June 12, 2009
BY ELECTRONIC SUBMISSION
United States Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 4561
100 F Street, N.E.
Washington, D.C. 20549-4561
Attention: Evan S. Jacobson
RE: PAR Technology Corporation
Form 10-K for Fiscal Year Ended December 31, 2008
Filed March 16, 2009
Form 10-Q for Fiscal Quarter Ended March 31, 2009
Filed May 11, 2009
File No. 001-09720
Ladies and Gentlemen:
PAR Technology Corporation, a Delaware corporation ("PAR" or the "Company"), is
transmitting for filing with the Securities and Exchange Commission (the
"Commission"), this letter reflecting PAR's responses to the written comments
communicated by Ms. Maryse Mills-Apenteng, Staff Attorney, to John W. Sammon,
Jr., Chairman of the Board and President of PAR, by letter dated May 20, 2009.
The responses set forth below have been organized in the same manner in which
the comments were presented in Ms. Mills-Apenteng's letter.
Form 10-K for Fiscal Year Ended December 31, 2008
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Comment:
1. We note that in the performance graph, included in your annual report
to security holders pursuant to Item 201(e) of Regulation S-K, you
compare your performance with the performance of a "peer group", but
do not appear to have disclosed the identity of the peer issuers, as
required by Instruction 5 to Item 201(e) of Regulation S-K. In
addition, the basis on which you have selected your "peer group" is
unclear. If you have not selected your "peer group" on an industry or
line-of-business basis, you must disclose the basis for its selection.
See Item 201(e)(1)(ii)(B) of Regulation S-K. Please advise.
Response:
The Company supplementally informs the staff that the following companies are
included in the Company's self constructed peer group: Micros Systems, Inc., PAR
Technology Corporation, and Radiant System, Inc. This peer group was selected on
an industry basis. In future filings the Company will include the following
narrative with its performance graph:
The following performance graph compares the cumulative total
shareholder return on the Company's Common Stock with the Standard and
Poor's 500 Index and the common stock of a self constructed peer group
made up of companies on an industry basis, which companies' returns
are weighted according to their respective market capitalizations at
the beginning of each year for which the return is calculated. The
graph is constructed on the assumption that $100 was invested in each
of the Company's Common Stock, the S&P 500 Stock Index, and the peer
group on December 31,____. The year end values of each investment are
based on share price appreciation and the reinvestment of dividends.
The following companies are included in the Company's self constructed
peer group: Micros Systems, Inc., PAR Technology Corporation, and
Radiant System, Inc.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Comment:
2. We note that your statement regarding the effectiveness conclusion of
your chief executive and financial officers indicates that your
disclosure controls and procedures were "designed to ensure that
information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in the SEC's rules and forms." Please confirm and clarify in future
filings whether your disclosure controls and procedures were also
designed to ensure that information required to be disclosed by you in
the reports filed or submitted under the Exchange Act is accumulated
and communicated to you management, including your chief executive and
financial officers, as appropriate to allow timely decisions regarding
required disclosure. Please note that this comment also applies to
your Form 10-Q for the fiscal quarter ended March 31, 2009.
Response:
The Company supplementally clarifies for the staff that the Company's disclosure
controls and procedures were designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. In addition, the disclosure
controls and procedures were also designed to ensure that information required
to be disclosed by the Company in the reports filed or submitted under the
Exchange Act is accumulated and communicated to management, including the chief
executive and financial officers, as appropriate, to allow timely decisions
regarding required disclosure. The Company will include these assertions within
its future filings.
Changes in Internal Controls over Financial Reporting
Comment:
3. We note your statement that there were no reportable changes in
internal control over financial reporting that occurred "during the
period covered by this Annual Report on Form10-K." Please note that
item 308(c)of Regulation S-K requires that you disclose whether there
were any changes in internal control over financial reporting "during
the fourth fiscal quarter" in the case of an annual report. Please
confirm that you will provide conforming disclosure in future filings.
Response:
The Company supplementally clarifies for the staff that with respect to Changes
in Internal Control over Financial Reporting as disclosed with Item 9A (2) of
its Form 10-K for the fiscal year ended December 31, 2008, there were no changes
in the Company's internal control over financial reporting that occurred during
the Company's fourth fiscal quarter. Furthermore, the Company confirms that it
will provide conforming disclosure in accordance with Item 308(c) of Regulation
S-K in future filings.
