<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C> <C> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Confidential, for Use of the Commission
Check the appropriate box: only (as permitted by Rule 14a-6(e)(2))
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
SULCUS HOSPITALITY TECHNOLOGIES CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (check the appropriate box):
<TABLE>
<S> <C> <C>
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(5) Total fee paid:
Not Applicable
[ ] Fee paid previously with preliminary materials
Not Applicable
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
Not Applicable
(2) Form, Schedule or Registration Statement No.:
Not Applicable
(3) Filing Party:
Not Applicable
(4) Date Filed:
Not Applicable
</TABLE>
<PAGE> 2
LOGO
October 30, 1998
Dear Shareholder:
The Annual Meeting of the Shareholders of our Company will be held at 10:00
a.m. on Tuesday, December 1, 1998, at the Westin William Penn Hotel, 530 William
Penn Plaza, Pittsburgh, Pennsylvania. The enclosed Notice of Meeting, Proxy
Statement and Annual Report contain detailed information about the business to
be transacted at the Annual Meeting.
The Board of Directors has nominated the two current directors whose term
of office expires this year to continue to serve as directors. You are also
being asked to ratify the selection of Crowe, Chizek and Company as the
Company's independent auditors for 1998.
On behalf of the Board of Directors and management, we cordially invite you
to attend the Annual Meeting. Whether or not you plan to attend the Annual
Meeting, please complete, sign, date and return the enclosed proxy card at your
earliest convenience so that your shares will be represented at the Annual
Meeting. If you choose to attend the Annual Meeting, you may revoke your proxy
and cast your votes in person.
Sincerely,
/s/ LEON D. HARRIS
Leon D. Harris
Chairman of the Board and
Chief Executive Officer
SULCUS LOGO
<PAGE> 3
SULCUS HOSPITALITY TECHNOLOGIES CORP.
41 NORTH MAIN STREET
GREENSBURG, PENNSYLVANIA 15601
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 1, 1998
TO THE SHAREHOLDERS OF SULCUS HOSPITALITY TECHNOLOGIES CORP.:
The Annual Meeting of the Shareholders of Sulcus Hospitality Technologies
Corp. (the "Company") will be held at 10:00 a.m. on Tuesday, December 1, 1998,
at the Westin William Penn Hotel, 530 William Penn Plaza, Pittsburgh,
Pennsylvania, for the following purposes:
1. To elect two Class I Directors to serve a three-year term to expire at
the Company's 2001 Annual Meeting of Shareholders.
2. To ratify the selection by the Board of Directors of Crowe, Chizek and
Company as the Company's independent auditors for the year ending
December 31, 1998.
3. To act upon such other business as may properly come before the meeting
or any adjournments thereof.
The close of business on September 25, 1998 has been fixed as the record
date for the determination of Shareholders entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
JOHN W. RYBA, Secretary
Greensburg, Pennsylvania
October 30, 1998
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING. IF YOU CHOOSE TO ATTEND THE
ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTES.
<PAGE> 4
SULCUS HOSPITALITY TECHNOLOGIES CORP.
41 NORTH MAIN STREET
GREENSBURG, PENNSYLVANIA 15601
PROXY STATEMENT
PROXIES, SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of proxies in the accompanying form to be used at the
Annual Meeting of Shareholders on December 1, 1998 (the "Annual Meeting").
Properly executed and dated proxies received will be voted in accordance with
the instructions thereon. If no instructions are given with respect to the
matters to be acted upon, the shares of Common Stock, no par value, of the
Company ("Common Stock") represented by the proxy will be voted for (i) the
election of the nominees for directors designated below and (ii) the
ratification of the appointment of the auditors of the Company. This proxy
soliciting material is being first mailed to Shareholders on or about October
30, 1998.
A shareholder giving a proxy may revoke it at any time before it is
exercised by filing with the Secretary of the Company an instrument of
revocation or a duly executed proxy bearing a later date. The revocation will
not be effective until written notice thereof is given to the Secretary of the
Company.
The election of directors requires a plurality of votes cast; and the
ratification of the appointment of Crowe, Chizek and Company as the Company's
auditors requires the affirmative vote of a majority of votes cast at a meeting
at which the holders of a majority of the outstanding shares of Common Stock are
present in person or by proxy. Abstentions and broker non-votes will be included
in determining the number of shares present at the Annual Meeting but will not
be included in determining the number of votes cast.
The cost of printing and mailing proxy material will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid for such solicitation. The Company will request brokers and nominees who
hold shares of Common Stock in their names to furnish proxy material to
beneficial owners of the shares and will reimburse such brokers and nominees for
their reasonable expenses incurred in forwarding solicitation materials to such
beneficial owners.
