs. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 15 of 19 (4.) If Vendor, repudiates this Agreement or commits any other --------------------------------------------------------- material breach of this Agreement and fails to remedy such breach [CONFIDENTIAL ------------------------------------------------------------------------------- TREATMENT REQUESTED] after receipt of written notice by Buyer specifying such ----------------------------------------------------------------------------- alleged breach, then Buyer's sole and exclusive remedy and Vendor's sole ------------------------------------------------------------------------ liability shall be limited to the following: ------------------------------------------- a. Buyer may cancel this Agreement, such cancellation to be effective as of the date notice of such is received, via fax or personal delivery, by Vendor. Cancellation shall cancel the remaining portion of Buyer's Minimum Purchase Commitment or Optional Purchase Commitment, as applicable, (i.e. that portion which had not been Delivered as of the date of cancellation) and shall be without further liability to Vendor, provided however, that Buyer shall fulfill all of its unsatisfied obligations or liabilities which arose prior to said cancellation; and/or b. Buyer may, upon written notice to Vendor, cancel any or all of their outstanding Releases to the extent the Components, Systems and/or Programs ordered hereby have not been shipped or are not ready for shipment on the date of cancellation; and/or c. Buyer may go into the marketplace and purchase the remaining portion of Buyer's Minimum Purchase Commitment or Optional Purchase Commitment, as applicable (i.e. that portion which had not been Delivered as of the date of cancellation) from a third party and the difference between the purchase price which Buyer actually pays and the applicable purchase price stated in this Agreement, to the extent such difference does not [CONFIDENTIAL TREATMENT REQUESTED] shall be paid by Vendor to Buyer; and/or d. Any or all other remedies which are applicable and available to the Buyer under the provisions of the New York Uniform Commercial Code. e. In no event shall anything herein be construed in such a manner as to effect a forfeiture of monies paid by Buyer to Vendor hereunder. B. Vendor's Remedies: (1.) If Buyer repudiates or materially breaches this Agreement at any time prior to Vendor's Delivery of all of the Minimum Purchase Commitment and does not timely cure such breach, then Buyer and Vendor hereby agree that Vendor may manufacture and ship to a Vendor facility (which shall be deemed as Buyer taking Delivery and title to such Systems/Components), [CONFIDENTIAL TREATMENT REQUESTED] the remaining quantity of the Systems/Components of the Minimum Purchase Commitment which Buyer is required to but has failed to take Delivery of and title to prior to such required date in order to satisfy such purchase commitment obligation, and require Buyer to pay for all such Systems/Components, at the applicable purchase prices and in accordance with the payment provisions stated in this Agreement. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 16 of 19 (2.) If Buyer repudiates or otherwise commits any material breach (other than that which is covered by Subparagraph 15B.(1) above) of this Agreement including but not limited to, the payment and license provisions of this Agreement, in a material manner, and fails to cure such breach [CONFIDENTIAL TREATMENT REQUESTED] after receipt of written notice by Vendor specifying such alleged breach, then Buyer and Vendor hereby agree that Vendor's sole and exclusive remedies and Buyer's sole liability shall be limited to the following; Vendor may, in its sole discretion. a. Cancel this Agreement without any further obligation or liability to Buyer, (except for its obligations of confidentiality as specified in Paragraph 11 of this Agreement and Exhibits F1 and F2 of this Agreement) such cancellation to be effective as of the date notice of such is received, via fax or personal delivery, by Buyer; provided, however, that Vendor shall fulfill all of its unsatisfied obligations or liabilities which arose prior to such cancellation; b. Require Buyer to pay the price per System for all Systems Delivered [CONFIDENTIAL TREATMENT REQUESTED] it may have been entitled to for exercise of its option and with or without demand or notice to Buyer declare any amount unpaid immediately due and payable; c. Require Buyer to take tittle to and pay for, at the Minimum Purchase Commitment price per System and in accordance with the payment provisions stated in this Agreement. (i) all remaining Systems/Components of the Minimum Purchase Commitment or Optional Purchase Commitment, as applicable, and (ii) all additional Systems/Components and/or Programs which had been ordered by Buyer but had not been Delivered by Vendor on or before the date of Vendor's cancellation; and d. Any or all other remedies which are applicable and available to the Seller under the provisions of the New York Uniform Commercial Code. C. Vendor neither assumes nor authorizes any other person to assume for Vendor any other liability in connection with the sale or use of the Systems/Components sold under this Agreement 16. ESCROWED MATERIAL: ------------------ Buyer and Vendor agree to abide by the terms and conditions of the Escrow Agreement as set forth in Exhibit G attached hereto and incorporated herein by reference. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 17 of 19 17. COMPLETE AGREEMENT: ------------------- This Agreement is the complete Agreement between the parties with respect to its subject matter. This Agreement is entered into after full investigation, without either party relying on any statement or representation made by the other party not embodied herein. their terms and conditions of this Agreement may not be supplemented, changed, waived, discharged, terminated or otherwise modified orally or by the terms of any Purchase Order or Release, acknowledgment, invoice or other such instrument, but only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge, termination or modifications is sought. No waiver of any breach of any obligation hereunder shall be deemed a waiver of such obligation or of any subsequent breach of the same or any other obligation. 18. GOVERNING LAW: -------------- This Agreement shall be construed and interpreted in accordance with the laws of the State of New York. 19. SEVERABILITY: ------------- In the event that any one or more provisions contained in this Agreement should, for any reason, be held to be unenforceable in any respect under the laws of any State or of the United States, its unenforceability shall not affect any other provisions of this Agreement, but shall be deemed replaced by an enforceable provisions determined by the arbiter of the dispute to be most closely reflective of the parties original intent. 20. ASSIGNMENT: ----------- A. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that neither party shall assign its rights nor delegate any of its duties or obligations under this Agreement, including the Confidentiality Agreement and Escrow Agreement, without the prior written consent of the other party, which consent will not be unreasonably withheld. B. Notwithstanding Subparagraph 20A. above, Buyer may assign its rights under this Agreement to another subsidiary of its parent corporation, Pepsico, provided Buyer is not released from its responsibilities and obligations set forth in this Agreement and provided further that any System/Components purchased or any Programs or associated Documentation licensed by an assignee under this Agreement shall only be purchased or licensed for installation and use in a Taco Bell or Hot'n Now restaurant. 18 of 19 21. SURVIVAL: --------- The applicable rights and obligations set forth in Paragraphs 1, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 of this Agreement shall survive and continue after any expiration, cancellation, or termination of this Agreement and shall be binding upon the parties and their successors and assigns. 22. NOTICES: -------- All communications and notices relating to this Agreement are to be sent by fax, personal or reputable overnight delivery addressed as follows: If to Vendor: If to Buyer: ------------ ------------ PAR Microsystems Corporation Taco Bell Corp. 220 Seneca Turnpike 17901 Von Karman New Hartford, NY 13413 Irvine, CA 92714 Attention: President Attention: Vice President (copy Attn: Legal Dept.) Information Technology Dept. (copy Attn: Legal Dept.) IN WITNESS WHEREOF, the parties have hereunto have executed this Agreement effective as of the first date set forth above. PAR MICROSYSTEMS CORPORATION TACO BELL CORP. By [CONFIDENTIAL TREATMENT By /s/ Richard Goodman ------------------------ REQUESTED] ------------------------ Title National Account Mngr Title SUP & CFO ----------------------- --------------------- Reviewed by: -------------- Date: 12/8/95 --------------------- [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 19 of 19 EX-10.2 7 SERVICE INTEGRATION AGREEMENT EXHIBIT 10.2 [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. TACO BELL SERVICE INTEGRATION AGREEMENT --------------------------------------- INDEX -----