Item 11. Executive Compensation (Incorporated By Reference From Definitive Proxy
Statement Filed April 21, 2009)
Compensation Discussion and Analysis
Comment:
4. Please clarify what role, if any, your chief executive officer has in
setting his own compensation. In this regard, it is unclear how the
chief executive officer's compensation is determined. Please confirm
that you will address in future filings how each element of the chief
executive officer's total compensation is determined.
Response:
The Company supplementally informs the staff that the determination of the
Company's chief executive officer's compensation is solely within the purview of
the Compensation Committee of the Company's Board of Directors (the
"Compensation Committee" or "Committee"). In determining the compensation of the
chief executive officer and assessing the appropriateness of the compensation
for all other named executives, the Compensation Committee solicits and
considers the self assessment of each executive as to their performance against
pre-established goals and objectives, the executive's involvement in the day to
day operations of the relevant business unit, as well as results of a third
party compensation survey. As to the chief executive specifically, the Committee
also performs its own evaluation of the chief executive's performance in light
of the goals and objectives the Committee had approved for the prior fiscal
year. The third party compensation survey utilized by the Committee evaluates
the compensation levels of chief executive officers at companies of similar size
and geographic location within the high technology, durable group industry, as
defined by the third party compensation survey, companies which are determined
to be peers of the Company. Based on the Compensation Committee's consideration
of the aforementioned information, combined with the chief executive's
anticipated level of involvement in the daily operations of the Company in
fiscal year 2008, the Compensation Committee determined that a compensation
increase in fiscal year 2008 as compared to fiscal year 2007 was not necessary.
Other than the chief executive's self assessment which is solicited and
considered by the Compensation Committee in establishing compensation levels,
the chief executive does not have any role in establishing his compensation.
Furthermore, the Company confirms that in future filings, it will address how
each element of the chief executive officer's total compensation is determined.
Elements of Executive Compensation
Base Salary
Comment:
5. Although you indicate that you benchmark base salaries "near the
average midpoint for similar positions" identified in the survey on
which you relied, you have not identified the peer companies. Please
tell us the basis for omitting the components of the benchmarking
group. In this regard, we note your reference broadly describing the
companies as "the high technology group within the durable goods
industry sector"
Response:
The Company supplementally informs the staff that the compensation surveys
provided by the national third party provider and utilized as a compensation
benchmark did not identify specific peer companies, but rather identified peer
groups, disaggregated by industry, volume of revenue, total employee headcount,
and geographic region. In selecting the appropriate peer group, the Compensation
Committee utilized the high technology peer group companies within the durable
goods industry sector, having consolidated revenues within the range of $100
million and $500 million, full time equivalent employees within the range of
1,001 and 5,000, and located in the northeastern United States. The Committee
concluded that the aforementioned peer group was the most similar with respect
to industry, operations, size and location of the Company, and would be
appropriate in deriving their compensation benchmarks. In future filings, the
Company will provide the above specificity relative to the peer group companies
utilized.
Comment:
6. We note that base salaries for your named executive officers, except
for Dr. Sammon changed during the periods covered by your summary
compensation table. Please explain why the base salary changed for
each affected named executive officer during the last fiscal year and
discuss the relevant factors that led to that change. Please confirm
that you will include a discussion of material changes in compensation
in your Compensation Discussion and Analysis in future filings, as
applicable. See Item 402(b)(2)(ix) of Regulation S-K.
Response:
The Company supplementally informs the Staff that base salaries are established
after consideration of the results of a peer group compensation survey (as
discussed in comment number 5 above), combined with the executive's self
assessment and an estimate of the projected level of involvement the executive
will have in the day to day operations of the Company, as well as thorough
consideration of the executive's performance to his/her respective
pre-determined goals and objectives. With respect to the change in salary for
each affected named executive officer, changes were based on the following:
Ronald J. Casciano - Mr. Casciano's base salary in fiscal year 2008 was
increased from his base salary in fiscal year 2007 after the Company's
consideration of the results of the third party peer group survey. Based on the
Company's review of the survey results, it was determined that Mr. Casciano's
base salary was lower than the average midpoint salary of someone serving in a
similar position at the peer companies included within the survey. As a result,
the Compensation Committee approved an increase to Mr. Casciano's base salary,
as indicated within the summary compensation table.
Charles A. Constantino - Mr. Constantino's base salary in fiscal year 2008 was
increased from his base salary in fiscal year 2007 as a result of an increase in
Mr. Constantino's involvement in the day to day operations of the Company (to
offset the reduction in Mr. Cortese's workload as discussed below). This
increased salary level was approved by the Company's Compensation Committee.