As of September 25, 1998 (the "Record Date"), the Company had 17,084,150
shares of Common Stock outstanding and entitled to notice of, and to vote at,
the Annual Meeting. Each share of Common Stock is entitled to one vote on each
matter to be voted on at the Annual Meeting. When voting for the election of
directors, no shareholder is entitled to vote his or her shares cumulatively.
PROPOSAL 1
ELECTION OF DIRECTORS
The Amended and Restated Articles of Incorporation and the By-Laws of the
Company provide for a Board of Directors of not less than one nor more than nine
members, to be determined from time to time by resolution of the Board. The
Board is divided into three classes, with one Class elected each year for a term
of three years.
Currently the Board consists of six members, two Class I members with terms
expiring at the 1998 Annual Meeting, two Class II members with terms expiring at
the 1999 Annual Meeting and the remaining two Class III members with terms
expiring at the 2000 Annual Meeting.
If, for any reason, a nominee should be unable to serve as director at the
time of the Annual Meeting, a contingency which is not expected to occur, the
persons designated herein as proxies may not vote for the election of any other
person not named herein as a nominee for election to the Board of Directors. The
election of the nominees to the Board of Directors will be determined based on a
plurality of votes cast provided the holders of a majority of all shares of the
Common Stock entitled to notice of and to vote at the Annual Meeting are present
by proxy or in person.
<PAGE> 5
The two nominees for directors set forth below, each of whom are currently
Class I Directors, are proposed to be elected at the Annual Meeting to serve
until the 2001 Annual Meeting of Shareholders. Set forth below is certain
information with regard to the two nominees for election. The remaining four
directors will continue to serve as members of the Board for the terms set forth
below.
NOMINEES FOR CLASS I DIRECTORS--EXPIRING AT THE 1998 ANNUAL MEETING
David H. Adler, age 54, was appointed a Director of the Company in August
1993. Mr. Adler has been Chief Executive Officer and majority shareholder of a
group of privately-owned companies since 1985, including the Adler Financial
Group, a financial management company, David H. Adler Real Estate Enterprises
and PEBECO (Pennsylvania Bedding Incorporated) of Scranton, Pennsylvania, a
manufacturer of King Koil and other private labeled mattresses and sleep
products.
Michael Wager, age 47, was appointed a Director of the Company in April
1998. Since 1989, Mr. Wager has been a partner in the law firm of Benesch,
Friedlander, Coplan & Aronoff LLP, legal counsel to the Company. He is also a
director of Michael Anthony Jewelers, Inc. and American Speedy Printing Centers,
Inc. and serves as a trustee of The Gateway Economic Development Corporation of
Greater Cleveland. Mr. Wager is the son-in-law of Mr. Robert Gries.
CLASS II DIRECTORS--EXPIRING AT THE 1999 ANNUAL MEETING
David W. Berkus, age 57, was appointed a Director of the Company in August
1997. Since 1993, Mr. Berkus has been the Principal of Berkus Technology
Ventures, a venture capital company that invests in software-based businesses.
Prior to that, Mr. Berkus founded Computerized Lodging Systems, Inc.
Christine Hughes, age 51, was appointed a Director of the Company in
November 1997. Since 1996 Ms. Hughes has been Vice President of Marketing for
Secure Computing Corporation, a leader in network security. Prior to Secure
Computing, Ms. Hughes was Senior Vice President of Corporate Marketing for
Novell, Inc. from 1994 to 1996. Before joining Novell, Ms. Hughes was Vice
President of Integrated Marketing, U.S. Operations for Xerox Corporation.
CLASS III DIRECTORS--EXPIRING AT THE 2000 ANNUAL MEETING
Leon D. Harris, age 60, was appointed a Director of the Company in November
1996 and Chief Executive Officer on March 3, 1997. On October 13, 1997, Mr.
Harris was elected Chairman of the Board of Directors. From August 1993 to March
1997, he was the President of Physalia Corporation, a consulting group
functioning in the computer systems/technology market. From 1985 to 1993, Mr.
Harris was President/CEO of Olivetti USA, the American subsidiary of Olivetti
Group SpA, an Italian office equipment and systems company.