DEFINITIONS................................................. 1 TERM AND TERMINATION........................................ 2 COVERAGE OF EQUIPMENT....................................... 3 HELP DESK SUPPORT........................................... 4 ON-SITE REMEDIAL MAINTENANCE................................ 6 PERFORMANCE EVALUATION, PENALTY & CUSTOMER'S REMEDY......... 10 CUSTOMER RESPONSIBILITIES................................... 15 EXCLUSIONS FROM COVERAGE.................................... 16 UPCHARGE ITEMS.............................................. 16 REPORTING REQUIREMENTS...................................... 18 PRICING, INVOICING AND PAYMENT.............................. 18 SITEBASE RETENTION.......................................... 21 WARRANTY DISCLAIMER......................................... 22 LIMITATION OF LIABILITY..................................... 22 GENERAL..................................................... 15 EXHIBIT A EXHIBIT B................................................... 30 EXHIBIT C................................................... 31 EXHIBIT D................................................... 32 EXHIBIT E................................................... 35 EXHIBIT F................................................... 38 EXHIBIT Fl.................................................. 42 EXHIBIT F2.................................................. 47 EXHIBIT G................................................... 48
PAR SERVICE INTEGRATION AGREEMENT --------------------------------- By and between PAR Microsystems Corporation ("PAR"), a New York corporation, with its principal office located at 8383 Seneca Turnpike, New Hartford, New York 13413 and Taco Bell Corp. ("Customer"), a California corporation, with its principal offices located at 17901 Von Karman, Irvine, California 92714-6212. PAR and Customer agree that the following terms and conditions apply to Help Desk Support and On-Site Remedial Maintenance Service provided by PAR for all PAR and certain Third Party Equipment currently installed and to be installed at the Sites, defined below, during the term of this PAR Service Integration Agreement ("Agreement"). 1. DEFINITIONS 1.1 "Site(s)" covered under this Agreement shall include: ------- (a) all Customer owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants located within the United States of America and Canada in which any of the Equipment set forth in Exhibit A attached to and made a part of this Agreement, is installed, and (b) all Customer owned locations in Puerto Rico and all Customer franchisee/ licensee restaurant locations within the United States of America and Canada for the sole purpose of providing On-Site Remedial Maintenance Service for the T.A.C.O. back-office personal computers. 1.2 "PAR Equipment" shall include all hardware and software distributed by PAR ------------- installed at a Site(s) that is eligible for service under this Agreement. Such software is included for the sole purpose of providing Customer with Help Desk Support in the use of such software. 1.3 "Third Party Equipment" shall include the hardware and software running on --------------------- such equipment set forth in Exhibit A (as may be subsequently amended by the parties during the term of this Agreement) installed at a Site(s), that is eligible for service under this Agreement. Such software is included for the sole purpose of providing Customer with Help Desk Support in the use of such software. 1.4 "Equipment" shall mean all PAR Equipment and Third Party Equipment, or a --------- specified subgroup thereof. 1.5 [CONFIDENTIAL TREATMENT REQUESTED] shall mean the licensed PAR Service Management system utilized by PAR. 1.6 "Call Priority" shall mean the priority assigned by the Customer Service ------------- Communication Center ("CSCC") to an incoming Customer call. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. 1.7 "Days" shall mean calendar days unless otherwise designated. ---- 1.8 "PAR Holidays" shall mean those holidays established by PAR on a calendar ------------ year basis. PAR shall notify Customer of PAR's holiday schedule thirty (30) Days prior to commencement of each calendar year within the term of this Agreement. PAR Holidays from the Effective Date of this Agreement through the end of calendar year 1995 are as follows: September 4, November 23, November 24 and December 25, 1995. 1.9 "Customer Help Desk Holidays" shall mean those Customer Help Desk holidays --------------------------- established by Customer on a calendar year basis. Customer shall notify PAR of Customers Help Desk holiday schedule thirty (30) Days prior to commencement of each calendar year during the term of this Agreement. Customer Help Desk Holidays from the Effective Date of this Agreement through the end of calendar year 1995 are as follows: November 23 and December 25, 1995. 1.10 "FSO" is PAR's Domestic and Canadian Field Service Organization and --- certain PAR selected independent subcontractors performing Remedial Maintenance Service on PAR's behalf in the United States, Canada and Puerto Rico. 1.11 "On-Site Remedial Maintenance Service" ("RMS') is maintenance required due ------------------------------------ to malfunction(s) in Equipment which necessitates service on Site. RMS is provided by the FSO and is only available for that Equipment set forth on Exhibit A hereto, subject to the requirements of Section 3, below. 1.12 "Help Desk Support" is support provided remotely, by telephone, by PAR's ----------------- CSCC for certain Equipment set forth on Exhibit A hereto, and user support of the software, referenced in Sections 1.2 & 1.3 above, subject to the requirements of Section 3, below. 1.13 [CONFIDENTIAL TREATMENT REQUESTED] 1.14 [CONFIDENTIAL TREATMENT REQUESTED] 1.15 [CONFIDENTIAL TREATMENT REQUESTED] 2. TERM AND TERMINATION 2.1 Unless extended pursuant to Section 2.2 below, the term of this Agreement shall be [CONFIDENTIAL TREATMENT REQUESTED]. This Agreement shall become effective on September 1, 1995 ("Effective Date") and shall terminate on [CONFIDENTIAL TREATMENT REQUESTED]. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -2- 2.2 Provided written notification of exercise is given to PAR by Customer not later than [CONFIDENTIAL TREATMENT REQUESTED], Customer may extend this Agreement for [CONFIDENTIAL TREATMENT REQUESTED]. If Customer does not exercise this option to extend by such date [CONFIDENTIAL TREATMENT REQUESTED] as set forth in Exhibit B hereto. 2.3 Notwithstanding Subsection 2.1 or 2.2 above, either party shall have the right to terminate this Agreement without notice upon the occurrence of any of the following events: (i) if the other party petitions for a reorganization under the Bankruptcy Act, or is adjudicated bankrupt, or if a receiver, trustee or liquidator is appointed for the other party's business, or if the other party makes an assignment for the benefit of creditor's, or should the other party admit in writing its inability to pay its debts as they become due; (ii) if the other party defaults in the payment of any sum due hereunder, and fails to cure said default within sixty (60) Days after receipt of written notice from the other party; or (iii) if the other party attempts to assign this Agreement without the other party's prior written consent. Such termination shall be without prejudice to any other rights or remedies the terminating party may have. Any such termination shall not relieve Customer of its obligation to pay PAR for those service fees and/or charges that accrued prior to termination. 3. COVERAGE OF EQUIPMENT 3.1 For the term of this Agreement, Customer agrees that PAR will provide and will be Customers exclusive service provider for: (a) Help Desk support and RMS Support for all Equipment installed in all Customer owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants located within the United States of America and Canada, and (b) RMS Support for the T.A.C.O. back-office personal computers installed in all Customer locations in Puerto Rico and all Customer franchisee/licensee restaurant locations within the United States of America and Canada. 3.1.1 Notwithstanding Section 3.1 above, and subject to the requirements/restrictions set forth in Sections 11 & 12 of this Agreement neither of which are waived or modified by -this provision, if Customer decides not to extend the Agreement by [CONFIDENTIAL TREATMENT REQUESTED] then during the [CONFIDENTIAL TREATMENT REQUESTED] of the Agreement Customer shall have the right to remove a maximum of [CONFIDENTIAL TREATMENT REQUESTED] Sites from coverage under this Agreement and to contract with another party for the service of such Sites as a field trial. Should the Agreement be extended for a [CONFIDENTIAL TREATMENT REQUESTED], Customer shall have the right to a field trial on the same terms described above during the [CONFIDENTIAL TREATMENT REQUESTED]. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -3- 3.2 All PAR Equipment set forth in Exhibit A attached hereto and made part hereof installed in Customer owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants -located within the United States of America and Canada prior to the Effective Date, shall be eligible for service under this Agreement upon the Effective Date. 3.2.1 All new Third Party Equipment set forth in Exhibit A installed in --- Customer owned Taco Bell, Taco Bell Express and Hot 'n Now restaurants located within the United States of America and Canada on or after the Effective Date, shall be eligible for service under this Agreement upon the installation date. 3.3 All Third Party Equipment set forth in Exhibit A attached hereto installed in Sites prior to the Effective Date shall be eligible for service under this Agreement on the Effective Date. All Equipment set forth in Exhibit A which is acquired by Customer after the Effective Date in conjunction with Customer's acquisition of a restaurant(s) within which such Equipment is installed, shall be eligible for service under this Agreement only upon PAR's acceptance of such Equipment for service. 3.4 All new Third Party Equipment set forth in Exhibit A attached hereto --- installed in Customer owned Sites located within the United States of America and Canada and all new T.A.C.O. back-office personal computers installed in Customer owned Sites in Puerto Rico and Customer franchise/licensee Sites within the United States of America and Canada after the Effective Date shall be eligible for service under this Agreement upon the installation date. 3.5 All new Equipment and all used Third Party Equipment installed at --- Customer's Sites which was not set forth in Exhibit A as of the Effective Date but is subsequently added thereto by mutual Agreement of the parties shall be eligible for service. 