<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1997
REGISTRATION NO. 333-28595
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
PEGASUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7389 75-2605174
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
3811 TURTLE CREEK BOULEVARD, SUITE 1100
DALLAS, TEXAS 75219
(214) 528-5656
(Address, including zip code, telephone number,
including area code, of registrant's principal executive office)
JOHN F. DAVIS, III
PEGASUS SYSTEMS, INC.
3811 TURTLE CREEK BOULEVARD, SUITE 1100
DALLAS, TEXAS 75219
(214) 528-5656
(Name, address, including zip code, telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
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<S> <C>
GUY KERR KENNETH L. GUERNSEY
WHIT ROBERTS JAMIE E. CHUNG
Locke Purnell Rain Harrell MITCHELL R. TRUELOCK
(A Professional Corporation) Cooley Godward LLP
2200 Ross Avenue, Suite 2200 One Maritime Plaza, 20th Floor
Dallas, Texas 75201 San Francisco, California 94111
(214) 740-8000 (415) 693-2000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------
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 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. [ ]
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
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 AUGUST 4, 1997
PROSPECTUS
2,953,300 SHARES
[PEGASUS SYSTEMS, INC. LOGO]
PEGASUS SYSTEMS, INC.
COMMON STOCK
Of the 2,953,300 shares of Common Stock offered hereby, 2,700,000 shares
are being sold by the Company and 253,300 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Common Stock has been approved for quotation on the Nasdaq
National Market subject to official notice of issuance under the symbol PEGS.
------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
------------------
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.
<TABLE>
<CAPTION>
====================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............. $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3)............... $ $ $ $
==================================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 442,995 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be made
available for delivery on or about , 1997, at the office of the agent
of Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
VOLPE BROWN WHELAN & COMPANY
, 1997
<PAGE> 3
DESCRIPTION OF PAGE 2
Pegasus Systems Inc. logo with caption reading:
Created by the hotel industry, for the hotel industry.
THISCO logo with caption reading:
Provides electronic interface between hotel central reservations systems
and Global Distribution Systems
o Leading provider of electronic hotel room reservation processing
services
o Connects 25,000 hotel properties around the world to GDSs and other
electronic distribution channels
TravelWeb logo with caption reading:
Internet hotel information and reservation service
o A leading Internet travel booking service
o Offers consumers direct reservation access to approximately 13,000
hotels in 140 countries.
HCC logo with caption reading:
Provides commission processing services for hotels and travel agencies
o 64,000 travel agencies worldwide participate
o Processed over $110 million in commissions in 1996
Caption reading: Pegasus Systems' Stockholders include many of the world's
leading hotel companies
Logos of the following stockholders and customers:
Inter-continental Hotels
Best Western
Hilton Hotels and Resorts
Forte Hotels
Marriott
Choice Hotels International
La Quinta Inn
ITT Sheraton
Hyatt Hotels & Resorts
Utell International
Reed Travel Group
Anasazi
Promus Hotel Corporation
Westin Hotels & Resorts
<PAGE> 4
[GRAPHIC]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE> 5
DESCRIPTION OF INSIDE FRONT COVER WITH FOLD-OUT
Caption reading:
Leading worldwide provider of hotel reservation and commission processing
services.
Pegasus Systems, Inc. logo with caption reading:
Through its services and systems - THISCO, TravelWeb, Netbooker, UltraRes,
UltraDirect and HCC - Pegasus Systems provides the technology that
facilitates the electronic booking of hotel rooms worldwide. Regardless
of whether the reservation comes from a travel agent, a meeting planner or
conventions and visitors bureau, a corporate travel department, or directly
from an individual traveler via the Internet, Pegasus Systems' services can
facilitate the transaction.
Pictures and logos depicting the following transaction flows:
1. Consumer to Travel Agent to Global Distribution System ("GDS") to
UltraSwitch-THISCO to Hotel.
2. Consumer to GDS Internet Travel Sites to GDS to UltraSwitch-THISCO to
Hotel.
3. Consumer to TravelWeb to UltraSwitch-THISCO to Hotel.
4. Consumer to Partner Web Sites to Pegasus Systems NetBooker to
UltraSwitch-THISCO to Hotel.
5. Consumer to Corporate Travel to Pegasus Systems-UltraDirect to
UltraSwitch-THISCO to Hotel.
6. Consumer to Conventions, Meetings, Housing to Pegasus Systems-UltraRes
to UltraSwitch-THISCO to Hotel.
7. Hotel to HCC-Hotel Clearing Corporation to Travel Agent.
THISCO logo with caption reading:
THISCO's service is a gateway to more than 25,000 hotels around the world.
When a reservation is made via any of the distribution vehicles shown
above, THISCO translates the reservation request into the hotel's unique
computer format and queries the hotel's database. A confirmed reservation
is then transmitted back through THISCO's service and sent to the traveler
via the distribution channel. This entire process occurs in a matter of
seconds.
TravelWeb logo with caption reading:
TravelWeb is a leading Internet travel booking service that has quickly
established its niche as one of the largest interactive sites in which
consumers can freely research and reserve hotel rooms around the world.
Connecting to approximately 13,000 hotels via the THISCO service, TravelWeb
enables travelers to directly access hotel central reservation systems to
check room rates, features and availability, and to make reservations.
Other features on the site, including airline flight reservations, hotel
photos, maps, weather and special discount programs, make TravelWeb a
"one-stop" travel site for both the leisure and business traveler.
HCC logo with caption reading:
HCC completes the room reservation transaction for more than 64,000
participating travel agencies by collecting and consolidating hotel
booking commissions due to each agency from more than 11,000 participating
hotel properties worldwide. The value-added consolidation and reporting
services that HCC provides to both its hotel and travel agency participants
help both parties operate more efficiently and effectively.
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors." The terms "Company" and "Pegasus"
when used in this Prospectus refer to Pegasus Systems, Inc., a Delaware
corporation, and, unless the context requires otherwise, its predecessors and
consolidated subsidiaries.
THE COMPANY
Pegasus is a leading provider of transaction processing services to the
hotel industry worldwide. The Company's THISCO(TM) and TravelWeb(R) hotel room
reservation services improve the efficiency and effectiveness of the reservation
process by enabling travel agents and individual travelers to electronically
access hotel room inventory information and conduct reservation transactions.
The Company's HCC service, the global leader in hotel commission payment
processing, improves the efficiency and effectiveness of the commission payment
process for participating hotels and travel agencies by consolidating payments
and providing comprehensive transaction reports.
The Company's electronic interface business for hotel room reservations was
established in 1989 by 16 leading hotel and travel-related companies to address
the need for a neutral, reliable third-party source of hotel reservation
information and transaction processing services. The Company's commission
processing business was founded by substantially the same stockholder group in
1991. Today, the Company's stockholders include 11 of the 15 leading hotel
chains in the world based on 1996 total revenues as reported by Business Travel
News. The Company's strategic position as a gateway in the hotel room
distribution chain, transaction processing capabilities and reputation for
reliability and neutrality enable it to offer a range of services delivering
industry-wide benefits that would be difficult for any industry participant to
achieve individually.
The Company's THISCO service provides an electronic interface from hotel
central reservation systems to travel agencies through Global Distribution
Systems ("GDSs"), which are electronic travel information and reservation
systems such as SABRE. Over 25,000 hotel properties worldwide, including
those of 13 of the 15 leading hotel chains based on 1996 total revenues,
utilize the THISCO service.
The Company's TravelWeb service provides individual travelers direct access
to more than 40,000 dynamically served pages of online hotel information
and the ability to make reservations electronically at approximately 13,000
properties in 140 countries. In January 1997, TravelWeb was ranked the
second most popular travel-related Web site, according to PC Meter, L.P., a
market research service. In June 1997, a daily average of approximately
30,000 Internet users visited the TravelWeb site, located at
www.travelweb.com. In addition, through its recently introduced NetBooker
service, the Company offers TravelWeb's comprehensive hotel database and
Internet hotel reservation capabilities to third-party Web sites.
The Company's HCC service consolidates commissions paid by participating
hotels to a participating travel agency into a single monthly payment and
provides participants with comprehensive transaction reports. Over 11,000
hotel properties and 64,000 travel agencies worldwide utilize the HCC
service to increase the efficiency and reduce costs associated with
preparing, paying and reconciling hotel room reservation commissions.
Pegasus has structured its service offerings so that it has the opportunity
to process and gain fee revenues from most electronic hotel room reservation and
commission transactions. The Company derives THISCO and TravelWeb revenues by
charging its hotel participants a fee based on the number of reservations made
less the number canceled ("net reservations"). The Company derives HCC revenues
by charging its travel agency customers a percentage of the dollar amount of
commissions paid to the travel agencies and by generally charging hotels a
transaction fee. The Company's revenues have grown at a compound annual rate of
54.4% to $15.9 million in 1996 from $2.8 million in 1992, excluding 1992
revenues from the HCC service which was acquired in 1995. The Company has
entered into contracts with terms generally ranging from two to five years with
most of its THISCO, HCC and TravelWeb hotel customers, many of which are Company
stockholders.
3
<PAGE> 7
The operations of the global hotel industry include a wide variety of
participants and a series of complex information and transaction flows.
According to the International Hotel Association, the global hotel industry
generated $247 billion in revenues in 1994. The Company believes that costs
associated with reserving and distributing hotel rooms, including commissions
and fees paid to intermediaries such as travel agencies and GDSs, hotel
reservation-related staffing costs and reservation system information technology
expenses, represent a significant proportion of total operating costs. The
Company's services simplify the complexity of room reservation information and
transaction flows, thereby reducing the distribution costs of rooms for the
hotel industry.
The Company believes that it will benefit from four significant trends in
the global hotel industry. First, as hotels and travel agencies increasingly
shift from manual to electronic means of making room reservations, the Company
can provide them with reservation and commission processing services. Second, as
individual travelers increasingly make their hotel reservations over the
Internet, the Company is positioned to process these reservations through its
own TravelWeb site or through third-party Web sites that use the Company's
NetBooker hotel room reservation service, including Web sites operated by
Preview Travel, Inc. and Internet Travel Network. Third, as independent hotels
and smaller hotel chains increasingly affiliate with large chains, many of which
are the Company's customers, the number of hotel properties for which Pegasus
processes electronic reservations and commissions increases. Fourth, as travel
agencies recognize the importance of hotel reservation commission revenues, the
Company believes that travel agencies will generate an increasing volume of
electronic hotel room reservations and will increasingly rely on the Company to
process hotel commissions.
The Company's objective is to capitalize on its central position in the
hotel industry information and transaction flow in order to become the leading
provider of services and technology that enable the efficient and effective
distribution of hotel rooms. To achieve this objective, the Company intends to
employ a strategy that includes the following key elements: (i) expanding its
customer base; (ii) expanding its service offerings to include virtually all of
the electronic hotel room distribution channels; (iii) developing an information
service to provide hotels and other industry participants with hotel transaction
information for use in strategic analysis, market tracking, improved target
marketing and revenue optimization; and (iv) building strategic alliances and
pursuing acquisition opportunities.
The Company was incorporated in Delaware in 1995, and holds directly or
indirectly all of the outstanding capital stock of (i) The Hotel Industry Switch
Company ("THISCO"), a Delaware corporation formed in 1988 to operate the
electronic interface business between hotel reservation systems and major GDSs;
(ii) The Hotel Clearing Corporation ("HCC"), a Delaware corporation formed in
1991 to operate the commission payment processing business; and (iii) TravelWeb,
Inc., a Delaware corporation formed in 1995 to operate the online hotel
reservation business. The Company's principal executive office is located at
3811 Turtle Creek Boulevard, Suite 1100, Dallas, Texas 75219. The Company's
telephone number is (214) 528-5656.
RECENT DEVELOPMENTS
In June 1997, Marriott International, Inc. ("Marriott"), which is a
customer of the Company's THISCO and TravelWeb services, also became a customer
of the Company's HCC service.
In May 1997, HFS Incorporated ("HFS") renewed its participation in the
Company's HCC service by entering into a new long-term agreement with the
Company.
In May 1997, the Company entered into a Distribution Services Agreement
with Holiday Inn Worldwide ("Holiday Inn") under which Holiday Inn, currently a
customer of the Company's HCC service, also will become a customer of the
Company's THISCO, TravelWeb, NetBooker, UltraDirect and UltraRes services
commencing in 1998. In May 1997, the Company issued to Holiday Inn warrants to
purchase 345,723 shares of Common Stock. The warrants are exercisable at any
time during the two year period ending May 12, 1999 at an exercise price equal
to the lower of $7.20 per share or 85.0% of the price per share for the Common
Stock offered hereby.
4
<PAGE> 8
THE OFFERING
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<S> <C>
Common Stock offered by the Company........................ 2,700,000 shares
Common Stock offered by the Selling Stockholders........... 253,300 shares
Common Stock to be outstanding after the offering.......... 9,429,712 shares(1)
Use of proceeds............................................ To repay indebtedness payable to certain
stockholders of the Company and for
working capital and other general
corporate purposes. See "Use of Proceeds"
and "Certain Transactions."
Nasdaq National Market symbol.............................. PEGS
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA(2):
Net revenues.......................... $ 2,792 $ 3,938 $ 4,666 $ 9,296 $15,869 $ 3,803 $ 4,377
Operating income (loss)............... (613) 198 168 (2,809) (2,585) (707) (232)
Net loss.............................. $(1,179) $ (398) $ (423) $(3,571) $(3,485) $ (967) $ (388)
Pro forma net loss per share(3)....... $ (0.48) $ (0.05)
Shares used in pro forma net loss per
share calculation(3)............... 7,203 7,481
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED(4)
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............. $ 2,441 $ 24,090
Working capital....................... 1,405 23,859
Total assets.......................... 13,601 35,249
Long-term obligations, net of current
portion............................ 5,957 1,540
Accumulated deficit................... (14,959) (14,959)
Total stockholders' equity............ 1,600 28,471
</TABLE>
- ---------------
(1) Based on the number of shares outstanding as of March 31, 1997. Excludes as
of March 31, 1997 (i) 866,667 shares of Common Stock reserved for issuance
under the Company's 1996 Stock Option Plan (the "1996 Plan"), of which
options to purchase 771,733 shares of Common Stock were outstanding at a
weighted average exercise price of $2.39 per share and (ii) 333,333 shares
of Common Stock reserved for issuance under the Company's 1997 Stock Option
Plan (the "1997 Plan"), which will become effective upon the completion of
this offering. In May 1997, the Company issued to Holiday Inn warrants to
purchase up to 345,723 shares of Common Stock. The warrants are exercisable
at any time during the two year period ending May 12, 1999 at an exercise
price equal to the lower of $7.20 per share or 85.0% of the price per share
for the Common Stock offered hereby. See "Business -- Recent Developments"
and "Management -- 1996 and 1997 Stock Option Plans."
(2) The Company's statement of operations data for 1992, 1993 and 1994 consist
of the accounts of THISCO. Statement of operations data for periods
thereafter reflect the operations of the Company, including the acquisition
of 83.3% of the outstanding capital stock of HCC in July 1995 and the
acquisition of the remaining 16.7% of the outstanding capital stock of HCC
in June 1996, together with the depreciation and amortization applicable to
such acquisitions. Amortization applicable to the acquisition of HCC totaled
$645,419, $1,412,499 and $383,511 in 1995, 1996 and the three months ended
March 31, 1997, respectively. See Notes 1, 2 and 3 of Notes to Consolidated
Financial Statements.
(3) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the calculation of pro forma net loss per share.
(4) Adjusted to reflect the sale of the 2,700,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $11.00
per share and application of the estimated net proceeds. See "Use of
Proceeds" and "Capitalization."
5
<PAGE> 9
Except as set forth in the Consolidated Financial Statements and the Notes
thereto or as otherwise indicated, the information contained in this Prospectus
assumes no exercise of the Underwriters' over-allotment option and gives effect,
concurrently with this offering, to (i) a 4-for-3 split of the Company's
outstanding Common Stock and Series A Preferred Stock, (ii) the conversion of
all outstanding shares of Series A Preferred Stock into shares of Common Stock
and (iii) certain amendments to the Company's Certificate of Incorporation and
By-laws. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results and the timing of certain events
could differ materially from those discussed in the forward-looking statements
as a result of certain factors, including those set forth under "Risk Factors"
and elsewhere in this Prospectus.
UltraSwitch(R), TravelWeb(R) and HCC Hotel Clearing Corporation(R) are
registered trademarks of the Company. This Prospectus also includes trademarks
and tradenames of companies other than the Company, which are the property of
their respective owners.
6
<PAGE> 10
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results and the timing of certain events
could differ materially from those discussed in the forward-looking statements
as a result of certain factors, including those set forth below and elsewhere in
this Prospectus. The following risk factors should be considered carefully in
evaluating the Company and an investment in the Common Stock offered hereby.
Substantial Net Losses. The Company has experienced substantial net losses,
including a net loss of $3.5 million in 1996, and had an accumulated deficit of
approximately $14.6 million as of December 31, 1996. The Company's HCC and
THISCO services have accounted for the majority of the Company's revenues to
date, and the Company expects no significant revenues in 1997 from its other
services, which are relatively new in their respective markets. Any decrease in
the revenues from the HCC or THISCO services, or any increase in expenses
related to any of the Company's services substantially above the amounts
budgeted therefor, could have a material adverse effect on the Company's
financial condition and results of operations. The Company anticipates that its
budgeted operating expenses will increase in the foreseeable future as it
continues to develop its services, increase its sales and marketing activities
and expand its distribution channels. To achieve profitability, the Company must
successfully implement its business strategy and increase its revenues while
controlling expenses. There can be no assurance as to when or if the Company
will achieve profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Competition.
-- Electronic Hotel Room Reservation Processing Service. The Company faces
significant competition in connection with its THISCO hotel room reservation
processing service. The principal competitor of the Company's THISCO service is
WizCom International, Ltd. ("WizCom"), which was a wholly owned indirect
subsidiary of Avis, Inc. ("Avis"). As a result of the acquisition of Avis by
HFS, a stockholder and customer of the Company, in September 1996, WizCom became
a wholly owned indirect subsidiary of HFS. Although HFS has recently renewed its
participation in the Company's HCC service, HFS has notified the Company that it
is moving its electronic hotel room reservation processing from THISCO to
WizCom. The Company has an agreement with HFS which requires HFS to pay for a
certain minimum level of THISCO processing services annually for the life of the
agreement. In 1996, revenues from HFS for electronic hotel room processing
services were $517,905 above the annual minimum fee under the agreement, which
is $182,700. HFS historically has generated more revenues for the Company than
any other hotel chain that is a customer and a stockholder of Pegasus. See
"Certain Transactions." HFS accounted for 12.3%, 9.7% and 4.7% of the Company's
revenues during 1994, 1995 and 1996, respectively. HFS is a Selling Stockholder
in this offering. See "Principal and Selling Stockholders." HFS currently uses
and in the future could use the WizCom technology to compete with certain of the
Company's current and future services. There can be no assurance that any
additional customers will not change their electronic reservation interface to
WizCom or to another similar service. Also, hotels can choose to connect
directly to one or more GDSs, thereby bypassing the THISCO service and
eliminating the need to pay fees to the Company. Such competitors or their
affiliates may have greater financial and other resources than the Company.
Factors affecting the competitive success of an electronic hotel room
reservation processing service include reliability, levels of fees, number of
hotel properties on the system, ability to provide a neutral comprehensive
interface between hotels and other participants in the distribution of hotel
rooms and ability to develop new technological solutions. There can be no
assurance that another participant in the hotel room distribution process or a
new competitor will not create services with features that would reduce the
attractiveness of the Company's services. The Company's inability to compete
effectively with respect to these services could have a material adverse effect
on the Company's financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Recent Developments" and " -- Competition."
The Company charges hotel participants certain fees for processing status
messages from hotel central reservation systems to GDSs. Status messages are
electronic messages sent by hotels to GDSs to update room rates, features and
availability information in GDS databases. The Company intends to reduce certain
status
7
<PAGE> 11
message fees beginning in the third quarter of 1997. In addition, a hotel
participant can choose to use the Company's UltraSelect service to provide
travel agencies direct access through GDSs to its central reservation system,
thereby reducing the need to send status messages through the Company's THISCO
service. There can be no assurance that the volume of, and fees generated from,
status message processing will remain at the same or a higher level in the
future. Any significant decrease in the volume of status messages processed or
in the amount of status message fees generated could have a material adverse
effect on the Company's financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Services."
-- Internet Hotel Room Reservation Service. The market for the Company's
TravelWeb and NetBooker services is highly competitive. Current competition
includes traditional telephone or travel agency reservation methods and other
Internet travel reservation services. There are a large number of Internet
travel-related services offered by the Company's competitors, and many of these
competitors are larger and have significantly greater financial resources and
name recognition than the Company. Several competitive Web sites such as
Travelocity (a site operated by The SABRE Group Holdings, Inc.) and Expedia (a
site operated by Microsoft Corporation) offer a more comprehensive range of
travel services than TravelWeb or NetBooker. The Company faces competition in
the online hotel room reservation business not only from its current competitors
but also from possible new entrants, including other Web sites. The costs of
entry into the Internet hotel room reservation business are relatively low.
There can be no assurance that the Company's Internet hotel room reservation
services will compete successfully. The failure of these services to compete
successfully could have a material adverse effect on the Company's financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Competition."
-- Commission Processing Service. The market for the Company's HCC service
is competitive. The Company's competitors in the commission processing business
include National Processing Company ("NPC"), WizCom and Citicorp. NPC, a company
that has traditionally provided car rental and cruise line commission processing
services, recently began offering its services to hotels and travel agencies.
WizCom has recently announced its intention to offer a service that may be
competitive with the Company's HCC service. Citicorp provides commission
consolidation services to hotel chains. In addition, hotels that are current or
prospective customers of the HCC service can decide to process commission
payments without, or in competition with, the HCC service. Some of these current
or potential competitors have substantially greater financial and other
resources than the Company. Furthermore, while the Company has agreements with
all of its hotel customers for the HCC service, most of the Company's travel
agency customers are not obligated by any agreement with the Company. If a
significant percentage of these travel agencies were to cease using the HCC
commission processing service, the Company's financial condition and results of
operations could be materially adversely affected. See "Management Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business -- Competition."
Dependence on Hotel Industry; Consolidation Trends. The Company derives
substantially all of its revenues directly and indirectly from the hotel
industry. The hotel industry is sensitive to changes in economic conditions that
affect business and leisure travel and is highly susceptible to unforeseen
events, such as political instability, regional hostilities, recession, gasoline
price escalation, inflation or other adverse occurrences that result in a
significant decline in the utilization of hotel rooms. Any event that results in
decreased travel or increased competition among hotels may lower hotel room
reservation volumes, the average daily rates for hotel rooms or both and could
have a material adverse effect on the Company's financial condition and results
of operations.
The hotel industry recently has witnessed a period of consolidation in
which hotel chains have acquired or merged with other chains. Such activities
may reduce the Company's customer base. Similar consolidation trends have
occurred in the GDS industry. After the recent merger between Amadeus and System
One, the GDS industry has consolidated to four major GDSs. If further
consolidation were to take place, the value provided by the Company to
participants in the hotel room distribution process and the benefits to hotel
operators of utilizing the THISCO service would be reduced. The Company
typically offers volume-based discounting of its fees, which could result in a
higher percentage of discounted fees if the consolidation trends
8
<PAGE> 12
in the hotel and GDS industries continue. There can be no assurance that any
potential decrease in the Company's customer base or any potential increase in
the percentage of discounted fees will not have a material adverse effect on the
Company's financial condition and results of operations.
Fluctuations in Quarterly Operating Results. The Company has experienced in
the past and expects to experience in the future significant fluctuations in
quarterly operating results. Such fluctuations may be caused by many factors,
including but not limited to the introduction of new or enhanced services by the
Company or its competitors, the degree of customer acceptance of new services,
competitive conditions in the industry, seasonal factors, reduction in client
base, changes in pricing, the extent of international expansion, the mix of
international and domestic sales and general economic conditions. Because the
Company's expense budget is set early in a fiscal year and a significant portion
of the Company's operating expenses are relatively fixed in nature, fluctuations
in revenues may cause substantial variation in the Company's results of
operations from quarter to quarter. Due to the foregoing factors, many of which
are beyond the Company's control, quarterly revenues and operating results are
difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as any indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of securities analysts or investors, which could have a
material adverse effect on the market price of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Potential Adverse Changes in Hotel Commission Payments. Absent any express
arrangement in individual cases, hotels currently are under no contractual
obligation to pay room reservation commissions to travel agencies. Hotels could
elect to reduce the current industry customary commission rate of 10%, limit the
maximum commission generally paid for a hotel room reservation or eliminate
commissions entirely. In 1995, the airline industry placed a maximum limit on
the amount of commissions payable to travel agencies for any domestic airline
ticket issued. Recently, certain airlines have capped the dollar amount that
they will pay to travel agencies for airline reservations made online. In
addition, hotels increasingly are utilizing other direct distribution channels,
such as the Internet, or offering negotiated rates to major corporate customers
that are non-commissionable to travel agencies. Because a substantial portion of
the Company's revenues are dependent on the dollar volume of travel agency
commissions paid by hotels, any change in the hotel commission payment system
that reduces the commissions payable to travel agencies and any acceleration of
the trend towards direct distribution of rooms by hotels could have a material
adverse effect on the Company's financial condition and results of operations.
See "Business -- Services."
Control by Existing Stockholders; Conflicts of Interest. Prior to this
offering, a substantial majority of the outstanding shares of the Company's
Common Stock was owned by certain hotel industry companies that are customers of
the Company. Upon the completion of this offering, the stockholders of the
Company before this offering will beneficially own approximately 70.4% of the
outstanding Common Stock, including 44.0% that will be owned either by hotel
companies or hotel representation firms. As a result, these stockholders, if
they act together, will be able to exercise significant influence over all
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. Such concentration of ownership
could have the effect of delaying, preventing or deferring a change in control
of the Company. The Company's interest in achieving profitability from its
services to the hotel industry conflicts with the interests of some of its
existing stockholders or their affiliates to lower their costs of utilizing the
Company's services. In 1996, services provided by Pegasus to its stockholders
directly and indirectly accounted for 75.4% of the Company's revenues. See Note
14 of Notes to Consolidated Financial Statements. Additionally, to the extent
TravelWeb and other Web-based services, including the third-party Web sites
using the Company's NetBooker service, are successful in causing consumers to
shop for and reserve hotel rooms directly, such success could adversely affect
the role of travel agencies and correspondingly could materially adversely
affect future HCC revenues of the Company. Reed Travel Group, a division of Reed
Elsevier Inc. and a stockholder of the Company ("Reed"), holds certain license
rights to use the Company's UltraSwitch technology for applications unrelated to
the hotel industry, which may limit or otherwise conflict with the Company's
ability to expand its service offerings. Any of these conflicts could result in
a material adverse effect on the
9
<PAGE> 13
Company's financial condition and results of operations. See
"Business -- Technology and Operations," "Certain Transactions" and "Principal
and Selling Stockholders."
Dependence on Growth of Internet Commerce. The market for electronic hotel
reservation services over the Internet is rapidly evolving and depends upon
market acceptance of novel methods for distributing services and products, which
involves a high degree of uncertainty. The success of the Company's TravelWeb
and NetBooker services will depend upon the adoption of the Internet by
consumers as a widely used medium for commerce. The Internet may not prove to be
a viable commercial marketplace for any number of reasons, including inadequate
development of the necessary infrastructure or the lack of complementary
services and products, such as high speed modems and high speed communication
lines. The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. There can be no
assurance that the Internet infrastructure will continue to be able to support
the demands placed on it by this continued growth. Moreover, critical issues
concerning the commercial use of the Internet (including security, reliability,
cost, ease of use, accessibility and quality of service) remain unresolved and
may negatively affect the growth or attractiveness of commerce conducted on the
Internet. If critical issues concerning the commercial use of the Internet are
not favorably resolved, if the necessary infrastructure is not developed or if
the Internet does not become a viable commercial marketplace, the Company's
financial condition and results of operations could be materially adversely
affected. See "Business -- Industry Background" and "-- Services."
System Interruption and Security Risks. The Company's operations are
dependent on its ability to protect its computer systems and databases against
damage or system interruptions from fire, earthquake, power loss,
telecommunications failure, unauthorized entry or other events beyond the
Company's control. A significant amount of the Company's computer equipment is
located at a single site in Phoenix, Arizona. There can be no assurance that
unanticipated problems will not cause a significant system outage or data loss.