Robert D. Gries, age 69, has been a Director of the Company since 1983 and
was elected Vice Chairman of the Board on October 13, 1997. He was the Acting
Chairman of the Board of Directors from March 3, 1997 to October 13, 1997. Since
1964, Mr. Gries has been President of the Gries Companies, which engages in
venture capital financing. From 1966 to 1995 he was Vice President, director and
a principal shareholder of the Cleveland Browns Football Company, Inc., a
National Football League team. Mr. Gries is a director of Gries Financial Corp.,
a registered investment advisor. Mr. Gries is the father-in-law of Mr. Michael
Wager.
BOARD OF DIRECTORS' AND COMMITTEE MEETINGS
The Board of Directors met six (6) times during the year ended December 31,
1997. Each of the directors attended at least 75 percent of the aggregate number
of Board of Directors' and Committee meetings of which he or she was a member
during 1997, with the exception of Mr. Berkus and Ms. Hughes who were elected to
the Board of Directors in August 1997 and November 1997, respectively. Mr. Wager
was not a director during fiscal 1997.
2
<PAGE> 6
Nominating Committee. The Company did not have a Nominating Committee until
October 13, 1997. The Nominating Committee's primary function is to advise the
Board of Directors as to nominees for election thereto. The Nominating Committee
did not meet during 1997. The current members of the Nominating Committee are
Messrs. Gries and Harris.
Compensation Committee. The Company did not have a Compensation Committee
until October 13, 1997. The primary function of the Compensation Committee is to
review the compensation arrangements of the Company's Chief Executive Officer.
The Compensation Committee did not meet during 1997. The current members of the
Compensation Committee are Ms. Hughes, and Messrs. Adler and Gries.
Audit Committee. The Board of Directors has an Audit Committee which
reviews financial and audit issues, the scope and plan of the annual audit,
reviews the audit results and reports thereon, and makes recommendations
regarding the Company's independent auditors and the Company's internal
accounting practices and policies. The Company's Audit Committee sits for a term
of one year. The Audit Committee, composed of directors who are not officers or
employees of the Company ("Outside Directors"), is appointed each year following
the Annual Meeting of the Shareholders. Messrs. Adler and Gries currently serve
on the Audit Committee. The Audit Committee met two times during 1997.
Stock Option Committee. The Company has a Stock Option Committee, the
primary functions of which are to administer the Company's individual grants of
stock options, and the Company's 1997 Employee Stock Purchase Plan and 1997
Long-Term Incentive Plan. The Stock Option Committee met two times during 1997.
The current members of the Stock Option Committee are Messrs. Adler and Gries.
COMPENSATION OF DIRECTORS
Outside Directors are reimbursed for their direct expenses incurred in
attending a meeting. In addition, pursuant to the Company's Amended and Restated
1991 Stock Option Plan for Directors and the 1997 Non-Employee Directors' Stock
Option Plan (the "Directors Plans"), the Company has reserved one million shares
of its Common Stock for directors (excluding directors who are officers or
employees) of the Company or any of its subsidiaries. A committee is charged
with authority to administer the Directors Plans, to award options, determine
the option exercise price (at a price not less than the fair market value of the
Common Stock when granted) and fix the vesting schedule and other terms thereof.
During fiscal year 1997, options to purchase 100,000 shares of Common Stock were
awarded under the 1991 Directors Plan to each Outside Director, at an exercise
price of $1.6875 per share, except for Ms. Hughes whose options were granted at
an exercise price of $3.00. Options to purchase 25 percent of such shares vested
immediately upon grant, with the remaining 75 percent vesting in 25 percent
increments over the following three years. Also granted in 1997 were options to
purchase 5,000 shares of Common Stock to each Outside Director, under the 1997
Non-Employee Director's Stock Option Plan. The exercise prices of such options
are $3.1875 per share for Messrs. Gries, Adler and Berkus and $3.00 per share
for Ms. Hughes. Options to purchase one-third of such shares vest one year from
the date of grant, with the remaining two-thirds vesting in one-third increments
over the following two years. Upon becoming a director in April 1998, Mr. Wager
received options to purchase 100,000 shares of Common Stock at an exercise price
of $1.6875 per share.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Crowe, Chizek and
Company as independent auditors to examine the financial statements of the
Company for the fiscal year ending December 31, 1998, and directed that such
appointment be submitted for ratification by the Shareholders at the Annual
Meeting.
The affirmative vote of the majority of the shares represented at the
Annual Meeting and entitled to vote is required for ratification. Management
recommends the appointment of Crowe, Chizek and Company be ratified by the
Shareholders.
3
<PAGE> 7
Representatives of Crowe, Chizek and Company are expected to be present at
the Annual Meeting. They will have the opportunity to make statements if they
desire to do so and will be available to respond to appropriate questions.