3.6 PAR's acceptance shall be provided only after: (a) PAR's inspection of the Equipment at PAR's then current time and material rates, which shall not exceed [CONFIDENTIAL TREATMENT REQUESTED]; and (b) completion, at PAR's then current time and material rates, of any repairs or adjustments, which are deemed necessary by PAR to bring the Equipment into proper, or operating condition and which are authorized by Customer. 4. HELP DESK SUPPORT 4.1 For purposes of this Section 4, the following definitions shall apply: [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -4- 4.1.1 "Call Text Update" is the date and time electronically generated by 4.1.2 "CSCC Response" is the duration of time from the assignment of a Call Priority until Call Text Update. 4.1.3 "CSCC Response Percentage" is calculated for each CSCC Call Priority Category by dividing the number of calls for such CSCC Call Priority Category in which PAR has met or exceeded its CSCC Response by the total number of calls of such Call Priority received by PAR. 4.2 The Principal Period of Maintenance ("PPM") for Help Desk Support provided by the CSCC is [CONFIDENTIAL TREATMENT REQUESTED]. 4.3 For purposes of this Section 4, the following Call Priority categories are applicable to CSCC/Help Desk Support:
CSCC Call Priority Definition ------------------ ---------- P1 [CONFIDENTIAL TREATMENT REQUESTED] P2 [CONFIDENTIAL TREATMENT REQUESTED] P3 [CONFIDENTIAL TREATMENT REQUESTED] P4 [CONFIDENTIAL TREATMENT REQUESTED]
4.4 Help Desk Support requires PAR to meet the following CSCC Response times in providing a Call Text Update:
CSCC Call Priority CSCC Response CSCC Response Percentage ------------------ ------------- ------------------------ P1 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] P2 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] P3 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED]
[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -5- P4 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED]
4.5 In cases where PAR's CSCC response to calls is restricted or impossible due to circumstances beyond the reasonable control of the CSCC, including but not necessarily limited to: acts of nature, acts of war, strikes, electrical outages, support system failures or problems (i.e. [CONFIDENTIAL TREATMENT REQUESTED], paging, phone systems), fire, etc., then such calls shall not be used in the determination of the CSCC Response Percentages. 5. ON-SITE REMEDIAL MAINTENANCE 5.1 For purposes of this Section 5, the following definitions shall apply: 5.1.1 "Notify" is the first available "Contract Hour" date and time after which it has been determined that an FSO technician needs to be sent to the Site. 5.1.2 "Arrival" is the actual date and time that the FSO technician arrives at the Site. 5.1.3 "Contract Hour" is that or those hours falling within the applicable PPM. 5.1.4 "FSO RMS Response" is the duration of time from the electronically generated [CONFIDENTIAL TREATMENT REQUESTED] system "Notify" date and time until the date and time logged into the [CONFIDENTIAL TREATMENT REQUESTED] system for "Arrival." Only "Contract Hours" will be applied to this calculation. 5.1.5 "FSO RMS Restoral" is the duration of time from the [CONFIDENTIAL TREATMENT REQUESTED] calculated "Estimated Time of Arrival" date and time until the [CONFIDENTIAL TREATMENT REQUESTED] "Complete" date and time. "Clock Hours" will be applied to this calculation. 5.1.6 "Estimated Time of Arrival" ("ETA") is the [CONFIDENTIAL TREATMENT REQUESTED] calculated latest possible "Arrival" date and time that will allow the FSO to meet the referenced FSO RMS Response times. 5.1.7 "Complete" is the date and time entered into the [CONFIDENTIAL TREATMENT REQUESTED] which is the date and time PAR determined the Equipment was restored to its proper operating condition. 5.1.8 "Clock Hours" are all available time periods not affected by PPM but excluding PAR Holidays and in the case of RMS PC calls, Customer Help Desk Holidays. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -6- 5.1.9 "FSO RMS Response Percentage" for an applicable period is calculated for each Call Priority category by dividing the number of calls for such Call Priority in which PAR has met or exceeded its FSO RMS Response by the total number of calls of such Call Priority received by PAR, during such period. 5.1.10 "FSO RMS Restoral Percentage" for an applicable period is calculated for each Call Priority category by dividing the number of calls for such Call Priority in which PAR has met or exceeded its FSO RMS Restoral by the total number of calls of such Call Priority received by PAR, during such period. 5.2 The following Call Priority categories are applicable to RMS:
RMS Call Priority Definition ----------------- ---------- P0 [CONFIDENTIAL TREATMENT REQUESTED] P1 [CONFIDENTIAL TREATMENT REQUESTED] P2 [CONFIDENTIAL TREATMENT REQUESTED] PC [CONFIDENTIAL TREATMENT REQUESTED] ND [CONFIDENTIAL TREATMENT REQUESTED]
5.3 The PPMs for RMS are as follows:
RMSCall Priority PPM ---------------- --- P0 [CONFIDENTIAL TREATMENT REQUESTED] P1 [CONFIDENTIAL TREATMENT REQUESTED] P2 & ND [CONFIDENTIAL TREATMENT REQUESTED] PC [CONFIDENTIAL TREATMENT REQUESTED]
5.4 RMS will be provided during the PPMs set forth above in Section 5.3., following a determination by the CSCC that the reported problem requires RMS. The determination to provide RMS will be made subsequent to remote troubleshooting and technical assistance, provided by the CSCC, which must be first utilized by a Site requesting assistance. A Site that [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -7- refuses or fails to devote a reasonable amount of time and effort of trained Site personnel to troubleshoot the problem via the CSCC will cause the call to be automatically assigned either a [CONFIDENTIAL TREATMENT REQUESTED] Call Priority status [CONFIDENTIAL TREATMENT REQUESTED]. Such Priority status shall be in PAR's reasonable discretion based on the information obtained by PAR. [CONFIDENTIAL TREATMENT REQUESTED]. 5.5 During RMS, the FSO may install or replace parts as it determines necessary in order to restore the inoperative or malfunctioning Equipment to good operating condition. [CONFIDENTIAL TREATMENT REQUESTED]. All replaced parts become the property of PAR. 5.6 The FSO may, at its sole option, as part of the provision of RMS, make any engineering changes or modifications to the Equipment which, in its sole discretion, is required or desirable, if such changes do not negatively and substantially impact Customers ability to operate the Equipment. However, with respect to Third Party Equipment, PAR must receive Customer's prior written approval of any change or modification. Customer must be notified of any changes or modifications to the PAR Equipment which may materially impact Customer's operations. 5.7 RMS as provided under this Agreement does not ensure uninterrupted operation of the Equipment. 5.8 The FSO reserves the right to refuse to provide RMS when, in its reasonable judgment, conditions at the Site represent a hazard to the safety and/or health of FSO employees. 5.9 The FSO representative will notify the Site, by telephone, of the approximate arrival date and time, prior to making an RMS call. 5.10 At the conclusion of an RMS call, a Customer Site management representative shall sign the Incident Report presented by the FSO representative concurring that the RMS call has been completed and that the Equipment is functioning. 5.11 The FSO is required to meet the following response times in responding to an RMS call:
RMSCall Priority FSO RMS Response FSO RMS Response Percentage ---------------- --------------------- --------------------------- P0 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] P1 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED]
[CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -8- P2 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] PC & ND [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED]
[CONFIDENTIAL TREATMENT REQUESTED]. In cases where PAR's FSO RMS response and/or Restoral to a call is restricted or impossible due to circumstances beyond the reasonable control of the FSO, including but not necessarily limited to: acts of nature, acts of war, strikes, unusual traffic conditions, electrical outages, support system failures or problems (i.e. [CONFIDENTIAL TREATMENT REQUESTED], paging, phone systems), etc., then such calls shall not be used in the determination of the FSO RMS Response Percentages and FSO RMS Restoral Percentages. Additional time shall be permitted for response to P0 and Pl calls based upon the Site's geographical distance from a PAR FSO location, as follows:
Distance From PAR FSO Location Adder (Hours) ------------------------------ ------------- [CONFIDENTIAL TREATMENT REQUESTED]miles [CONFIDENTIAL TREATMENT REQUESTED] ([CONFIDENTIAL TREATMENT REQUESTED]Km) [CONFIDENTIAL TREATMENT REQUESTED]miles [CONFIDENTIAL TREATMENT REQUESTED] ([CONFIDENTIAL TREATMENT REQUESTED]Km) [CONFIDENTIAL TREATMENT REQUESTED]miles [CONFIDENTIAL TREATMENT REQUESTED] ( [CONFIDENTIAL TREATMENT REQUESTED]Km)
PAR FSO locations are set forth on Exhibit C hereto. FSO locations may be added or deleted in PAR's sole's discretion provided PAR ensures that the total number of Customer Sites (for which PAR provides RMS under the terms of this Agreement) more than [CONFIDENTIAL TREATMENT REQUESTED] miles ([CONFIDENTIAL TREATMENT REQUESTED] Km) from the closest FSO location does not exceed [CONFIDENTIAL TREATMENT REQUESTED]. PAR shall notify Customer in writing of any changes in FSO locations. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -9- 5.12 The FSO is required to meet the following FSO RMS Restoral times and Percentages in restoring the subject Equipment to proper operating condition:
LEVEL 1 LEVEL 2 ------- ------- FSO RMS Restoral FSO RMS Restoral Percentage FSO RMS Restoral Percentage FSO RMS Restoral ---------- -------- ---------- -------- Call Priority ------------- P0 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] REQUESTED] REQUESTED] P1 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] REQUESTED] REQUESTED] P2 [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] REQUESTED] REQUESTED] PC&ND [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT [CONFIDENTIAL TREATMENT REQUESTED] REQUESTED] REQUESTED] REQUESTED]
5.13 The following RMS Call Priority uplift options shall be available to the Customer: Option 1 - Uplift from any RMS Call Priority to "P0" RMS Call priority. -------- Provided PAR meets the P0 FSO RMS Response and FSO RMS Level 1 Restoral set forth in Sections 5.11 and 5.12 above, Customer shall be invoiced at the fee set forth on Exhibit D attached hereto. For monthly reporting, calls uplifted to P0 RMS Call Priority will be measured against the initially assigned RMS Call Priority FSO RMS Response and FSO RMS Level 1 Restoral commitments. Option 2 - Uplift from P2, PC or ND RMS Call Priority to P1 RMS Call Priority. -------- Provided PAR meets the P1 FSO RMS Response and FSO RMS Level 1 Restoral set forth in Sections 5.11 and 5.12 above, Customer shall be invoiced at the fee set forth on Exhibit D attached hereto. For monthly reporting, calls uplifted to a P1 RMS Call Priority will be measured against the initially assigned RMS Call Priority FSO RMS Response and FSO RMS Level 1 Restoral commitments. 5.14 Should the FSO render Equipment partially operational on a P1 or P2 call, the RMS Call Priority shall not be changed and the call shall not be closed until the Equipment is fully restored to proper operating condition. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -10- 5.15 Should a Site representative request RMS for other Equipment installed in such Site while an FSO representative is at the Site repairing another item of Equipment, the original call will be completed and closed and a new RMS call will thereafter be opened by such FSO representative before leaving the Site. 5.16 Should the RMS Call Priority for a call be changed by the CSCC subsequent to dispatch, the [CONFIDENTIAL TREATMENT REQUESTED] shall be used to measure performance. 5.17 Notwithstanding the RMS Call Priority assigned, FSO RMS P1 Response and FSO RMS Level 1 P1 Restoral shall apply to all RMS calls [CONFIDENTIAL TREATMENT REQUESTED] which are received by PAR within [CONFIDENTIAL TREATMENT REQUESTED]. 6. PERFORMANCE EVALUATION, PENALTY & CUSTOMER'S REMEDY 6.1 For purposes of this Section 6 the Following definitions shall apply: 6.1.1 "POS Revenue" shall mean the revenue received by PAR under this Agreement from Customer during the [CONFIDENTIAL TREATMENT REQUESTED] for providing RMS for Customer's [CONFIDENTIAL TREATMENT REQUESTED]. POS Revenue excludes all time and material revenue generated under this Agreement and all revenue which may result from the performance by PAR of any of the items set forth in Sections 8 and/or 9 of this Agreement. 6.1.2 "PC Revenue" shall mean the revenue received by PAR under this Agreement from Customer during the [CONFIDENTIAL TREATMENT REQUESTED] for providing RMS for Customer's [CONFIDENTIAL TREATMENT REQUESTED]. PC Revenue excludes all time and material revenue generated under this Agreement and all revenue which may result from the performance by PAR of any of the items set forth in Sections 8 and/or 9 of this Agreement. 6.1.3 "CSCC Revenue" shall mean the revenue received by PAR under this Agreement from Customer during the [CONFIDENTIAL TREATMENT REQUESTED] for providing [CONFIDENTIAL TREATMENT REQUESTED]. CSCC Revenue excludes all time and material revenue generated under this Agreement and all revenue which may result from the performance by PAR of any of the items set forth in Sections 8 and/or 9 of this Agreement. 6.1.4 [CONFIDENTIAL TREATMENT REQUESTED] shall commence [CONFIDENTIAL TREATMENT REQUESTED] and terminate at midnight on [CONFIDENTIAL TREATMENT REQUESTED]. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -11- 6.1.5 [CONFIDENTIAL TREATMENT REQUESTED] if applicable, shall commence upon termination of any applicable recovery period (described hereinafter) and shall terminate with respect to a Performance Measurement Category, [CONFIDENTIAL TREATMENT REQUESTED]. 6.1.6 [CONFIDENTIAL TREATMENT REQUESTED] if applicable, shall commence upon termination of any applicable recovery period (described hereinafter) and shall terminate with respect to a Performance Measurement Category, [CONFIDENTIAL TREATMENT REQUESTED]. 6.1.7 [CONFIDENTIAL TREATMENT REQUESTED] shall commence [CONFIDENTIAL TREATMENT REQUESTED] and terminate at midnight on [CONFIDENTIAL TREATMENT REQUESTED]. 6.1.8 [CONFIDENTIAL TREATMENT REQUESTED] if applicable, shall commence [CONFIDENTIAL TREATMENT REQUESTED] and terminate at midnight on [CONFIDENTIAL TREATMENT REQUESTED]. 6.1.9 "Penalty" shall mean the amount assessed pursuant to Sections 6.2 through 6.6 hereinafter which shall be payable to Customer by PAR and computed pursuant to Exhibit "F," "Penalties" and which are more particularly described in the accompanying examples set forth in" Exhibits "F.1" and "F.2." 6.2 Notwithstanding any other provisions of this Agreement which identify various performance measurements, only the following [CONFIDENTIAL TREATMENT REQUESTED] Performance Measurement Categories shall be used in the assessment of penalties against PAR: Performance Measurement Categories: [CONFIDENTIAL TREATMENT REQUESTED] 6.3 In the event, (i) PAR's performance for the [CONFIDENTIAL TREATMENT REQUESTED] does not result in the payment of a Penalty by PAR, and (ii) the Customer has decided to extend this Agreement for [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -12- then notwithstanding any provision herein to the contrary, Penalties will not be applicable to the [CONFIDENTIAL TREATMENT REQUESTED] of this Agreement. 6.4 PAR shall, within [CONFIDENTIAL TREATMENT REQUESTED] Days after the end of the [CONFIDENTIAL TREATMENT REQUESTED], provide Customer with a measurement period report package which includes all reports the parties may agree to, including a summary of PAR's performance for each of the [CONFIDENTIAL TREATMENT REQUESTED] Performance Measurement Categories, over the entire applicable measurement period (hereinafter "Measurement Period Report"). Based upon the data contained in such Measurement Period Report package, Customer shall evaluate PAR's performance with respect to each of the Performance Measurement Categories against the applicable performance percentage commitments set forth in Sections 4 & 5 above and the Penalty schedules set forth in Exhibit F of this Agreement. Customer shall within (45) Days after the end of the applicable [CONFIDENTIAL TREATMENT REQUESTED], notify PAR if writing of any Penalty (by Performance Category). 6.5 For the [CONFIDENTIAL TREATMENT REQUESTED], if Customer notifies PAR of a Penalty for PAR's failure to satisfy the performance percentage commitment for one or more of the [CONFIDENTIAL TREATMENT REQUESTED] Performance Measurement Categories (hereinafter such failed Measurement Categories shall be referred to as the "Recovery Category(ies)"), then PAR shall have from PAR's receipt of such Penalty notice through [CONFIDENTIAL TREATMENT REQUESTED] to improve its performance in such Recovery Category(ies) (hereinafter "Recovery Period"). 6.5.1 If during the [CONFIDENTIAL TREATMENT REQUESTED] of the Recovery Period, PAR's performance for such [CONFIDENTIAL TREATMENT REQUESTED] satisfies the performance percentage commitment for [CONFIDENTIAL TREATMENT REQUESTED] of the Recovery Categories, then with respect to such satisfied Recovery Category(ies), PAR shall commence the applicable Contract Year Probationary Period. Hereinafter, during the Probationary Period such satisfied Recovery Category(ies) shall be referred to as "Probationary Categories." 6.5.2 If during the [CONFIDENTIAL TREATMENT REQUESTED] of the Recovery Period, PAR's performance for such [CONFIDENTIAL TREATMENT REQUESTED] fails to satisfy the performance percentage commitment for [CONFIDENTIAL TREATMENT REQUESTED] of the Recovery Categories, then with respect to such failed Recovery Category(ies), PAR shall pay to Customer the Penalty associated with such failed Recovery Category(ies), within [CONFIDENTIAL TREATMENT REQUESTED] Days after termination of the Recovery Period. 6.5.3 If PAR's performance [CONFIDENTIAL TREATMENT REQUESTED] throughout the entire Probationary Period satisfies the performance percentage commitment for [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -13- [CONFIDENTIAL TREATMENT REQUESTED] of the Probationary Categories then PAR shall be relieved of its obligation to pay Customer the applicable [CONFIDENTIAL TREATMENT REQUESTED] Penalty associated with such Probationary Category(ies) satisfied. 6.5.4 If PAR's performance during [CONFIDENTIAL TREATMENT REQUESTED] of the Probationary Period, should fail to satisfy the performance percentage commitment for [CONFIDENTIAL TREATMENT REQUESTED] of the Probationary Categories then PAR shall pay to Customer the Penalty associated with such failed Probationary Category(ies), within [CONFIDENTIAL TREATMENT REQUESTED] Days after termination of the Probationary Period for such failed Probationary Category(ies). 