Despite the implementation of security measures, the Company's infrastructure
may also be vulnerable to break-ins, computer viruses or other disruptions
caused by its customers or others. Any damage to the Company's databases,
failure of communication links or security breach or other loss that causes
interruptions in the Company's operations could have a material adverse effect
on the Company's financial condition and results of operations. See
"Business -- Systems Maintenance and Disaster Recovery."
Impact of Technological Advances; Delays in Introduction of New
Services. The Company's future success will depend, in part, on its ability to
develop leading technology, enhance its existing services, develop and introduce
new services that address the increasingly sophisticated and varied needs of its
current and prospective customers and respond to technological advances and
emerging industry standards and practices on a timely and cost effective basis.
Although the Company strives to be a technological leader, there can be no
assurance that future advances in technology will be beneficial to, or
compatible with, the Company's business or that the Company will be able to
economically incorporate such advances into its business. In addition, keeping
abreast of technological advances in the Company's business may require
substantial expenditures and lead time. There can be no assurance that the
Company will be successful in effectively using new technologies, adapting its
services to emerging industry standards or developing, introducing and marketing
service enhancements or new services, or that it will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these services. If the Company incurs increased
costs or is unable, for technical or other reasons, to develop and introduce new
services or enhancements of existing services in a timely manner in response to
changing market conditions or customer requirements, or if new services do not
achieve market acceptance, the Company's financial condition and results of
operations could be materially adversely affected. See "Business -- Services"
and "-- Technology and Operations."
Dependence on Key Customers and Third-Party Service Arrangements. The
Company's business is dependent upon customer arrangements with its hotel
stockholders or their affiliates, other hotel chains and hotel representation
firms, travel agencies, travel agency consortia and GDSs. The Company has not
entered into written agreements with certain travel agencies relating to the HCC
service. There can be no assurance that the Company will be able to continue or
renew these arrangements on equal or better terms or initiate new arrangements.
Any cancelation or non-renewal of these arrangements that results in a
significant
10
<PAGE> 14
reduction in the Company's customer base or revenue sources could materially
adversely affect the Company's financial condition and results of operations. In
addition, the Company relies on third parties to provide consolidation,
remittance and worldwide currency exchange services for its HCC service and
facility maintenance and disaster recovery services for computer and
communications systems used in all of the Company's services. There can be no
assurance that these service contracts will be successfully extended upon
expiration or that Pegasus can enter into contracts with alternate service
providers at the same or lower cost. Any failure by the Company to extend these
contracts or to secure alternate service providers could have a material adverse
effect on the Company's financial condition and results of operations. See
"Business -- Services," "-- Customers," "-- Technology and Operations" and
"-- Systems Maintenance and Disaster Recovery."
Government Regulation. The Company's primary customers are hotel chains and
hotel representation firms. The Company currently has as its stockholders 11 of
the 15 leading hotel chains in the world based on 1996 total revenues. While the
Company believes that it has been acting since its inception as an entity
independent of its stockholders, and its stockholders have not engaged in any
anti-competitive activities through or in connection with the Company, there can
be no assurance that federal, state or foreign governmental authorities, the
Company's competitors or its consumers will not raise anti-competitive concerns
regarding the Company's close relationship with its hotel stockholders. Any such
action by federal, state or foreign governmental authorities or allegations by
third parties could have a material adverse effect on the Company's financial
condition and results of operations. While certain aspects of the travel
industry are heavily regulated by the United States Government, the services
currently offered by the Company, including electronic room reservation
processing services, commission processing services and online reservation
services, have not been subject to any material industry-specific government
regulation. However, there can be no assurance that federal, state or foreign
governmental authorities will not attempt to regulate one or more of the
Company's current or future services. Due to the increasing popularity of the
Internet, it is possible that laws and regulations may be adopted with respect
to the Internet, covering issues such as privacy, pricing, content and quality
of products and services. The adoption of laws or regulations affecting the
Company's lines of business could reduce the rate of growth of the Company or
could otherwise have a material adverse effect on the Company's financial
condition and results of operations. See "Business -- Government Regulation."
Risks Associated with Management of Growth. The Company has in recent years
experienced significant growth and anticipates that significant expansion will
continue to be required in order to address potential market opportunities. The
Company anticipates significantly increasing the size of its Information
Technology Group and sales and marketing staff following the completion of this
offering. There can be no assurance that if the Company continues to expand,
management will be effective in attracting and retaining additional qualified
personnel, expanding the Company's physical facilities, integrating acquired
businesses or otherwise managing growth. In addition, there can be no assurance
that the Company's systems, procedures or controls will be adequate to support
any expansion of the Company's operations. The Company's inability to manage
growth effectively could have a material adverse effect on the Company's
financial condition and results of operations.
Risks Associated with International Expansion and Operations. Pursuit of
international growth opportunities may require significant investments for an
extended period before returns on such investments, if any, are realized. There
can be no assurance as to the extent, if at all, that the Company's plans to
expand in international markets will be successful. The Company's current
international activities and prospects may be adversely affected by factors such
as policies of the United States and foreign governments affecting foreign
trade, privacy issues, investment and taxation, exchange controls, political
risks and currency risks. One or more of these factors could materially
adversely affect the Company's financial condition and results of operations.
See "Business -- Strategy."
Dependence on Key Personnel. The Company believes that its success will
continue to be dependent upon its ability to attract and retain skilled managers
and other key personnel, including its President, John F. Davis, III, its Chief
Information Officer, Joseph W. Nicholson, and its other present officers. The
loss of the
11
<PAGE> 15
services of any of its present officers could have a material adverse effect on
the Company's financial condition and results of operations. Although the
Company currently has "key-man" insurance covering Messrs. Davis and Nicholson,
there can be no assurance that the amount of such insurance would be adequate to
compensate for the loss of the services of the insured officers. The Company
believes that its future business results will also depend in significant part
upon its ability to identify, attract, motivate and retain additional highly
skilled technical personnel. Competition for such personnel in the information
technology industry is intense. There can be no assurance that the Company will
be successful in identifying, attracting, motivating and retaining such
personnel, and the failure to do so could have a material adverse effect on the
Company's financial condition and results of operations. See "Management."
Dependence on Proprietary Technology; Risk of Infringement. The Company's
success depends upon its proprietary technology, consisting of both its software
and its hardware designs. The Company relies upon a combination of copyright,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary technology. There can be no assurance that the Company's present
protective measures will be enforceable or adequate to prevent misappropriation
of its technology or independent third-party development of the same or similar
technology. Many foreign jurisdictions offer less protection of intellectual
property rights than the United States, and there can be no assurance that the
protection provided to the Company's proprietary technology by the laws of the
United States or foreign jurisdictions will be sufficient to protect the
Company's technology. In addition, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others, or to defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result in substantial cost
and diversion of management resources, and a successful claim could effectively
block the Company's ability to use or license its technology in the United
States or abroad or otherwise have a material adverse effect on the Company's
financial condition and results of operations.
The Company has found and may in the future find it necessary or desirable
to procure licenses from third parties relating to current or future services or
technology, but there can be no assurance that the Company will continue to be
able to obtain such licenses or other rights or, if it is able to obtain them,
that it will be able to do so on commercially acceptable terms. The Company
could be placed at a disadvantage if its competitors obtain licenses with lower
royalty fee payments or other terms more favorable than those received by the
Company. If the Company or its suppliers were unable to obtain licenses relating
to current or future services or technology, the Company could be forced to
market services without certain technological features. The Company's inability
to obtain licenses necessary to use certain technology or its inability to
obtain such licenses on competitive terms could have a material adverse effect
on the Company's financial condition and results of operations. See
"Business -- Proprietary Rights."
Risks Associated with Potential Acquisitions. While the Company has no
current agreements or negotiations underway with respect to any potential
acquisitions, the Company regularly evaluates such opportunities and may make
acquisitions of other companies or technologies in the future. Acquisitions
involve numerous risks, including difficulties in assimilating acquired
operations and products, diversion of management's attention from other business
concerns, amortization of acquired intangible assets and potential loss of key
employees of acquired companies. The Company has no experience in assimilating
acquired nonaffiliated organizations into the Company's operations. There can be
no assurance as to the ability of the Company to integrate successfully any
operations, personnel or services that might be acquired in the future, and a
failure by the Company to do so could have a material adverse effect on the
Company's financial condition and results of operations. See
"Business -- Strategy."
Year 2000 Compliance. The Company has implemented a program designed to
ensure that all software used in connection with the Company's services will
manage and manipulate data involving the transition of dates from 1999 to 2000
without functional or data abnormality and without inaccurate results related to
such dates. However, with regard to travel reservations beginning in the year
2000, any failure on the part of the Company, or its travel-related customers to
ensure that any such software complies with year 2000 requirements, regardless
of when such travel reservations occur, could have a material adverse effect on
the financial condition and results of operations of the Company.
12
<PAGE> 16
Management's Discretion as to Use of Unallocated Net Proceeds; Benefits to
Existing Stockholders. The Company has designated only limited specific use for
the net proceeds to the Company from the sale of Common Stock in this offering.
The Company expects to use approximately $5.2 million of such net proceeds to
retire outstanding indebtedness to certain existing stockholders of the Company
and the remainder for working capital and other general corporate purposes.
Consequently, the Board of Directors and management of the Company will have
broad discretion in allocating a significant portion of the net proceeds to the
Company from this offering. In addition to the repayment of outstanding
indebtedness, existing stockholders will benefit from this offering as a result
of an increase in the market value and liquidity of their investments in the
Company. See "Use of Proceeds," "Certain Transactions" and "Principal and
Selling Stockholders."
Future Capital Needs; Uncertainty of Additional Financing. The Company
currently anticipates that its available cash resources combined with the net
proceeds to the Company from this offering will be sufficient to meet its
presently anticipated working capital and capital expenditure requirements for
at least the next twelve months. However, the Company may need or choose to
raise additional funds in order to support more rapid expansion, develop new or
enhanced services, respond to competitive pressures, acquire complementary
businesses or technologies or respond to unanticipated requirements. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution in net book value per share, and
such equity securities may have rights, preferences or privileges senior or
similar to those of the holders of the Company's Common Stock. There can be no
assurance that additional financing will be available when needed on terms
favorable to the Company, if at all. If adequate funds are not available on
acceptable terms, the Company may be unable to develop or enhance its services,
take advantage of future opportunities or respond to competitive pressures or
unanticipated requirements, any of which could have a material adverse effect on
the Company's financial condition and results of operations. See "Dilution" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Shares Eligible for Future Sale. Sales of substantial amounts of shares in
the public market following this offering could materially adversely affect the
market price of the Common Stock. Immediately following the offering, the
Company will have 9,429,712 shares of Common Stock outstanding. Of these shares,
6,476,412 shares will be "restricted securities" as defined by Rule 144 ("Rule
144") adopted under the Securities Act of 1933, as amended (the "Securities
Act"). These shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701
("Rule 701") adopted under the Securities Act. The Company is unable to predict
the effect that future sales made under Rule 144, Rule 701 or otherwise will
have on the market price of the Common Stock prevailing at that time. The
Company, its executive officers and directors who are stockholders, and certain
other stockholders including the Selling Stockholders have agreed, subject to
certain limited exceptions, not to offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus, without the prior written
consent of Hambrecht & Quist LLC. Any shares subject to these lock-up agreements
may be released at any time by Hambrecht & Quist LLC with or without notice.
Pursuant to an agreement between the Company and the holders (or their permitted
transferees) of approximately 6,476,412 shares of Common Stock, these holders
will be entitled to certain registration rights with respect to such shares. In
addition, the Company intends to register the shares of Common Stock reserved
for issuance under the Company's 1996 Plan and 1997 Plan. See
"Management -- 1996 and 1997 Stock Option Plans," "Description of Capital
Stock -- Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
Immediate and Substantial Dilution. Purchasers of Common Stock in this
offering will incur immediate and substantial dilution in the amount of $8.34
per share, assuming an initial public offering price of $11.00 per share. To the
extent that outstanding options or warrants to purchase the Common Stock are
exercised, there will be further dilution. See "Dilution."
Anti-Takeover Matters. The Company's Second Amended and Restated
Certificate of Incorporation ("Certificate") and Second Amended and Restated
By-laws ("By-laws"), each of which become effective contemporaneously with the
completion of this offering, contain provisions that may have the effect of
delaying, deterring or preventing a potential takeover of the Company that
stockholders purchasing shares in this offering may consider to be in their best
interests. The Certificate and By-laws provide for a classified
13
<PAGE> 17
Board of Directors serving staggered terms of three years, prevent stockholders
from calling a special meeting of stockholders and prohibit stockholder action
by written consent. The Certificate also authorizes only the Board of Directors
to fill vacancies, including newly created directorships and states that
directors of the Company may be removed only for cause and only by the
affirmative vote of holders of at least two-thirds of the outstanding shares of
the voting stock, voting together as a single class. In addition, the
Certificate grants the Board of Directors the authority to issue up to 2,000,000
shares of preferred stock, having such rights, preferences and privileges as
designated by the Board of Directors, without stockholder approval. Section 203
of the Delaware General Corporation Law, which is applicable to the Company,
contains provisions that restrict certain business combinations with interested
stockholders, which may have the effect of inhibiting a non-negotiated merger or
other business combination involving the Company. See "Description of Capital
Stock -- Anti-Takeover Provisions."
Absence of a Prior Public Market; Potential Volatility of Stock
Price. Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained. The initial public offering price of the Common Stock will be
determined through negotiations between the Company, the Selling Stockholders
and the Underwriters and may not be indicative of the market price for the
Common Stock after this offering. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price.
The market price for the Common Stock may be highly volatile. The Company
believes that factors such as quarterly fluctuations in financial results or
announcements by the Company or by its competitors, travel agencies, hotel
operators or other hotel industry participants could cause the market price of
the Common Stock to fluctuate substantially. In addition, the stock market may
experience extreme price and volume fluctuations which often are unrelated to
the operating performance of specific companies. Market fluctuations or
perceptions regarding the hotel industry, as well as general economic or
political conditions, may adversely affect the market price of the Common Stock.
In the past, following periods of volatility in the market price for a company's
securities, securities class action litigation has often been instituted. Such
litigation could result in substantial costs and a diversion of management
attention and resources, which could have a material adverse effect on the
Company's financial condition and results of operations.
14
<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $11.00 per share are estimated to be $26,871,000 ($31,402,839 if the
Underwriters' over-allotment option is exercised in full), after deducting the
underwriting discount and estimated offering expenses payable by the Company.
The Company will not receive any of the proceeds from the sale of Common Stock
by the Selling Stockholders. See "Principal and Selling Stockholders."
The principal purposes of this offering are to repay certain indebtedness,
to obtain additional capital, to create a public market for the Common Stock and
to facilitate future access by the Company to the public equity markets. The
Company anticipates that approximately $5.2 million of the net proceeds of this
offering will be used to repay indebtedness outstanding under notes payable to
certain stockholders of the Company (the "Stockholder Debt"). The Stockholder
Debt bears interest at such rates and matures on such dates as are set forth in
"Certain Transactions." The Company has no specific plans for the remainder of
the net proceeds but expects that such proceeds from this offering will be used
for general corporate purposes, including working capital, increased staffing
expenses, increased promotional expenses and the purchase of additional
equipment. The amounts and timing of the Company's actual expenditures will
depend upon numerous factors, including the Company's research and development
efforts, competition and marketing and sales activities. Pending application of
the net proceeds as described above, the Company intends to invest such proceeds
in short-term marketable securities. See "Risk Factors -- Management's
Discretion as to Use of Unallocated Net Proceeds; Benefits to Existing
Stockholders," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Certain
Transactions."
DIVIDEND POLICY
To date, the Company has neither declared nor paid any cash dividends on
shares of its Common Stock. The Company currently intends to retain its earnings
in the future to support operations and finance its growth and, therefore, does
not intend to pay cash dividends on the Common Stock in the foreseeable future.
The payment of cash dividends in the future will be at the discretion of the
Board of Directors and subject to certain limitations under the Delaware General
Corporation Law and will depend upon factors such as the Company's earnings
levels, capital requirements, financial condition and other factors deemed
relevant by the Board of Directors. There can be no assurance that the Company
will pay any dividends in the future.
15
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 (i) on an actual basis, (ii) on a pro forma basis adjusted to
reflect the conversion of all shares of outstanding Series A Preferred Stock
into shares of Common Stock and (iii) as adjusted to give effect to the sale by
the Company of the 2,700,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $11.00 per share and the application of the
estimated net proceeds therefrom as set forth in "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------
PRO AS
ACTUAL FORMA ADJUSTED
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term obligations(1)................. $ 1,896 $ 1,896 $ 1,090
======== ======== ========
Long-term obligations, net of current portion(1)............ 5,957 5,957 1,540
-------- -------- --------
Stockholders' equity:
Preferred Stock, $.01 par value, 2,000,000 shares
authorized; 1,538,463 shares issued and outstanding
(actual); no shares outstanding (pro forma and as
adjusted).............................................. 15 -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized; 5,307,733 shares issued (actual); 6,846,196
shares issued (pro forma); 9,546,196 shares issued (as
adjusted)(2)........................................... 53 68 95
Additional paid-in capital................................ 16,968 16,968 43,812
Unearned compensation expense............................. (451) (451) (451)
Accumulated deficit....................................... (14,959) (14,959) (14,959)
Less treasury stock (116,484 shares, at cost)............. (26) (26) (26)
-------- -------- --------
Total stockholders' equity........................... 1,600 1,600 28,471
-------- -------- --------
Total capitalization.............................. $ 7,557 $ 7,557 $ 30,011
======== ======== ========
</TABLE>
- ------------------------------
(1) See "Certain Transactions" and Notes 6 and 7 of Notes to Consolidated
Financial Statements.
(2) Excludes as of March 31, 1997 (i) 866,667 shares of Common Stock reserved
for issuance under the Company's 1996 Plan, of which options to purchase
771,733 shares of Common Stock were outstanding at a weighted average
exercise price of $2.39 per share and (ii) 333,333 shares of Common Stock
reserved for issuance under the Company's 1997 Plan, which will become
effective upon the completion of this offering. In May 1997, the Company
issued to Holiday Inn warrants to purchase 345,723 shares of Common Stock.
The warrants are exercisable at any time during the two year period ending
May 12, 1999 at an exercise price equal to the lower of $7.20 per share or
85.0% of the price per share for the Common Stock offered hereby. See
"Business -- Recent Developments" and "Management -- 1996 and 1997 Stock
Option Plans."
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<PAGE> 20
DILUTION
As of March 31, 1997, the Company had a net tangible book deficiency of
approximately $1.8 million or $0.27 per share on a pro forma basis. Pro forma
net tangible book deficiency per share is determined by dividing the net
tangible book deficiency (tangible assets less liabilities) of the Company by
the number of shares of Common Stock outstanding on a pro forma basis, after
giving effect to (i) a 4-for-3 split of the Company's outstanding Common Stock
and Series A Preferred Stock to be effected concurrently with this offering and
(ii) the conversion of all shares of outstanding Series A Preferred Stock into
an equal number of shares of the Company's Common Stock. After giving effect to
the issuance and sale of the 2,700,000 shares of Common Stock offered by the
Company hereby (at an assumed initial public offering price of $11.00 per share)
and after deduction of the underwriting discounts and estimated offering
expenses payable by the Company and the application of the estimated net
proceeds therefrom as set forth in "Use of Proceeds," the adjusted net tangible
book value of the Company as of March 31, 1997 would have been approximately
$25.1 million or $2.66 per share. This represents an immediate increase in net
tangible book value of $2.93 per share to existing stockholders and an immediate
dilution of $8.34 per share to new investors purchasing shares of Common Stock
in this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book deficiency per share as of
March 31, 1997......................................... $(0.27)
Increase per share attributable to new investors.......... 2.93
------
Adjusted net tangible book value per share after the
offering.................................................. 2.66
------
Dilution per share to new investors......................... $ 8.34
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
the differences between the number of shares of Common Stock purchased from the
Company, the aggregate consideration paid and the average price per share paid
by existing stockholders and new investors purchasing shares of Common Stock in
this offering (based upon an assumed initial public offering price of $11.00 per
share):
<TABLE>
<CAPTION>
SHARES
PURCHASED(1) TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(2)....... 6,729,712 71.4% $17,010,488 36.4% $ 2.53
New investors(2)........ 2,700,000 28.6 29,700,000 63.6 11.00
--------- ----- ----------- -----
Total......... 9,429,712 100.0% $46,710,488 100.0%
========= ===== =========== =====
</TABLE>
- ------------------------------
(1) The foregoing computations assume no exercise of outstanding stock options
or warrants. As of March 31, 1997, options to purchase 771,733 shares of
Common Stock were outstanding under the Company's 1996 Plan at a weighted
average exercise price of $2.39 per share. In May 1997, the Company issued
to Holiday Inn warrants to purchase 345,723 shares of Common Stock. The
warrants are exercisable at any time during the two year period ending May
12, 1999 at an exercise price equal to the lower of $7.20 per share or 85.0%
of the price per share for the Common Stock offered hereby. To the extent
these options or warrants are exercised, there will be further dilution to
new investors. See "Business -- Recent Developments" and "Management -- 1996
and 1997 Stock Option Plans."
(2) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 6,476,412 shares, or approximately
68.7% of the total shares of Common Stock outstanding after this offering,
and will increase the number of shares held by new investors to 2,953,300,
or approximately 31.3% of the total shares of Common Stock outstanding after
this offering. See "Principal and Selling Stockholders."
17
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of and for the year
ended December 31, 1996 are derived from the Consolidated Financial Statements
of the Company that have been audited by Price Waterhouse LLP, independent
accountants, and are included elsewhere in this Prospectus. The selected
consolidated financial data as of and for the year ended December 31, 1995 and
the selected consolidated financial data as of and for the year ended December
31, 1994 are derived from the financial statements of the Company that have been
audited by Belew Averitt LLP, independent accountants, and are included
elsewhere in this Prospectus. The selected financial data as of and for the year
ended December 31, 1993 are derived from the Company's financial statements that
have been audited by Belew Averitt LLP, but are not included herein. The
selected financial data as of and for the year ended December 31, 1992 are
derived from the Company's financial statements that were audited by other
independent accountants, but are not included herein.
The selected consolidated financial data as of and for the three months
ended March 31, 1996 and 1997 are derived from unaudited consolidated financial
statements and are included elsewhere in this Prospectus. The unaudited
consolidated financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for all of 1997. The
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Company's
Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
------- ------ ------ ------- ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(1):
Net revenues................................. $ 2,792 $3,938 $4,666 $ 9,296 $15,869 $3,803 $4,377
Operating expenses:
Cost of services........................... 1,172 1,266 1,546 3,883 6,199 1,638 1,558
Research and development................... 303 397 238 840 1,961 627 623
Write-off of purchased in-process research
and development.......................... -- -- -- 1,223 245 -- --
General and administrative expenses........ 652 709 1,065 2,770 3,799 692 856
Marketing and promotion expenses........... 66 17 130 912 2,824 644 865
Depreciation and amortization.............. 1,212 1,351 1,519 2,477 3,426 909 707
------- ------ ------ ------- ------- ------ ------
Total operating expenses.............. 3,405 3,740 4,498 12,105 18,454 4,510 4,609
------- ------ ------ ------- ------- ------ ------
Operating income (loss)...................... (613) 198 168 (2,809) (2,585) (707) (232)
Other (income) expense:
Interest expense........................... 568 597 591 815 893 212 212
Interest income............................ (2) (1) -- -- (114) -- (56)
------- ------ ------ ------- ------- ------ ------
Loss before income taxes and minority
interest................................... (1,179) (398) (423) (3,624) (3,364) (919) (388)
Income taxes................................. -- -- -- -- 15 -- --
------- ------ ------ ------- ------- ------ ------
Loss before minority interest................ (1,179) (398) (423) (3,624) (3,379) (919) (388)
Minority interest............................ -- -- -- 53 (106) (48) --
------- ------ ------ ------- ------- ------ ------
Net loss..................................... $(1,179) $ (398) $ (423) $(3,571) $(3,485) $ (967) $ (388)
======= ====== ====== ======= ======= ====== ======
Pro forma net loss per share(2).............. $ (0.48) $(0.05)
======= ======
Weighted average shares used in the pro forma
net loss per share calculation(2).......... 7,203 7,481
Supplemental pro forma net loss per
share(2)................................... $ (0.38) $(0.03)
======= ======
Weighted average shares used in the
supplemental pro forma net loss per share
calculation(2)............................. 7,744 8,006
</TABLE>
18
<PAGE> 22
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------------------------ --------------------------
1992 1993 1994 1995 1996 1997 AS ADJUSTED(3)
---- ---- ---- ---- ---- ---- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital
(deficit).............. $ (103) $ (126) $ (844) $(1,560) $ 2,068 $ 1,405 $ 23,859
Total assets............. 5,490 4,872 4,150 10,316 13,892 13,601 35,249
Accounts payable and
accrued liabilities.... 423 415 690 1,941 2,689 2,640 2,640
Short-term borrowings,
including current
portion of long-term
debt................... 407 459 1,392 1,049 1,834 1,896 1,090
Long-term obligations,
net of current
portion................ 6,488 6,224 4,718 6,994 6,353 5,957 1,540
Minority interest........ -- -- -- 1,340 -- -- --
Accumulated deficit...... (6,693) (7,091) (7,514) (11,085) (14,570) (14,959) (14,959)
Total stockholders'
equity (deficit)....... (1,828) (2,226) (2,649) (2,380) 1,954 1,600 28,471
</TABLE>
- ------------------------------
(1) The Company's statement of operations data for 1992, 1993 and 1994 consist
of the accounts of THISCO. Statement of operations data for periods
thereafter reflect the operations of the Company, including the acquisition
of 83.3% of the outstanding capital stock of HCC in July 1995 and the
acquisition of the remaining 16.7% of the outstanding capital stock of HCC
in June 1996, together with the depreciation and amortization applicable to
such acquisitions. Amortization applicable to the acquisition of HCC totaled
$645,419, $1,412,499 and $383,511 in 1995, 1996 and the three months ended
March 31, 1997, respectively. See Notes 1, 2 and 3 of Notes to Consolidated
Financial Statements.
(2) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the calculation of pro forma net loss per share and supplemental
pro forma net loss per share.
(3) Adjusted to reflect the sale of 2,700,000 shares of Common Stock offered by
the Company hereby at an assumed offering price of $11.00 per share and the
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Capitalization."
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus. This Prospectus
contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results and the timing of certain events
could differ materially from those discussed in the forward-looking statements
as a result of certain factors including those set forth under "Risk Factors"
and elsewhere in this Prospectus.
OVERVIEW
Pegasus is a leading provider of transaction processing services to the
hotel industry worldwide. The Company's THISCO and TravelWeb hotel room
reservation services improve the efficiency and effectiveness of the hotel
reservation process by enabling travel agents and individual travelers to
electronically access hotel room inventory information and conduct reservation
transactions. The Company's HCC service, the global leader in hotel commission
payment processing, improves the efficiency and effectiveness of the commission
payment process for participating hotels and travel agencies by consolidating
payments and providing comprehensive transaction reports. Historically, the
Company has derived a majority of its revenues from its THISCO and HCC services.
In 1996, approximately 51.3% of the Company's consolidated revenues was derived
from its electronic hotel reservation processing services, including 42.5% from
the THISCO service and 8.8% from the TravelWeb service, and approximately 48.7%
of the Company's consolidated revenues was derived from its HCC service. The
Company has experienced substantial growth since its inception. Revenues
increased at a compound annual rate of 54.4% to $15.9 million in 1996 from $2.8
million in 1992, excluding 1992 revenues from the HCC service which was acquired
in 1995. However, there can be no assurance that the Company will experience the
same rate of revenue growth in the future. Any significant decrease in the rate
of revenue growth could have a material adverse effect on the Company's
financial condition and results of operations.
Of the hotel customers for the Company's THISCO and HCC services in 1995,
all continued to be customers in 1996. Hotels generally enter into long-term
contracts for the Company's THISCO service that specify minimum annual
transaction and payment commitments.
The Company's revenues are predominantly transaction-based. The Company
derives its revenues from its THISCO service by charging its hotel participants
a fee based on the number of reservations made, less the number canceled ("net
reservations"), and a fee for "status messages" processed through the THISCO
service. Status messages are electronic messages sent by hotels to GDSs to
update room rates, features and availability information in GDS databases. As a
hotel's cumulative volume of net reservations increases during the course of the
calendar year, its fee per transaction decreases after predetermined transaction
volume hurdles have been met. As a result, for higher volume customers, unit
transaction fees are higher at the beginning of the year, when cumulative
transactions are lower. The Company recognizes revenues based on the expected
fee per transaction to be earned for services to be provided to the customer
during the entire year. This process of recognizing revenues results in a
deferred revenue balance being created during early periods of the year, which
will be reflected in interim balance sheets and be fully utilized and eliminated
by the end of each year. Additionally, Pegasus generally charges new
participants in the THISCO service a one-time set-up fee for work associated
with the implementation of the interface with the THISCO service. The Company
also charges certain GDSs a fee based on the number of net reservations to
compensate for the management and consolidation of multiple interfaces.