EXECUTIVE OFFICERS
Information concerning the current executive officers of the Company is
furnished in the Company's Annual Report on Form 10-K/A No. 1.
EXECUTIVE COMPENSATION
The following tables reflect the compensation paid by the Company during
fiscal years 1997, 1996 and 1995 for services in all capacities to the Company
of the Chairman of the Board and each of the other four most highly compensated
executive officers of the Company at December 31, 1997 (collectively, the "Named
Officers"). More specific information regarding compensation is provided in the
notes accompanying the tables.
SUMMARY COMPENSATION TABLE
The following table reflects total compensation paid during 1997, 1996 and
1995, for services in all capacities by the Company to the Chairman and each of
the other four most highly compensated executive officers of the Company during
1997 (the "Named Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
---------------------
ANNUAL COMPENSATION (IN THOUSANDS) SECURITIES
---------------------------------- UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/SARS
PRINCIPAL POSITION YEAR SALARY($) BONUSES COMPENSATION($)
------------------ ---- --------- ------- ---------------
(THOUSANDS OF SHARES)
<S> <C> <C> <C> <C> <C>
Leon D. Harris............................. 1997 225 25 -- 312(1)
Chairman & Chief Executive Officer 1996 -- -- -- --
1995 -- -- -- --
John W. Ryba............................... 1997 104 3 -- --
Senior Vice President & Chief Legal
Officer 1996 104 -- -- --
1995 104 -- -- --
William F. McLay........................... 1997 145 7 -- --
Senior Vice President & 1996 120 -- -- 20
Chief Operating Officer(2) 1995 120 -- -- 20
H. Richard Howie........................... 1997 123 -- -- --
Chief Financial Officer & Treasurer(2) 1996 120 -- -- 36
1995 120 -- -- --
Barry A. Logan............................. 1997 120 13 -- --
President & General Manager 1996 108 22 -- 10
Sulcus Restaurant Division 1995 114 -- -- --
</TABLE>
- ---------------
(1) Additionally, options to purchase 50,000 shares were issued on November 13,
1996 to Mr. Harris under the 1991 Directors Plan.
(2) Employed by the Company until April 1998.
4
<PAGE> 8
OPTION GRANTS IN FISCAL YEAR 1997
The following table summarizes the aggregate amount of shares subject to
stock options granted, for the period January 1, 1997, through December 31,
1997, to the Named Officers. No gain on these options will be realized by any of
the Named Officers without an increase in the price of Common Stock from the
date of grant, which will benefit all Shareholders proportionately. The number
of shares granted and values thereof are in thousands, except for per share
prices.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS INDIVIDUAL OPTION
OPTIONS/ GRANTED TO EXERCISE OR GRANTS
SARS EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME GRANTED IN 1997 ($/SHARE) DATE 5%($)(1) 10%($)(1)
---- ------- ------- --------- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leon D. Harris................ 250 30% $1.6250 01/01/01 $ 88 $188
50 6% $1.6875 01/01/01 $ 18 $ 39
12 1% $2.0624 01/01/01 $ 5 $ 12
--- -- ---- ----
312 37% $111 $239
John W. Ryba.................. 1 -- $2.3125 01/01/01 -- $ 1
William F. McLay.............. 3 -- $2.3125 01/01/01 $ 2 $ 3
H. Richard Howie.............. -- -- -- -- -- --
Barry A. Logan................ 102 12% $1.6875 01/01/01 $ 37 $ 80
6 1% $2.3125 01/01/01 $ 3 $ 6
--- -- ---- ----
108 13% $ 40 $ 86
</TABLE>
- ---------------
(1) The calculations of potential realizable values are based on theoretical and
arbitrary rates of appreciation in the price of Common Stock from the date
of grant of five and ten percent for the option terms, are mandated by the
rules of the United States Securities and Exchange Commission and may or may
not accurately reflect or predict the actual values of the stock options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the net value
realized on the exercise of stock options in 1997 by each of the Named Officers
as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/97 12/31/97($)(1)
-------- --------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- --- ------------- -------------
<S> <C> <C> <C> <C>
Leon D. Harris...................... 0 0 60/252 $74/$307
John W. Ryba........................ 0 0 120/1 $ 120/$1
William F. McLay.................... 0 0 68/35 $ 36/$24
H. Richard Howie.................... 0 0 14/22 $ 6/$9
Barry A. Logan...................... 0 0 34/87 $35/$100
</TABLE>
- ---------------
(1) The value of unexercised, in-the-money options is the difference between the
exercise price and the fair market value of Company Common Stock at December
31, 1997, which was $2.8750.