6.6 Except as provided in Section 6.7 below, the imposition of Penalties in accordance with this Section 6 and Exhibit F shall be Customer's sole and exclusive remedy for PAR's failure to satisfy any response or restoral performance commitments set forth in this Agreement. In no event, (i) shall PAR be liable to Customer in other way (monetary or nonmonetary), and/or (ii) [CONFIDENTIAL TREATMENT REQUESTED] for PAR's failure to satisfy any response or restoral performance commitments. 6.7 Notwithstanding any provision herein to the contrary, in the event that PAR fails to respond to any RMS Pl service call more than [CONFIDENTIAL TREATMENT REQUESTED] from ETA, and such failure is caused by the intentional disregard or gross negligence of PAR, then Customer shall be entitled to receive from PAR as reasonable liquidated damages and not as a penalty, the sum of [CONFIDENTIAL TREATMENT REQUESTED] beyond such initial [CONFIDENTIAL TREATMENT REQUESTED] period that PAR fails to respond and reasonably pursue RMS. 7 CUSTOMER RESPONSIBILITIES 7.1 Customer shall ensure that all appropriate Site personnel are trained in the operation of the Equipment and shall inform all such personnel of the significant terms and conditions of this Agreement. Customer shall provide a sufficient number of trained, English speaking personnel at each Site such that at least one (1) supervisory employee trained and qualified in the operation of the Equipment is available to work with/assist a CSCC representative, by telephone, during the Site's normal operating hours to troubleshoot any Equipment problems and/or resolve any operational or procedural problems found. Such trained Site supervisory assistance is necessary to ensure effective and timely resolution of the problem by PAR. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -14- 7.2 Customer shall be responsible for ordering, installing and using only those consumable items which conform to the Equipment's specifications and which are necessary for routine operation, such as paper rolls, printer ribbons, keys, diskettes and filters. 7.3 Customer shall use best efforts to allow FSO representatives full, free and ready access to the Equipment. In addition, Customer shall provide, free of charge, on Site; working space, heat, light, ventilation, electrical power and outlets for use by FSO representatives to perform RMS. Such facilities shall be promptly provided to the FSO representative upon arrival and shall be within a reasonable working distance from the Equipment to ensure effective and efficient RMS. If the FSO representative is not provided full, free and ready access to the Equipment upon arrival and the failure to provide such is determined in PAR's reasonable judgment to have resulted in PAR's failure to meet its response and restoral commitments for such call and any other calls scheduled for such FSO that day then the applicable response times and the restoral times for such calls shall not be used in the performance measurements of the response or restoral percentages. 7.4 Customer shall, at its expense, property maintain the Site and provide the operating environment and necessary utility services for the Equipment in accordance with PAR's or the applicable Third Party Equipment/software manufacturer's specifications. 7.5 Customer shall not permit any person other than an FSO representative to perform maintenance or to attempt any repair to the Equipment without the prior written authorization of PAR. In the event such unauthorized third party service is permitted by Customer on any Equipment, such Equipment shall no longer be eligible for service under this Agreement. Such Equipment may regain eligibility for service under this Agreement only after PAR's acceptance of such Equipment in accordance with the terms of Section 3.6 above. 7.6 Customer shall provide PAR with reasonable prior written notice of all product rollouts or other changes in Customer's operations in order for PAR to properly forecast and implement any support changes necessary to meet its service commitments. If Customer fails to provide such notice and the failure to do so is determined in PAR's reasonable judgment to be the cause of PAR's failure to meet its response and restoral commitments for certain calls, then the applicable response times and the restoral times for such calls shall not be used in the performance measurements of the response or restoral percentages. 8. EXCLUSIONS FROM COVERAGE 8.1 The service items set forth in Sections 8.2 through 8.7 below are outside the scope of the Help Desk Support and RMS Support PAR has agreed to provide pursuant to Sections 4 and 5 of this Agreement and therefore are excluded from coverage under the terms of this Agreement. Notwithstanding any provision herein to the contrary, PAR neither promises to provide nor is -15- obligated to provide any of such excluded services. However, PAR would entertain a request for proposal from Customer to perform such services under a separate agreement if Customer so desired. 8.2 [CONFIDENTIAL TREATMENT REQUESTED] 8.3 [CONFIDENTIAL TREATMENT REQUESTED] 8.4 [CONFIDENTIAL TREATMENT REQUESTED] 8.5 [CONFIDENTIAL TREATMENT REQUESTED] 8.6 [CONFIDENTIAL TREATMENT REQUESTED] 8.7 [CONFIDENTIAL TREATMENT REQUESTED] 9. UPCHARGE ITEMS 9.1 The items set forth in Sections 9.2 through 9.10 below are items which were not priced into the Help Desk Support and RMS Support fees set forth in Exhibit D attached hereto. Customer shall be charged additional fees at either PAR's then current time and material rates (including reasonable travel expenses) or, if agreed to in advance, the additional fees negotiated by the parties hereto for all time, material and reasonable expense PAR expends, at the request of, or as a result of Customer, on such items. Notwithstanding any provision herein to the contrary, PAR neither promises to provide nor is obligated to provide any of such items. 9.2 All RMS and Help Desk Support labor, material and expenses to correct problems with or resulting from and/or caused by the use of any other equipment (not connected to the Equipment) not covered under this Agreement unless such equipment has been previously approved in writing by PAR. 9.3 All RMS or Help Desk Support labor, material and expenses resulting from and/or caused by Customer's failure to provide the operating environment required by the Equipment specifications, including, but not limited to, the failure to provide or the failure of adequate electrical power, air conditioning or humidity control. 9.4 All RMS or Help Desk Support labor, material and expenses resulting from and/or caused by operation of the Equipment connected to or in combination with: (a) other equipment, peripherals, attachments or devices not covered under this Agreement or otherwise approved in writing by PAR; (b) any software which PAR as of the time of the service has not accepted; (c) operating supplies not meeting Equipment specifications; [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -16- (d) material changes to Site operations (including but not necessarily limited to material roll-outs such as 'Border Lights" etc.); or (e) material changes to the Equipment or software. 9.5 All RMS or Help Desk Support labor, material and expenses resulting from and/or caused by use of the Equipment for other than the normal usage for which the Equipment was designed. For purposes of this Agreement, the term "normal usage" is defined as regular, ordinary and routine usage for that specific piece of Equipment. 9.6 All RMS or Help Desk Support labor, material and expenses resulting from and/or caused by accident, abuse, neglect, misuse, unauthorized maintenance, negligence or deliberate act including but not limited to the following: a. Foreign objects or substance falling on or leaking onto the Equipment; b. Improper handling, shipping or storage of the Equipment prior to or after installation; c. Disaster, which shall include, but not be limited to, fire, water, wind, flood, lightning, electrical disturbance, war, civil disturbance, other catastrophes or similar causes; d. Installing, repairing, maintaining, replacing parts or modifying the Equipment or software by anyone other than a PAR FSO representative; or e. Operation or use of the Equipment or software not in accordance with applicable written operating instructions. 9.7 All RMS or Help Desk Support labor, material and expenses to repair a problem reported by Customer in accord with this Agreement which is determined by the FSO representative not to be a problem with the Equipment but actually a problem with an item not covered under this Agreement (e.g. Customer steam line - video jittering). 9.8 All RMS labor, material and expenses related to installations, changes or modifications to Equipment, upgrades to Equipment, permanent removal of Equipment or the relocation of Equipment within or between Sites. 9.9 All RMS labor, material and expenses to perform standard operational functions, such as but not limited to the replacement of printer ribbons or paper. 9.10 All RMS performed after the PPM or the next day (at increased costs to PAR), caused when prompt access to the Equipment is not allowed or is materially hampered by Customer. -17- 10. REPORTING REQUIREMENTS 10.1 On a [CONFIDENTIAL TREATMENT REQUESTED] basis [CONFIDENTIAL TREATMENT REQUESTED], PAR will deliver to Customer two (2) copies of a Contract Report Package containing reports depicting PAR's performance under this Agreement for the prior [CONFIDENTIAL TREATMENT REQUESTED]. The Contract Report Package will be in the format as set forth in Exhibit G. 10.2 Field trial reports are outside the scope of this Agreement. 10.3 All information contained in the Contract Report Package or other reports provided by PAR to Customer shall be deemed PAR Microsystems Company Confidential Information and shall be covered by the Mutual Confidentiality Agreement attached hereto as Exhibit E. 11. PRICING, INVOICING AND PAYMENT 11.1 Subject to Sections 2.2, 11.1, 11.10 and 11.11 herein, the prices to be invoiced by PAR and paid by Customer for Help Desk Support and RMS are set forth in Exhibit D attached hereto. 