Beginning in the third quarter of 1997, the Company intends to reduce certain of
the fees that it charges hotels for transmitting status messages. See "Risk
Factors -- Competition --Electronic Hotel Room Reservation Processing Service."
Pegasus derives its revenues from its HCC service by charging a
participating travel agency a fee based on a percentage of the dollar amount of
commissions paid to that agency through the HCC service. The Company also
generally charges a participating hotel a fee based on the number of
commissionable transactions arising from that hotel. Revenues from HCC travel
agency fees can vary substantially from period
20
<PAGE> 24
to period based on the fluctuations of the average daily room rates. Pegasus
recognizes revenues from its HCC service in the month in which the hotel stay
occurs and collects and pays commissions to travel agencies by the 15th business
day of the following month. If a hotel fails to deliver funds to the Company,
the Company is not obligated to deliver commission payments on behalf of the
hotel to travel agencies. HCC revenues also include amortization of a $2.0
million payment received by the Company in June 1993 in exchange for a five-year
noncancelable data processing contract. This payment was initially recorded as
unearned income and is being recognized as revenue over the life of the
contract. The amount recognized in 1996 was $431,000. See Note 11 of Notes to
Consolidated Financial Statements.
The Company offers two services, TravelWeb and NetBooker, that provide
hotel reservation capability to individual travelers through the Internet.
During 1996, Pegasus derived the substantial majority of its TravelWeb revenues
from fees related to the creation of Web pages for hotels and for maintaining
these pages on the TravelWeb site. During 1997, the Company is transitioning its
fee structure to begin charging participating hotels subscription fees based on
the number of their properties included in the database and transaction fees
based on the number of net reservations made at their properties through the
TravelWeb service. The Company is not in a position to forecast the effect that
this change in fee structure will have on its TravelWeb revenues. There can be
no assurance that such a change will not have a material adverse effect on the
Company's financial condition and results of operations. The Company also
derives revenues through the sale of advertising space on the TravelWeb site.
Pegasus realizes revenues from NetBooker, the Company's hotel room reservation
service provided to third-party Web sites, by charging third-party Web sites an
initial development and licensing fee and by charging hotels a fee based on the
number of net reservations made through the NetBooker service. The Company has
not received a material amount of revenues for the TravelWeb service or the
NetBooker service to date, and there can be no assurance that either of these
services will produce a material amount of revenues in the future. See "Risk
Factors -- Competition" and "-- Dependence on Growth of Internet Commerce."
The Company has developed or is in the process of developing several new
services, including UltraRes, UltraDirect and Pegasus Information Services, to
capitalize on its existing technology and customer base to provide additional
electronic hotel reservation capabilities and information services to existing
Pegasus customers and to other participants in the hotel room distribution
process. The Company intends to derive revenues from UltraRes, a service that
automates the processing of hotel bookings for large meetings and conventions,
by charging participating hotels and meeting organizers transaction-based fees
for net reservations made. The Company intends to derive revenues from
UltraDirect, a service that automates the hotel room reservation process for
corporate travelers, by charging hotels transaction-based fees for net
reservations. The Company has not received any material revenues for any of
these services, and there can be no assurance that any of these services will
produce a material amount of revenues in the future. See "Risk Factors --
Competition" and "-- Impact of Technological Advances; Delays in Introduction of
New Services."
The Company's future success will depend, in part, on its ability to
develop leading technology, enhance its existing services, develop and introduce
new services that address the increasingly sophisticated and varied needs of its
current and prospective customers, and respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis.
Although the Company strives to be a technological leader, there can be no
assurance that future advances in technology will be beneficial to, or
compatible with, the Company's business or that the Company will be able to
economically incorporate such advances into its business. In addition, keeping
abreast of technological advances in the Company's business may require
substantial expenditures and lead time. There can be no assurance that the
Company will be successful in effectively using new technologies, adapting its
services to emerging industry standards or developing, introducing and marketing
service enhancements or new services, or that it will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these services. If the Company incurs increased
costs or is unable, for technical or other reasons, to develop and introduce new
services or enhancements of existing services in a timely manner in response to
changing market conditions or customer requirements, or if new services do not
achieve market acceptance, the Company's financial condition and results of
operations could be materially adversely affected. See "Risk Factors -- Impact
of Technological Advances; Delays in Introduction of New Services."
21
<PAGE> 25
The Company's cost of services consists principally of: (i) personnel costs
relating to information technology; (ii) facilities and equipment maintenance
costs; and (iii) fees paid to Citicorp for the processing of travel agency
commissions. Research and development costs consist principally of personnel
costs, related overhead costs and fees paid to outside consultants. General and
administrative expenses are primarily personnel, office, legal and accounting
related. Most of these expenses, by their nature, do not fluctuate directly with
net revenues on a short-term basis. Marketing and promotion expenses consist
primarily of personnel costs, advertising, public relations and participation in
trade shows and other industry events. The Company anticipates that it will
incur substantially higher marketing costs in the foreseeable future due to the
Company's plan to spend heavily on promotional activities in support of its
TravelWeb service. Depreciation and amortization expense includes: (i) computer
equipment depreciation; (ii) office furniture, equipment and leasehold
improvement depreciation expense; (iii) amortization of software, including
software acquired as part of the acquisition of HCC; and (iv) goodwill
amortization. Interest expense includes notes payable to certain stockholders of
the Company and payments made under capital equipment leases. Minority interest
represents certain former minority interests in subsidiaries that have been
wholly owned by the Company since June 1996. See Notes 1, 2, 3 and 7 of Notes to
Consolidated Financial Statements.
All costs incurred in the internal development of computer software used in
the delivery of the Company's services are expensed until a product design and a
working model of the software have been tested and completed. Thereafter, any
further development or production costs are capitalized. Maintenance and
customer support costs are expensed as incurred. Prior to 1996, the capitalized
development costs were being amortized over three to five years using the
straight-line method. However, in 1996 the Company changed the estimated life of
all internally and externally developed computer software to three years. The
result of such change in estimated life was to increase net losses for 1996 by
approximately $292,000. See Note 1 of Notes to Consolidated Financial
Statements.
In July 1995, the Company acquired 83.3% of outstanding capital stock of
HCC in exchange for 2,242,800 shares of the Common Stock for an aggregate
purchase price of $2.7 million, resulting in a $6.5 million excess of purchase
price over net assets acquired. At the time of the acquisition, $1.2 million was
allocated to research and development that had not reached technological
feasibility and had no probable alternative future use, and this amount was
expensed in the quarter ending September 30, 1995. At the time of the
acquisition, $3.5 million was allocated to software which is being amortized
over a three year period ending in June 1998, and the balance of the purchase
price, $1.7 million, was recorded as excess of cost over the fair value of net
assets acquired (goodwill) and is being amortized on a straight line basis
through June 2010. In June 1996, the Company purchased the remaining 16.7% of
outstanding capital stock of HCC in exchange for $2.0 million and 89,733 shares
of Common Stock, resulting in an $833,000 excess of purchase price over net
assets acquired. At the time of the acquisition of this minority interest,
$245,000 was allocated to research and development that had not reached
technological feasibility and had no probable alternative future use, and this
amount was expensed in the quarter ending June 30, 1996. At the time of the
acquisition of the 16.7% interest in June 1996, $469,000 was allocated to
software which is being amortized over a two year period ending in June 1998 to
correspond to the amortization period of the software relating to the
acquisition that occurred in July 1995, and the balance of the purchase price,
$119,000, was recorded as excess of cost over the fair value of net assets
acquired (goodwill) and is being amortized on a straight line basis through June
2010 to correspond to the amortization period of the goodwill relating to the
acquisition that occurred in July 1995. See Notes 1, 2 and 3 of Notes to
Consolidated Financial Statements.
The Company has recorded unearned compensation and compensation expense for
the difference between the exercise price and the deemed fair value of the
Company's Common Stock with respect to 503,333 shares issuable upon exercise of
options granted in 1996. These amounts are initially recorded as unearned
compensation and amortized to cost of services and general and administrative
expense over the vesting periods of the options, generally four years. Unearned
compensation amortized to expense in 1996 was $65,000. Amortization of unearned
compensation will adversely affect the Company's reported operating results
through the third quarter of 2000. See Note 9 of Notes to Consolidated Financial
Statements.
As of December 31, 1996, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $14.6 million, which expire in
various years beginning in 2003. The net deferred tax
22
<PAGE> 26
asset is fully reserved because of uncertainty regarding its realizability. See
Note 10 of Notes to Consolidated Financial Statements.
In connection with its efforts to continue its growth, in both its
traditional and recently introduced service offerings, the Company anticipates
significantly increasing the size of its information technology and sales and
marketing organizations. Because certain of the costs related to the
introduction of such new service offerings are largely fixed in nature, and as a
result of spending on development and marketing of such new service offerings,
the Company has not realized in the past, and anticipates that it will not
realize in the foreseeable future, gross margins on the provision of such
recently introduced services comparable to the gross margins it realizes on its
THISCO and HCC service offerings. Such lower gross margin contribution from
newly introduced service offerings and the associated marketing and development
expenses have been significant components of the losses incurred by the Company
and are expected to continue to have a detrimental effect on the Company's
operating results for the foreseeable future. The Company has experienced
substantial net losses, including a net loss of $3.5 million in 1996, and had an
accumulated deficit of approximately $14.6 million as of December 31, 1996. The
Company anticipates that its operating expenses will increase substantially in
the foreseeable future as it continues the development of its services,
increases its sales and marketing activities and expands its distribution
channels. To achieve profitability, the Company must successfully implement its
business strategy and increase its revenues while controlling expenses. There
can be no assurance as to when or if the Company will achieve profitability.
There also can be no assurance that if the Company continues to expand,
management will be effective in attracting and retaining additional qualified
personnel, expanding the Company's physical facilities or otherwise managing
growth. In addition, there can be no assurance that the Company's systems,
procedures or controls will be adequate to support any expansion of the
Company's operations. The Company's inability to manage growth effectively could
have a material adverse effect on the Company's financial condition and results
of operations. See "Risk Factors -- Substantial Net Losses," "-- Risks
Associated with Management of Growth" and "-- Dependence on Key Personnel."
All statements contained in this Prospectus other than statements of
historical fact, including statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" concerning the
Company's financial position and liquidity, results of operations, prospects for
continued growth, ability to maintain or improve transaction volumes, net sales
or profit margins and other matters are forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove correct. Factors that could cause the Company's results to differ
materially from the results discussed in or contemplated by such forward-looking
statements include the risks described under "Risk Factors," including without
limitation substantial net losses, competition, dependence on the hotel
industry, consolidation trends, fluctuations in quarterly operating results,
potential adverse changes in hotel commission payments, control by existing
stockholders, conflicts of interest, dependence on growth of Internet commerce,
system interruption and security risks, impact of technological advances, delays
in introduction of new services, dependence on key customers and third-party
service arrangements, government regulation, management of growth, international
expansion and operations, dependence on key personnel, dependence on proprietary
technology, infringement, potential acquisitions, year 2000 compliance,
management's discretion as to use of unallocated net proceeds, benefits to
existing stockholders, future capital needs, uncertainty of additional
financing, shares eligible for future sale, immediate and substantial dilution,
anti-takeover matters, absence of a prior public market and potential volatility
of stock price. All forward-looking statements in this Prospectus are expressly
qualified in their entirety by the cautionary statements in this paragraph, in
"Risk Factors" and elsewhere in this Prospectus.
23
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's statement of operations to net
revenues:
<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES
-----------------------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of services......................... 33.1 41.8 39.1 43.1 35.6
Research and development................. 5.1 9.0 12.4 16.5 14.2
Write-off of purchased in-process
research and development.............. -- 13.2 1.5 -- --
General and administrative expenses...... 22.8 29.8 23.9 18.2 19.5
Marketing and promotion expenses......... 2.8 9.8 17.8 16.9 19.8
Depreciation and amortization............ 32.6 26.6 21.6 23.9 16.2
----- ----- ----- ----- -----
Total operating expenses......... 96.4 130.2 116.3 118.6 105.3
----- ----- ----- ----- -----
Operating income (loss).................... 3.6 (30.2) (16.3) (18.6) (5.3)
Other (income) expense:
Interest expense......................... 12.7 8.8 5.6 5.6 4.9
Interest income.......................... -- -- (0.7) -- (1.3)
----- ----- ----- ----- -----
Loss before income taxes and minority
interest................................. (9.1) (39.0) (21.2) (24.2) (8.9)
Income taxes............................... -- -- 0.1 -- --
----- ----- ----- ----- -----
Loss before minority interest.............. (9.1) (39.0) (21.3) (24.2) (8.9)
Minority interest.......................... -- 0.6 (0.7) (1.2) --
----- ----- ----- ----- -----
Net loss................................... (9.1)% (38.4)% (22.0)% (25.4)% (8.9)%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 AND 1997
Net revenues. Net revenues increased by $573,000, or 15.1%, to $4.4 million
in the three months ended March 31, 1997 from $3.8 million in the three months
ended March 31, 1996. THISCO revenues increased as a result of a 17.8% increase
in net reservations made in the three months ended March 31, 1997 as compared to
the three months ended March 31, 1996. Additionally, the average fee paid by
hotels using the THISCO service increased during the three months ended March
31, 1997 as a result of an increase in total status messages processed. HCC
revenues grew as a result of a 12.3% increase in hotel commission transactions
processed during the three months ended March 31, 1997 as compared to the three
months ended March 31, 1996 due in part to the addition of hotel properties and
travel agencies participating in the HCC service. The net revenues to the
Company per commissionable transaction increased in the three months ended March
31, 1997 because of an increase in overall hotel average daily rates. Revenues
contributed by the TravelWeb service declined 51.5% in the three months ended
March 31, 1997 as compared to the three months ended March 31, 1996. This
decrease resulted primarily from the Company's transitioning its hotels
participating in the TravelWeb service to a subscription fee arrangement and the
Company's increasing reliance on subscription fees and recurring transaction
fees rather than page building and set-up fees.
Cost of services. Cost of services was consistent at $1.6 million in the
three months ended March 31, 1997 compared to the three months ended March 31,
1996. Costs of services related to the Company's THISCO and HCC services did not
change materially for the period, reflecting the relatively high fixed-cost
component of providing these services.
Research and development. Research and development expenses decreased
$4,000, or 0.7%, to $623,000 in the three months ended March 31, 1997 from
$627,000 in the three months ended March 31, 1996.
24
<PAGE> 28
General and administrative expenses. General and administrative expenses
increased $164,000, or 23.6%, to $856,000 in the three months ended March 31,
1997 from $692,000 in the three months ended March 31, 1996. This increase was
due to greater office related costs and personnel costs.
Marketing and promotion expenses. Marketing and promotion expenses
increased $221,000, or 34.4%, to $865,000 in the three months ended March 31,
1997 from $644,000 in the three months ended March 31, 1996. Marketing and
promotion expenses grew primarily due to the promotion of the TravelWeb service
and to a lesser degree the promotion of the THISCO and HCC services.
Depreciation and amortization. Depreciation and amortization expenses
decreased $202,000, or 22.2%, to $707,000 in the three months ended March 31,
1997 from $909,000 in the three months ended March 31, 1996. This decrease was
primarily due to the completion in 1996 of the amortization of previously
capitalized software.
Interest expense. Interest expense remained unchanged at $212,000. The
expense reflects interest accrued on promissory notes payable to certain
stockholders of the Company and payments made under capital equipment leases.
Interest income. During the three months ended March 31, 1997 the Company
realized $56,000 in interest income as a result of short term investments of
operating cash balances on the proceeds from the sale of shares of the Company's
Series A Preferred Stock in June 1996.
YEARS ENDED DECEMBER 31, 1995 AND 1996
Net revenues. Net revenues increased by $6.6 million, or 70.7%, to $15.9
million in 1996 from $9.3 million in 1995. THISCO revenues increased as a result
of a 27.0% increase in net reservations made in 1996 as compared to 1995.
Additionally, the average fee paid by hotels using the THISCO service increased
during 1996 as a result of an increase in total status messages processed. HCC
revenues grew as a result of the acquisition by the Company of HCC in July 1995
and the subsequent growth in hotel commission transactions processed due, in
part, to the addition of hotel properties and travel agencies participating in
the HCC service. The net revenues to the Company per commissionable transaction
increased in 1996 because of a change in the hotel customer mix and an increase
in overall hotel average daily rates. To the extent that the total volume of
commissions processed by the HCC service increases, the average ratio of net
revenue to total commissions collected will decrease. Revenues contributed by
the TravelWeb service increased 57.6% in 1996 as compared to 1995, which
resulted primarily from amounts charged to hotels for Web page building and
maintenance fees and less significantly from advertising and promotions and from
fees charged to hotels for net reservations processed through the TravelWeb
service. Beginning in 1997, Pegasus is transitioning its hotels participating in
the TravelWeb service to a subscription fee arrangement, whereby, in addition to
paying fees for net reservations made through this service, participating hotels
will remit monthly fees per property listing in the TravelWeb service. See
"-- Overview."
Cost of services. Cost of services increased $2.3 million, or 59.7%, to
$6.2 million in 1996 from $3.9 million in 1995. This increase was due to the
acquisition by the Company of HCC in July 1995 and operating expenses for
TravelWeb, including expenses for contract Web site page building, software
development and the employment of additional technical personnel.
Research and development; Write-off of purchased in-process research and
development. Research and development expenses increased $143,000, or 6.9%, to
$2.2 million in 1996 from $2.1 million in 1995. After eliminating the effect of
the one-time charges taken in 1995 and 1996 for research and development
expenses relating to the acquisition of HCC, research and development expenses
increased $1.2 million, or 133%, to $2.0 million in 1996 from $840,000 in 1995.
This increase was due to increased development expenses primarily related to
TravelWeb.
General and administrative expenses. General and administrative expenses
increased $1.0 million, or 37.1%, to $3.8 million in 1996 from $2.8 million in
1995. This increase was due to greater office-related costs, personnel costs,
legal and accounting fees and travel-related costs.
25
<PAGE> 29
Marketing and promotion expenses. Marketing and promotion expenses
increased $1.9 million, or 209.6%, to $2.8 million in 1996 from $912,000 in
1995. As a percentage of net revenues, marketing and promotion expense increased
to 17.8% in 1996 from 9.8% in 1995. Marketing and promotion expenses grew
primarily due to the promotion of the TravelWeb service and to a lesser degree
the promotion of the THISCO and HCC services.
Depreciation and amortization. Depreciation and amortization expenses
increased $949,000, or 38.3%, to $3.4 million in 1996 from $2.5 million in 1995.
In 1996, the Company changed the estimated life of capitalized software from
five years to three years. The effect of this change was to increase
depreciation by $292,000 in 1996. Also, in 1996 the Company recognized a full
year of amortization of software and goodwill relating to the Company's
acquisition in July 1995 of 83.3% of the outstanding capital stock of HCC and
began to amortize software and goodwill that resulted from the purchase by the
Company in June 1996 of the remaining 16.7% of the outstanding capital stock of
HCC.
Interest expense. Interest expense increased $77,000, or 9.5%, to $893,000
in 1996 from $816,000 in 1995. The expense includes interest accrued on
promissory notes payable to certain stockholders of the Company and payments
made under capital equipment leases.
Interest income. During 1996, the Company realized $114,000 in interest
income as a result of short term investments of operating cash balances on the
proceeds from the sale of shares of the Company's Series A Preferred Stock in
June 1996.
Income taxes. Income taxes reflect foreign income taxes payable with
respect to the taxable earnings of the Company's United Kingdom subsidiary,
which reports earnings on a cost-plus basis. Currently, the United Kingdom
office reports taxable earnings equal to 10.0% of the total operating cost of
the office.
YEARS ENDED DECEMBER 31, 1994 AND 1995
Net revenues. Net revenues increased $4.6 million, or 99.2%, to $9.3
million in 1995 from $4.7 million in 1994. This increase was due in part to the
acquisition by the Company of HCC in July 1995 and its subsequent growth and to
the growth in the THISCO service. Revenues from the THISCO service increased
approximately 15.5% primarily as a result of growth in net reservations, which
was due to increased use of the service by the Company's existing customer base
and the addition of new customers. During 1995, the average fee paid per THISCO
transaction by hotels decreased as a result of a 15% reduction (effective July
1, 1994) in net reservation fees charged to hotels. Revenues for the TravelWeb
service increased primarily as a result of Web page building and maintenance
fees charged to hotels in connection with the commencement of the TravelWeb
service in July 1994.
Cost of services. Cost of services increased $2.4 million, or 151.1%, to
$3.9 million in 1995 from $1.5 million in 1994. Operating expense as a
percentage of sales increased to 41.8% in 1995 from 33.1% in 1994. This increase
was due to the acquisition by the Company of HCC in July 1995 greater personnel
costs from the growth in the number of technical personnel employed by Pegasus,
costs incurred in connection with an upgrade of hardware used in the Company's
UltraSwitch technology, expenses incurred with respect to Web page building and
costs related to the acquisition by the Company of HCC and other organizational
matters. See Note 2 of Notes to Consolidated Financial Statements.
Research and development; Write-off of purchased in-process research and
development. Research and development expenses increased $1.8 million, or
766.2%, to $2.1 million in 1995 from $238,000 in 1994. This increase was due to
a $1.2 million write-off of in-process research and development related to the
Company's acquisition of 83.3% of the outstanding capital stock of HCC and to
THISCO, TravelWeb and HCC software development.
General and administrative expenses. General and administrative expenses
increased $1.7 million, or 160.1%, to $2.8 million in 1995 from $1.1 million in
1994. This increase was due to acquisition by the Company of HCC and other
organizational matters, higher office costs and greater personnel costs arising
from increases in number of personnel.
26
<PAGE> 30
Marketing and promotion expenses. Marketing and promotion expenses
increased $782,000, or 599.2%, to $912,000 in 1995 from $130,000 in 1994.
Marketing and promotion expenses grew primarily due to the promotion of the
TravelWeb service.
Depreciation and amortization. Depreciation and amortization increased
$958,000, or 63.1%, to $2.5 million in 1995 from $1.5 million in 1994. As a
percentage of sales, depreciation and amortization decreased to 26.6% in 1995
from 32.6% in 1994. The increase in depreciation and amortization is related to
new hardware purchased for the Company's UltraSwitch technology in 1995 and
amortization of software and goodwill related to the Company's acquisition of
83.3% of the outstanding capital stock of HCC in 1995.
Interest expense. Interest expense increased $225,000, or 38.0%, to
$816,000 in 1995 from $591,000 in 1994. Interest expense includes interest
accrued on certain promissory notes payable to stockholders of the Company and
payments made under capital equipment leases. The increase in interest expense
was primarily related to the new hardware purchased for the Company's
UltraSwitch technology, which was financed through a lease in 1995.
27
<PAGE> 31
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited statement of operations
data for each of the Company's last eight quarters ended March 31, 1997, as well
as such data expressed as a percentage of the Company's total net revenues for
the periods indicated. This data has been derived from the Company's unaudited
financial statements that, in management's opinion, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information when read in conjunction with the audited
Consolidated Financial Statements of the Company and the Notes thereto appearing
elsewhere in this Prospectus. The Company believes that quarter-to-quarter
comparisons of its financial results are not necessarily meaningful and should
not be relied upon as any indication of future performance. See "Risk
Factors -- Fluctuations in Quarterly Operating Results."
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ $1,556 $ 2,966 $ 3,337 $3,803 $ 4,005 $3,976 $ 4,085 $4,377
Operating expenses:
Cost of services...................... 535 1,237 1,644 1,638 1,483 1,564 1,514 1,558
Research and development.............. 196 281 243 627 320 399 615 623
Write-off of purchased in-process
research and development............ -- 1,223 -- -- 245 -- -- --
General and administrative expenses... 442 1,009 1,008 692 1,120 913 1,074 856
Marketing and promotion expenses...... 34 426 387 644 693 647 840 865
Depreciation and amortization......... 445 797 849 909 924 769 824 707
------ ------- ------- ------ ------- ------ ------- ------
Total operating expenses........ 1,652 4,973 4,131 4,510 4,785 4,292 4,867 4,609
------ ------- ------- ------ ------- ------ ------- ------
Loss from operations.................... (96) (2,007) (794) (707) (780) (316) (782) (232)
Other (income) expense:
Interest expense...................... 217 195 218 212 188 221 272 212
Interest income....................... -- -- -- -- (4) (55) (55) (56)
------ ------- ------- ------ ------- ------ ------- ------
Loss before income taxes and minority
interest.............................. (313) (2,202) (1,012) (919) (964) (482) (999) (388)
Income taxes............................ -- -- -- -- -- -- 15 --
------ ------- ------- ------ ------- ------ ------- ------
Loss before minority interest........... (313) (2,202) (1,012) (919) (964) (482) (1,014) (388)
Minority interest....................... -- 65 (11) (48) (58) -- -- --
------ ------- ------- ------ ------- ------ ------- ------
Net loss................................ $ (313) $(2,137) $(1,023) $ (967) $(1,022) $ (482) $(1,014) $ (388)
====== ======= ======= ====== ======= ====== ======= ======
Pro forma net loss per share............ $(0.14) $ (0.15) $(0.06) $ (0.13) $(0.05)
====== ======= ====== ======= ======
Weighted average shares used in the pro
forma net loss per share
calculation........................... 6,826 6,834 7,572 7,572 7,481
Supplemental pro forma net loss per
share(1).............................. $(0.11) $ (0.12) $(0.04) $ (0.11) $(0.03)
====== ======= ====== ======= ======
Weighted average shares used in the
supplemental pro forma net loss per
share calculation(1).................. 7,360 7,371 8,111 8,113 8,006
</TABLE>
<TABLE>
<CAPTION>
Percentage of Net Revenues
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of services...................... 34.4 41.7 49.3 43.1 37.0 39.3 37.0 35.6
Research and development.............. 12.6 9.5 7.3 16.5 8.0 10.0 15.0 14.2
Write-off of purchased in-process
research and development............ -- 41.2 -- -- 6.1 -- -- --
General and administrative expenses... 28.4 34.0 30.2 18.2 28.0 23.0 26.3 19.6
Marketing and promotion expenses...... 2.2 14.3 11.6 16.9 17.3 16.3 20.6 19.8
Depreciation and amortization......... 28.6 26.9 25.4 23.9 23.1 19.3 20.2 16.1
------ ------- ------- ------ ------- ------ ------- ------
Total operating expenses........ 106.2 167.6 123.8 118.6 119.5 107.9 119.1 105.3
------ ------- ------- ------ ------- ------ ------- ------
Loss from operations.................... (6.2) (67.6) (23.8) (18.6) (19.5) (7.9) (19.1) (5.3)
Other (income) expense:
Interest expense...................... 13.9 6.6 6.5 5.6 4.7 5.6 6.7 4.8
Interest income....................... -- -- -- -- (0.1) (1.4) (1.3) (1.2)
------ ------- ------- ------ ------- ------ ------- ------
Loss before income taxes and minority
interest.............................. (20.1) (74.2) (30.3) (24.2) (24.1) (12.1) (24.5) (8.9)
Income taxes............................ -- -- -- -- -- -- 0.3 --
------ ------- ------- ------ ------- ------ ------- ------
Loss before minority interest........... (20.1) (74.2) (30.3) (24.2) (24.1) (12.1) (24.8) (8.9)
Minority interest....................... -- 2.2 (0.3) (1.2) (1.4) -- -- --
------ ------- ------- ------ ------- ------ ------- ------
Net loss................................ (20.1)% (72.0)% (30.6)% (25.4)% (25.5)% (12.1)% (24.8)% (8.9)%
====== ======= ======= ====== ======= ====== ======= ======
</TABLE>
- ------------------------------
See footnote on following page.
28
<PAGE> 32
(1) Supplemental pro forma net loss per share is based on the weighted average
number of shares of Common Stock used in the calculation of pro forma net
loss per share, plus the shares that the Company would have had to issue in
the offering to repay indebtedness outstanding under notes payable to
certain stockholders of the Company. For purposes of computing supplemental
pro forma net loss per share, the pro forma net loss was reduced by the
elimination of related interest expense on such notes payable. See "Use of
Proceeds," Note 1 of Notes to Consolidated Financial Statements and Note 4
of Notes to Consolidated Interim Financial Statements (Unaudited).