5
<PAGE> 9
EMPLOYMENT ARRANGEMENTS
In March 1997, Leon Harris was elected as the Company's Chief Executive
Officer. Mr. Harris has entered into an employment agreement with the Company
providing for an annual salary of $225,000. Commencing on August 11, 1997, the
Board of Directors authorized an increase of Mr. Harris' annual base salary to
$300,000 and the term of his agreement was extended from three years to a total
of five years. Mr. Harris is entitled to receive annual bonuses (ranging from 3%
to 5% of the annual after-tax earnings as of December 31) in each year of his
employment, commencing in 1997, subject to certain limitations, payable one-half
in cash and one-half in stock options. These bonus options vest one-half on the
date of grant and one-half one year later. Mr. Harris also was granted an option
to purchase 250,000 shares of the Company's Common Stock at $1.625 per share
vesting over five years at 20 percent per year beginning March 4, 1997. On
August 11, 1997, Mr. Harris was granted options to purchase 50,000 shares of the
Common Stock at $1.6875 per share. Under the terms of his employment agreement,
Mr. Harris may retain all options granted and all other rights for two years if
his employment is terminated without cause.
The Company's employment agreements impose non-competition and
confidentiality obligations and provide for the assignment to the Company of all
rights to any technology developed by the executive during the term of his
employment.
On October 13, 1997, the Company entered into change in control severance
agreements with certain of its executive officers (the "Change in Control
Agreements"), including each of the Named Officers. Each of the Change in
Control Agreements provides that, in the event of termination of the Named
Officer's employment by the Company other than for cause, or upon the Named
Officer's resignation for Good Reason (each of which terms is defined in the
Change in Control Agreements), within 24 months immediately following a change
in control of the Company (as defined below) the Named Officer shall receive the
following benefits from the Company: (i) 300% of the sum of (A) his current base
salary, (B) the highest annual bonus paid to him in the prior two (2) completed
fiscal years, and (C) the target bonus he would receive for the year in which
the change in control occurs; (ii) cash payments in lieu of rights under any
incentive compensation or bonus plans, outstanding stock options, and one (1)
year of additional accrued benefits under the Company's health and medical
plans; and (iii) additional life and health insurance benefits and outplacement
services for a period of one (1) year.
A "change in control" under the Change in Control Agreements is deemed to
occur if: (i) any person becomes the owner of 10% of the Company's voting
securities; (ii) during any one (1) year period the majority of the members of
the Board of Directors changes without the approval of two-thirds of the
directors; (iii) the Company's Shareholders approve a merger or consolidation
with another company in which the Company's voting securities do not continue to
represent at least 80% of the surviving entity (except in the case of certain
recapitalizations of the Company); or (iv) the Company's Shareholders approve a
plan of complete liquidation, sale or disposition of all or substantially all of
the Company's assets.
On February 24, 1997, Mr. Jeffrey Ratner, the former Chairman of the
Company, gave notice to the Company of termination of his employment agreement.
Termination provisions of his employment agreement resulted in a severance
obligation of the Company, although the parties disputed the amounts due. In May
1997, the Company and Mr. Ratner entered into a Settlement Agreement and Mutual
Release (the "Settlement Agreement") pursuant to which, among other things, the
Company agreed to (i) pay to Mr. Ratner the sum of $1,225,000 plus interest at
the rate of 5% per annum, in 84 equal semi-monthly installments of $15,911.72,
which payments commenced effective as of March 1, 1997; (ii) provide Mr. Ratner
with family health and life insurance benefits until April 1, 2000; and (iii)
reimburse Mr. Ratner for reasonable legal fees associated with the termination
of his employment, not in excess of $50,000. Under the Settlement Agreement, Mr.
Ratner agrees generally not to compete, through ownership control or employment,
with the Company for a period of three years.
REPORT ON EXECUTIVE COMPENSATION
Compensation of Executive Officers. The salaries paid during 1997 to the
Company's executive officers were either (i) approved or ratified by the Board
of Directors of the Company or (ii) fixed pursuant to employment agreements
approved by the Board of Directors. See "EXECUTIVE COMPENSATION--Employ-
6
<PAGE> 10
ment Arrangements." The Board of Directors' approvals were based upon various
subjective factors such as the executive officer's responsibilities, position,
qualifications, individual performance and years of experience. In no such case
did the Board of Directors undertake a formal survey or analysis of compensation
paid by other companies.