Gregory T. Cortese - Mr. Cortese's base salary in fiscal year 2008 was decreased
from his salary in fiscal year 2007 as a result of a leave of absence taken by
Mr. Cortese in fiscal year 2008, thereby decreasing his level of involvement
with the day to day operations of the Company. Had Mr. Cortese not taken a leave
of absence, his base salary for fiscal year 2008 would have been unchanged from
that of fiscal year 2007 based on the operating performance of the Company's
Hospitality operating segment, which Mr. Cortese oversees.
Stephen P. Lynch - Mr. Lynch's base salary in fiscal year 2008 was increased
from his fiscal year 2007 base salary as a result of his elevation to the
position of President of the Company's Government segment.
Additionally, the Company confirms that it will include discussions of material
changes in compensation in our Compensation Discussion and Analysis in future
filings, as applicable.
Incentive Compensation
Comment:
7. We note that you have not provided a quantitative discussion of the
terms of the necessary targets to be achieved in order for your
executive officers to earn their annual performance bonuses. Items
402(b)(2)(v) and (vi) of Regulation S-K require appropriate disclosure
of the specific items of corporate performance that are taken into
consideration in setting compensation policies and making compensation
decisions and how specific forms of compensation are structured and
implemented to reflect these performance items. With respect to
performance target levels, to the extent you have omitted this
disclosure under Instruction 4 to Item 402 (b) of Regulation S-K,
provide us with a detailed supplemental analysis supporting your
conclusion and provide appropriate corresponding disclosure pursuant
to Instruction 4. In disclosing the level of difficulty or ease
associated with achievement of the undisclosed performance levels or
other factors, please provide as much detail as necessary without
disclosing information that poses a reasonable risk of competitive
harm. In this regard, consider providing disclosure that addresses the
relationship between historical and future achievement and the extent
to which you set the incentive parameters based upon a probability
that you would achieve the performance objectives.
Response:
The Company supplementally informs the staff that the specific items of
corporate performance that are taken into account in setting compensation
policies and making compensation decisions are pretax income from operations,
revenue, inventory turnover, and collection of accounts receivable. Each factor
is weighted in determining the eligible incentive compensation, noting that
pretax income from operations and revenue represent approximately 85% of the
potential incentive compensation to be awarded, while inventory turnover and
collections of accounts receivable represent the remaining 15%.
The performance goals are established by the Company's Executive Management Team
and Board of Directors and correlate to the Company's annual operating plan,
determined based on the Company's historical results, and current industry and
economic conditions. The established goals are set with a reasonable probability
of being achieved, noting that during the last five completed fiscal years,
"target" performance has been achieved approximately 40% of the time. Incentive
compensation begins to be awarded when 80% of the target objective has been
satisfied (except for the revenue target which begins when 90% of the target has
been achieved).
In future filings, the Company will expand disclosure to include qualitative
discussion of the terms of the necessary targets to be achieved in order for its
executive officers to earn their annual performance bonuses.
Comment:
8. Please provide a more detailed discussed linking achievement of
performance targets to the amount of compensation actually awarded to
each named executive officer.
Response:
The Company supplementally informs the staff that the achievement of performance
targets is most associated with the Company's Non-Equity Incentive Plan
Compensation. As stated in the Company's response to question 6 above, base
salary is established mostly based on the named executive's expected role with
the Company, combined with consideration of base pay provided to peer company
executives, as determined through the review of a third party compensation
survey. Stock awards, option awards and non-qualified deferred compensation
earnings are generally not significant compensation components for the named
executives. As such, the Company will focus its response as it relates to the
non-equity incentive compensation provided to each named executive.
Dr. John W. Sammon, Ronald J. Casciano and Charles A. Constantino - Incentive
compensation for these named executives was linked to each of the Company's
business unit's weighted pretax income, revenue, inventory turnover, and
accounts receivable days sales outstanding. 85% of the total award was based on
pretax income and revenue targets, while the remaining 15% was associated with
inventory and collections performance goals. Incentive compensation begins to be
awarded when 80% of the target objective has been satisfied (except for the
revenue target which begins when 90% of the target has been achieved). Maximum
award limitations are established at 140% of the target performance objective,
which translates into 200% of the established award amount for that objective.
Gregory T. Cortese - Mr. Cortese's incentive compensation was linked to pretax
income, revenue, inventory turnover, and accounts receivable days sales
outstanding of the Company's Hospitality operating segment with which Mr.
Cortese oversees, noting that 85% of the total award was based on pretax income
and revenue targets, while the remaining 15% was associated with inventory and
collections performance goals. Incentive compensation begins to be awarded when
80% of the target objective has been satisfied (except for the revenue target
which begins when 90% of the target has been achieved). Maximum award
limitations are established at 140% of the target performance objective, which
translates into 200% of the established award amount for that objective.