The Company does not believe that inflation has materially impacted results
of operations during the past three years. Substantial increases in costs and
expenses could have a significant impact on the Company's results of operations
to the extent such increases are not passed along to customers.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its cash requirements for operations and
investments in equipment primarily through private sales of capital stock,
borrowings from stockholders and capital lease financing. Cash flows from the
sale of capital stock amounted to $7.5 million in 1996, of which $2.0 million
was used to purchase a minority interest in a subsidiary and $235,000 was used
to repay notes payable to stockholders. Cash flows from the sale of capital
stock amounted to $571,000 in 1995.
Net cash provided by operating activities amounted to $979,000, $496,000,
$410,000 and $213,000 in 1994, 1995, 1996 and the quarter ended March 31, 1997,
respectively. Net cash used in investing activities for the purchase of
software, furniture and equipment amounted to $185,000, $639,000, $362,000 and
$407,000 in 1994, 1995 and 1996 and the quarter ended March 31, 1997,
respectively. In addition, the Company purchased $2.7 million of marketable
securities in 1996 and realized net proceeds of $1.3 million in the three months
ended March 31, 1997 from the purchase and maturity of marketable securities.
The Company's principal sources of liquidity at December 31, 1996 included
cash and cash equivalents of $1.8 million, short term investments of $2.7
million and restricted cash of $690,000, which represents funds for travel
agency commission checks that have not cleared HCC's processing bank and are
returned to HCC. Any of such amounts which are not remitted to travel agencies
will be escheated to the appropriate state, as required.
The Company believes that the net proceeds from this offering, along with
current cash and cash equivalents, will be sufficient to fund its working
capital and capital expenditure requirements for at least the next twelve
months. Thereafter, if cash generated from operations is insufficient to satisfy
the Company's liquidity requirements, the Company may seek to issue additional
equity or debt securities or establish a credit facility. The issuance of
additional equity or convertible debt securities could result in additional
dilution to the Company's stockholders. There can be no assurance that financing
will be available to the Company in amounts or on terms acceptable to the
Company. Although the Company has no material commitments for capital
expenditures, it anticipates purchasing approximately $1.5 million of property
and equipment in 1997, primarily for computer equipment, furniture and fixtures.
Some portion of these capital expenditures may be financed through capital
leases. See "Risk Factors -- Future Capital Needs; Uncertainty of Additional
Financing."
RECENTLY ISSUED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123), encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans at fair
value. The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25), and related Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair market value of the
Company's stock at the date of the grant over the amount the employee must pay
to acquire the stock.
29
<PAGE> 33
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (FAS 128), was issued. FAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share ("EPS") for
entities with publicly held common stock or potential common stock. FAS 128
simplifies the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share" (APB 15), and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the statement of operations for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. FAS 128 requires restatement of
all prior-period EPS data presented. The Company will adopt FAS 128 in its
consolidated financial statements as of and for the year ending December 31,
1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
30
<PAGE> 34
BUSINESS
OVERVIEW
Pegasus is a leading provider of transaction processing services to the
hotel industry worldwide. The Company's THISCO and TravelWeb hotel room
reservation services improve the efficiency and effectiveness of the hotel
reservation process by enabling travel agents and individual travelers to
electronically access hotel room inventory information and conduct reservation
transactions. The Company's HCC service, the global leader in hotel commission
payment processing, improves the efficiency and effectiveness of the commission
payment process for participating hotels and travel agencies by consolidating
payments and providing comprehensive transaction reports. The Company's services
benefit many of the participants in the hotel room distribution process,
including hotels, hotel representation firms, Global Distribution Systems
("GDSs"), travel agencies, convention and other large meeting organizers,
corporate travel departments and Web sites with travel-related features. In 1996
approximately 51.3% of the Company's consolidated revenues was derived from its
hotel reservation processing services, including 42.5% from the THISCO service
and 8.8% from the TravelWeb service, and approximately 48.7% was derived from
its HCC service.
The Company's electronic interface business for hotel room reservations was
established in 1989 by 16 leading hotel and travel-related companies to address
the need for a neutral, reliable third-party source of hotel reservation
information and transaction processing services. The Company's commission
processing business was founded by substantially the same stockholder group in
1991. Today, the Company's stockholders include 11 of the 15 leading hotel
chains in the world based on 1996 total revenues. The Company's strategic
position as a gateway in the hotel room distribution chain, transaction
processing capabilities and reputation for reliability and neutrality enable it
to offer a range of services delivering industry-wide benefits that would be
difficult for any of the participants to achieve individually. Over the past
several years, the Company has expanded its services to include virtually all
electronic distribution channels through which hotel room reservations are made.
Over 25,000 hotel properties worldwide, including those of 13 of the 15
leading hotel chains in the world based on 1996 total revenues, currently
participate in the Company's THISCO service. The number of net reservations
booked through the THISCO service has increased to approximately 13.9 million in
1996 from 1.1 million in 1990.
TravelWeb provides individual travelers direct access to more than 40,000
dynamically served pages of online hotel information and the ability to make
reservations at approximately 13,000 hotel properties in 140 countries. In June
1997, a daily average of approximately 30,000 Internet users visited the
TravelWeb site. The Company's NetBooker service offers operators of third-party
Web sites the same comprehensive information contained on TravelWeb and a simple
and fast method of making a hotel reservation online.
The THISCO and TravelWeb services utilize the Company's UltraSwitch
technology. This technology can facilitate the distribution of hotel rooms
through virtually all of the automated distribution channels by offering hotels
a single, seamless electronic interface to:
- over 120,000 travel agencies through all of the leading GDSs;
- individual travelers directly through the Internet;
- third-party Web sites;
- convention and other large meeting organizers; and
- corporate travel departments through travel management software and
service providers.
Pegasus provides the HCC commission processing service to over 64,000
travel agencies and 11,000 hotel properties worldwide. In 1996, the Company
processed over $111.7 million in gross commission payments, an increase of 49.9%
as compared to 1995, including commission payments made in 1995 prior to the
acquisition of HCC by Pegasus.
31
<PAGE> 35
The Company charges for its services generally on a per-transaction or
commission basis. The Company has increased its revenue at a compound annual
growth rate of 54.4% to $15.9 million in 1996 from $2.8 million in 1992,
excluding 1992 revenues from the HCC service which was acquired in 1995. The
revenue growth has reflected growth in the THISCO service, the introduction of
the TravelWeb service and the acquisition and growth of the HCC service. The
revenue growth in the THISCO service reflects the increasing number of
participating hotels and travel agencies that made reservations through the
THISCO service, the shift from manual to electronic hotel reservations and the
overall health in the hotel industry. The revenue growth in the HCC service
principally reflects growth in the dollar amount of hotel commission payments
processed by the Company as a result of an increase in the number of hotels and
travel agencies using the HCC service and higher average daily hotel room rates.
The Company believes it has numerous opportunities to continue its growth,
including: (i) adding members of the hotel and travel agency industries as
customers, in particular internationally where the Company's market share is
lower; (ii) addressing all of the emerging electronic distribution channels for
hotel rooms; (iii) providing customers access to comprehensive hotel industry
information and (iv) pursuing strategic relationships and acquisition
opportunities.
RECENT DEVELOPMENTS
In June 1997, Marriott, which is a customer of the Company's THISCO and
TravelWeb services, also became a customer of the Company's HCC service.
In May 1997, HFS renewed its participation in the Company's HCC service by
entering into a new long-term agreement with the Company.
In May 1997, the Company entered into a Distribution Services Agreement
with Holiday Inn, under which Holiday Inn, currently a customer in the Company's
HCC service, also will become a customer of the Company's THISCO, TravelWeb,
NetBooker, UltraDirect, and UltraRes services commencing in 1998. In May 1997,
the Company issued to Holiday Inn warrants to purchase 345,723 shares of Common
Stock. The warrants are exercisable at any time during the two year period
ending May 12, 1999 at an exercise price equal to the lower of $7.20 per share
or 85.0% of the price per share for the Common Stock offered hereby.
INDUSTRY BACKGROUND
The operations of the global hotel industry include a wide variety of
participants and a series of complex information and transaction flows.
According to the International Hotel Association, the global hotel industry
generated $247 billion in revenues in 1994. The Company believes that costs
associated with reserving and distributing hotel rooms, including commissions
paid to intermediaries, such as travel agencies and GDSs, hotel
reservation-related staffing costs and reservation system information technology
expenses, represent a significant proportion of total operating costs. The
Company's services simplify the complexity of room reservation information and
transaction flows, thereby reducing the distribution costs of rooms for the
hotel industry. The Company believes that revenues derived from electronically
booked hotel reservations will grow at a higher rate than overall hotel industry
revenues, as a greater number of hotels and travel agencies acquire electronic
booking capabilities.
The room reservation and commission payment processes in the hotel industry
are complex and information intensive. Making a hotel room reservation requires
significant amounts of data, such as room rates, features and availability. This
complexity is compounded by the need to confirm, revise or cancel room
reservations, which generally requires multiple parties to have ongoing access
to real-time reservation information. Similarly, the process of reconciling and
paying hotel commissions to travel agencies is based on transaction-specific
hotel data and consists of a number of relatively small payments to travel
agencies, often including payments in multiple currencies. In addition,
information regarding guest cancelations and "no-shows" needs to be accurately
communicated between hotels and travel agencies in order to reconcile commission
payments.
Reservations for hotel rooms are made either directly by individual
travelers or indirectly through intermediaries. Individual travelers typically
make direct reservations by telephoning or faxing a hotel to ascertain room
rates, features and availability and to make reservations. Increasingly,
individual travelers can
32
<PAGE> 36
conduct all aspects of this transaction through hotel and travel-related Web
sites. Intermediaries for hotel room reservations, including travel agencies,
convention and other large meeting organizers and corporate travel departments,
access hotel information either by telephone or fax or through a GDS such as
SABRE, Galileo, System One or Worldspan. GDSs are global electronic travel
information and reservation systems that, among other things, maintain databases
of room rate, feature and availability information provided by hotels to which
they are connected. Because each GDS has a unique electronic interface to hotel
reservation systems, each GDS can obtain room information and book rooms only at
hotels that have developed protocols and message formats compatible with that
particular GDS.
A number of current trends are affecting the hotel industry. First, the
hotel industry has been shifting from manual to electronic means of making hotel
room reservations. According to a survey done for the Hotel Electronic
Distribution Network Association ("HEDNA") by Hospitality Technology Consulting,
30 million hotel room reservations were made electronically through GDSs in
1996. As more hotels become electronically bookable, the Company expects that
electronic hotel room reservations will grow substantially in the United States
and internationally over the next several years. Second, a small but growing
number of individual travelers are making hotel room reservations electronically
on the Internet. Third, smaller hotel chains and independent hotels increasingly
have affiliated with large hotel chains through a process known in the industry
as "branding" or "reflagging." This global consolidation process produces
economies of scale and increases the global penetration of larger hotel chains,
many of whom are the Company's stockholders and customers. Fourth, hotel
commissions are becoming increasingly important to travel agencies as a source
of revenue. Travel agencies are looking to increase their revenue by making more
hotel room reservations to offset the effects of increased competition among
travel agencies, new competition from emerging travel service distribution
channels and caps on commissions for airline reservations, which historically
have been the leading revenue source for travel agencies.
Because of the information-intensive and complex nature of the hotel room
reservation and commission payment processes, the Company believes a substantial
opportunity exists for an intermediary that can provide services to manage hotel
industry information and transaction flows among multiple parties. Effective,
neutral, third-party management of information and transaction flows improves
the ability of all participants in the hotel room distribution process to
conduct business on a seamless and automated basis by providing efficient and
real-time access to hotel information. To be effective in addressing the hotel
industry's needs, the provider of such services must have: (i) an in-depth
understanding of the business processes of participants involved in the
distribution of hotel rooms; (ii) a reputation for reliability and trusted
neutrality in the industry to bring otherwise competing constituencies together
for industry-wide benefits; (iii) participation by a critical mass of hotels and
participants in the electronic hotel room distribution process and (iv)
expertise in leading technology applications. By acting as a gateway for
information and transaction flows, such a provider of services would be well
positioned to improve the efficiency and effectiveness of the distribution of
hotel rooms, the processing of travel agency commission payments and the
gathering and distribution of hotel industry information.
THE PEGASUS SOLUTION
The Company provides information and transaction processing services that
improve the efficiency and effectiveness of the hotel room reservation and
commission payment processes. The Company's THISCO and TravelWeb services
enhance the electronic hotel room reservation process by providing a standard,
common electronic interface that enables individual travelers and intermediaries
to access hotel room inventory information and conduct reservation transactions.
The Company's HCC service improves the efficiency and effectiveness of the
commission payment process for hotels and travel agencies by consolidating
commissions into one payment in the travel agency's currency of choice and
providing comprehensive transaction reports. The Company has developed an
in-depth understanding of the technical and business processes involved in hotel
room reservations and commission payment processing. The Company's strategic
position as a gateway in the hotel room distribution chain, transaction
processing capabilities and reputation for reliability and neutrality enable it
to offer a range of services delivering industry-wide benefits that would be
difficult for any industry participant to achieve individually.
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<PAGE> 37
The Company's current services and services in development generally fall
into three categories: electronic hotel room reservation services, commission
payment processing services and information services. Depicted in the following
diagram are the Company's electronic hotel room reservation services and
commission payment processing services that are currently offered or in
development.
[PRODUCT DIAGRAM]
Pictures and logos depicting the following transaction flows:
1. Consumer to Travel Agent to Global Distribution System ("GDS") to
UltraSwitch-THISCO to Hotel.
2. Consumer to GDS Internet Travel Sites to GDS to UltraSwitch-THISCO to
Hotel.
3. Consumer to TravelWeb to UltraSwitch-THISCO to Hotel.
4. Consumer to Partner Web Sites to Pegasus Systems NetBooker to
UltraSwitch-THISCO to Hotel.
5. Consumer to Corporate Travel to Pegasus Systems-UltraDirect to
UltraSwitch-THISCO to Hotel.
6. Consumer to Conventions, Meetings, Housing to Pegasus Systems-UltraRes
to UltraSwitch-THISCO to Hotel.
7. Hotel to HCC-Hotel Clearing Corporation to Travel Agent.
The Company's THISCO service is a leading provider of room reservation
processing services that electronically connect hotel central reservation
systems with other participants in the hotel room distribution process. Over
25,000 hotel properties worldwide, including those of 13 of the 15 leading hotel
chains based on 1996 total revenues currently utilize the THISCO service.
Furthermore, because the THISCO service provides a connection to each major GDS,
and through them over 120,000 travel agencies worldwide, as well as with
convention and other large meeting organizers, corporate travel departments and
emerging Internet travel services, the Company offers hotels an effective and
low cost single point of contact with all the major participants in the hotel
room distribution process. The THISCO service provides travel agencies greater
and easier access to real-time hotel information and the ability to make a
reservation and receive a confirmation in seconds. The THISCO service also
allows GDSs to offer fast confirmation for hotel room reservations made through
their systems, improved efficiency because of a single interface, access to
25,000 hotel properties worldwide and real-time availability of information.
Convention and other large meeting organizers, corporate travel departments and
others also are able to utilize the THISCO service to automate their hotel room
reservation process. Additionally, individual travelers can shop in real-time
and reserve hotel rooms directly by using either TravelWeb, the Company's own
Web site, or through a Web site that utilizes NetBooker, the Company's hotel
reservation service provided to third-party Web sites.
The Company's HCC commission processing service simplifies the payment of
travel agency hotel room commissions by over 11,000 participating hotel
properties to over 64,000 participating travel agencies worldwide. By
consolidating the payment of commissions and providing comprehensive transaction
reports, HCC enables hotels and travel agencies to increase efficiency and
reduce costs associated with preparing, paying and reconciling commissions.
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<PAGE> 38
The Company generally charges for its services on a per-transaction or
commission basis. The Company has the opportunity to earn revenue by processing
transactions through virtually all of the means by which electronic hotel room
reservations occur, whether or not a GDS is involved in the transaction.
STRATEGY
The Company's objective is to capitalize on its central position in the
hotel industry information and transaction flow in order to become the leading
provider of services and technology that enable the efficient and effective
electronic distribution of hotel rooms. To achieve this objective, the Company
intends to employ a strategy that includes the following key elements:
Expand Customer Base. The Company's established customer base includes
hotels, hotel representation firms, travel agencies, GDSs and third-party Web
sites. The Company intends to expand its customer base domestically and
internationally by adding customers and by cross-selling its new and existing
services to its current and future customers. Because of the fixed nature of
many of the Company's costs, the addition of new customers and the increase in
transaction volumes with new and existing customers enhances the profitability
of all of the Company's services.
Expand Hotel Room Distribution Channels. The Company is expanding its
service offerings to include additional distribution channels, such as hotel
room reservation services for individual travelers over the Internet, for
convention and other large meeting organizers and for corporate travel
departments through corporate intranets. The Company is addressing this online
distribution opportunity through increasing the capability and consumer
awareness of its TravelWeb site, expanding the use by third-party Web sites of
the Company's NetBooker service and providing services to corporate travel
departments through its UltraDirect service. The Company plans to capitalize on
the opportunity with convention and other large meeting organizers by providing
these distribution participants electronic access to hotel central reservation
systems through its UltraRes service. The Company's services are intended to
provide transaction fee revenue opportunities through virtually all of the
distribution channels by which electronic hotel room reservations occur.
Develop Hotel Industry Information Service. The Company intends to develop
an information service which will provide hotels and other industry participants
with hotel transaction information for use in strategic analysis, market
tracking and improved target marketing and revenue optimization. The Company's
proposed service is intended to utilize both information to which it currently
has access through the other services it provides and information it would
compile using its network of hotel industry relationships.
Build Strategic Alliances and Pursue Acquisition Opportunities. The Company
intends to build strategic alliances with other participants in the hotel
industry, as well as members of the financial information services, Internet and
information technology industries, to enhance the functionality and market
presence of the Company's services. The Company believes that these
relationships will increase brand recognition of its services and help to expand
its customer base. The Company will also seek to acquire assets, technology and
businesses that provide complementary services or access to new markets and
customers.
SERVICES
The Company's current services and services in development generally fall
into three categories: electronic hotel room reservation services, commission
payment processing services and information services. In 1996 approximately
51.3% of the Company's consolidated revenues was derived from its hotel
reservation services, including 42.5% from the THISCO service and 8.8% from the
TravelWeb service, and approximately 48.7% was derived from its HCC service.
35
<PAGE> 39
Hotel Room Reservation Services
The following table summarizes the hotel room reservation services the
Company has developed or is developing (including year of introduction):
<TABLE>
<S> <C> <C> <C>
HOTEL ROOM RESERVATION SERVICES
----------------------------------------------------------------------------------------------------------------
Services Users Benefits
--------------------------------
THISCO (1989) - Hotels and hotel - Improved efficiency because of single
representation firms interface
- Single interface between hotel
central reservation systems - Improved customer service due to
and GDSs utilized by travel frequent hotel room inventory updates
agencies
- Improved accessibility to wide
audience of travel agencies via GDSs
- GDSs and participating travel - Improved efficiency because of single
agencies interface
- Rapid confirmations
- Access to over 25,000 hotel properties
worldwide
- Real-time availability of information
TravelWeb - Hotels and hotel - Access to emerging low cost electronic
representation firms distribution channel
- Electronic hotel property
catalog (1994) - Reduced distribution costs
- Web-based hotel room - Inexpensive publication and
reservations (1995) distribution of comprehensive and up-to-
date hotel information and promotions
- More attractive presentation of hotel
information
- Individual travelers - Around the clock electronic access to
hotel reservation capability
- Ability to shop and gain convenient
access to approximately 13,000 hotel
properties with rich information
content, including rate, feature and
availability information
- Access to special promotional offers
NetBooker (1997 -- in - Hotels and hotel - Access to emerging low cost electronic
development) representation firms distribution channel
- Comprehensive hotel database - Reduced distribution costs
and hotel room reservation
capability tailored and fully - Inexpensive publication and
integrated into third-party distribution of comprehensive and up-to-
Web sites date hotel information and promotions
- More attractive presentation of hotel
information
- Wider distribution of hotel
information and access to individual
travelers through presence on multiple
Web sites
- Third-party Web sites - Low cost access to comprehensive hotel
information and proven online hotel
reservation functionality
- Increased site value due to wider
scope of services provided
- Advertising and transaction-based
revenue opportunities
UltraRes (1996) - Hotels and hotel - Improved accuracy of convention and
representation firms large meeting reservations
- Electronic hotel room
reservation connectivity for - Reduced costs by eliminating manual
convention and other large group reservation process
bookings
- Improved tracking of room inventory
- Convention and visitors - Improved reservation and cancellation
bureaus tracking and reporting capabilities
- Meeting planners - Single connection to multiple hotel
properties
- Group housing reservation
providers - Reduced costs by eliminating manual
reservation process
UltraDirect (1997 -- in - Hotels and hotel - Target marketing
development) representation firms
- Broadened distribution channel
- Direct electronic hotel room
reservation capability for - Improved ability to update corporate
corporate travel departments rate and availability information and
respond to reservation requests
- Reduced distribution costs for
corporate room sales
- Corporate travel departments - Reduced time and effort in making
hotel reservations
- Enforcement of corporate travel
policies and utilization of preferred
rates
- Improved travel information reporting
- Corporate travel agencies and - Account retention
related Web sites
- Low cost access to hotel information
and online booking functionality
- Reduced time and effort in making
hotel reservations
- Enforcement of corporate travel
policies and utilization of preferred
rates
- Improved travel information reporting
</TABLE>
36
<PAGE> 40
THISCO. The Company's THISCO service is a leading electronic hotel room
reservation processing service that interfaces communications concerning hotel
reservation information between all major GDSs and hotel central reservation
systems. According to HEDNA, approximately 30.0 million hotel room reservations
were made electronically through GDSs during 1996. During 1996, approximately
13.9 million hotel room reservations were made through THISCO. THISCO currently
connects central reservation systems representing over 25,000 participating
hotel properties to each major GDS and through them over 120,000 travel agencies
worldwide. The following table sets forth the number of THISCO net reservations
in each of the years 1990 through 1996.
THISCO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net reservations............ 1,145 3,498 5,012 6,481 8,373 10,963 13,947
Year-over-year growth
rate...................... 206% 43% 29% 29% 31% 27%
</TABLE>
THISCO enables a hotel to connect to all major GDSs without having to build
and maintain a separate interface for each GDS. Without THISCO or a similar
service, hotel chains that desire their room inventory to be accessible to
travel agencies electronically on a GDS must develop protocols and message
formats compatible with each GDS, a process that entails significant time and
expense. Alternatively, hotels may rely more heavily on less-automated means,
such as traditional toll-free telephone reservation centers with higher
processing costs. THISCO enables the processing of hotel room reservations and
also transmits millions of status messages sent by participating hotels every
day to update room rates, features and availability on GDS databases. Many
participating hotels also have chosen to utilize the Company's UltraSelect
service, which provides travel agencies using GDSs with direct access through
THISCO to a hotel's central reservation system bypassing the GDS databases to
obtain the most complete and up-to-date hotel room information available. See
"-- Technology and Operations."
Hotels using THISCO improve the efficiency of their central reservation
systems and reduce costs by not having to develop and maintain separate
communications circuits and translation software for each GDS. Through THISCO,
participating hotels are able to gain improved access to a wide audience of
travel agencies worldwide that are connected to GDSs and to provide better
customer service due to the ability to frequently update hotel room information
on GDS databases in a fast and reliable manner. THISCO benefits travel agencies
that use GDSs by providing real-time access to comprehensive hotel room
information and enabling them to make reservations and receive confirmations in
seconds from over 25,000 hotel properties worldwide.
Pegasus charges its hotel customers a fee based on the number of net
reservations processed through THISCO. In addition, hotels pay certain fees for
status messages sent to GDSs through THISCO. New participants in THISCO may be
charged one-time set-up fees for work associated with the implementation of the
interface with THISCO. The Company also charges certain GDSs a fee based on the
number of net reservations to compensate for the management and consolidation of
multiple interfaces. The technology used by THISCO also enables the Company to
enhance its revenue base by providing the information and reservation interface
for its other hotel reservation services, including TravelWeb, NetBooker,
UltraRes and UltraDirect.
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<PAGE> 41
TravelWeb. Located at www.travelweb.com, TravelWeb provides individual
travelers direct access to more than 40,000 dynamically served pages of online
hotel information and the ability to make reservations at approximately 13,000
hotel properties in 140 countries. In January 1997, TravelWeb was ranked as the
second most popular travel-related Web site, according to the P.C. Meter, L.P.,
a market research service. In June 1997, a daily average of approximately 30,000
Internet users visited the TravelWeb site. The following table sets forth the
number of net reservations made using the TravelWeb service in each of the past
four quarters since the Company introduced online reservation capabilities in
December 1995.
TRAVELWEB
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1996 1997
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net reservations..................... 1,782 5,557 10,294 14,571 21,201
Quarter-over-quarter growth rate..... 212% 85% 42% 46%
</TABLE>
Individual travelers traditionally obtain information or reserve a room by
contacting a hotel directly by telephone or fax or indirectly through
intermediaries, such as travel agencies, convention and other large meeting
organizers and corporate travel departments. As a result, an individual traveler
cannot easily obtain information from a wide range of hotel properties in a
timely manner. TravelWeb provides detailed information regarding a wide array of
hotel properties and, through its connection to the Company's THISCO service,
allows individual travelers to reserve a hotel room and receive a confirmation
in seconds. See "-- Technology and Operations."
TravelWeb benefits hotels, hotel representation firms and individual
travelers. TravelWeb reduces distribution costs for hotels and hotel
representation firms. TravelWeb also enables access to an emerging low cost
electronic distribution channel. In addition, TravelWeb provides an inexpensive
method of publishing and distributing comprehensive and up-to-date hotel
marketing information with an attractive presentation format featuring visual
images and graphics. Hotels can easily add, delete and update such information
using the Company's "remote author" feature. Additionally, the "Click-it!
Weekends" feature highlights weekend specials, enabling hotels to take advantage
of the real-time nature of the Internet to offer flexible pricing and to reach
individual travelers on a world-wide basis quickly and inexpensively. TravelWeb
benefits individual travelers by providing electronic access, 24 hours a day,
seven days a week, to shop for and reserve a hotel room in one or more of the
thousands of hotel properties online. Furthermore, individual travelers are able
to gain detailed information about a hotel property and its special promotional
offers through the rich information content available on TravelWeb.
In addition to hotel room reservations, TravelWeb offers airline booking
capability through a GDS. TravelWeb allows users to check air fares, flight
times and availability and purchase airline tickets while online. All TravelWeb
air bookings are routed to a partner travel agency and ticketed and shipped by
FedEx at no extra cost to the traveler. TravelWeb also offers "The Resources
Center" which provides information and links for a variety of travel-related
services, such as food, shopping, area attractions and business services.
Hotel participants in TravelWeb pay the Company a monthly subscription fee
based on the number of their properties included in the database and a fee based
on the number of net reservations made through TravelWeb. The Company also began
to sell advertising space on TravelWeb during 1996, focusing on advertisers that
cater to travelers. The Company has not received a material amount of
transaction-based revenues for the TravelWeb service to date, and there can be
no assurance that this service will produce a material amount of revenues in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
NetBooker. The Company recently introduced a service for the operators of
third-party Web sites which combines TravelWeb's hotel information database and
THISCO's electronic interface capability to make hotel room reservations. To
conduct Internet-based electronic commerce successfully, Web site operators must
offer a content set which is sufficiently broad, accurate, up-to-date,
graphically appealing and useful to
38
<PAGE> 42
attract buyers to the Web site. Typically, the development of such a content set
is expensive and time consuming. Furthermore, in addition to providing
individual travelers with access to useful and graphically appealing
information, the operator of a Web site must offer individual travelers the
capability to effect a transaction in order to generate a transaction fee. The
Company's NetBooker service offers operators of Web sites the same information
contained on TravelWeb and a simple and fast method of making a hotel room
reservation online. The Company's NetBooker service utilizes advanced technology
applications to customize the TravelWeb hotel database so that it appears to the
user to be an integral part of the third-party Web site. In connection with this
service, the operator of the third-party Web site establishes an interface to
the Company's THISCO service, which enables users of the Web site to shop and
query room availability, electronically make a reservation and receive a
confirmation in seconds. In August 1996, the Company entered into an agreement
with Preview Travel Inc. to provide its America Online users, as well as its Web
site users, direct access to the TravelWeb database and direct connections to
hotel central reservation systems. Recently, the Company entered into a similar
agreement with Internet Travel Network. See "-- Technology and Operations."