Certain executive officers received stock options during 1997 under the
Company's Amended 1991 Incentive Stock Option Plan for Officers and Other Key
Employees (the "Amended 1991 Stock Option Plan"). Options under the Amended 1991
Stock Option Plan are either awarded by the Stock Option Committee of the Board
of Directors, whose members are Outside Directors, or are fixed by employment
agreements approved by the Board of Directors. The Stock Option Committee
awarded options under the Amended 1991 Stock Option Plan in 1997 based upon the
terms of employment agreements or upon various subjective factors such as the
executive officer's responsibilities, individual performance and anticipated
contribution to the Company's performance. The Stock Option Committee neither
undertook a formal survey or analysis of options awarded by other companies nor,
except to the extent provided for in employment agreements, established
numerical targets or goals in determining these option awards.
Deductibility of Compensation. Effective January 1, 1994, the Internal
Revenue Service under Section 162(m) of the Internal Revenue Code will generally
deny the deduction of compensation paid to executives to the extent such
compensation exceeds $1 million per executive per year, subject to an exception
for compensation that meets certain "performance-based" requirements. Whether
the Section 162(m) limitation with respect to an executive will be exceeded and
whether the Company's tax deductions for compensation paid in excess of the $1
million limit will be denied will depend upon the resolution of various factual
and legal issues that cannot be resolved at this time. As to options granted
under the Amended 1991 Stock Option Plan, the Stock Option Committee intends to
comply to the extent practicable with the rules governing the Section 162(m)
limitations so that compensation attributable to such options will not be
subject to limitation under such rules. As to other compensation, while it is
not expected that compensation to executives of the Company will exceed the
Section 162(m) limitation in the foreseeable future (and no officer of the
Company received compensation in 1997 which resulted in the non-deductibility of
such compensation to the Company under Section 162(m)), various relevant
considerations will be reviewed from time to time, taking into account the
interests of the Company and its Shareholders, in determining whether to
endeavor to cause such compensation to be exempt from the Section 162(m)
limitation.
Submission of Report. This Report on Executive Compensation is submitted by
the members of the Compensation Committee, Robert D. Gries, David H. Adler and
Christine Hughes.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons participated in compensation decisions made during
1997: Robert D. Gries and David H. Adler. There are no interlocking
relationships, as defined in the regulations of the Securities and Exchange
Commission, involving either of these individuals.
7
<PAGE> 11
PERFORMANCE INFORMATION
Set forth below in tabular form is a comparison of the total Shareholder
return (annual change in share price plus dividends paid, assuming reinvestment
of dividends when paid) assuming an investment of $100 on the starting date for
the period shown for the Company, the S & P 500 Index (a broad equity market
index which includes the stock of companies traded on the American Stock
Exchange) and the S & P Computer Software and Services Index (an index of
manufacturers and distributors of and service providers for computer software
and software systems). The return shown is based on the percentage change from
December 31, 1992 through December 31, 1997.
<TABLE>
<CAPTION>
Sulcus Computer
Measurement Period Hospitality S&P 500 (Software&SVC)-
(Fiscal Year Covered) Tech CP Index 50
<S> <C> <C> <C>
Dec 92 100.00 100.00 100.00
Dec 93 81.58 110.08 127.63
Dec 94 26.32 111.53 150.87
Dec 95 22.37 153.45 212.02
Dec 96 21.71 188.68 329.61
Dec 97 30.26 251.63 459.15
</TABLE>
SECURITY OWNERSHIP
As of October 13, 1998, there were 17,084,150 shares of Common Stock issued
and outstanding. The following table sets forth the number and percentage of the
shares of Common Stock known by management of the Company to be beneficially
owned as of October 13, 1998, by (i) all Shareholders who own 5% or more of the
Company's Common Stock, (ii) all directors of the Company, (iii) each current or
former executive officer included in the Summary Compensation Table and (iv) all
directors and executive officers of the Company as a group. Unless stated
otherwise, each person so named exercises sole voting and investment power as to
the shares of Common Stock so indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
DIRECTORS, OFFICERS AND 5% SHAREHOLDERS BENEFICIALLY OWNED OF CLASS
--------------------------------------- ------------------ ----------
<S> <C> <C>
Leon D. Harris........................................... 250,661(1) 1.5%
Robert D. Gries.......................................... 196,667(2) 1.2%
David H. Adler........................................... 96,417(3) *
David W. Berkus.......................................... 125,634(4) *
Christine Hughes......................................... 51,667(5) *
Michael Wager............................................ 28,000(6) *
John W. Ryba............................................. 102,500(7) *
William F. McLay......................................... 18,175(8) *
H. Richard Howie......................................... 1,000(9) *
Barry A. Logan........................................... 58,600(10) *
All directors and executive officers as a group (10
persons)............................................... 929,321 5.4%
</TABLE>
8
<PAGE> 12
- ---------------
(1) Includes 32,100 shares currently owned of record and 218,561 shares subject
to a currently exercisable option.**
(2) Includes 145,000 shares owned of record and 51,667 shares subject to a
currently exercisable option.**
(3) Includes 6,000 shares owned of record and 90,417 shares subject to a
currently exercisable option.**
(4) Includes 38,952 shares of restricted Common Stock and 35,015 shares of
Common Stock held in the name of The Berkus Trust and 51,667 shares subject
to a currently exercisable option.**
(5) Includes 51,667 shares subject to a currently exercisable option.**
(6) Includes 3,000 shares currently owned of record and 25,000 shares subject
to a currently exercisable option.**
(7) Includes 240 shares owned of record and 88,260 shares subject to a
currently exercisable option.**
(8) Includes 18,175 shares currently owned of record. Mr. McLay left the
Company in April 1998 and all options expired as of October 6, 1998.