Stephen P. Lynch - Mr. Lynch's incentive compensation was linked to the pretax
income, revenue, and accounts receivable days sales outstanding for the
Company's Government operating segment with which Mr. Lynch oversees, noting
that 85% of the total award was based on pretax income and revenue targets,
while the remaining 15% was associated with collections performance goals.
Incentive compensation begins to be awarded when 80% of the target objective has
been satisfied(except for the revenue target which begins when 90% of the target
has been achieved). Maximum award limitations are established at 140% of the
target performance objective, which translates into 200% of the established
award amount for that objective.
The Company has disclosed the range of potential non-equity incentive plan
awards established for fiscal year 2008 within the "Grants of Plan-Based Awards"
table.
Equity Compensation
Comment:
9. Please provide a more detailed discussion of your equity incentive
plan. For example, explain why options were awarded to Mr. Lynch and
Mr. Casciano during the last fiscal year and clarify whether the
options awarded were incentive stock options or non-qualified stock
options. Explain how the Compensation Committee determined the amounts
awarded.
Response:
The Company supplementally informs the staff that its equity incentive plan is
available to its key employees, including its named executive officers. Equity
awards are discretionary and are approved by the Company's Compensation
Committee, following recommendations from the Company's Stock Option Committee.
The recommendations are typically established based on the key employee's
assumption of an increased role within the Company or as a mechanism to provide
compensation competitive with that of the key employee's peers either internally
or after consideration of the third party compensation survey utilized by the
Company.
The Company supplementally informs the staff that during fiscal year 2008,
incentive stock options were awarded to Mr. Lynch, commensurate with his
promotion to President of Rome Research Corporation and PAR Government Systems
Corporation. These awards were approved by the Compensation Committee following
recommendation of the Company's Stock Option Committee based on Mr. Lynch's new
role and the total compensation package deemed appropriate for that increased
role. This determination was made after consideration of the third party
compensation survey as well as Mr. Lynch's historical performance with the
Company.
The Company supplementally clarifies that Mr. Casciano did not receive any stock
awards in fiscal year 2008. The amount included in column "f" of the Summary
Compensation Table contained in the Company's Proxy Statement represents
compensation expense recognized in fiscal year 2008 from equity awards
previously issued to Mr. Casciano (awards which vested over multiple years), in
accordance with the recognition provisions of Financial Accounting Standards
Board Statement No. 123R, Share-Based Payment.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
- --------------------------------------------------------------------------------
Related Stockholder Matters (Incorporated by Reference
- --------------------------------------------------------------------------------
From Definitive Proxy Statement Filed April 21, 2009)
- -----------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management
Comment:
10. It appears that you have not provided the tabular disclosure required
by Item 201(d) of Regulation S-K. Please advise. See Question 106.01
of the Division of Corporation Finance's Compliance & Disclosure
Interpretations of Regulation S-K.
Response:
The Company supplementally informs the staff that the Company has not provided
the tabular disclosure as required by Item 201(d) of Regulation S-K as all of
the compensation plans under which equity securities of the Company are
authorized for issuance have been approved by security shareholders. The Company
does not have any compensation plans which have not been approved by security
shareholders.
With respect to the disclosure items required by Item 201(d)(2) of Regulation
S-K, although not in the tabular format as required by Regulation S-K, the
Company has disclosed the required information within Footnote 7 to the
Consolidated Financial Statements, included within Item 15 of its Form 10-K.
With respect to each requirement of Item 201(d)(2) of Regulation S-K:
(i) The number of securities to be issued upon the exercise of outstanding
options, warrants, and rights: 980,000
(ii) The weighted-average exercise price of the outstanding options,
warrants and rights disclosed pursuant to paragraph (d)(2)(i) of this
item: $4.63
(iii) Other than securities to be issued upon the exercise of outstanding
options, warrants, and rights disclosed in paragraph (d)(2)(i) of this
Item,; the number of securities remaining available for future
issuance under the plan: 740,000
In future filings, the Company will disclose the information in the tabular
format as required by Item 201(d) of Regulation S-K.
Signatures
Comment:
11. We note that you did not identify the person signing the annual report
on Form 10-K in the capacity of controller or principal accounting
officer. See paragraph 2 (a) of General Instruction D to Form 10-K.
Note that any person who occupies more than one of the specified
positions must indicate each capacity in which he or she signs the
report. See paragraph 2(b) of General Instruction D to Form 10-K.