The Company's hotel customers benefit from its NetBooker service because it
enables a broader dissemination through the emerging, low cost Internet
distribution channel of the same marketing information supplied to TravelWeb. As
a result, hotels need only incur the effort and expense of creating and
maintaining their information on a single site to reach multiple Internet
distribution points and achieve increased overall visibility. Furthermore, the
NetBooker service provides hotel customers an inexpensive means to distribute
and publish visually attractive marketing information and Internet-specific
promotions. Hotels offering their own brand-specific Web sites also can have
their own content delivered to their sites from TravelWeb's database and process
reservation requests from their Web sites through the THISCO service. Users and
operators of third-party Web sites benefit from the NetBooker service through
immediate access to the rich content of TravelWeb. Furthermore, because users of
the third-party Web sites can book hotel rooms and receive confirmations in
seconds through the THISCO service, the Company's service affords the operators
of third-party Web sites the opportunity to generate a transaction fee revenue
stream.
The Company charges third-party Web sites an initial development and
licensing fee for the NetBooker service. For reservations made through the
NetBooker third-party Web sites, hotels pay the Company the same fee per net
reservation as for reservations made through TravelWeb. The Company has not
received a material amount of revenues for this service to date, and there can
be no assurance that this service will produce a material amount of revenues in
the future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
UltraRes. The Company recently introduced its UltraRes service, which
automates the processing of hotel room reservations for conventions and large
meetings. The process traditionally used to reserve hotel rooms for these events
is information-intensive and inefficient. Typically, convention and meeting
organizers request hotel reservations for blocks of rooms by fax, mail or
telephone. Hotels manually enter these reservations into their central
reservation systems and send confirmation numbers to the convention or meeting
organizers, and the meeting organizers manually enter the confirmation and
reservation information into their own systems. This process frequently leads to
inaccurate and delayed information and overbooking or underbooking. With the
Company's UltraRes service, convention and other large meeting organizers are
able to transfer reservation requests to the THISCO service electronically,
which translates the information to electronically book a room in each hotel
central reservation system. The UltraRes service eliminates the need to transfer
rooming lists for manual entry at the hotel and allows hotels to deliver
reservations and confirmations electronically in a fast and reliable manner. In
January 1997, the Company's UltraRes service was endorsed by the International
Association of Convention and Visitors Bureaus as the preferred standard for
electronic transmission of convention hotel reservations. See "-- Technology and
Operations."
The Company's UltraRes service can benefit all parties involved in the
distribution of hotel rooms for conventions and other large meetings. Since
reservations are made through the Company's THISCO service rather than manually,
reservations, modifications and cancellations can be received earlier and
updated more frequently and efficiently. The Company's UltraRes service provides
convention and other large meeting organizers a single connection to multiple
hotel properties and enables fast, accurate and reliable reservation
39
<PAGE> 43
and confirmation of hotel rooms at reduced cost. The Company's UltraRes service
also assists hotels in controlling their room inventory by reducing the risk of
overbooking or underbooking and allows hotels to reduce the cost of booking
related to convention reservations. The Company estimates that the majority of
these types of reservations were made at five major hotel chains (Hilton, Hyatt,
Marriott, Sheraton and Westin) whose facilities are designed for and cater to
large conventions and meetings. Because all five of these chains are THISCO
customers, the Company is positioned to take advantage of the existing
connectivity with these chains to facilitate the development and marketing of
the UltraRes service.
The Company will charge participating hotels and convention and other large
meeting organizers fees based on the number of net reservations made using the
UltraRes service. The Company introduced the UltraRes service in 1996 and since
then has processed approximately 35,000 hotel room reservations using this
service. The Company has not received a material amount of revenues for this
service to date, and there can be no assurance that this service will produce a
material amount of revenues in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
UltraDirect. The Company is developing its UltraDirect service for the
corporate travel management industry to provide a direct real-time link to the
Company's THISCO service through corporate intranet travel management software.
With the UltraDirect service, corporate travelers will be able to check
availability and make hotel reservations within seconds at hotel chains or
properties with which the traveler's employer has negotiated rates.
Traditionally, large companies have negotiated discounted hotel room rates with
hotel chains and properties to control their travel costs. However, because this
information at times is not available to a GDS, these rates frequently can only
be requested by a travel agency over the telephone. The UltraDirect service will
enable corporate travel departments of companies to have access to the
customized information negotiated with hotel chains and properties to facilitate
hotel room reservations. Furthermore, this information can be fully integrated
into other components of the intranet site and facilitate the creation of
passenger name records and detailed profile information.
The UltraDirect service will benefit hotels by providing an additional
hotel room distribution channel and enabling targeted marketing efforts directed
at corporate travel departments. Hotels will also be able to reduce distribution
costs for corporate room sales and better update information and respond to
reservation requests from corporate travelers. Pegasus markets this service to
developers of corporate travel software programs and to travel agencies that
operate intranet travel management services. UltraDirect is intended to provide
benefits to travel agencies and companies by decreasing the amount of time
necessary to arrange a business trip, improving travel information reporting and
helping to ensure that employees comply with company travel policies and utilize
hotels with whom the Company has negotiated rates.
The Company intends to charge hotels fees based on the number of net
reservations made using the UltraDirect service. The Company has reached an
agreement with TravelNet, Inc. (a division of Reed) that is designed to allow
users of TravelNet's Voyager travel management software system to access
UltraDirect for the purpose of making hotel reservations. When a corporate
traveler uses Voyager to make hotel arrangements, the Voyager system accesses
the UltraDirect service, which in turn connects to hotel central reservation
systems through the THISCO service. The Company has not received a material
amount of revenues for this service to date, and there can be no assurance that
this service will produce material revenues to the Company in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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<PAGE> 44
Commission Processing Services
HCC. The Company's HCC service began operations in 1992 to process the
payment of hotel commissions to travel agencies. The following table summarizes
the commission processing and payment services offered by HCC:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
COMMISSION PROCESSING SERVICE
- ------------------------------------------------------------------------------------------------------------------
Service Users Benefits
- ------------------------------------------------------------------------------------------------------------------
HCC (1992) - Travel agencies - Improved efficiency in reconciliation of commission
payments
- Commission processing
service: aggregates, - Reduced bookkeeping and banking costs
reports and disburses hotel
room reservation - Payment in preferred currency
commissions from hotels to
travel agencies - Improved information on customer reservation habits
- Assistance in reconciling commissions through
customer relation centers
- Hotels and hotel - Streamlined commission payment process
representation firms
- Reduced accounting, processing and bookkeeping costs
- Improved information regarding travel agency
bookings
- Encouragement of travel agency bookings at hotels
</TABLE>
The HCC service is the largest provider of travel agency commission and
processing services in the hotel industry. The Company has registered over
11,000 properties and over 64,000 travel agencies as HCC participants. During
1996, the Company processed more than six million commissionable transactions
using the HCC service, and the dollar amount of the commissions processed during
this period totaled approximately $111.7 million. The following table sets forth
the dollar amount of commissions processed during the year indicated:
HCC
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross commissions processed......... $ 5,156 $ 23,559 $ 36,394 $ 74,547 $111,714
Year-over-year growth rate.......... 357% 54% 105% 50%
</TABLE>
Typically, a hotel pays to the travel agency that made the hotel
reservation a commission of approximately 10% of the room rate paid by a hotel
guest. However, the payment process related to these commissions historically
has been costly and inefficient, consisting of numerous checks in small amounts
and little information regarding the basis from which the commission was
calculated. Furthermore, communication between hotels and travel agencies
regarding payable commissions generally has not been effective because guest
cancellations or "no-shows" would frequently not be reported and travel agencies
would expect a commission when in fact none was due. As a result, travel
agencies lacked the necessary resources to reconcile commission payments
effectively. In response to this problem, the Company developed the HCC service
to gather commission payment information, process that information and transmit
to travel agencies one consolidated check in the travel agency's currency of
choice, together with an information statement that enables the travel agency to
reconcile its hotel commission activity. See "-- Technology and Operations."
The Company's HCC service reduces a hotel's cost by streamlining the
commission payment process and consolidating into a single payment the aggregate
commission owed by a participating hotel to all participating travel agencies.
Additionally, the HCC service provides an incentive to travel agencies to make
reservations at HCC-participating hotels in countries other than their own
because the HCC service disburses checks denominated in each travel agency's
currency of choice. Furthermore, the monthly and quarterly marketing reports and
statistics prepared for the hotel by the HCC service allow the hotel to identify
and market more
41
<PAGE> 45
effectively to travel agencies that provide the hotel with its guests. The hotel
also benefits from HCC's Customer Relations Center, which allows travel agency
inquiries regarding commissions to be resolved by HCC rather than with the hotel
itself.
The Company's HCC service also provides benefits to its travel agency
participants. The consolidated check that the HCC service delivers in the travel
agency's currency of choice reduces the staff time spent processing multiple
checks and deposit slips, eliminates bank fees for multiple deposits and
currency exchanges and is designed to improve the travel agency's ability to
manage cash flow. The monthly report delivered by the HCC service allows the
travel agency to confirm commissions paid, follow customers' reservation habits
and reduce a travel agency's expenses for collection activity and for tracking
bookings that result in cancellations or "no-shows." The HCC Customer Relations
Center provides prompt responses to agency inquiries and can substantially
reduce the time and cost of reconciling outstanding commissions. The Company's
optional HCC Electronic service for electronic payment and reconciliation of
commissions enables travel agencies to reduce commission reconciliation costs
and provides travel agencies with immediate access to funds. Pegasus maintains a
Web site, HCCnet, that provides a comprehensive description of HCC services.
HCCnet provides a complete listing of all of the hotels that have committed to
paying hotel commissions through the HCC service. Moreover, travel agencies can
subscribe to receive an executive summary report that can be used to evaluate
the travel agency's activity with a particular hotel to assist with volume
negotiations, among other matters.
The Company charges each participating travel agency a service fee based on
the amount of commissions paid to the travel agency. The Company also generally
charges hotels a fee based on the number of commissionable transactions
processed.
Pegasus Information Services
The Company intends to develop a service to provide hotel information to a
wide variety of audiences in the global hotel industry, from hotel guests to
travel industry marketing groups to hotel chains. The Company believes that the
hotel industry has limited sources that provide transaction-specific hotel data
in a timely manner. Leveraging the existing databases used in its THISCO,
TravelWeb and HCC services and utilizing other data available through hotel
property management systems, the Company intends the new service to be able to
compile data regarding hotel guests and their use of hotels in
transaction-specific detail and to organize that data into meaningful
information, which will be made available in forms that protect an individual
traveler's privacy. The Company also intends to be able to produce data
regarding a hotel company's average daily room rate and occupancy rate to be
used by a hotel company to compare itself with its competitors in a manner
consistent with legal limitations. Furthermore, the Company intends that the new
service will be able to provide data in an electronic format to individual
travelers or corporate travel departments regarding a particular stay at a hotel
to facilitate automated expense reporting or to ensure travel policy adherence.
The Company believes that numerous participants in the travel industry will
desire the Company's data services, including hotel companies, travel agencies,
individual travelers, convention and other large meeting organizers, corporate
travel departments, hotel developers and hotel industry consultants.
The Company's future success will depend, in part, on its ability to
develop leading technology, enhance its existing services, develop and introduce
new services that address the increasingly sophisticated and varied needs of its
current and prospective customers, and respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis.
Although the Company strives to be a technological leader, there can be no
assurance that future advances in technology will be beneficial to, or
compatible with, the Company's business or that the Company will be able to
economically incorporate such advances into its business. In addition, keeping
abreast of technological advances in the Company's business may require
substantial expenditures and lead time. There can be no assurance that the
Company will be successful in effectively using new technologies, adapting its
services to emerging industry standards or developing, introducing and marketing
service enhancements or new services, or that it will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these services. The services that the Company is in
the process of developing may require substantial expenditures. If the Company
incurs increased costs or is unable, for technical or other reasons, to develop
and introduce new
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<PAGE> 46
services or enhancements of existing services in a timely manner in response to
changing market conditions or customer requirements, or if new services do not
achieve market acceptance, the Company's financial condition and results of
operations could be materially adversely affected. See "Risk Factors -- Impact
of Technological Advances; Delays in Introduction of New Services."
CUSTOMERS
The Company markets and provides its services to a wide range of customers,
including but not limited to hotels, large travel agencies, travel agency
consortia comprised of smaller travel agencies, GDSs and independent hotels
represented by hotel representation firms such as Anasazi, Inc., Utell
International and Lexington Services Corporation. During 1996, no one customer
accounted for as much as 6% of the Company's revenues.
Pegasus includes as its customers 14 of the 15 largest hotel chains in the
world based on 1996 total revenues. As of May 31, 1997, the Company's customers
include the following hotels and hotel representation firms which have a minimum
of 10 properties, with stockholders (or affiliates thereof) of the Company
indicated by an asterisk:
ADAM'S MARK HOTELS & RESORTS
AMERIHOST INN HOTELS
*ANASAZI, INC.
- -- Anasazi Travel Resources
-- AmeriSuites
-- ARCOTEL Hotels & Resorts
-- Camberely Hotels
-- Copthorne Hotels
-- Fairmont Hotels
-- Four Seasons Hotels & Resorts
-- Grand Bay Hotels & Resorts
-- Grand Heritage
-- Grand Traditions
-- LRI
-- Loews Hotels
-- Millineum Hotels
-- New Otani Hotels
-- Nikko Hotels
-- Regent International Hotels
-- Registry Hotels
-- Rihga Royal Hotels
-- Shangri-La Hotels
-- Sonesta International
-- Station Casinos
-- Sterling International Hotels
-- Wellesley Inns
-- World Hotels & Resorts
-- Vacation Break Hotels
BENCHMARK HOSPITALITY
*BEST WESTERN INTERNATIONAL
*CHOICE HOTELS INTERNATIONAL
- -- Clarion Inns
-- Comfort Inns
-- EconoLodge
-- Friendship Inns
-- Mainstay Suites
-- Quality Inns
-- Rodeway Inns
-- Sleep Inns
COASTAL HOTELS
DOUBLETREE HOTELS
- -- Red Lion Hotels & Inns
*FORTE
- -- Forte Hotels
-- Meridien
GLOBAL RESOURCES, INC.
- -- Global Resources Hotels
-- SCANRES
-- World Class Hotels
HAWTHORN SUITES
*HILTON HOTELS CORPORATION
HILTON INTERNATIONAL
HOLIDAY INN WORLDWIDE
*HFS INCORPORATED
- -- Days Inns of America
-- Howard Johnson
-- Knights Inn
-- Ramada
-- RCI Management, Inc.
-- Super 8 Motels
-- Travelodge Hotels
-- Villager Lodge
-- Wingate Inn
HOTEL OKURA
HOTKEY INTERNATIONAL
-- Regal Hotel Group U.K.
-- Romantik Hotels
*HYATT HOTELS
HYATT INTERNATIONAL
*INTER-CONTINENTAL HOTELS
- -- Inter-Continental Hotels and Resorts
-- Forum Hotels by Inter-Continental
-- Global Partner Hotels & Resorts
*ITT SHERATON
- -- Four Points
-- Global Connections
-- ITT Sheraton Hotels & Resorts
-- Sheraton Luxury Collection
KIMPTON HOTELS
*LA QUINTA INNS
LEXINGTON SERVICES CORPORATION
- -- Bartells Hotels
-- Design Hotels
-- Harvey Hotels
-- Lexington Hotels & Suites
-- Suite Connection
-- Summerfield Suites
MANDARIN ORIENTAL HOTEL
MARITIM HOTELS
*MARRIOTT CORPORATION
- -- Courtyard Inns
-- Fairfield Inns
-- Marriott Hotels, Resorts and Suites
-- Marriott Vacation Club International
-- Residence Inns
-- Ritz-Carlton
OBEROI GROUP OF HOTELS
ORBIS HOTELS
PAN PACIFIC HOTELS & RESORTS
POSADAS
- -- Fiesta Americana
-- Fiesta Inns
PREFERRED HOTELS & RESORTS WORLDWIDE
*PROMUS HOTELS CORPORATION
- -- Embassy Suites
-- Embassy Vacation Resorts
-- Hampton Inn & Suites
-- Hampton Inns
-- Hampton Vacation Resorts
-- Homewood Suites
RED ROOF INNS
*REED TRAVEL GROUP
REGAL HOTELS
RENAISSANCE HOTELS & RESORTS
SCEPTRE HOTELS
SILVER MANOTEL MARKETING
SOL MELIA HOTELS
SOUTHERN PACIFIC
SWISSOTEL
TAJ GROUP OF HOTELS
TOKYU HOTELS
TRUST INTERNATIONAL
TRYP HOTELS
*UTELL INTERNATIONAL
- -- ANA Hotels
-- Airco
-- Beresford Hotels
-- Disneyland Paris
-- Golden Tulip Hotels
-- Helmsley/Harley Hotels
-- Ian Schrager
-- Insignia Resorts
-- Omni Hotels
-- Queens Moat Houses Hotels
-- Scandic Hotels
-- Summit International
-- Thistle/Mt. Charlotte Hotels
-- Tops International Hotels
-- Warwick Hotels
-- West Coast Hotels
VIP INTERNATIONAL
WALT DISNEY WORLD RESORTS & THEME
PARKS
*WESTIN HOTELS & RESORTS
WESTMARK HOTELS
WYNDHAM HOTELS & RESORTS
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The Company has registered approximately 64,000 travel agencies as
participants in the HCC service. Of the 100 largest travel agencies in the
United States, according to Travel Weekly, a publication owned by a stockholder
of the Company, 66 are customers of the Company's HCC service. The following
travel agencies represent the 10 largest HCC customers based on 1996 revenues to
the Company:
<TABLE>
<S> <C>
AMERICAN EXPRESS MUTUAL TRAVEL
ASSOCIATED TRAVEL SERVICES OMEGA WORLD TRAVEL
BTI AMERICAS TRAVEL AND TRANSPORT
CARLSON WAGONLIT TRAVEL ONE
CUC TRAVEL WORLD TRAVEL PARTNERS
</TABLE>
The Company's business is dependent upon customer arrangements with its
hotel stockholders or their affiliates, other hotel chains and hotel properties
and hotel representation firms, travel agencies, travel agency consortia and
GDSs. There can be no assurance that the Company will be able to continue or
renew these arrangements on equal or better terms. Any cancellation or
non-renewal of these arrangements that results in a significant reduction in the
Company's customer base or revenue sources could materially adversely affect the
Company's financial condition and results of operations. See "Risk
Factors -- Dependence on Key Customers and Third-Party Service Arrangements."
SALES AND MARKETING
The Company sells all of its services to hotels through a direct sales
force in the Americas and in Europe and sells its HCC services directly to
travel agencies and through relationships with travel agency consortia and
franchisors. Additionally, as of July 31, 1997, the Company has a team of 20
technical support staff to supplement the efforts of the sales force and provide
comprehensive customer support services. The Company has a Chief Marketing
Officer, a Vice President for domestic sales and four salespersons based in
Dallas responsible for sales in the Americas and a Vice President for
international sales and a salesperson based in London responsible for sales
outside of the Americas. The Company organizes its hotel sales force in the
Americas into three geographic territories, each targeting hotels and UltraRes
service users. Each hotel salesperson seeks to establish ongoing relationships
with the reservations and marketing management personnel of hotels in that
representative's designated territory and to assist the hotels in achieving
increased efficiency and cost reduction in their hotel reservation systems
through the use of the Company's services. The Company's travel agency sales
force sells HCC services directly to large travel agencies. Additionally, the
Company offers its HCC service to smaller travel agencies organized in consortia
and to travel agency franchisees through preferred supplier programs. The terms
of these programs are set at the consortium or franchisor level, and the HCC
service is promoted to travel agency members of these organizations through
trade shows and consortium newsletters and magazines. The Company has made
arrangements with two of the four major GDSs to offer the HCC service to their
participating travel agencies in Europe through a joint promotional program. The
Company's London-based international sales personnel focus on both travel
agencies and hotels in different regions throughout the world. The Company also
has a salesperson devoted to promoting the UltraRes service to convention and
other large meeting organizers and hotels. The Company uses the services of a
third-party marketing organization to sell advertising on the TravelWeb site.
The Company believes that the THISCO, HCC and TravelWeb brand names are
important assets of the Company, signifying the quality and reliability of the
Company's services. A separate brand manager is responsible for marketing each
brand. Each brand manager is responsible for product development and
enhancement, customer sales support, development of promotional and other
collateral materials, identification and optimization of revenue sources, market
research and establishment of relationships with key vendors. The THISCO service
is marketed primarily through establishing contacts and relationships with hotel
management, GDSs and other major users of the services. In addition,
participation in industry organizations and trade conventions increases brand
recognition of the Company's services. The Company also has sought to market its
UltraDirect service to corporate travel management software developers so that
they will include an automatic connection to the THISCO service in their hotel
reservation system software. In marketing the
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TravelWeb service, brand managers focus their efforts on site development and
establishing links to existing third-party Web sites and related Internet
content providers and aggregators. Marketing efforts for the HCC service
primarily are directed towards participation in travel agency industry trade
shows and promotion through travel agency consortia and franchisors.
TECHNOLOGY AND OPERATIONS
THISCO. The THISCO service utilizes the Company's UltraSwitch technology to
automate hotel reservation transaction processing between a GDS and a hotel
chain's central reservation system. UltraSwitch utilizes a UNIX-based,
client/server architecture. GDSs are connected to UltraSwitch through either
point-to-point telecommunications lines or a multi-protocol frame relay network,
both of which are managed by the Company. Communication processors running
proprietary, UNIX-based software perform protocol conversions. The transaction
processing engine within UltraSwitch, which contains its own proprietary,
UNIX-based software, performs message formatting and field translation functions
between GDSs and hotels' central reservation systems. UltraSwitch also contains
an Informix relational database that stores transaction-specific information for
billing and marketing and translates specific hotel property information. For a
hotel to change from THISCO to another service, the hotel would be required to
change the protocol used by its central reservation system, as well as
substantially convert the message formats used by its central reservation
system. If a hotel desired to bypass UltraSwitch and connect its central
reservation system directly to one or more GDSs, the hotel would be required to
develop protocols and message formats compatible with each GDS with which it
established such a connection and bear the recurring costs required to maintain
each system. The Company believes that these costs may discourage a hotel from
changing to a competitor or to a direct connection with a GDS. See
"-- Competition."
When using the THISCO service, hotels provide and update room rates,
features and availability information in two ways: (i) by transmitting
information to GDS databases through status messages and (ii) by offering
continuous, direct access to the hotel central reservation system through
UltraSelect. Hotel status messages transmitted through UltraSwitch are processed
within seconds. UltraSwitch processed an average of 42 million status messages
per month during 1996. A GDS database, however, stores only a limited amount of
room rate, feature and availability information for a hotel, which may not be
synchronized with the hotel's central reservation system. The Company's
UltraSelect service allows travel agencies that use GDSs direct access through
UltraSwitch into a hotel's central reservation system to shop and browse for all
room types and room rates with the most complete and updated hotel room
information. To accomplish this process, UltraSwitch receives proprietary direct
access transaction requests from each GDS, translates those into one or more
UltraSelect transaction requests and forwards them to the hotels' central
reservation systems. To utilize the UltraSelect service, the hotel's central
reservation system must be modified to accept the transmission of transactions
and allow for the electronic processing of these transactions through
UltraSwitch in real-time. Approximately 50% of hotels that subscribe to the
THISCO service provide this type of access to their central reservation systems
through the Company's UltraSelect service.
Using the information provided through the UltraSwitch technology, a travel
agent is able to shop or browse for a hotel room that fits particular
specifications, such as location, room rates and features. Once a travel agent
determines the desired hotel and type of room, UltraSwitch enables the travel
agent to inquire about availability of the room. The UltraSwitch technology
interfaces the request from the travel agent through a GDS with the information
available in the hotel's central reservation system. If a hotel room fitting the
inquiry is available, UltraSwitch enables the travel agent to book the room and
receive a confirmation within a matter of seconds. In 1996, the average
UltraSwitch processing time for interactive transactions, such as reservations
and inquiry messages, was 0.22 seconds and the average uptime across the 84
distinct connections to UltraSwitch was 99.6%, including as downtime all
scheduled and emergency downtime.
Utilizing the existing technology of UltraSwitch, the Company has developed
UltraRes and UltraDirect, services that provide customized technological
interfaces for convention and other large meeting organizers and corporate
travel departments to enable direct access into the extensive database of
hotels' central reservation systems and reservation and confirmation of hotel
bookings in seconds.
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In connection with the development of the UltraSwitch technology and
related financing provided by Reed, the Company licensed certain rights to Reed
to use the UltraSwitch technology on an exclusive, royalty free basis, for
applications not related in any way to the operations of the hotel industry. In
connection therewith, Reed agreed not to compete with the Company and its use of
the UltraSwitch technology in the hotel industry. See "Certain Transactions."
TravelWeb. The Company has created its TravelWeb service using a scalable
architecture that presents user-friendly hotel and travel information to
individual travelers. The TravelWeb service stores detailed information on
approximately 13,000 hotel properties on an Informix relational database. To
add, delete and update information on their properties, hotels can access the
information in the TravelWeb database either through electronic batch transfers
or using a standard Web browser through the Company's proprietary "remote
author" feature. The Company's secured server software prevents unauthorized use
of the "remote author" feature, and the Company's quality assurance personnel
review any updated information to assure consistency. TravelWeb communication
engines (called Web engines) manipulate the information contained in the
Informix database. TravelWeb's scalable architecture allows the TravelWeb
service to access and manipulate the information contained in its database using
multiple Web engines. A Web engine currently consists of a Sun UltraSparcII,
Netscape Enterprise server software and a Javascript application. Although the
Informix database currently resides on a single Sun E 3000 database server, the
architecture allows the addition of more database servers as demand requires.
This advanced technology enables the TravelWeb service to format data to appear
as part of the Web site on which the information is viewed. The TravelWeb
service connects its information database to the Company's UltraSwitch
technology, which allows a user of the TravelWeb service who has found a desired
hotel room to secure a hotel reservation and a confirmation. The Company's
proprietary software contains a number of features to protect reservation
systems from abusive booking practices and allows hotels to control and maintain
the number of reservations made through the TravelWeb service allowed at any
hotel property.
To assure a high level of Internet connectivity, the Company has entered
into an arrangement with Genuity, Inc., a "Tier 1" Internet service provider, to
connect the TravelWeb service to the Internet. Genuity is responsible for
maintaining the speed and reliability of communications conducted through the
TravelWeb service. Genuity also provides message routing assistance and dynamic
load balancing of communications to minimize bottlenecks in Internet
communications. Furthermore, the Company's databases and Web engines used with
the TravelWeb service are located at sites operated by Genuity.
NetBooker. The Company's NetBooker reservation service provides third-party
Web sites direct access to the extensive TravelWeb hotel database and
UltraSwitch's hotel reservation and confirmation capabilities. The technology
used in the NetBooker service is similar to the TravelWeb service technology.
The scalable architecture utilized by the TravelWeb service and the use of the
Javascript application create a template environment in which a Web engine can
manipulate information in the Informix database and present such information
under the distinct front-end format of the customer Web site. In addition, the
NetBooker reservation service allows a customer Web site to establish an
interface to the Company's UltraSwitch technology, which enables users of the
Web site to shop and query room availability and to electronically book a
reservation in seconds. As a result, users of the third-party Web site have full
access to TravelWeb's database and booking capabilities while visiting that
site.
HCC. The HCC service captures information derived from hotel property
management systems to process commission payments for travel agencies. The HCC
service provides a connection for hotels through the same communication network
that the Company provides for its THISCO service. Communication engines perform
protocol conversions. The Company's UNIX-based processing engine for the HCC
service uses proprietary software to process commission information. The
Company's Customer Relations Center can access the processing engine to answer
questions regarding commissions from travel agencies. The HCC service also
utilizes an Informix database that stores transaction-specific information
regarding hotel stays and information regarding required currency conversions,
cleared checks, the source of reservations and hotel and travel agency profiles.
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The HCC service gathers information from hotels monthly to process
commission payments and information statements. Participating hotels use the
Company's proprietary HCC software to either collect the data derived from a
hotel's property management system or compile data from each hotel property. In
some instances, hotels using an outside party's commission payment consolidation
service will pass on the information from the outside party to the HCC service.
As the information is gathered, the HCC service continually updates the
commissions payable and interfaces with Citibank regarding any required currency
conversions. The HCC service notifies participating hotels of the amount of
commissions payable generally on the tenth business day of each month. Those
hotels are required under contract to deliver funds to the Company within 48
hours, and Pegasus delivers the funds to Citicorp to process checks or
electronic wires to travel agencies. If a hotel fails to deliver funds to
Pegasus, Pegasus is not obligated to deliver commission payments on behalf of
the hotel to travel agencies. Citicorp and Perot Systems prepare payments and
information statements for travel agencies, and the payments and information
statements generally are sent out on the 15th business day of each month.