(9) Includes 1,000 shares currently owned of record. Mr. Howie left the Company
in April 1998 and all options expired as of October 6, 1998.
(10) Includes 900 shares currently owned of record and 57,700 shares subject to
a currently exercisable option.**
* Less than 1% issued and outstanding.
** A currently exercisable option is one which is exercisable within 60 days
from the date hereof.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and holders of greater
than 10% of the Common Stock are required by regulation of the Securities and
Exchange Commission to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
directors and officers were complied with, except that Mr. Gries once filed his
Form 4 two days late and on another occasion filed his Form 4 one day late, and
Ms. Hughes filed her Form 3 two days late.
Based on the Company's records and because the Company has not received
copies of, and is not aware of, any statements filed with the Securities and
Exchange Commission pursuant to Section 13(d) or 13(g) of the Exchange Act, the
Company believes that it did not have any greater than 10% beneficial owners at
any time during fiscal 1997.
CERTAIN TRANSACTIONS
Mr. Leon Harris, Chief Executive Officer and Director of the Company was
the President and owner of Physalia Corporation until March 3, 1997. In April
1996, Physalia Corporation entered into a management contract with Radix
Systems, Inc., a subsidiary of the Company, to provide management and operating
services related to document conversion activities. The contract provided for
the payment by Radix of a set monthly fee, variable commissions calculated as a
percent of Radix' gross sales, bonus and reimbursement of out-of-pocket
expenses. During the year ended December 31, 1997, payments of $32,000 were made
to Physalia. In accordance with its terms, the contract terminated on March 31,
1997.
The Company leases office space in Greensburg, Pennsylvania from a trust
established by the Company's former Chairman. The leases commenced on various
dates from March 1, 1983 and expire on various dates through September 30, 2001.
Rent expense under these agreements was $228,000, $234,000, and $225,000 for the
years ended December 31, 1997, 1996, and 1995, respectively. As of December 31,
1997, the future annual
9
<PAGE> 13
rental commitments under these leases are $180,000 in 1998, $104,000 in 1999,
$96,000 in 2000, and $75,000 in 2001.
In February 1995, Mr. David W. Berkus, a director of the Company, entered
into a consulting agreement with the Company pursuant to which he provides
services to the Company primarily focused on the activities and communications
between the Company and its subsidiary, Sulcus Hospitality Group, Inc. Mr.
Berkus' compensation under the agreement is $6,500 per month, comprised of cash
and Common Stock, plus actual and reasonable expenses. The number of shares of
Common Stock is determined monthly by dividing one-third of the monthly
compensation by the closing price on the first trading day of each successive
month, ignoring fractional shares. The consulting agreement also provides Mr.
Berkus with limited registration rights in connection with the issuance of these
shares. In connection with the consulting agreement, Mr. Berkus also entered
into a confidentiality agreement with the Company, as well as a non-competition
clause contained in the consulting agreement.
Mr. Michael Wager, a director of the Company and the son-in-law of Mr.
Robert Gries, is a partner in the law firm of Benesch, Friedlander, Coplan &
Aronoff LLP, which is the Company's principal outside counsel.
OTHER MATTERS TO COME BEFORE THE MEETING
No other matters are intended to be brought before the meeting by the
Company, nor does the Company know of any matters to be brought before the
meeting by others. If other matters properly come before the meeting, the
persons named in the proxy will vote the shares represented therein in
accordance with the judgment of management on any such matters.