11.1.1 The prices set forth in Exhibit D for the [CONFIDENTIAL TREATMENT REQUESTED] reflect a price reduction which is only applicable if: (a) on the first day of the [CONFIDENTIAL TREATMENT REQUESTED], the sum of the number of Customer owned and franchisee/licensee Sites for which PAR provides both Help Desk Support and RMS Support for such Sites point of sale Equipment (hereinafter in Sections 11.1 and 12 collectively the "POS Sites") pursuant to this Agreement is [CONFIDENTIAL TREATMENT REQUESTED] the number of such Sites on the Effective Date, [CONFIDENTIAL TREATMENT REQUESTED] (b) Customer extends the Agreement for a [CONFIDENTIAL TREATMENT REQUESTED] pursuant to Section 2.2 of this Agreement [CONFIDENTIAL TREATMENT REQUESTED] PAR's performance over the [CONFIDENTIAL TREATMENT REQUESTED] results in the payment of a Penalty by PAR to Customer. If Customer does not satisfy the requirements of Sections 11.1.1 (a) & (b) above, then the [CONFIDENTIAL TREATMENT REQUESTED] pricing set forth in Exhibit B shall become effective. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -18- 11.1.2 The prices set forth in Exhibit D for the [CONFIDENTIAL TREATMENT REQUESTED] reflect a price reduction which is only applicable if on the first day of the [CONFIDENTIAL TREATMENT REQUESTED] the sum of the number of POS Sites for which PAR provides both Help Desk Support and RMS Support pursuant to this ---- Agreement is [CONFIDENTIAL TREATMENT REQUESTED] the number of such Sites on the Effective Date. 11.1.3 Notwithstanding Sections 11.1.1 (a) and 11.1.2 above, if Customer satisfies the [CONFIDENTIAL TREATMENT REQUESTED] POS Site increase as of the first day of the [CONFIDENTIAL TREATMENT REQUESTED] as set forth in Section 11.1.1 (a) above and the [CONFIDENTIAL TREATMENT REQUESTED] POS Site increase as of the first day of the [CONFIDENTIAL TREATMENT REQUESTED] as set forth in Section 11.1.2 above, above but Customer thereafter reduces the number of such --- POS Sites then the [CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED] prices set forth in Exhibit D shall be adjusted as follows: (a) if at any time during the [CONFIDENTIAL TREATMENT REQUESTED] the number of POS Sites described in Sections 11.1.1 (a) and 11.1.2 above should be [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date then all prices shall revert back to [CONFIDENTIAL TREATMENT REQUESTED] pricing as set forth in Exhibit D for as long as the number of such POS Sites remains [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date; (b) if at any time during the [CONFIDENTIAL TREATMENT REQUESTED] the number of POS Sites described in Sections 11.1.1 (a) and 11.1.2 above should [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date but [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date (hereinafter the "[CONFIDENTIAL TREATMENT REQUESTED] Pricing Range") then all prices shall revert back to [CONFIDENTIAL TREATMENT REQUESTED] pricing as set forth in Exhibit D for as long as the number of such POS Sites remains within such [CONFIDENTIAL TREATMENT REQUESTED] Pricing Range; and (c) if at any time during the [CONFIDENTIAL TREATMENT REQUESTED] the number of POS Sites described in Sections 11.1.1(a) and 11.1.2 above should be [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date then all prices shall revert back to [CONFIDENTIAL TREATMENT REQUESTED] pricing as set forth in Exhibit D for as long as the number of such POS Sites remains [CONFIDENTIAL TREATMENT REQUESTED] the number of such POS Sites on the Effective Date. 11.2 PAR will invoice Customer, in advance, for [CONFIDENTIAL TREATMENT REQUESTED] Help Desk Support [i.e. [CONFIDENTIAL TREATMENT REQUESTED] of the annual Help Desk Support Site fees set forth in Exhibit D to this Agreement] and every [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -19- [CONFIDENTIAL TREATMENT REQUESTED] thereafter throughout the term of this Agreement for each [CONFIDENTIAL TREATMENT REQUESTED] period or portion thereof. 11.3 For all Equipment installed in a Site defined in Section l.l (a) and for a T.A.C.O. back-office personal computers installed in a Site defined in Section 1.1 (b) as of the Effective Date, [CONFIDENTIAL TREATMENT REQUESTED] of the annual RMS Support fees set forth in Exhibit D hereto will be invoiced [CONFIDENTIAL TREATMENT REQUESTED], in advance, by PAR on the Effective Date and [CONFIDENTIAL TREATMENT REQUESTED] will be invoiced by PAR every [CONFIDENTIAL TREATMENT REQUESTED] thereafter throughout the term of this Agreement for each [CONFIDENTIAL TREATMENT REQUESTED] or [CONFIDENTIAL TREATMENT REQUESTED] the Equipment or a comparable, eligible replacement is installed at such Site. 11.4 If Equipment is replaced by a comparable and eligible piece of Equipment during the period for which RMS has been paid, the new Equipment will be covered under the remaining period of the payment made for the replaced Equipment. 11.5 If Equipment for which RMS has been paid is removed or replaced by noncomparable or non-eligible Equipment or other equipment, [CONFIDENTIAL TREATMENT REQUESTED]. 11.6 Notwithstanding any provision of this Agreement to the contrary, there will be no refund or transfer of Help Desk Support or RMS Support fees paid unless agreed to by the parties. 11.7 For Equipment which is installed and/or becomes eligible for service under this Agreement during a calendar month subsequent to the [CONFIDENTIAL TREATMENT REQUESTED] Day of that month, RMS Support and Help Desk Support fees will commence as of the first day of the next month. For Equipment which is installed and/or becomes eligible for service under this Agreement during a calendar month prior to the [CONFIDENTIAL TREATMENT REQUESTED] Day of that month, RMS and Help Desk fees will commence as the first Day of such month in which the Equipment is installed and/or becomes eligible for service. 11.8 Payment is due and payable in full thirty (30) Days after the receipt of invoice. Any amount payable by Customer that remains unpaid thirty (30) Days after the due date shall be subject to interest on the unpaid amount at the rate of twelve percent (12%) per annum. 11.9 Where time and material and uplift billings apply for work performed by PAR for items set forth in Sections 8 & 9 of this Agreement and for work performed in accordance with Subsections 3.7, 5.4 and 5.13 above the billings shall be forwarded separately to Customer or franchisee/licensee, whichever is applicable. PAR shall use its best efforts to obtain a signature [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -20- from a Site managerial employee on the PAR Incident Report acknowledging that PAR has informed such employee that the services/work have been performed at an additional charge. PAR shall use its best efforts to include the PAR Incident Report or electronic record of the incident with such billings. PAR's failure to include the PAR Incident Report or electronic record of the incident with the billing shall not preclude payment by Customer nor shall it result in an extension of the payment due date. If not included with the billing, PAR will subsequently provide the PAR Incident Report or other substantiating documentation upon receipt of a written request from Customer specifying the associated invoice number(s) requested. If such PAR Incident Report or other substantiating documentation is not received by Customer within [CONFIDENTIAL TREATMENT REQUESTED] Days from PAR's receipt of Customer's request, PAR shall issue a credit for such billing against the associated invoice. 11.10 The prices contained in Exhibit D hereto were calculated assuming that the CPI Index for All Urban Consumers, All Items from [CONFIDENTIAL TREATMENT REQUESTED] (hereinafter "CPI Period") would not increase by more than [CONFIDENTIAL TREATMENT REQUESTED]%. If Customer extends this Agreement for a [CONFIDENTIAL TREATMENT REQUESTED] and the CPI Index over the CPI Period increases by more than [CONFIDENTIAL TREATMENT REQUESTED] percent ([CONFIDENTIAL TREATMENT REQUESTED]%) then the applicable [CONFIDENTIAL TREATMENT REQUESTED] prices shall be increased by that percentage in excess of [CONFIDENTIAL TREATMENT REQUESTED] percent ([CONFIDENTIAL TREATMENT REQUESTED]%). 11.11 The prices contained in Exhibit D hereto were also calculated assuming a general availability of all replacement parts throughout the term of the Agreement and an actual reduction in the cost to PAR of such parts over the term. If during the term of this Agreement, there is a decrease in the availability of any replacement parts causing the cost of such replacement parts to be significantly higher than the cost as of the Effective Date hereof, PAR shall provide Customer with written notice of such change and Customer will assist PAR in either identifying a lower cost supplier or a suitable substitute for such parts. If Customer and PAR cannot identify a lower cost supplier or find a suitable substitute within [CONFIDENTIAL TREATMENT REQUESTED] then PAR reserves the right to increase its pricing for such replacement parts by an amount equal to the actual increase in costs to PAR. 11.12 Upon written notification from Customer that Customer has transferred ownership of a Site to another party, PAR will discontinue invoicing with the next invoicing period. Customer is responsible for all fees through the date PAR's Taco Bell Account/Program Manager receives written or electronic notice of such change from Taco Bell in accordance with the notice provision set forth in Section 15.19 herein. No credit will be provided for failure to provide timely notice. 