Under its arrangement with Citicorp and Perot Systems, Citicorp performs
currency conversions, prepares checks and electronic wires and delivers funds
and information statements to travel agencies. Perot Systems prepares the
information statements that are sent by Citicorp on behalf of the Company. This
arrangement expires in December 1998. See "Risk Factors -- Dependence on Key
Customers and Third-Party Service Arrangements."
SYSTEMS MAINTENANCE AND DISASTER RECOVERY
Because large numbers of travel agencies, hotels and other customers depend
on the Company for real-time transaction processing services, system reliability
and uptime are critical to the Company's success. In 1996, the average uptime
across the 84 distinct connections to UltraSwitch was 99.6%, including as
downtime all scheduled and emergency downtime. The Company has entered into an
arrangement with Anasazi, Inc. ("Anasazi") a stockholder of the Company, to
manage and operate certain equipment owned by Pegasus, which is located at a
site owned by Anasazi in Phoenix, Arizona. An employee of the Company oversees
the services provided by Anasazi, such as equipment monitoring, assurance of
power supply and communications link back up support. The Company has entered
into an agreement with Pyramid Technologies Corporation for the provision of
computer hardware maintenance and replacement and mitigation of the potential
effects of system downtime. In addition, the Company has entered into an
agreement under which Comdisco, Inc. will provide disaster recovery services for
the restoration of the Company's services as soon as practicable. In connection
with this agreement, Comdisco, Inc. is making arrangements to provide full
system redundancy within 24 hours in the event of a site disaster. See "Risk
Factors -- System Interruption and Security Risks."
RESEARCH AND DEVELOPMENT
The Company recognizes that its ability to maintain its position and grow
depends upon continued expansion of its services. Investments in development are
crucial to obtaining new customers and retaining existing customers. The
Company's research and development activities primarily consist of software
development, development of enhanced communication protocols and custom user
interfaces and database design and enhancement. In its research and development
process, the Company works in close collaboration with its customers to address
their specific needs. As of July 31, 1997, the Company employed 57 people in its
Information Technology Group and from time to time, supplements their efforts
with the use of independent consultants and contractors. This group is comprised
of information technology, services development, technical services and product
support personnel. The Company's total research and development expense was
$238,000, $2.1 million and $2.2 million for 1994, 1995 and 1996, respectively.
COMPETITION
The Company faces significant competition in connection with its THISCO
hotel room reservation processing service. The principal competitor of the
Company's THISCO service is WizCom, which was a wholly owned indirect subsidiary
of Avis. As a result of the acquisition of Avis by HFS, a stockholder and
customer of the Company, in September 1996, WizCom became a wholly owned
indirect subsidiary of HFS.
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Although HFS has recently renewed its participation in the Company's HCC
service, HFS has notified the Company that it is moving its electronic hotel
room reservation processing from THISCO to WizCom. The Company has an agreement
with HFS which requires HFS to pay for a certain minimum level of THISCO
processing services annually for the life of the agreement. In 1996, revenues
from HFS for electronic hotel room processing services were $517,905 above the
annual minimum fee under the agreement, which is $182,700. HFS historically has
generated more revenues for the Company than any other hotel chain that is a
customer and a stockholder of Pegasus. See "Certain Transactions." HFS accounted
for 12.3%, 9.7% and 4.7% of the Company's total revenues during 1994, 1995 and
1996, respectively. HFS is a Selling Stockholder in this offering. See
"Principal and Selling Stockholders." HFS currently uses and in the future could
use the technology utilized by WizCom to compete with certain of the Company's
current and future services. There can be no assurance that any additional
customers will not change their electronic reservation interface to WizCom or to
another similar service. Also, hotels can choose to connect directly to one or
more GDSs, thereby bypassing THISCO and eliminating the need to pay fees to the
Company. In addition, one or more GDSs can choose to bypass the THISCO service
and develop and operate a new common electronic interface to hotel central
reservation systems. Such competitors or their affiliates may have greater
financial and other resources than the Company. Factors affecting competitive
success of the electronic hotel room reservation processing service include
reliability, levels of fees, number of hotel properties on the system, ability
to provide a neutral, comprehensive interface between hotels and other
participants in the distribution of hotel rooms and ability to develop new
technological solutions. There can be no assurance that another participant in
the hotel room distribution process or a new competitor will not create services
with features that would reduce the attractiveness of the Company's services.
The Company's inability to compete effectively with respect to these services
could have a material adverse effect on the Company's financial condition and
results of operations. See "Risk Factors -- Competition."
The Company charges hotel participants certain fees for processing status
messages from hotel central reservation systems to GDSs. The Company intends to
reduce certain status message fees in July 1997. In addition, a hotel
participant can choose to use the Company's UltraSelect service to provide
travel agencies direct access through GDSs to its central reservation system,
thereby reducing the need to send status messages through the Company's THISCO
service. There is no assurance that the volume of and fees generated from status
messages processing will remain at the same or a higher level in the future. Any
significant decrease in the volume of status messages processed or in the amount
of status message fees generated could have a material adverse effect on the
Company's financial condition and results of operations. See
"Business -- Services."
The Company believes that the costs involved in a hotel switching from
THISCO to another service would discourage any such decision. WizCom, the
Company's principal competitor in the provision of interfaces between hotel
reservation systems and GDSs, uses a single protocol that is different from the
multiple protocols employed by THISCO. Consequently, to connect to WizCom, a
hotel would be required to change the protocol used by its central reservation
system, as well as substantially convert the message formats used by the hotel
reservation system. If a hotel desired to connect directly with GDSs, the
protocols and the message formats of the hotel's central reservation system
would have to be revised to conform with each separate GDS to which the hotel
reservation system is connected. In addition, the hotel would be responsible for
the ongoing maintenance and updating costs necessary to continue a direct
connection with each GDS and would have to absorb the costs to maintain a
network with each GDS.
The market for the Company's TravelWeb and NetBooker services is highly
competitive. Current competition includes traditional telephone or travel agency
reservation methods and other Internet travel reservation services. There are a
large number of Internet travel-related services offered by the Company's
competitors, and many of these competitors are larger and have significantly
greater financial resources and name recognition than the Company. Several
competitive Web sites such as Travelocity (a site operated by The SABRE Group
Holdings, Inc.) and Expedia (a site operated by Microsoft Corporation) offer a
more comprehensive range of travel services than TravelWeb or NetBooker. The
Company faces competition in the hotel room reservation business not only from
its current competitors but also from possible new entrants including other Web
sites. The costs of entry into the Internet hotel room reservation business is
relatively low.
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There can be no assurance that the Company's Internet hotel room reservation
services will compete successfully. The failure of these services to compete
successfully could have a material adverse effect on the Company's financial
condition and results of operations. See "Risk Factors -- Competition."
The market for the Company's HCC service is competitive. The Company's
competitors in the commission processing business include NPC, WizCom and
Citicorp. NPC, a company that has traditionally provided car rental and cruise
line commission processing services, recently began offering its services to
hotels and travel agencies as well. WizCom recently announced that it is
introducing a commissions payment service that may be competitive with the HCC
service. Citicorp provides commission consolidation services to hotel chains. In
addition, hotels that are current or prospective customers of the HCC service
could decide to process commission payments without, or in competition with, the
HCC service. Some of these current or potential competitors have substantially
greater financial and other resources than the Company. Furthermore, while the
Company has agreements with all of its hotel customers for the HCC service, most
of the Company's travel agency customers are not obligated by any agreement with
the Company. If a significant percentage of these travel agencies were to cease
using the HCC commission processing service, the Company's financial condition
and results of operations could be materially adversely affected. See "Risk
Factors -- Competition."
GOVERNMENT REGULATION
The Company's primary customers are hotel chains and hotel representation
firms. The Company currently has as its stockholders 11 of the 15 leading hotel
chains in the world based on 1996 total revenues. While the Company believes
that it has been acting since its inception as an entity independent of its
stockholders, and its stockholders have not engaged in any anti-competitive
activities through or in connection with the Company, there can be no assurance
that federal, state or foreign governmental authorities, the Company's
competitors or its consumers will not raise anti-competitive concerns regarding
the Company's close relationship with its hotel stockholders. Any such action by
federal, state or foreign governmental authorities or allegations by third
parties could have a material adverse effect on the Company's financial
condition and results of operations. While certain aspects of the travel
industry are heavily regulated by the United States Government, the services
currently offered by the Company, including electronic room reservation
processing services, commission processing services and Internet-based
reservation services, have not been subject to any material industry-specific
government regulation. However, there can be no assurance that federal, state or
foreign governmental authorities will not attempt to regulate one or more of the
Company's current or future services. Due to the increasing popularity of the
Internet, it is possible that laws and regulations may be adopted with respect
to the Internet, covering issues such as privacy, pricing, content and quality
of products and services. The adoption of laws or regulations affecting the
Company's lines of business could reduce the rate of growth of the Company or
could otherwise have a material adverse effect on the Company's financial
condition and results of operations. See "Risk Factors -- Government
Regulation."
PROPRIETARY RIGHTS
The Company is constantly developing new processing technology and
enhancing existing proprietary technology. The Company has no patents. The
Company primarily relies on a combination of copyright, trade secrets,
confidentiality procedures and contractual provisions to protect its technology.
Despite these protections, it may be possible for unauthorized parties to copy,
obtain or use certain portions of the Company's proprietary technology. While
any misappropriation of the Company's intellectual property could have a
material adverse effect on the Company's competitive position, the Company
believes that protection of proprietary rights is less significant to the
Company's business than the continued pursuit of its operating strategies and
other factors, such as the Company's relationship with industry participants and
the experience and abilities of its key personnel.
The Company has registered "UltraSwitch," "TravelWeb," "UltraAcess" and
"HCC Hotel Clearing Corporation" as United States federal trademarks and
applications to register "HCCLink," "ChainLink," "UltraRes," "Click-It" and
"Pegasus" are pending with the United States Patent and Trademark Office.
Trademark applications for "TravelWeb" also have been filed in Canada and
Europe. There can be no
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assurance that the Company's applications to register such trademarks will be
successful. The Company has no knowledge of any infringement to or any prior
claims of ownership of trademarks that would materially adversely affect the
Company's current operation. The Company pursues and intends to continue to
pursue registration of its trademarks whenever possible and to vigorously defend
its proprietary rights against infringement or other threats to the greatest
extent practicable under the laws of the United States and other countries. See
"Risk Factors -- Dependence on Proprietary Technology; Risk of Infringement."
EMPLOYEES
At July 31, 1997, the Company had 104 employees, 99 of which were located
in the United States, with 57 persons in the Information Technology Group, 25
persons performing sales and marketing, customer relations and business
development functions and the remainder performing corporate, finance and
administrative functions. The Company has five employees in England performing
international sales activities. The Company has no unionized employees. The
Company believes that its employee relations are satisfactory.
PROPERTIES
The Company's principal executive office is a leased facility with
approximately 29,800 square feet of space in Dallas, Texas. The Company leases
this space under a lease agreement that expires December 2002. The Company also
maintains an administrative and sales office in a leased facility with
approximately 3,300 square feet of space near London, England. The lease
agreement for the office in England expires in May 1998. Under an agreement with
Anasazi, certain of the equipment owned by the Company is housed at a site owned
by Anasazi in Phoenix, Arizona. The Company believes that its existing
facilities are well maintained and in good operating condition and are adequate
for its present and anticipated levels of operations.
LEGAL PROCEEDINGS
The Company is a party from time to time to certain routine legal
proceedings arising in the ordinary course of its business. Although the outcome
of any such proceedings cannot be predicted accurately, the Company does not
believe any liability that might result from such proceedings could have a
material adverse effect on the Company's financial condition and results of
operations.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Executive officers, directors and other key employees of the Company, and
their ages as of June 30, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John F. Davis, III........................ 44 President, Chief Executive Officer, and
Director
Joseph W. Nicholson....................... 36 Chief Information Officer
Jerome L. Galant.......................... 47 Chief Financial Officer
Michael R. Donahue........................ 43 Chief Marketing Officer
Phillip A. Mytom-Hart..................... 43 Vice President, International Sales and
Marketing
M. Nicholas Jent.......................... 55 Vice President, Sales and Marketing
William S. Lush........................... 55 Vice President, Business Development
John W. Biggs(1).......................... 53 Director
Donald R. Dixon........................... 49 Director
William C. Hammett, Jr.(2)................ 50 Vice Chairman of the Board of Directors
I. Malcolm Highet(2)...................... 46 Director
Rockwell A. Schnabel(1)................... 60 Director
Paul J. Travers(1)(2)..................... 44 Chairman of the Board of Directors
Mark C. Wells............................. 47 Director
Bruce Wolff............................... 53 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
John F. Davis, III has served as the President and Chief Executive Officer
of the Company since February 1989 and as a director of the Company since July
1995. Before joining Pegasus, Mr. Davis was the founder, President and director
of Advanced Telemarketing Company, a provider of inbound and outbound
telemarketing services. He was also one of the founders of 1-800-Flowers,
Limited, a company offering quality floral arrangements by telephone.
Joseph W. Nicholson has served as the Chief Information Officer of the
Company since 1989. Prior to joining Pegasus, he spent ten years at Texas
Instruments in various positions, including Systems Analyst and Systems Manager.
Jerome L. Galant has served as the Chief Financial Officer of the Company
since September 1996. From April 1996 to September 1996, Mr. Galant served as
the Chief Financial Officer of Personnel Security & Safety Systems, Inc., a
technology development company. From 1990 to February 1996, Mr. Galant served in
a variety of positions for The SABRE Group, including Managing Director,
Finance.
Michael R. Donahue has served as Chief Marketing Officer of the Company
since May 1997. From 1988 to May 1997, Mr. Donahue served as Vice President of
Marketing and Development for Lane Hospitality, a hotel management firm.
Phillip A. Mytom-Hart has served as the Vice President, International Sales
and Marketing of the Company since September 1993. From 1991 to September 1993,
Mr. Hart served as Vice President, Sales and Marketing for Hilton International.
M. Nicholas Jent has served as the Vice President, Sales and Marketing of
the Company since August 1992. From 1988 to March 1991, Mr. Jent served as
Senior Vice President, Sales and Marketing for Telesphere Communications, Inc.,
a long distance communications company.
51
<PAGE> 55
William S. Lush has served as Vice President, Business Development of the
Company since May 1995. From 1990 to May 1995, Mr. Lush served as Vice
President, Service Development in the travel management services group of
American Express Travel Related Services.
John W. Biggs has served as a director of the Company since October 1995.
Mr. Biggs has served as Vice President, Travel and Hospitality for Computer
Sciences Corporation, a consulting firm, since August 1996. From April 1994 to
July 1996, Mr. Biggs served as Chief Operations Officer for Regency Systems
Solutions, an affiliate of Hyatt Hotels Corporation ("Hyatt"). From 1984 to
April 1994, Mr. Biggs served as Senior Vice President, Hotel Accounting and
Administration at Hyatt. Hyatt is a stockholder of the Company.
Donald R. Dixon has served as a director of the Company since June 1996.
Since 1993, Mr. Dixon has been associated with Trident Capital, L.P., a venture
capital firm ("Trident"), which he helped found. From 1988 to 1993, Mr. Dixon
served as Co-President of Partech International, a private equity fund manager
associated with Banque Paribas. Mr. Dixon serves on the Board of Directors of
Bank America Merchant Services, Inc., Platinum Software Corporation, Unison
Software, Inc. and several privately held companies. Trident manages Information
Associates, L.P. and Information Associates, C.V., both of which are
stockholders of the Company.
William C. Hammett, Jr. has served as a director and Vice Chairman of the
Board of the Company since October 1995. Since August 1996, Mr. Hammett has
served as Senior Vice President and Chief Financial Officer of La Quinta Inns,
Inc., which is a stockholder of the Company. From June 1992 to August 1996, Mr.
Hammett has served as Senior Vice President, Accounting and Administration of La
Quinta Inns, Inc.
I. Malcolm Highet has served as a director of the Company since October
1995. Mr. Highet has served as Executive Vice President, Corporate Development
for Reed Elsevier Inc. since October 1996. From 1989 through October 1996, Mr.
Highet served as Chief Financial Officer and later as Chief Operations Officer
for a major division of Reed. Reed and Utell International are both divisions of
Reed Elsevier Inc. and stockholders of the Company.
Rockwell A. Schnabel has served as a director of the Company since June
1996. Since 1993, Mr. Schnabel has been associated with Trident, which he helped
found. From 1989 to 1992, Mr. Schnabel served as acting Secretary of Commerce
and the Deputy Secretary of Commerce during the Bush Administration. Mr.
Schnabel serves on the Board of Directors of Cyprus Amax Minerals Company,
International Game Technology, Inc., CSG Systems, Inc., and Anasazi. Anasazi is
a stockholder of the Company. Trident manages Information Associates, L.P. and
Information Associates C.V., both of which are stockholders of the Company.
Paul J. Travers has served as a director and Chairman of the Board of the
Company since October 1995. Mr. Travers has served as the Senior Vice President,
Property Management for Inter-Continental Hotels Corporation
("Inter-Continental") since 1994. From 1990 to 1994. Mr. Travers served as Vice
President, Finance and Group Controller of Inter-Continental. Inter-Continental
is a stockholder of the Company.
Mark C. Wells has served as a director of the Company since September 1996.
Mr. Wells has served as Senior Vice President, Franchise Services for Promus
Hotel Corporation ("Promus") since February 1996. From April 1995 to February
1996, Mr. Wells served as Senior Vice President, Marketing for Promus. Promus is
a stockholder of the Company.
Bruce Wolff has served as a director of the Company since October 1995. Mr.
Wolff has served as Vice President, Distribution Sales and Marketing for
Marriott Lodging since 1986. Marriott Lodging is an affiliate of Marriott
International, Inc., which is a stockholder of the Company.
The Company currently has authorized nine directors. The current directors
were elected pursuant to the provisions of the Company's Amended and Restated
Certificate of Incorporation in effect prior to this offering, and pursuant to a
voting agreement that will expire upon the closing of this offering. Upon the
closing of this offering, the Second Amended and Restated Certificate of
Incorporation will provide for a classified Board of Directors. The terms of
office of the Board of Directors will be divided into three classes: Class I,
which will consist of Messrs. Biggs, Dixon and Hammett, will expire at the
annual meeting of stockholders to be held in
52
<PAGE> 56
1998; Class II, which will consist of Messrs. Highet, Wells and Wolff, will
expire at the annual meeting of stockholders to be held in 1999; and Class III,
which will consist of Messrs. Davis, Schnabel and Travers, will expire at the
annual meeting of stockholders to be held in 2000. At each annual meeting of
stockholders beginning with the 1998 annual meeting, the successors to directors
whose terms will then expire will be elected to serve from the time of election
and qualification until the third annual meeting following election and until
their successors have been duly elected and qualified, or until their earlier
resignation or removal. The officers of the Company are appointed by and serve
at the discretion of the Board of Directors. There are no family relationships
among the current directors and officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, consisting of Messrs.
Biggs, Schnabel and Travers, and an Audit Committee, consisting of Messrs.
Hammett, Highet and Travers. The Compensation Committee makes recommendations to
the Board of Directors concerning salaries and incentive compensation for the
Company's officers and employees and administers the Company's 1996 Plan and
1997 Plan (when it comes into effect upon completion of this offering). Prior to
November 1996, decisions concerning the compensation of officers, including that
of Mr. Davis, were made by the Board of Directors as a whole. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other accounting related services and reviews and evaluates the Company's
internal control functions.
DIRECTORS' COMPENSATION
Directors currently do not receive any cash compensation from the Company
for their service as members of the Board of Directors, although they are
reimbursed for all reasonable expenses incurred in connection with the
performance of their duties as directors of the Company.
53
<PAGE> 57
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the five other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended December 31, 1996 were in excess of $100,000 for
services rendered in all capacities to the Company for that year:
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
1996 ANNUAL LONG-TERM
COMPENSATION AWARDS
----------------------------------------- ---------------------
OTHER ANNUAL SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(2) OPTIONS(#) COMPENSATION($)(3)
- --------------------------- --------- -------- ------------------ --------------------- ------------------
<S> <C> <C> <C> <C> <C>
John F. Davis, III(4)........ $261,708 $302,208 $7,500 300,000 $10,511
President and Chief
Executive Officer
Joseph W. Nicholson(4)....... 164,000 56,292 7,500 150,000 3,335
Chief Information Officer
Jerome L. Galant(5).......... 45,313 14,014 1,889 53,333 --
Chief Financial Officer
M. Nicholas Jent............. 145,000 38,667 7,500 9,333 600
Vice President, Sales and
Marketing
William S. Lush.............. 115,838 32,000 5,677 46,666 495
Vice President, Business
Development
Phillip A. Mytom-Hart........ 134,655 38,577 6,739 12,133 600
Vice President, Sales and
Marketing, International
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission") the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers that are available generally to all salaried employees of
the Company, and certain perquisites and other personal benefits received by
the Named Executive Officers that do not exceed the lesser of $50,000 or 10%
of any such officer's salary and bonus disclosed in the table.
(2) Reflects for 1996 matching contributions made by the Company pursuant to its
401(k) Savings Plan.
(3) Includes premiums paid during 1996 for life insurance policies for the
benefit of the Named Executive Officers.
(4) The salaries of Messrs. Davis and Nicholson were paid in accordance with the
terms of their respective employment agreements. The bonus of Mr. Davis
includes a one time $200,000 employment agreement signing bonus. See
"-- Employment Agreements."
(5) The salary of Mr. Galant represents remuneration paid to him from September
1996 to December 1996. Mr. Galant commenced employment with the Company in
September 1996.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL EXERCISE MARKET PRICE GRANT DATE
UNDERLYING OPTIONS OPTIONS GRANTED PRICE PER ON DATE OF EXPIRATION PRESENT VALUE
NAME GRANTED(1) IN 1996(2) SHARE(3) GRANT(3) DATE(4) ($)(5)
---- -------------------- --------------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Davis, III.... 300,000 38.9% $2.01 $3.11 12/31/05 $465,750
Joseph W. Nicholson... 150,000 19.4 2.01 3.11 12/31/05 232,875
Jerome L. Galant...... 53,333 6.9 2.01 3.11 12/31/05 82,799
M. Nicholas Jent...... 9,333 1.2 3.11 3.11 12/31/05 6,650
William S. Lush....... 46,666 6.0 3.11 3.11 12/31/05 33,250
Phillip A.
Mytom-Hart.......... 12,133 1.6 3.11 3.11 12/31/05 8,645
</TABLE>
- ---------------
See footnotes on following page
54
<PAGE> 58
(1) Options were granted under the 1996 Plan. The options held by Messrs. Davis
and Nicholson vest over a four-year period, with 25% of the shares vesting
after one year and 1/48th of the shares vesting each month for the next 36
months. The options held by Messrs. Galant, Jent, Lush and Hart vest over a
four-year period with 25% of the shares vesting after one year and 1/16th of
the shares vesting each quarter for the next 12 quarters.
(2) Based on an aggregate of 771,733 shares subject to options granted in 1996.
(3) The exercise price of the options held by Messrs. Davis, Nicholson and
Galant are established by each of their employment agreements with the
Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview" and Note 9 of Notes to Consolidated
Financial Statements. The market price for the options set forth in the
table is based upon an appraisal performed by an independent consulting firm
engaged by the Company.
(4) Options may terminate before their expiration date upon the death,
disability or termination of employment of the optionee.
(5) These values are determined using the Black-Scholes Option Pricing Model.
The Black-Scholes Option Pricing Model is one of the methods permitted by
the Commission for estimating the present value of options. The
Black-Scholes Option Pricing Model is based on assumptions as to certain
variables as described below and it is not intended to estimate, and has no
direct correlation to, the value of stock options that an individual will
actually realize. The actual value of the stock options that a Named
Executive Officer may realize, if any, will depend on the excess of the
market price on the date of exercise over the exercise price. The values
listed above were based on the following assumptions: volatility -- 0.0;
risk free rate of return -- 6.5%; dividend yield -- 0.0%; and expected
life -- 4 years.
AGGREGATE FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive Officers,
information concerning the number and value of securities underlying unexercised
options held on December 31, 1996. No options were exercised by such persons
during 1996.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS OPTIONS AT
AT YEAR END YEAR-END (1)
-------------------- ------------
NAME UNEXERCISED UNEXERCISED
---- ----------- -----------
<S> <C> <C>
John F. Davis, III................................... 300,000 $2,697,000
Joseph W. Nicholson.................................. 150,000 1,348,500
Jerome L. Galant..................................... 53,333 479,464
M. Nicholas Jent..................................... 9,333 73,637
William S. Lush...................................... 46,666 368,194
Phillip A. Mytom-Hart................................ 12,133 95,729
</TABLE>
- ---------------
(1) There was no public trading market for the Common Stock as of December 31,
1996. Accordingly, these values have been calculated in accordance with the
rules of the Commission on the basis of an assumed initial public offering
price of $11.00 per share of the Common Stock, minus the exercise price,
multiplied by the number of shares underlying the option.
1996 AND 1997 STOCK OPTION PLANS
Scope. The Company has a 1996 Stock Option Plan (the "1996 Plan"). The
Company has recently approved the creation of the 1997 Stock Option Plan (the
"1997 Plan") and an amendment (the "Amendment") to the 1996 Plan. The 1997 Plan
and the Amendment will take effect upon the completion of this offering. The
1996 Plan, as amended, and the 1997 Plan (collectively, the "Plans") are
designed to attract and retain qualified and competent personnel for positions
of substantial responsibility and to provide additional incentive to employees
and consultants of the Company. The Plans have substantially the same
provisions, which are set forth herein. Options granted under the Plans may be
Incentive Stock Options or Nonstatutory Stock Options, as determined by the
Administrator (as hereinafter defined) at the time of grant and subject to the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The 1996 and 1997 Plans have reserved for issuance 866,667 shares and
333,333 shares of Common Stock, respectively. As of March 31, 1997, options
covering 771,733 shares of Common Stock have been granted
55
<PAGE> 59
under the 1996 Plan. No option has been granted under the 1997 Plan. If an
option granted under the Plans expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an option exchange
program, the unpurchased shares may be available for future grants or sale under
the Plans. The 1996 and 1997 Plans will terminate on June 24, 2006 and March 25,
2007, respectively.
Eligibility. Persons eligible to participate in the Plans include all
employees and all consultants of the Company. For purposes of describing the
Plans, the term employee means any person employed by the Company or any parent
or subsidiary of the Company. For purposes of describing the Plans, the term
consultant means any person who is engaged by the Company or any parent or
subsidiary of the Company to render consulting or advisory services and is
compensated for such services, and any director of the Company who is not
compensated for his or her services or is paid only a director's fee by the
Company. Non-Statutory Stock Options may be granted to employees and
consultants. Incentive Stock Options may be granted only to employees.
Administration. The Plans are administered by the Board of Directors or the
Committee appointed by the Board (the "Administrator"). The Administrator has
the authority to grant options under the Plans and to determine the vesting
schedule and the exercise price of the options. The Administrator also has full
power and authority to construe, interpret and administer the Plans.
Option Exercise Price. The exercise price per share for the shares to be
issued pursuant to exercise of an option under the Plans shall be such price as
is determined by the Administrator. In the case of an Incentive Stock Option
granted to an employee, who at the time of the grant owns stock representing
more than 10% of the voting power of all classes of stock of the Company or any
parent or subsidiary, the exercise price per share shall be no less than 110% of
the fair market value per share on the date of grant. In the case of an
Incentive Stock Option granted to any employee other than an employee described
in the foregoing sentence, the per share exercise price shall be no less than
100% of the fair market value per share on the date of grant. In the case of a
Non-Statutory Stock Option, the per-share exercise price shall be determined by
the Administrator and shall be no less than 50% of the fair market value.