SHAREHOLDER PROPOSALS
Any Shareholder of the Company wishing to submit a proposal for action at
the Company's Annual Meeting of Shareholders to be held in 1999 and desiring the
proposal to be considered for inclusion in the Company's proxy material relating
thereto must provide a written copy of the proposal to the management of the
Company at its principal executive office not later than July 1, 1999, and must
otherwise comply with the rules of the Securities and Exchange Commission
relating to shareholder proposals. If the Company does not receive notice of the
Shareholder proposal prior to September 14, 1999, the person named in the proxy
will vote the shares represented thereby in accordance with the judgment of
management on any such shareholder proposal.
UPON WRITTEN REQUEST TO THE COMPANY BY ANY SHAREHOLDER WHOSE PROXY IS
SOLICITED HEREBY, THE COMPANY WILL FURNISH A COPY OF ITS ANNUAL REPORT ON FORM
10-K/A NO. 1 FOR THE YEAR ENDED DECEMBER 31, 1997 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES
THERETO, WITHOUT CHARGE TO THE SHAREHOLDER REQUESTING THE SAME. REQUESTS SHOULD
BE DIRECTED TO THE ATTENTION OF JOHN W. RYBA, SECRETARY, AT 41 NORTH MAIN
STREET, GREENSBURG, PENNSYLVANIA 15601.
By Order of the Board of Directors,
JOHN W. RYBA, Secretary
10
<PAGE> 14
SULCUS HOSPITALITY TECHNOLOGIES CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 1, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF SULCUS HOSPITALITY TECHNOLOGIES CORP.
41 NORTH MAIN STREET
GREENSBURG, PENNSYLVANIA 15601
The undersigned hereby appoints Leon D. Harns and John W. Ryba, as proxy
or proxies of the undersigned, with full power of substitution and
resubstitution, to represent the undersigned and to vote all of the shares of
the Common Stock of Sulcus Hospitality Technologies Corp. ("Sulcus"), which the
undersigned is entitled in any capacity to vote if personally present at the
Annual Meeting of Shareholders of Sulcus to be held at the Westin William Penn
Hotel, 630 William Penn Plaza, Pittsburgh, Pennsylvania on December 1, 1998, at
10:00 a.m. local time, and at any and all adjournments or postponements thereof,
with respect to all the matters set forth in the Proxy Statement dated October
30, 1998, and all supplements and amendments thereto and, in their discretion,
upon all matters incidental to the conduct of the Annual Meeting and all
matters presented at the meeting but which, are not known to the Board of
Directors at the time of solicitation of this proxy. The undersigned hereby
revokes any proxy or proxies heretofore given by the undersigned to vote at
said meeting or any adjournment thereof.
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on the proxy and at the discretion of
the proxy holders as to any other matters that may properly come before the
Annual Meeting of Shareholders. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS,
PROXIES WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS
AND IN ACCORDANCE WITH THE JUDGMENT OF MANAGEMENT AS TO ANY OTHER MATTER THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF SHAREHOLDERS. The undersigned
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
of the Proxy Statement (with all enclosures and attachments) dated October 30,
1998, relating to the Annual Meeting. Please mark, sign date and return this
proxy in the enclosed postage prepaid envelope as soon as possible, even if you
plan to attend the Annual Meeting.
[ ] I Plan to attend the Annual Meeting
(Continued, and to be signed and dated, on other side)
<PAGE> 15
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
SULCUS HOSPITALITY TECHNOLOGIES CORP.
DECEMBER 1, 1998
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C>
WITHHOLD AUTHORITY
FOR ALL TO VOTE
NOMINEES FOR ALL NOMINEES
LISTED AT RIGHT LISTED AT RIGHT FOR AGAINST ABSTAIN
1. PROPOSAL NOMINEES: DAVID H. ADLER 2. PROPOSAL TO RATIFY THE
TO ELECT [ ] [ ] MICHAEL WAGER APPOINTMENT OF CROWE, [ ] [ ] [ ]
NOMINEES CHIZEK AND COMPANY AS
SET FORTH TO THE BOARD OF DIRECTORS. INDEPENDENT AUDITORS.
(Instructions to withhold authority to vote for any
individual nominee, write the nominee's name in the
space below.)
- ----------------------------------------------------
Signature(s): Date: , 1998
-------------------------------------------------------------------------------------- --------------
NOTE: Please sign this proxy exactly as your name appears above. Joint owners should each sign. Attorneys, administrators,
trustees, guardians and other signing in a representative capacity should indicate this capacity. An authorized officer may sign
on behalf of a corporation and should indicate the name of the corporation and his or her capacity.
</TABLE>