Please advise
Response:
The Company supplementally informs the staff that Ronald J. Casciano, Vice
President, Chief Financial Officer and Treasurer, also serves as the Company's
Chief Accounting Officer, as required by paragraph 2(a) and 2(b) of General
Instruction D to Form 10-K. As Ronald J. Casciano occupies more than one of the
specified positions, the Company will indicate each capacity in future filings.
List of exhibits
Comment:
12. It appears that you have not filed your lease with John
Springer-Miller as an Exhibit. Please file the lease as an exhibit to
the Form 10-K pursuant to Item 601 (b) (10) (ii) (A) or (D) of
Regulation S-K, or provide us with your analysis as to how you
determined not to file the lease as an exhibit.
Response:
The Company supplementally informs the staff that in determining the required
exhibits to be filed with the Form 10-K for the fiscal year ended December 31,
2008, the Company considered the guidance as promulgated by Item
601(b)(10)(ii)(A) and (D) of Regulation S-K related to contracts and leases and
determined that the lease with John Springer-Miller was immaterial in amount and
therefore did not require inclusion as an exhibit. In making this materiality
determination, the Company considered the fact that quantitatively, total fiscal
year 2008 expense associated with this lease represented only 0.6% of the
Company's consolidated operating expenses for fiscal year 2008. Furthermore,
this lease represented only 13% of total operating lease expense in fiscal year
2008 which was also determined to be immaterial based on the 15% quantitative
materiality threshold as noted in Item 601(b)(10)(ii)(C) related to fixed assets
(although this relates to a different type of contract, the company considered
the 15% as a benchmark in assessing quantitative materiality). Furthermore, as
the lease expires on September 30, 2009, the Company determined it to be
qualitatively immaterial.
Although not filed as an exhibit within its Form 10-K for the fiscal year ended
December 31, 2008, the Company has disclosed the existence of this lease within
Footnote 13 to the Consolidated Financial Statements included within Item 15 of
its Form 10-K and has included disclosure of the related party transaction
within the Company's annual proxy filing.
Comment:
13. You have indicated that 32% of your revenues were derived from
government Contracts for the fiscal year ended December 31, 2008.
please provide us with your analysis as to how you determined not to
file the contracts as exhibits Pursuant to Item 601 (b) (10) (ii) (B)
or Regulation S-K.
Response:
The Company supplementally informs the staff that in determining the required
exhibits to be filed with the Form 10-K for the fiscal year ended December 31,
2008, the Company considered the guidance as promulgated by Item
601(b)(10)(ii)(B) of Regulation S-K related to contracts and determined that
although 32% of the Company's consolidated revenue was derived from government
contracts, this revenue was derived from numerous different government
contracts. As such, the Company's government operation is not substantially
dependent on any one contact and these contracts are, in addition, entered into
in the ordinary course of the Company's government business. Therefore, the
Company determined it not necessary to file the contacts as exhibits pursuant to
Item 601(b)(10)(ii)(B) of Regulation S-K.
Exhibits 31.1 and 31.2
Comment:
14. The certifications may not be changed in any respect from the language
of Item 601 (b) (31) of Regulation S-K, even if the change would
appear to be inconsequential in nature. See Section II.B.4 of SEC
Release No. 34-46427. We note that you have made the following
changes:
o Replaced the word "report" with "annual Report" in
paragraphs 2 and 3;
o Modified the language of paragraph 4(d); and
o Deleted the language "(or persons performing the equivalent
functions)" in the introductory language in paragraph 5.
Please confirm that you will conform your disclosures in future
filings to the exact language of provided Item 601 (b) (31) of
Regulation S-K. Please note that this comment also applies to
your Form 10-Q for the fiscal quarter ended March 31, 2009.
Response:
The Company supplementally confirms with the staff that it will conform
disclosures in future filings to the exact language provided in Item 601(b)(31)
of Regulation S-K.
PAR hereby acknowledges as follows:
1. PAR is responsible for the adequacy and accuracy of the disclosures
included in its filings;
2. PAR understands that staff comments or changes to disclosures in
response to staff comments do not foreclose the Commission from taking
any action with respect to PAR's filings; and
3. PAR understands that it may not assert staff comments as a defense in
any proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please contact the undersigned at 800-448-6505, extension 273, should you
require additional information or have questions regarding this letter.
Very truly yours,
PAR Technology Corporation
By: /s/Ronald J. Casciano
-------------------------------------
Ronald J. Casciano, Vice President,
Chief Financial Officer, Treasurer
and Chief Accounting Officer