12. SITEBASE RETENTION [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -21- 12.1 Customer shall ensure that the total number of POS Sites for which PAR provides both Help Desk and RMS support (counting both Company-owned and franchisee/licensee) is at least [CONFIDENTIAL TREATMENT REQUESTED] Sites throughout the term of this Agreement. If the total number of POS Sites shall at any time drop below this [CONFIDENTIAL TREATMENT REQUESTED] level then Customer shall pay PAR [CONFIDENTIAL TREATMENT REQUESTED]. Any monies due PAR pursuant to this Section 12.1, shall be divided evenly across all Customer owned POS Sites and shall be included, as a separate line item, on PAR's monthly invoices for such Sites. 12.2 Customer shall ensure that the total number of T.A.C.O. back-office Sites for which PAR provides RMS support ("PC Sites") (counting both Customer owned and franchisee/licensee) is at least [CONFIDENTIAL TREATMENT REQUESTED] Sites throughout the term of this Agreement. If the total number of PC Sites shall at any time drop below this [CONFIDENTIAL TREATMENT REQUESTED] level then Customer shall pay PAR [CONFIDENTIAL TREATMENT REQUESTED]. Any monies due PAR pursuant to this Section 12.2, shall be divided evenly across all PC Sites and shall be included, as a separate line item, on PAR's monthly invoices for such Sites. 13. WARRANTY DISCLAIMER 13.1 EXCEPT AS EXPRESSLY STATED HEREIN, PAR MAKES NO WARRANTY WITH RESPECT TO SERVICES OR PARTS PROVIDED HEREUNDER, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR OF MERCHANTABILITY. 13.2 IN ADDITION, PAR DOES NOT ENSURE UNINTERRUPTED OR ERROR-FREE OPERATION OF THE EQUIPMENT COVERED UNDER THIS AGREEMENT. 14. LIMITATION OF LIABILITY 14.1 IN NO EVENT, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, INDEMNITY, WARRANTY, OR OTHERWISE, SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, THE LOSS OF ACTUAL OR ANTICIPATED REVENUE OR PROFITS, THE LOSS OR CONTAMINATION OF DATA, THE LOSS OF THE ABILITY TO TRANSMIT OR USE DATA OR EQUIPMENT, BUSINESS INTERRUPTION, DOWNTIME COSTS, LOSS OF ACTUAL OR ANTICIPATED VALUE OF THE BUSINESS OF EITHER PARTY, OR DAMAGE TO THE BUSINESS REPUTATION OF EITHER PARTY. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -22- 14.2 NOTWITHSTANDING ANY PROVISION HEREIN TO THE CONTRARY AND EXCEPT FOR CLAIMS FOR PERSONAL INJURY OR DEATH AND EXCEPT FOR CLAIMS RESULTING FROM THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF PAR, ITS EMPLOYEES, AGENTS OR SUBCONTRACTORS, IN NO EVENT SHALL PAR'S LIABILITY ON ANY CLAIM OF ANY KIND (INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE, CONTRACT, STRICT LIABILITY ETC.) FOR ANY LOSS OR DAMAGE ARISING OUT OF OR IN ANY WAY RESULTING FROM THIS AGREEMENT, OR FROM THE PERFORMANCE OR BREACH THEREOF, OR FROM THE MATERIAL OR SERVICES FURNISHED HEREUNDER, SHALL IN NO CASE EXCEED [CONFIDENTIAL TREATMENT REQUESTED]. 14.3 IN NO EVENT WILL PAR BE LIABLE FOR ANY DAMAGES OR EXPENSES CAUSED BY CUSTOMER'S FAILURE TO PERFORM ITS RESPONSIBILITIES. PAR IS NOT LIABLE FOR LOSS OF FUNDS CONTAINED IN, DISPENSED BY, OR ASSOCIATED WITH, ANY ITEM OF EQUIPMENT OR ANY SITE. 14.4 NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY, NO DEFAULT, DELAY OR FAILURE TO PERFORM ON THE PART OF PAR SHALL BE CHARGEABLE HEREUNDER IF SUCH IS DUE TO CAUSES BEYOND PAR'S REASONABLE CONTROL. IN THE EVENT OF SUCH DEFAULT, DELAY OR FAILURE TO PERFORM, ANY DATES OR TIMES BY WHICH PAR IS OTHERWISE SCHEDULED TO PERFORM SHALL BE EXTENDED AUTOMATICALLY FOR A PERIOD OF TIME EQUAL IN DURATION TO THE ADDITIONAL TIME REQUIRED TO PERFORM. 15. GENERAL 15.1 Confidentiality. Any confidential information identified as such and --------------- disclosed by either party to the other in the course of this Agreement shall be subject to the terms of the Mutual Confidentiality Agreement between PAR and Customer, dated as of the Effective Date, a copy of which is attached hereto as Exhibit E, which confidentiality obligations shall survive expiration or termination of this Agreement for a period of [CONFIDENTIAL TREATMENT REQUESTED] from the date of such expiration or termination. 15.2 Indemnification for Third Party Claims. PAR agrees to indemnify and hold -------------------------------------- Customer, its officers, directors, employees, agents, affiliates, subsidiaries, parent company, successors and assigns harmless against any and all third party claims, counterclaims, suits, demands, actions, causes of actions, damages, setoffs, liens, attachments, debts, expenses, judgments, or other liabilities of whatsoever kind or nature, including reasonable attorney's fees and costs, arising from any alleged or actual negligent, willful, reckless, or wrongful act or omission of PAR, its officers, directors, employees and agents in PAR's performance under this Agreement or from any breach of PAR's representations and warranties specifically set forth herein which resulted in [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATRERIAL THAT HAS BEEN OMITED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -23- personal injury, death or property damage to a third party. These obligations shall survive the termination or expiration of the Agreement. 15.3 Insurance,. During the term of this Agreement, PAR shall maintain in full ---------- force and effect the kinds of insurance, containing the limits of liability set forth below: a. Workers' Compensation - The worker's compensation policy shall comply with the workers' compensation law of the state in which the Services are rendered and shall include employer's liability coverage for not less than $1,000,000 per occurrence. Such policy shall provide coverage for all persons engaged in the activities described in this Agreement under the employ, supervision or control of PAR. b. General Liability - The policy shall contain a combined single limit of liability of not less that $1,000,000 per occurrence and a separate limit of liability for products and completed operations of not less that $1,000,000 per occurrence. c. Automobile Liability - If automotive vehicles are operated by PAR in its performance of its obligations under this Agreement, PAR shall maintain an automobile liability policy which shall include coverage on all owned, non-owned and hired vehicles and shall have a minimum limit of liability of not less than $1,000,000 per occurrence. Coverage shall be placed with an insurer having a Best's Key Rating of "A" or better. Upon execution of the Agreement by both parties, PAR shall furnish Customer with a Certificate of Insurance evidencing such coverages. If any of the foregoing coverage expires, changes, or is cancelled, PAR shall notify Customer within thirty (30) Days prior to the effective date of such expiration, change or cancellation. Should PAR fail to maintain the insurance coverage required hereunder and not cure such within [CONFIDENTIAL TREATMENT REQUESTED] Days of its receipt of written notice from Customer, Customer may terminate the Agreement immediately upon its receipt of notice thereof, or Customer shall have the right, but not the obligation, to purchase such insurance on PAR's behalf, and to deduct the cost thereof from any amounts owed to PAR under the Agreement. 15.4 Qualifications of Personnel. PAR represents that it will ensure that its --------------------------- employees and subcontractors are reasonably trained to perform the Help Desk and RMS support required under this Agreement and have the ability to communicate clearly in English with Customer personnel and to follow reasonable directions. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -24- 15.5 Relationship of Parties. PAR is an independent contractor with respect to ----------------------- its performance of its support services hereunder. Nothing contained herein shall be deemed to create the relationship of partner, principal and agent, or joint venturer between the parties. PAR has no right or authority to incur obligations of any kind in the name of or for the account of Customer nor to commit or bind Customer to any contract or other obligation. 15.6 Audit. PAR's Help Desk Support and RMS Support response and restoral ----- records shall be maintained in a reasonable manner. PAR agrees that Customer shall have the right, with notice, to audit all such records for a period of [CONFIDENTIAL TREATMENT REQUESTED] beyond the term of the Agreement. Customer shall bear the costs of such audits which shall be conducted during normal business hours at PAR's service headquarters. PAR agrees to make available reasonable copying capability and work space for Customer's representatives and agrees to cooperate fully in all such audits. 15.7 Assignment. Neither party may assign its rights or obligations under the ----------- Agreement without the prior written consent of the other party which may not be unreasonably withheld or delayed. 15.7.1 Notwithstanding Section 15.7 above, in no event shall Customer assign its rights or obligations under this Agreement to another party if such assignment: (i) would require PAR to provide support to Sites other than the Customer Sites contemplated herein (e.g. Taco Bell and Hot n' Now restaurants) or (ii) was to a competitor of PAR. If consent is granted by PAR, this Agreement shall, absent agreement between the parties, apply only to those Sites covered by this Agreement as of the day prior to the date of such assignment. Any attempt to assign any of the rights or delegate any of the obligations or duties of this Agreement without PAR's prior written consent shall be null and void. 15.8 Compliance with Laws. PAR shall obtain at its sole cost and expense all --------------------- governmental permits and authorizations of whatever nature required for PAR's performance of its obligations under the Agreement, and shall not violate any law, statute, ordinance or governmental rule or regulation applicable to such performance. PAR shall at its sole cost and expense promptly comply with all laws, statutes, ordinances and governmental rules, regulations and requirements arising out of or relating to PAR's performance of its obligations under the Agreement. 