Adjustments, Terminations and Amendment. In the event of any change in the
Company's capitalization, including any stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company, appropriate adjustments will be
made to the number of shares available under the Plans as well as the price per
share of Common Stock covered by each outstanding option. Upon the occurrence of
an acquisition event ("Acquisition Event") which shall mean (i) certain mergers
or consolidations of the Company with or into another corporation; (ii) the sale
of substantially all of the assets of the Company; (iii) the complete
liquidation of the Company; or (iv) the acquisition by another entity of
beneficial ownership of the Company's securities representing 50% or more of the
combined voting power of the Company's then outstanding securities, the Board of
Directors of the Company may (i) provide that each outstanding option shall be
assumed and/or an equivalent option be substituted by the successor corporation
or an affiliate thereof; (ii) upon written notice to the optionees, provide that
all options then unexercised will become exercisable in full as of a specified
date prior to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event; or (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive a cash
payment for each share of Common Stock surrendered, provide that all outstanding
options shall terminate upon consummation of such Acquisition Event, and each
optionee shall receive, in exchange therefor, a cash payment equal to the amount
(if any) by which the acquisition price multiplied by the number of shares of
Common Stock subject to such outstanding Options (whether or not then
exercisable), exceeds the aggregate exercise price of such options. The Plans
may be suspended, terminated, altered or amended in any way by the Board of
Directors, provided that, stockholder approval of any plan amendment will be
required to the extent necessary and desirable to comply with applicable
provisions of the Exchange Act, the Code or other legal requirements. No
suspension, termination, alteration or amendment of the Plans may alter or
impair the rights of any optionee under options previously granted.
56
<PAGE> 60
401(k) SAVINGS PLAN
The Company sponsors a qualified defined contribution retirement plan,
called the Pegasus Systems, Inc. 401(k) Savings Plan (the "401(k) Savings Plan")
under which eligible employees may elect to defer their current compensation by
up to certain statutorily prescribed annual limits ($9,500 in 1997) and to
contribute such amount to the 401(k) Savings Plan. The 401(k) Savings Plan
permits, but does not require, additional matching contributions by the Company
on behalf of all participants in the 401(k) Savings Plan. In 1996, the Company
made matching contributions of approximately $160,000. The 401(k) Savings Plan
is intended to qualify under Section 401 of the Code, so that contributions by
employees or by the Company to the 401(k) Savings Plan, and income earned on
such contributions, are not taxable to employees until withdrawn, and so that
contributions by the Company will be deductible by the Company when made. The
trustee for the 401(k) Savings Plan is Standard Insurance Company. The 401(k)
Savings Plan permits employees to direct investment of their accounts in the
401(k) Savings Plan among a selection of five mutual funds.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with each of Messrs. Davis
and Nicholson. Each agreement has a term extending through June 25, 2000, and
automatically renews for additional one year terms if neither the Company nor
the employee has notified the other party 60 days prior to the date of renewal
of its intention to terminate the agreement. The agreements provide that Messrs.
Davis and Nicholson will receive base annual salaries of $275,000 and $175,000,
respectively, and will be eligible to receive incentive compensation determined
by the Compensation Committee of the Board of Directors based on the achievement
of performance objectives established by the Compensation Committee from time to
time. The base annual salaries are subject to increase annually at the
discretion of the Compensation Committee. The agreements also provide that
Messrs. Davis and Nicholson will receive options for a total of 300,000 and
150,000 shares of Common Stock, respectively, at an exercise price of $2.01 per
share. These options were granted on June 25, 1996. The options will fully vest
no later than June 25, 2000. Each agreement obligates the Company to the extent
commercially practicable to maintain life insurance with respect to Messrs.
Davis and Nicholson. The Company currently maintains coverage with respect to
Mr. Davis in the amount of $2.5 million with the Company as the sole
beneficiary. The Company currently maintains coverage with respect to Mr.
Nicholson in the amount of $1.0 million with the Company as the sole
beneficiary.
Each employment agreement provides that either the Company or the employee
has the right to terminate the employment at any time during the term of the
agreement with or without cause by delivering written notice of termination to
the other 30 days prior to the date of termination. Each agreement provides for
a severance payment if the agreement is terminated by the Company without cause.
Under such circumstances, Messrs. Davis and Nicholson would receive their base
annual salary for a period of 12 months following the date of termination,
payable over such 12-month period at such times as executives of the Company
receive their regular salary payments; all accrued salary, any benefits under
any plans of the Company in which the employee is a participant to the full
extent of such employee's rights under such plans and any appropriate
out-of-pocket business expense reimbursements; and, vesting of the options
granted under the applicable employment agreement shall accelerate so that (i)
if termination of employment occurs prior to July 25, 1999, such employee's
options shall vest for an additional 75,000 and 37,500 shares of Common Stock,
respectively (in addition to shares vested as of the date of termination), or
(ii) if termination of employment occurs on or after July 25, 1999, such
employee's options shall fully vest. If the agreements are terminated
voluntarily either by the employee or by the Company with cause, or by reason of
death or disability, then Mr. Davis or Mr. Nicholson, as the case may be, or
their respective estate will be entitled to payment of all accrued salary,
vesting of the options granted through the date of termination only, any further
benefits under any plans of the Company in which such person is a participant to
the full extent of such person's rights under such plans through the date of
termination only, and any appropriate out-of-pocket business expense
reimbursements.
The Company has entered into a letter agreement with Jerome L. Galant,
Chief Financial Officer. The agreement provides that Mr. Galant will receive
annual base salary of $145,000, plus a bonus of up to 30% of
57
<PAGE> 61
such annual base salary. Pursuant to this agreement, Mr. Galant has been granted
options to purchase up to 53,333 shares of Common Stock at an exercise price of
$2.01 per share.
The Company has entered into a letter agreement with Michael R. Donahue,
Chief Marketing Officer. The agreement provides that Mr. Donahue will receive
annual base salary of $165,000, and will be eligible to receive incentive
compensation based on the achievement of certain performance objectives.
Pursuant to this agreement, Mr. Donahue has been granted options to purchase up
to 53,333 shares of Common Stock at an exercise price of $5.25 per share. These
options will vest over four years. In addition, under certain circumstances Mr.
Donahue will receive a severance payment equal to (i) six-months base salary if
the employment terminates after 12 months; (ii) nine-months base salary if
employment terminates after 24 months; and (iii) twelve-months base salary if
employment terminates after 36 months.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's Second
Amended and Restated Certificate of Incorporation, which becomes effective upon
completion of this offering, provides that no director of the Company will be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of the law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. In addition, the Company maintains
directors' and officers' liability insurance. There is no pending litigation or
proceeding involving a director, officer or employee of the Company regarding
which indemnification is sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification.
58
<PAGE> 62
CERTAIN TRANSACTIONS
Since its inception, the Company has relied in part on stockholder loans to
fund its capital needs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." The
following table sets forth certain information concerning the outstanding loans
made by each stockholder named therein and the amount of principal and interest
paid to such stockholders during the periods indicated.
<TABLE>
<CAPTION>
AMOUNT OF PRINCIPAL
AMOUNT OF LOANS AND INTEREST PAID IN
LARGEST AMOUNT OF OUTSTANDING YEAR ENDED DEC. 31,
LOANS OUTSTANDING (INCLUDING ACCRUED ------------------------------
(INCLUDING ACCRUED INTEREST) AS OF INTEREST
STOCKHOLDERS/LENDERS INTEREST)(1) MARCH 31, 1997 RATE(2) 1994 1995 1996
- -------------------- ------------------ ------------------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Reed Travel Group(3)........... $4,536,482 $4,072,554 Prime + 2% $588,426 $463,363 $441,241
Best Western International,
Inc.......................... 185,878 128,540 Prime + 1% -- -- --
Choice Hotels International,
Inc.......................... 91,541 62,649 Prime + 1% -- -- --
Forte, Inc..................... 90,976 61,995 Prime + 1% -- -- --
HFS Incorporated............... 174,337 69,554 Prime + 1% 12,710 36,574 --
Hilton Hotels Corporation...... 86,093 46,559 Prime + 1% 3,116 10,263 --
Hyatt Hotels Corporation....... 180,790 101,067 Prime + 1% -- 22,628 --
Inter-Continental Hotels
Corporation.................. 177,039 114,332 Prime + 1% 2,653 9,267 --
La Quinta Inns, Inc............ 176,388 114,386 Prime + 1% 2,682 7,967 --
Marriott Corporation........... 86,044 27,081 Prime + 1% 6,012 23,629 --
Promus Hotels, Inc............. 167,504 103,945 Prime + 1% -- -- --
ITT Sheraton Corporation....... 185,311 127,882 Prime + 1% -- -- --
Utell International(3)......... 94,148 65,604 Prime + 1% -- -- --
Utell International(3)(4)...... 215,503 -- Prime + 3% -- 16,151 205,514
Westin Hotels & Resorts........ 184,215 126,679 Prime + 1% -- -- --
<CAPTION>
AMOUNT OF
PRINCIPAL
AND INTEREST PAID
IN THREE MONTHS
ENDED
STOCKHOLDERS/LENDERS MARCH 31, 1997
- -------------------- -----------------
<S> <C>
Reed Travel Group(3)........... $296,524
Best Western International,
Inc.......................... --
Choice Hotels International,
Inc.......................... --
Forte, Inc..................... --
HFS Incorporated............... --
Hilton Hotels Corporation...... --
Hyatt Hotels Corporation....... --
Inter-Continental Hotels
Corporation.................. --
La Quinta Inns, Inc............ --
Marriott Corporation........... --
Promus Hotels, Inc............. --
ITT Sheraton Corporation....... --
Utell International(3)......... --
Utell International(3)(4)...... --
Westin Hotels & Resorts........ --
</TABLE>
- ---------------
(1) Sets forth as of March 31, 1997 the largest aggregate amount of indebtedness
outstanding since January 1994. The maturity date for the loan from Reed is
June 30, 2001. The maturity date for each of the remaining loans is July 21,
2000.
(2) "Prime" means the prime rate of interest published in the Wall Street
Journal. As of March 31, 1997, such prime rate was 8.5% per annum.
(3) Reed and Utell International are divisions of Reed Elsevier Inc. In
connection with the development of the UltraSwitch technology and related
financing provided by Reed, the Company licensed Reed certain rights to use
the UltraSwitch technology for applications unrelated to the hotel industry.
See "Business -- Technology and Operations." I. Malcolm Highet is a director
of the Company and is affiliated with Reed Elsevier, Inc. See "Management"
and "Principal and Selling Stockholders."
(4) Note was paid in full on March 28, 1996.
The Company derives a substantial portion of its revenue from stockholders
and their affiliated companies. See Note 14 of Notes to Consolidated Financial
Statements for information concerning related party transactions. The following
table sets forth the amount of revenues the Company received in 1994, 1995 and
1996 and the three months ended March 31, 1997 from its stockholders and their
affiliates with respect to services rendered by the Company in connection with
the THISCO, HCC and TravelWeb services:
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31,
-------------------------------- THREE MONTHS ENDED
STOCKHOLDERS 1994 1995 1996 MARCH 31, 1997
------------ -------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Anasazi, Inc............................ $120,560 $117,798 $169,190 $101,993
Best Western International, Inc......... 395,208 425,022 577,894 193,239
Choice Hotels International, Inc........ 349,943 397,340 516,666 130,994
Forte, Inc.............................. 155,766 217,563 429,098 70,399
HFS Incorporated........................ 574,401 902,377 741,549 222,042
Hilton Hotels Corporation............... 178,595 265,305 410,844 56,693
Hyatt Hotels Corporation................ 380,149 535,983 633,818 217,439
Inter-Continental Hotels Corporation.... 121,751 275,284 380,287 76,033
La Quinta Inns, Inc..................... 122,662 218,782 208,037 64,014
Marriott Corporation.................... 164,590 205,664 425,673 84,201
Promus Hotels, Inc...................... 451,901 533,629 644,815 215,851
ITT Sheraton Corporation................ 468,800 487,783 623,985 178,319
Utell International..................... 174,052 194,159 243,505 61,805
Westin Hotels & Resorts................. 114,080 173,576 453,020 71,552
</TABLE>
59
<PAGE> 63
Effective in July 1995, the Company issued 4,934,667 shares of Common Stock
in exchange for all of the outstanding capital stock of THISCO and 83.3% of the
outstanding capital stock of HCC (the "Reorganization"). Lodging Network, Inc.
("LNI"), a stockholder of the Company, retained certain shares of HCC preferred
stock, representing 16.7% of the outstanding capital stock of HCC. In
conjunction with the Reorganization, LNI was granted an option (the "LNI
Option") expiring in July 1998 to exchange its interest in HCC for 448,667
shares of the Company's Common Stock. In June 1996, the Company purchased the
shares of HCC preferred stock held by LNI for $2.0 million and 89,733 shares of
Common Stock, and the LNI Option was canceled. See Notes 2 and 3 of Notes to the
Consolidated Financial Statements.
Prior to the Reorganization, HCC offered a special bonus plan for
management of HCC, including Messrs. Davis, Nicholson, Jent and Hart. As part of
the Reorganization in 1995, HCC management agreed to forfeit their rights to
participate in the bonus plan to HCC in return for a cash payment and the
opportunity to purchase an aggregate of 283,333 shares of the Company's Common
Stock for $570,874.
In June 1996, Information Associates, L.P. and Information Associates, C.V.
purchased 1,538,463 shares of the Company's Series A Preferred Stock for $4.88
per share or $7,500,005, representing 22.9% of the shares of the Company's
capital stock outstanding after the purchase. Information Associates, L.P. and
Information Associates, C.V. are affiliates of Trident. Donald R. Dixon and
Rockwell A. Schnabel, two directors of the Company, are associated with Trident.
See "Management" and Note 8 of Notes to the Consolidated Financial Statements.
Anasazi, a stockholder of the Company, provides services to the Company
which include facility management and maintenance, consulting and software
development. During 1994, 1995 and 1996 and during the three months ended March
31, 1997, the Company paid to Anasazi $526,641, $578,469 and $716,870 and
$103,143, respectively, for these services. In the past three fiscal years, the
Company has purchased furniture and interior design items from Right Angle, a
company owned by Mrs. Leah Davis, the spouse of Mr. John F. Davis, III, the
Chief Executive Officer, President and a director of the Company. Mrs. Davis
received commissions not in excess of 15% of the amount of such purchases. The
total payments made to Right Angle and Mrs. Davis for furniture, decorative
items and commissions in 1994, 1995 and 1996 were $88,149, $16,908 and $121,425,
respectively. With regard to its transactions with Anasazi and Right Angle, the
Company believes that the terms of such transactions were at least as favorable
to the Company as terms that could have been negotiated with an unrelated third
party.
60
<PAGE> 64
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 31, 1997 and as adjusted to
reflect the sale of shares in this offering by (i) each person known by the
Company to own beneficially more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors, (iii) each of the Named Executive Officers,
(iv) all directors and executive officers of the Company as a group and (v) each
Selling Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER THE
THE OFFERING(1) NUMBER OF OFFERING(1)(2)
------------------- SHARES -------------------
NAME NUMBER PERCENT BEING OFFERED NUMBER PERCENT
---- --------- ------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
Entities affiliated with Trident
Capital(3)............................ 1,538,463 22.9% -- 1,538,463 16.3%
Reed Travel Group (A division of Reed
Elsevier Inc.)(4)..................... 642,800 9.6 128,600 514,200 5.5
HFS Incorporated(5)..................... 507,200 7.5 101,500 405,700 4.3
Promus Hotels, Inc.(6).................. 493,364 7.3 -- 493,364 5.2
Best Western International(7)........... 426,204 6.3 -- 426,204 4.5
Hyatt Hotels Corporation(8)............. 420,607 6.3 -- 420,607 4.5
ITT Sheraton Corporation(9)............. 336,267 5.0 -- 336,267 3.6
Utell International (A division of Reed
Elsevier Inc.)(4)..................... 115,920 1.7 23,200 92,720 1.0
John F. Davis, III(10).................. 259,750 3.8 -- 259,750 2.7
Joseph W. Nicholson(10)................. 92,208 1.4 -- 92,208 1.0
M. Nicholas Jent(10).................... 36,333 * -- 36,333 *
Phillip A. Mytom-Hart(10)............... 34,233 * -- 34,233 *
Michael Donahue......................... -- * -- -- *
Jerome L. Galant(10).................... 13,333 * -- 13,333 *
William S. Lush(10)..................... 11,666 * -- 11,666 *
John W. Biggs........................... -- * -- -- *
Donald R. Dixon(3)...................... -- * -- -- *
William C. Hammett, Jr. ................ -- * -- -- *
I. Malcolm Highet(4).................... -- * -- -- *
Rockwell A. Schnabel(3)................. -- * -- -- *
Paul J. Travers......................... -- * -- -- *
Mark C. Wells(6)........................ -- * -- -- *
Bruce Wolff............................. -- * -- -- *
Directors and executive officers as a
group (15 persons)(10)................ 447,523 6.5 -- 447,523 4.7
</TABLE>
- ---------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Except as indicated by footnote and subject to community
property law where applicable, the Company believes, based on information
furnished by such persons, that the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 6,729,712 shares of Common Stock outstanding as of July 31, 1997,
and 9,429,712 shares of Common Stock outstanding after the completion of
this offering. In computing the number of shares of Common Stock subject to
options held by that person that are exercisable within 60 days of July 31,
1997 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Of the total shares indicated as beneficially owned by entities affiliated
with Trident Capital, Information Associates, L.P. owns 1,496,693 shares
and Information Associates, C.V. owns 41,769 shares. Information
Associates, C.V. is a Netherlands Antilles limited partnership and Informa-
61
<PAGE> 65
tion Associates, L.P. is a Delaware limited partnership. The general
partner of each of these entities is Trident Capital Management, L.L.C., a
Delaware limited liability company ("Trident Capital"), the members of
which include Donald R. Dixon and Rockwell A. Schnabel, directors of the
Company. The address of Trident Capital is 2480 Sand Hill Road, Suite 100,
Menlo Park, California 94025.
(4) Reed and Utell International are divisions of Reed Elsevier Inc. The
address of Reed Elsevier Inc. is 200 Park Avenue, 17th Floor, New York, NY
10166. Mr. Highet, a director of the Company, is affiliated with Reed
Elsevier Inc.
(5) The address of HFS Incorporated is 3838 E. Van Buren, Phoenix, Arizona
85008.
(6) The address of Promus Hotels, Inc. is 755 Crossover Lane, Memphis,
Tennessee 38117. Mr. Wells, a director of the Company, is affiliated with
Promus Hotels, Inc.
(7) The address of Best Western International is 6201 N. 24th Parkway, Phoenix,
Arizona 85016.
(8) The address of Hyatt Hotels Corporation is 200 West Madison, Chicago,
Illinois 60606.
(9) The address of ITT Sheraton Corporation is Sixty State Street, World
Headquarters, Boston, Massachusetts 02109.
(10) Includes exercisable options held by Mr. Davis and Mr. Nicholson to
purchase 75,000 and 37,500 shares of Common Stock, respectively, and
options exercisable within 60 days of July 31, 1997 held by Messrs. Davis,
Nicholson, Jent, Mytom-Hart, Galant and Lush of 18,750, 9,375, 2,333,
3,033, 13,333 and 11,666 shares of Common Stock, respectively.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.01 par value per share ("Common Stock"), and 2,000,000 shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), issuable in
series. As of July 31, 1997, there were outstanding 6,729,712 shares of Common
Stock held of record by 29 stockholders assuming the conversion of all
outstanding shares of Preferred Stock into Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulate voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive, conversion or other rights to subscribe for additional securities
of the Company. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. Upon completion of this offering, there will be no shares of Preferred
Stock outstanding and the Company has no present plan to issue any shares of
Preferred Stock.
62
<PAGE> 66
WARRANTS
In connection with the Distribution Services Agreement entered into in May
1997 between the Company and Holiday Inn, the Company issued to Holiday Inn
warrants for the purchase of up to 345,723 shares of the Company Common Stock.
The warrants are exercisable at any time during the two year period ending May
12, 1999 at an exercise price equal to the lower of $7.20 per share or 85.0% of
the price per share for the Common Stock offered hereby.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Delaware Anti-Takeover Statute. The Company is subject to the provisions of
Section 203 of the Delaware General Corporation Law, an anti-takeover law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation's voting stock.
Certificate of Incorporation. The Certificate of Incorporation to be
effective concurrently with this offering (the "Certificate") provides (i) for
the authorization of the Board of Directors to issue, without further action by
the stockholders, up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
(ii) that any action required or permitted to be taken by stockholders of the
Company must be effected at a duly called annual or special meeting of the
stockholders and may not be effected by a consent in writing, (iii) that special
meetings of stockholders of the Company may be called only by the Chairman of
the Board, the Chief Executive Officer or a majority of the members of the Board
of Directors, (iv) for a classified Board of Directors, (v) that vacancies on
the Board of Directors, including newly created directorships, can be filled
only by a majority of the directors then in office, and (vi) that directors of
the Company may be removed only for cause and only by the affirmative vote of
holders of at least two-thirds of the outstanding shares of voting stock, voting
together as a single class.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited proposal for a takeover of the Company that does not
contemplate the acquisition of all of its outstanding shares, or an unsolicited
proposal for the restructuring or sale of all or part of the Company. Such
provisions, however, could discourage potential acquisition proposals and could
delay or prevent a change in control of the Company. Such provisions may also
have the effect of preventing changes in the management of the Company. See
"Risk Factors -- Anti-Takeover Matters."
LIMITATIONS ON DIRECTOR LIABILITY
The Certificate provides that, to the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, directors of the Company will not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (the
"Holders") after the completion of this offering of approximately 6,476,412
shares of Common Stock (the "Registrable Securities"), the Holders are entitled
to certain rights with respect to the registration of such shares under the
Securities Act. If the Company proposes to register any of its securities under
the Securities Act (other than a registration on a Form S-3 or any successor
form), either for its own account or for the account of other Holders exercising
registration rights, the Holders are entitled to notice of such registration and
are entitled, subject to certain limitations, to include shares of Registrable
Securities therein. Additionally, the Holders are entitled to certain
63
<PAGE> 67
demand registration rights pursuant to which they may require the Company to
file a registration statement under the Securities Act (other than a
registration on a Form S-3 or any successor forms) at the Company's expense with
respect to their shares of Registrable Securities, and the Company is required
to use its best efforts to effect such registration. Subject to certain
limitations, the Holders may also require the Company to register their shares
on Form S-3 when such form becomes available to the Company. Generally, the
Company is required to bear all registration and selling expenses incurred in
connection with any such registrations. The rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in such registration. Such
registration rights terminate as to any Holder at such time as the Holder holds
less then one percent (1%) of the Company's outstanding capital stock and may
sell all of such Holder's shares under rule 144 promulgated under the Securities
Act within a three-month period.
TRADING MARKET, TRANSFER AGENT AND REGISTRAR
The Common Stock has been approved for quotation on the Nasdaq National
Market subject to official notice of issuance under the symbol PEGS. The
Transfer Agent and Registrar for the Common Stock will be American Securities
Transfer & Trust, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding an
aggregate of 9,429,712 shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, all of the shares sold in the offering will be freely tradeable by
persons other than "affiliates" or persons deemed to be acting as "underwriters"
(as such terms are defined under the Securities Act) of the Company. The
remaining 6,476,412 shares of Common Stock are "restricted shares" within the
meaning of Rule 144 under the Securities Act and may be sold only if they are
registered under the Securities Act or are sold pursuant to an applicable
exemption from registration, including pursuant to Rule 144. The Company has
granted certain registration rights to the holders of such shares. See
"Description of Capital Stock -- Registration Rights."
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned, for at
least one year, shares of Common Stock that have not been registered under the
Securities Act or that were acquired from an "affiliate" of the Company is
entitled to sell within any three-month period the number of shares of Common
Stock which does not exceed the greater of one percent of the number of then
outstanding shares or the average weekly reported trading volume during the four
calendar weeks preceding the sale. Sales under Rule 144 are also subject to
certain notice and manner of sale requirements and to the availability of
current public information about the Company and must be made in unsolicited
brokers' transactions or to a market maker. A person (or persons whose shares
are aggregated) who is not an "affiliate" of the Company under the Securities
Act during the three months preceding a sale and who has beneficially owned such
shares for at least two years is entitled to sell such shares under Rule 144
without regard to the volume, notice, information and manner of sale provisions
of such rule. Rule 144 does not require the same person to have held the
securities for the applicable periods.
Any employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits affiliates and
non-affiliates to sell such shares without having to comply with the holding
period restrictions of Rule 144, in each case commencing 90 days after the date
of this Prospectus. In addition, non-affiliates may sell such shares without
complying with the public information, volume and notice provisions of Rule 144.
Rule 701 is available for optionholders of the Company as to all shares issued
pursuant to the exercise of options granted prior to this offering.
After the offering, the Company intends to file a registration statement on
Form S-8 to register the shares of Common Stock issuable upon exercise of
options granted or to be granted pursuant to the Plans. Accordingly, shares
issued upon exercise of such options will be freely tradeable by holders who are
not affiliates of the Company and, subject to the volume and other limitations
of Rule 144, by holders who are affiliates of the Company.
64
<PAGE> 68
The Company, its executive officers and directors who are stockholders,
certain holders of options to purchase Common Stock under the Plans and certain
other stockholders of the Company, all of which hold an aggregate of 6,476,412
shares of Common Stock, have agreed that, for a period of 180 days from the date
of this Prospectus, they will not offer, sell or otherwise dispose of any shares
of Common Stock or options to acquire Common Stock without the prior written
consent of Hambrecht & Quist LLC, except for the issuance by the Company of
options to purchase Common Stock or shares of Common Stock issuable upon the
exercise thereof, provided that such options shall not become exercisable and
such shares issuable upon exercise of options or pursuant to acquisitions shall
not be transferable prior to the end of the 180-day period and for certain
transfers by individuals signing such agreements to their immediate family
members.
Prior to the offering, there has been no market for the Common Stock. No
predictions can be made of the effect, if any, that market sales of shares of
Common Stock or the availability of such shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of Common Stock could adversely affect the prevailing market price of the Common
Stock, as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities. See "Risk Factors -- Absence of Prior
Public Market; Potential Volatility of Stock Price."
65
<PAGE> 69
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Hambrecht & Quist LLC, Montgomery Securities and Volpe Brown Whelan & Company,
LLC (the "Representatives"), have severally agreed to purchase from the Company
and the Selling Stockholders the following respective numbers of shares of
Common Stock:
<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
Montgomery Securities.......................................
Volpe Brown Whelan & Company, LLC...........................
-------
Total.............................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other
dealers. After the offering, the offering price and other selling terms may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 442,995
additional shares of Common Stock at the offering price, less the underwriting
discount set forth on the cover page of this Prospectus. To the extent the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the above table
bears to the total number of shares of Common Stock offered hereby. The Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
The offering of the shares 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 offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
The officers and directors who are stockholders of the Company and certain
of the other stockholders and optionholders, who will own in the aggregate
6,476,412 shares of Common Stock after the offering, have agreed, subject to
certain exceptions, that they will not, without the prior written consent of
Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of common Stock owned by
66
<PAGE> 70
them during the 180-day period following the date of this Prospectus. The
Company has agreed that it will not, without the prior written consent of
Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common
Stock, options or warrants to acquire shares of Common Stock or securities
exchangeable for or convertible into shares of Common Stock during the 180-day
period following the date of this Prospectus, except that the Company may issue
shares upon the exercise of options granted prior to the date hereof, and may
grant additional options under its Plans, provided that, without the prior
written consent of Hambrecht & Quist LLC, such additional options shall not be
exercisable during such 180-day period.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiations among the Company, the Selling Stockholders and the
Representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market and economic conditions, revenues
and earnings of the Company, market valuations of other companies engaged in
activities similar to the Company, estimates of the business potential and
prospects of the Company, the present state of the Company's business
operations, the Company's management and other factors deemed relevant. The
estimated initial public offering price range set forth on the cover of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.
Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such tranactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas. Cooley Godward LLP, San Francisco,
California, will pass upon certain legal matters for the Underwriters.
EXPERTS
The consolidated financial statements of Pegasus Systems, Inc. as of
December 31, 1996 and for the year ended December 31, 1996 included in this
Prospectus and the related financial statement schedule for the year ended
December 31, 1996 included elsewhere in the Registration Statement 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.
The consolidated financial statements of Pegasus Systems, Inc. (formerly
The Hotel Industry Switch Company in 1994) as of December 31, 1994 and 1995 and
for each of the two years in the period ended December 31, 1995 and the
consolidated financial statements of The Hotel Clearing Corporation as of
December 31, 1993 and 1994 and for each of the two years in the period ended
December 31, 1994 included in this Prospectus and the related financial
statement schedule for the years ended December 31, 1994 and 1995 included
elsewhere in the Registration Statement have been so included in reliance on the
reports of Belew Averitt LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
In January 1997, the Company advised Belew Averitt LLP ("Belew Averitt")
that it would no longer retain the firm as independent accountants. The reports
of Belew Averitt on the Company, formerly The Hotel Industry Switch Company, and
The Hotel Clearing Corporation for the previous years (1993, 1994 and 1995)
67
<PAGE> 71
did not contain an adverse opinion or a disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to change accountants was precipitated by the Company's plan to
complete an initial public offering in 1997 and was approved by the Board of
Directors on January 7, 1997. During the periods audited by Belew Averitt and
through January 7, 1997 there were no disagreements with Belew Averitt on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement(s) if not resolved to the
satisfaction of Belew Averitt, would have caused it to make reference to the
subject matter of the disagreements in connection with its reports. Price
Waterhouse LLP was engaged by the Company as its independent accountants on
January 7, 1997.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission"), a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits and schedules filed thereto. Statements contained in this Prospectus as
to the contents of any agreement, contract or other document referred to are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
such other document, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office in Washington, D.C. and
copies of all or any part thereof may be obtained upon payment of certain fees
prescribed by the Commission from the Public Reference Section of the Commission
at the Commission's principal office, 450 Fifth Street, N.W., Washington, D.C.