15.9 Consent. Whenever consent, approval, authorization or the like is ------- required, the same shall not be unreasonably withheld or delayed. 15.10 Force Majeure. Neither party shall be liable for damages or Penalties ------------- for its failure to perform due to contingencies beyond its reasonable control, including, but not limited to, fire, storm, flood, earthquake, explosion, accidents, public disorders, sabotage, lockouts, labor disputes, labor shortages, strikes, riots, acts of God or if performance would necessitate the violation of law or of a third party's intellectual property rights. [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -25- 15.11 Governing Law. This Agreement, and all matters arising out of or ------------- relating to this Agreement, shall be governed by the laws of the State of New York, without regard to the conflict of laws provisions thereof. 15.12 Taxes. All charges due hereunder are exclusive of federal, state and ----- local excise, sales, use and other taxes now or hereafter levied or imposed on the services or replacement parts provided hereunder, or on this Agreement. Except for taxes based on PAR's income, Customer shall be liable for and pay all such taxes and other levies. Customer shall reimburse PAR in full for any and all of the foregoing taxes or levies that are paid by PAR for which Customer is responsible hereunder. 15.13 Subcontractors. The services to be provided by PAR under this Agreement -------------- may be provided by the use of PAR selected independent subcontractors. 15.14 Modifications/Amendments. This Agreement may be modified or amended only ------------------------- in a writing signed by a duly authorized representative of each party. No other act, document, usage or custom shall be deemed to amend or modify this Agreement. 15.15 Purchase Orders. The parties to this Agreement agree that any prior or --------------- subsequent purchase order or other written notification from Customer shall be of no effect to add to or vary the terms and conditions of this Agreement, whether or not subsequently acknowledged by PAR. 15.16 Equipment Ownership. Customer warrants, with respect to the Equipment ------------------- subject to or affected by this Agreement, that Customer is the owner of such Equipment. 15.17 Personnel. Assignment of personnel to perform any services under this --------- Agreement shall be within the sole discretion of PAR. 15.18 Limitation. Neither party may bring an action, regardless of form, ---------- arising out of this Agreement more than two (2) years after the cause of action has accrued. 15.19 Notice. Notices required or allowed to be given hereunder shall be in ------ writing and shall be deemed to have been given when delivered by registered mail or overnight courier to the following respective addresses: If to PAR: PAR Microsystems Corporation 5757 Central Avenue Boulder, CO 80301 Attention: Taco Bell Account/Program Manager with a copy to: -26- PAR Microsystems Corporation PAR Technology Park 8383 Seneca Turnpike New Hartford, NY 13413-4991 Attention: Legal Department If to Customer: Taco Bell Corp. 17901 Von Karman Irvine, CA 92714-6212 Attention: Vice President Operations Services with a copy to: Taco Bell Corp. 17901 Von Karman Irvine, CA 92714-6212 Attention: General Counsel Addresses as such may be modified by like notice. 15.20 Unenforceable Provision. In the event any provision of this Agreement is ----------------------- held to be invalid or unenforceable, the remaining provisions of this Agreement will remain in full force and effect. 15.21 Waiver. No term or provision of this Agreement shall be deemed waived by ------ either party, and no breach excused by either party, unless such waiver or consent shall be in writing signed by a duly authorized representative of the other party. No consent by either party to, or waiver of, a breach by the other party, whether express or implied, shall constitute a consent to, or waiver of, or excuse for any other different or subsequent breach by the other party. 15.22 ADR: Disinterested Executives. In the event of a dispute (the "Issue"), ----------------------------- PAR's VP Account Management and Customer's Vice President Operations Services (hereinafter collectively referred to as "Project Manager(s)") will negotiate in good faith on a regular basis to resolve the Issue. In the event such negotiation extends more than thirty (30) Days and the Issue remains unresolved, or a Project Manager states in writing to the other that he/she will not be able to resolve the Issue through continued negotiation, the Project Managers will refer the Issue to the Disinterested Executives (as hereinafter defined) of PAR and Customer. "Disinterested Executives" as used herein are senior level executives from a separate business unit, division, subsidiary or affiliate of PAR and Customer, respectively which are identified by the parties. -27- No later than thirty (30) Days from the date of such referral, the Project Managers will each prepare in writing their own understanding of the Issue (the "Issue Statement"). The Issue Statements will be submitted to both Disinterested Executives no later than the expiration of the time period referred to in the preceding sentence. When the Issue Statements are received by the Disinterested Executives as described above, they will negotiate in good faith on a regular basis to resolve the issue(s) as expeditiously as feasible under the circumstances; provided, however, such negotiation will extend no more than thirty (30) Days from the date the Disinterested Executives receive the Issue Statements. Within thirty (30) Days of the earlier of (i) the conclusion of the negotiation by the Disinterested Executives or (ii) the expiration of the time period referred to in the preceding sentence, the Disinterested Executives will submit a joint written recommendation for any Issue the Disinterested Executives agreed upon and separate written recommendations for any Issue the Disinterested Executives disagreed upon or remain unresolved. PAR and Customer, agree to be bound by the joint written recommendation. 15.23 ADR:Mediation. In the event that an Issue remains unresolved by the ------------- Disinterested Executives as set forth in the preceding Section 15.22, it shall be a condition precedent to either party's right to commence litigation that the parties shall have participated in at least twenty (20) hours of mediation in accordance with the Mediation Procedures of United States Arbitration & Mediation, Inc. ("USA&M"). The parties agree to divide the costs of mediation equally. The mediation will be administered by United States Arbitration & Mediation of Upstate New York or such other appropriate office as may be designated by USA&M's national office in Seattle, Washington. 15.24 Entire Agreement. This Agreement, including any agreements specifically ---------------- referenced herein or attachments and exhibits hereto, constitutes the complete and entire agreement between the parties and supersedes all previous and contemporaneous agreements, proposals, communications or representations, written or oral, concerning the subject matter of this Agreement. EACH PARTY WARRANTS THAT IT HAS FULL POWER AND AUTHORITY TO ENTER INTO AND PERFORM THIS AGREEMENT, AND THE PERSON SIGNING THIS AGREEMENT ON SUCH PARTY'S BEHALF HAS BEEN DULY AUTHORIZED AND EMPOWERED TO ENTER INTO THIS AGREEMENT. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT, UNDERSTANDS IT AND AGREES TO BE BOUND BY IT. -28- Executed by Customer: Executed by PAR: /s/ Fred Traverse [CONFIDENTIAL TREATMENT REQUESTED] ----------------------------- ---------------------------------- Signature Signature Fred Traverse [CONFIDENTIAL TREATMENT REQUESTED ----------------------------- ---------------------------------- Printed Name Printed Name Vice President - Operations Vice President ----------------------------- ---------------------------------- Title Title Sept. 12, 1995 Sept. 12, 1995 ----------------------------- ---------------------------------- Date REVIEWED BY: --------------------------- DATE: 9/2/95 ----------------------------- [CONFIDENTIAL TREATMENT REQUESTED] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE COMMISSION PURSUANT TO RULE 406. -29- EX-11 8 STATE RE COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, ------------------- 1993 1994 1995 1995 1996 ----- ----- ----- --------- --------- Weighted average shares of common stock outstanding: Balance outstanding--beginning of period............................... 7,536 7,605 7,656 7,656 7,682 Weighted average shares issued during the period........................... 28 39 51 16 18 Weighted average shares of treasury stock acquired....................... -- (3) (23) -- -- Incremental shares of common stock outstanding giving effect to stock options.............................. 404 351 384 401 490 ----- ----- ----- --------- --------- Weighted balance--end of period....... 7,968 7,992 8,068 8,073 8,190 ===== ===== ===== ========= =========
EX-23.1 9 CONSENT OF PRICE WATERHOUSE LLP CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-2 of our report dated February 13, 1996, relating to the financial statements of PAR Technology Corporation, which appears in such Prospectus. We also consent to the application of such report to the Financial Statement Schedules for the three years ended December 31, 1995 listed under Item 14(a) of PAR Technology Corporation's Annual Report on Form 10-K for the year ended December 31, 1995 when such schedules are read in conjunction with the financial statements referred to in our report. The audits referred to in such report also included these Financial Statement Schedules. We also consent to the references to us under the headings "Experts" and "Selected Consolidated Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Consolidated Financial Data." Price Waterhouse LLP Syracuse, New York May 20, 1996