20549, or at the Commission's Regional Offices in New York, located at 7 World
Trade Center, Suite 1300, New York, New York 10048, or in Chicago, located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.
68
<PAGE> 72
PEGASUS SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PEGASUS SYSTEMS, INC.:
Consolidated Annual Financial Statements:
Reports of Independent Accountants........................ F-2
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996....................... F-5
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the Years Ended December 31, 1994, 1995
and 1996............................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996....................... F-7
Notes to Consolidated Financial Statements................ F-8
Consolidated Interim Financial Statements (Unaudited):
Consolidated Balance Sheets as of December 31, 1996 and
March 31, 1997......................................... F-23
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1997.......................... F-24
Consolidated Statement of Changes in Shareholders' Equity
for the Three Months Ended March 31, 1997.............. F-25
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1997.......................... F-26
Notes to Consolidated Interim Financial Statements........ F-27
THE HOTEL CLEARING CORPORATION:
Consolidated Annual Financial Statements:
Report of Independent Accountants......................... F-29
Consolidated Balance Sheets as of December 31, 1993 and
1994................................................... F-30
Consolidated Statements of Operations for the Years Ended
December 31, 1993 and 1994............................. F-31
Consolidated Statements of Shareholders' Deficit for the
Years Ended December 31, 1993 and 1994................. F-32
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993 and 1994............................. F-33
Notes to Consolidated Financial Statements................ F-34
Consolidated Interim Financial Statements (Unaudited):
Consolidated Balance Sheet as of June 30, 1995............ F-40
Consolidated Statements of Operations for the Six Months
Ended June 30, 1994 and 1995........................... F-41
Consolidated Statement of Shareholders' Deficit for the
Six Months Ended June 30, 1995......................... F-42
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1994 and 1995........................... F-43
Notes to Consolidated Interim Financial Statements........ F-44
</TABLE>
F-1
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Pegasus Systems, Inc.
The stock split described in Note 15 to the financial statements has not been
consummated at August 4, 1997. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations and changes in
shareholders' equity (deficit) and of cash flows present fairly, in all
material respects, the financial position of Pegasus Systems, Inc. and
its subsidiaries at December 31, 1996, and the results of their
operations and their cash flows for the year then ended, 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 audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above."
PRICE WATERHOUSE LLP
Dallas, Texas
February 21, 1997, except as to Note 13,
which is as of May 12, 1997
F-2
<PAGE> 74
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
Pegasus Systems, Inc.
The stock split described in Note 15 to the financial statements has not been
consummated at August 4, 1997. When it has been consummated, we will be in a
position to furnish the following report:
We have audited the accompanying consolidated balance sheet of Pegasus
Systems, Inc. (formerly The Hotel Industry Switch Company in 1994) and
its subsidiaries (Company) as of December 31, 1995, and the related
consolidated statements of operations, changes in shareholders' equity
(deficit) and cash flows for the years ended December 31, 1994 and 1995.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 1995, and the results of its operations and
its cash flows for the years ended December 31, 1994 and 1995 in
conformity with generally accepted accounting principles.
BELEW AVERITT LLP
Dallas, Texas
March 2, 1996
F-3
<PAGE> 75
PEGASUS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Cash and cash equivalents................................... $ 93,831 $ 1,796,311
Restricted cash............................................. 330,177 690,206
Short-term investments...................................... -- 2,705,076
Accounts receivable, net of allowance for doubtful accounts
of $20,000 and $44,805, respectively...................... 739,496 924,951
Accounts receivable from affiliates......................... 655,756 754,405
Other current assets........................................ 41,990 190,976
------------ ------------
Total current assets.............................. 1,861,250 7,061,925
Software development costs.................................. 4,085,501 2,113,758
Property and equipment, net................................. 2,660,467 3,001,012
Goodwill, net of accumulated amortization of $58,219 and
$178,943, respectively.................................... 1,687,452 1,685,772
Other noncurrent assets..................................... 21,324 29,269
------------ ------------
Total assets...................................... $ 10,315,994 $ 13,891,736
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued liabilities.................... $ 1,736,564 $ 2,574,186
Accounts payable to affiliates.............................. 204,188 115,049
Unearned income............................................. 431,373 470,588
Current portion of capital lease obligations................ 814,490 1,048,238
Current portion of notes payable to affiliates.............. 235,000 785,517
------------ ------------
Total current liabilities......................... 3,421,615 4,993,578
Capital lease obligations, net of current portion........... 1,696,570 1,749,899
Notes payable to affiliates, net of current portion......... 5,297,158 4,603,568
Unearned income............................................. 941,176 470,588
Other noncurrent liabilities................................ -- 119,709
Minority interest........................................... 1,339,682 --
Commitments and contingencies (Note 11)..................... -- --
Shareholders' equity (deficit):
Preferred stock, $.01 par value; 2,000,000 shares
authorized; zero and 1,538,463 shares issued and
outstanding, respectively.............................. -- 15,385
Common stock, $.01 par value; 100,000,000 shares
authorized, 5,218,000 and 5,307,733 shares issued,
respectively........................................... 52,180 53,077
Additional paid-in capital................................ 8,652,969 16,968,364
Unearned compensation..................................... -- (485,937)
Accumulated deficit....................................... (11,085,356) (14,570,157)
Less treasury stock (116,484 shares, at cost)............. -- (26,338)
------------ ------------
Total shareholders' equity (deficit).............. (2,380,207) 1,954,394
------------ ------------
Total liabilities and shareholders' equity
(deficit)....................................... $ 10,315,994 $ 13,891,736
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 76
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Net revenues (Notes 1 and 14)
Shareholder........................... $4,491,985 $ 7,400,592 $11,961,445
Nonshareholder........................ 174,466 1,895,136 3,907,567
---------- ----------- -----------
Total revenues................ 4,666,451 9,295,728 15,869,012
Cost of services........................ 1,546,065 3,882,496 6,199,058
Research and development................ 238,116 839,588 1,961,055
Write-off of purchased in-process
research and development (Note 3)..... -- 1,223,000 244,600
General and administrative expenses..... 1,065,345 2,770,474 3,799,199
Marketing and promotion expenses........ 130,474 912,230 2,824,633
Depreciation and amortization........... 1,518,588 2,476,812 3,425,678
---------- ----------- -----------
Operating income (loss)................. 167,863 (2,808,872) (2,585,211)
Other (income) expense:
Interest expense...................... 591,076 815,560 893,177
Interest income....................... -- -- (114,150)
---------- ----------- -----------
Loss before income taxes and minority
interest.............................. (423,213) (3,624,432) (3,364,238)
Income taxes............................ -- -- 15,000
---------- ----------- -----------
Loss before minority interest........... (423,213) (3,624,432) (3,379,238)
Minority interest....................... -- 53,528 (105,563)
---------- ----------- -----------
Net loss................................ $ (423,213) $(3,570,904) $(3,484,801)
========== =========== ===========
Unaudited pro forma data (Note 1):
Pro forma net loss per share............ $ (0.48)
===========
Weighted average shares outstanding used
in the pro forma net loss per share
calculation........................... 7,202,992
===========
Supplemental pro forma net loss per
share................................. $ (0.38)
===========
Weighted average shares used in the
supplemental pro forma net loss per
share calculation..................... 7,744,488
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 77
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK TREASURY STOCK
------------------- ------------------- ADDITIONAL --------------------
NUMBER OF NUMBER OF PAID-IN UNEARNED NUMBER OF
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION SHARES AMOUNT
--------- ------- --------- ------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance of THISCO at
December 31, 1993...... -- -- 762,000 $7,620 $ 4,857,478 -- -- --
Net loss................ -- -- -- -- -- -- -- --
--------- ------- --------- ------- ----------- --------- -------- --------
Balance of THISCO at
December 31, 1994...... -- -- 762,000 7,620 4,857,478 -- --
========= ======= ========= ======= =========== ========= ======== ========
Conversion of
shareholder loans...... -- -- -- -- 525,000 -- -- --
Exchange of THISCO
shares for Pegasus
shares................. -- -- (762,000) (7,620) 7,620 -- -- --
Formation of Pegasus.... -- -- 2,691,867 26,919 (26,919) -- -- --
Acquisition of HCC...... -- -- 2,242,800 22,428 2,721,749 -- -- --
Issuance of restricted
shares to management... -- -- 283,333 2,833 568,041 -- -- --
Net loss................ -- -- -- -- -- -- -- --
--------- ------- --------- ------- ----------- --------- -------- --------
Balance at December 31,
1995................... -- -- 5,218,000 52,180 8,652,969 -- -- --
========= ======= ========= ======= =========== ========= ======== ========
Issuance of Pegasus
preferred stock to
Information Associates,
L.P. and Information
Associates, C.V........ 1,538,463 $15,385 -- -- 7,484,620 -- -- --
Issuance of Pegasus
common stock for
purchase of minority
interest............... -- -- 89,733 897 277,725 -- -- --
Purchase of treasury
stock.................. -- -- -- -- -- -- (116,484) $(26,338)
Issuance of compensatory
stock options.......... -- -- -- -- 551,150 $(485,937) -- --
Proceeds from stock
subscription........... -- -- -- -- 1,900 -- -- --
Net loss................ -- -- -- -- -- -- -- --
--------- ------- --------- ------- ----------- --------- -------- --------
Balance at December 31,
1996................... 1,538,463 $15,385 5,307,733 $53,077 $16,968,364 $(485,937) (116,484) $(26,338)
========= ======= ========= ======= =========== ========= ======== ========
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------ -----------
<S> <C> <C>
Balance of THISCO at
December 31, 1993...... $ (7,091,239) $(2,226,141)
Net loss................ (423,213) (423,213)
------------ -----------
Balance of THISCO at
December 31, 1994...... (7,514,452) (2,649,354)
============ ===========
Conversion of
shareholder loans...... -- 525,000
Exchange of THISCO
shares for Pegasus
shares................. -- --
Formation of Pegasus.... -- --
Acquisition of HCC...... -- 2,744,177
Issuance of restricted
shares to management... -- 570,874
Net loss................ (3,570,904) (3,570,904)
------------ -----------
Balance at December 31,
1995................... (11,085,356) (2,380,207)
============ ===========
Issuance of Pegasus
preferred stock to
Information Associates,
L.P. and Information
Associates, C.V........ -- 7,500,005
Issuance of Pegasus
common stock for
purchase of minority
interest............... -- 278,622
Purchase of treasury
stock.................. -- (26,338)
Issuance of compensatory
stock options.......... -- 65,213
Proceeds from stock
subscription........... -- 1,900
Net loss................ (3,484,801) (3,484,801)
------------ -----------
Balance at December 31,
1996................... $(14,570,157) $ 1,954,394
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 78
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(423,213) $(3,570,904) $(3,484,801)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority interest....................................... -- (53,528) 105,563
Accrued interest reclassified to notes payable.......... -- 43,496 91,927
Reclassification of accrued interest to notes payable to
affiliates............................................ -- 255,203 --
Loss on write-down of equipment......................... -- 246,000 --
Write off of in-process research and development
costs................................................. -- 1,223,000 244,600
Adjustment for discontinued software projects........... -- -- 316,698
Loss (gain) on sale of equipment........................ (7,620) (14,553) 9,564
Depreciation and amortization........................... 1,518,588 2,476,812 3,425,678
Recognition of stock option compensation................ -- -- 65,213
Changes in assets and liabilities:
Restricted cash....................................... -- (157,307) (360,029)
Accounts receivable................................... (50,197) (182,998) (185,455)
Accounts receivable from affiliates................... (331,980) 80,785 (98,649)
Other current and noncurrent assets................... (1,966) (24,032) (156,931)
Accounts payable and accrued liabilities.............. 295,342 586,483 837,620
Accounts payable to affiliates........................ (20,403) (202,230) (89,139)
Unearned income....................................... -- (210,036) (431,373)
Other noncurrent liabilities.......................... -- -- 119,709
--------- ----------- -----------
Net cash provided by operating activities........... 978,551 496,191 410,195
--------- ----------- -----------
Cash flows from investing activities:
Purchase of software, property and equipment.............. (256,656) (639,461) (495,100)
Proceeds from sale of software, property and equipment.... 71,337 -- 133,134
Purchase of marketable securities......................... -- -- (2,705,076)
--------- ----------- -----------
Net cash used in investing activities............... (185,319) (639,461) (3,067,042)
--------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of stock........................... -- 570,874 7,500,005
Purchase of minority interest............................. -- -- (2,000,000)
Repayments on notes payable to affiliates................. (234,165) (103,337) (235,000)
Repayments of capital leases.............................. (459,398) (578,271) (974,969)
Purchase of treasury stock................................ -- -- (26,338)
Proceeds from stock subscription.......................... -- -- 1,900
Proceeds from line of credit.............................. -- -- 175,000
Repayment of line of credit............................... -- -- (175,000)
Proceeds from capital leases.............................. -- -- 93,729
--------- ----------- -----------
Net cash provided (used) by financing activities........ (693,563) (110,734) 4,359,327
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ 99,669 (254,004) 1,702,480
Cash and cash equivalents, beginning year................... 248,166 347,835 93,831
--------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 347,835 $ 93,831 $ 1,796,311
========= =========== ===========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 509,722 $ 706,842 $ 858,017
Income taxes paid......................................... -- -- --
--------- ----------- -----------
Supplemental schedule of noncash investing and financing
activities:
Acquisition of equipment under capital leases............. $ 120,252 $ 2,083,365 $ 1,045,988
========= =========== ===========
Conversion of notes payable to affiliates to additional
paid-in capital (Note 7)................................ $ -- $ 525,000 $ --
========= =========== ===========
Issuance of common stock for acquisitions (Notes 2, 3 and
8)...................................................... $ -- $ 2,744,177 $ 278,622
========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 79
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BACKGROUND
In July 1995, Pegasus Systems, Inc. (Pegasus or the Company) was formed as
a Delaware holding company to combine the operations of two existing companies
operating in the same industry, The Hotel Industry Switch Company (THISCO) and
The Hotel Clearing Corporation (HCC), as discussed in Note 2 below. For
accounting purposes, the combination was recorded as a purchase of HCC, as
discussed in Note 3 below.
CONSOLIDATION
The accompanying financial statements include the historical accounts of
THISCO for 1994. The financial statements for 1995 reflect the consolidated
balance sheets of THISCO and HCC and the consolidated operations of THISCO for
the year ended 1995 and HCC from the date of acquisition to December 31, 1995.
The 1996 consolidated financial statements include the accounts of Pegasus and
its wholly owned subsidiaries, THISCO and HCC. THISCO is consolidated with its
wholly owned subsidiary, TravelWeb, Inc. (TravelWeb), and HCC is consolidated
with its wholly owned subsidiary, Pegasus Systems Inc. (UK) Limited (Pegasus UK,
formerly The Hotel Clearing Corporation (UK) Limited), (collectively, the
Company). All significant intercompany balances have been eliminated in
consolidation.
THISCO was formed in September 1988 as a Delaware corporation. The
Company's THISCO service provides an electronic interface from hotel central
reservation systems to travel agencies through Global Distribution Systems
(GDSs), which are electronic travel information and reservation systems such as
SABRE.
HCC, acquired by the Company in July 1995 (see Note 3), was formed in July
1991 as a Delaware corporation. The Company's HCC service consolidates
commissions paid by participating hotels to a participating travel agency into a
single monthly payment and provides participants with comprehensive transaction
reports. Hotel properties and travel agencies worldwide utilize the HCC service
to increase the efficiency and reduce costs associated with preparing, paying
and reconciling hotel room reservation commissions.
TravelWeb was formed in October 1995 as a Delaware corporation. The
Company's TravelWeb service provides individual travelers direct access to
online hotel information and the ability to make reservations electronically at
hotel properties. In addition, through its recently introduced NetBooker
service, the Company offers TravelWeb's comprehensive hotel database and
Internet hotel reservation capabilities to third-party Web sites.
Pegasus UK, a wholly-owned subsidiary of HCC, was formed in September 1993
in England to market and provide services for travel agents and hotel chains
operating in Europe, Africa and Asia.
MANAGEMENT ESTIMATES
In preparing the consolidated financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses. Actual results may differ from those
estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of
three months or less from the date of purchase, to be cash equivalents.
F-8
<PAGE> 80
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RESTRICTED CASH
Funds for travel agency commission checks which have not cleared HCC's
processing bank after certain time periods are returned to HCC. Any amounts
which are not remitted to travel agents will be escheated to the appropriate
state, as required.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (FAS
115). In accordance with this Statement, prior period financial statements have
not been restated to reflect the change in accounting principle. The cumulative
effect of the adoption of FAS 115 did not have a material effect on the
Company's financial condition or results of operations.
As of December 31, 1994, 1995 and 1996, the status of the securities
accounted for under FAS 115, was as follows:
<TABLE>
<CAPTION>
AMORTIZED COST
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Held to maturity:
Corporate debt................................... $ -- $ -- $ 992,621
U.S. government agencies......................... -- -- 1,712,455
---------- ---------- ----------
$ -- $ -- $2,705,076
========== ========== ==========
</TABLE>
As of December 31, 1994, 1995 and 1996, the aggregate fair market value of
the held-to-maturity securities was $0, $0 and $2,705,076, respectively. The
gross unrealized gains and losses by type of security were not material.
The contract maturities of the held-to-maturity securities are less than
one year.
SOFTWARE DEVELOPMENT COSTS
All costs incurred in the internal development of computer software used in
delivery of the Company's services are expensed until a product design and a
working model of the software have been tested and completed. Thereafter, any
further development or production costs are capitalized until the software is
placed into service. Maintenance and customer support costs are expensed when
incurred. Capitalized software development costs are amortized on a
product-by-product basis using the greater of the amount computed by the ratio
of current year net revenue to estimated future net revenue, or the amount
computed by the straight-line method over a period which approximates the
estimated economic life of the products. The amount by which unamortized
software costs exceed the net realizable value, if any, is recognized in the
period the excess is determined. Prior to 1996, capitalized costs were being
amortized over three to five years using the straightline method. However, in
1996 the Company changed the estimated life of all capitalized software costs to
three years. The effect of this change was to increase the net loss during 1996
by approximately $292,000 or $0.04 per share on a pro forma basis. During 1996,
the Company recorded a charge of $316,698 resulting from discontinued software
development projects. During 1995 and 1996, the Company capitalized a total of
approximately $3,840,000 and $470,000, respectively, of software development
costs, including the software acquired in connection with the acquisition of HCC
(See Note 3). During 1994, 1995 and 1996, the Company amortized approximately
$970,000, $1,532,000 and $2,125,000, respectively, of capitalized software
costs. Accumulated amortization of software development costs was $4,614,686 and
$6,739,465 at December 31, 1995 and 1996, respectively.
F-9
<PAGE> 81
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
estimated useful lives, ranging from three to seven years. Leasehold
improvements are amortized over the life of the lease using the straight-line
method. Expenditures for maintenance and repairs, as well as minor renewals, are
charged to operations as incurred. Betterments and major renewals are
capitalized. Upon retirement or sale of an asset, the cost of the asset and the
related accumulated depreciation or amortization are removed from the accounts
and any resulting gain or loss is credited or charged to operations.
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (FAS 121) was issued. Effective January 1, 1996, the Company
adopted FAS 121 which requires that long-lived assets held and used by an
entity, or to be disposed of, be reviewed for impairment whenever events or
changes in circumstances indicate that the net book value of the asset may not
be recoverable. An impairment loss will be recognized if the sum of the expected
future cash flows (undiscounted and before interest) from the use of the asset
is less than the net book value of the asset. The amount of the impairment loss
will generally be measured as the difference between the net book value of the
assets and the estimated fair value of the related assets. Based on its most
recent analysis, the Company believes that no impairment of property and
equipment existed at December 31, 1995 or 1996.
GOODWILL
Goodwill represents the excess of the purchase price of acquisitions over
the fair value of the net assets acquired. Such excess costs are being amortized
on a straight-line basis over 15 years. Unamortized goodwill at December 31,
1995 and 1996, was $1,687,452 and $1,685,772, respectively. The carrying value
of goodwill is evaluated periodically in relation to the operating performance
and anticipated future undiscounted net cash flows of the related business.
Based on its most recent analysis, the Company believes that no impairment of
goodwill existed at December 31, 1996. Amortization of goodwill was $0, $58,219
and $120,724 in 1994, 1995 and 1996, respectively.
REVENUES
The Company primarily derives its revenues from transaction fees and
commissions charged to participating hotels and travel agencies. A substantial
portion of Company revenue is derived from shareholders and shareholder-owned
companies (see Note 14).
The Company's revenues are predominantly transaction-based. The Company
derives its revenues from its THISCO service by charging its hotel participants
a fee based on the number of reservations made, less the number cancelled ("net
reservations"), and a fee for "status messages" processed through the THISCO
service. Status messages are electronic messages sent by hotels to GDSs to
update room rates, features and availability information in GDS databases. As
cumulative volumes of net reservations increase during the course of the
calendar year, the fee per transaction decreases after predetermined transaction
volume hurdles have been met. As a result, for higher volume customers, unit
transaction fees are higher at the beginning of the year, when cumulative
transactions are lower. The Company recognizes revenues based on the expected
fee per transaction to be earned for services to be provided to the customer
during the entire year. Because the Company's customer contracts are based on
calendar year terms, this process of recognizing revenues results in a deferred
revenue balance being created during early periods of the year, which will be
reflected in interim balance sheets and be fully utilized by the end of each
year. Additionally, Pegasus generally charges new participants in the THISCO
service a one-time set-up fee for work associated with the implementation of the
interface with the THISCO service. Revenue for these one-time set-up fees is
recognized on a percentage of completion basis as the services are performed
over the set-up period, which generally ranges from two to six months. The
Company also charges certain GDSs a fee based on the number of net reservations
to
F-10
<PAGE> 82
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
compensate for the management and consolidation of multiple interfaces. Revenue
recognized for GDS fees is based on the actual volume of transactions processed
through the specific GDS multiplied by the anticipated average fee per
transaction to be charged to the GDS for the entire calendar year. Since both
the amount of GDS fees and the volume sensitive pricing is far less pronounced
than is the case with hotel customers, the amount of deferred revenue associated
with GDS billings is considerably less than that of the hotels. The Company
intends to reduce certain of the fees that it charges hotels for transmitting
status messages.
Pegasus derives its revenues from its HCC service by charging a
participating travel agency a fee based on a percentage of the dollar amount of
commissions paid to that agency through the HCC service. The Company also
generally charges a participating hotel a fee based on the number of
commissionable transactions arising from that hotel. Revenues from HCC travel
agency fees can vary substantially from period to period based on the types of
hotels at which reservations are made and overall room rates. Pegasus recognizes
revenues from its HCC service in the month in which the hotel stay occurs. In
the immediate following month, Pegasus collects commissions from the hotels by
the 12th business day of such month and pays commissions to travel agencies by
the 15th business day of such month. If a hotel fails to deliver funds to the
Company, the Company is not obligated to deliver commission payments on behalf
of the hotel to travel agencies. HCC revenues also include amortization of a
$2.0 million payment received by the Company in June 1993 in exchange for a
five-year noncancelable data processing contract. This payment was initially
recorded as unearned income and is being recognized as revenue over the life of
the contract. The amount of revenue recognized in 1996 was $431,000 (See Note
11). For the period from acquisition to December 31, 1995 and the year ended
December 31, 1996, HCC revenues from hotels are presented net of commission
payments to travel agencies of approximately $39,820,000 and $105,000,000,
respectively.
The Company offers two services, TravelWeb and NetBooker, that provide
hotel reservation capability to individual travelers through the Internet.
During 1996, Pegasus derived the substantial majority of its TravelWeb revenues
from fees related to the creation of Web site pages for hotels and for
maintaining these pages on the TravelWeb site. During 1997, the Company is
transitioning its fee structure to begin charging participating hotels
subscription fees based on the number of their properties included in the
database and transaction fees based on the number of net reservations made at
their properties through the TravelWeb service. The Company is not in a position
to forecast the effect that this change in fee structure will have on its
TravelWeb revenues. There can be no assurance that such a change will not have a
material adverse effect on the Company's financial condition and results of
operations. The Company also derives revenues through the sale of advertising
space on the TravelWeb site. Pegasus realizes revenues from NetBooker, the
Company's hotel room reservation service provided to third-party Web sites, by
charging third-party Web sites an initial development and licensing fee and by
charging hotels a fee based on the number of net reservations made through the
NetBooker service. The Company has not received a material amount of revenues
for the TravelWeb service or the NetBooker service to date, and there can be no
assurance that either of these services will produce a material amount of
revenues in the future.
INCOME TAXES
The Company presents income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). FAS 109
uses an asset and liability approach to account for income taxes. In the event
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities result in deferred tax assets, an evaluation of
the probability of being able to realize the future benefits indicated by such
assets is required. A valuation allowance is provided for a portion or all of
the deferred tax assets when there is sufficient uncertainty regarding the
Company's ability to recognize the benefits of the assets in future years.
F-11
<PAGE> 83
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ADVERTISING COSTS
Advertising and promotion-related expenses are charged to operations when
incurred. Advertising expense for 1994, 1995 and 1996 was approximately $84,000,
$173,000 and $613,000, respectively.
FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments reflected in
the consolidated balance sheets at December 31, 1995 and 1996 approximate their
respective fair values.
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments exposed to concentrations of credit
risk consist primarily of cash and receivables. Cash balances, exceeding the
federally insured limits, are maintained in financial institutions; however,
management believes the institutions are of high credit quality. The majority of
receivables are due from companies which are well-established entities in the
travel industry. As a consequence, management considers any exposure from
concentrations of credit risks to be limited.
ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123), encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans at fair
value. The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25), and related Interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the fair market value of the
Company's stock at the date of grant over the amount the employee must pay to
acquire the stock. Pro forma disclosure of net loss based on the provisions of
FAS 123 is discussed at Note 9.
STOCK SPLITS
A one hundred-for-one stock split was effected in June 1996. All references
in the consolidated financial statements to shares, share prices, per share
amounts and stock plans have been adjusted retroactively for the one
hundred-for-one stock split. Additional information is presented in Note 8.
In May 1997, the board of directors approved a four-for-three stock split
to be effective concurrent with the effectiveness of the Registration Statement
on Form S-1. All references in the consolidated financial statements to shares,
share prices, per share amounts and stock plans have been adjusted retroactively
for the four-for-three stock split.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency for the Company's foreign
operations. Gains and losses on the translation into U.S. dollars of amounts
denominated in foreign currencies are included in net income.
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Historical loss per share has been excluded from the Company's statements
of operations on the basis that it is irrelevant due to the planned conversion
of all outstanding Series A preferred stock to common stock on a one-for-one
basis concurrent with the effectiveness of the Company's initial public offering
(IPO). Pro forma net loss per share has been computed using the weighted average
number of common shares outstanding after giving retroactive effect to the
four-for-three stock split to be effected upon effectiveness of the Company's
Registration Statement on Form S-1 (see Note 15) and assuming that (i) all
shares of
F-12
<PAGE> 84
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Series A preferred stock have been converted to shares of common stock as of the
date of issuance and (ii) all shares, options and warrants issued subsequent to
June 1, 1996 at an exercise price less than the IPO price have been included in
the calculation as if they were outstanding for the entire period presented
using the treasury stock method and the IPO price.
SUPPLEMENTAL PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Supplemental pro forma net loss per share is based on the weighted average
number of shares of common stock used in the calculation of pro forma net loss
per share, plus the number of shares (541,496 for the year ended December 31,
1996) that the Company would need to repay $5,389,085 of indebtedness
outstanding under notes payable to certain stockholders of the Company at
December 31, 1996. For purposes of computing supplemental pro forma net loss per
share (unaudited), the pro forma net loss for the year ended December 31, 1996
was reduced by $539,213, representing elimination of the related interest
expense on such notes payable.
EARNINGS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (FAS 128), was issued. FAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock. FAS 128
simplifies the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share" (APB 15), and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the statement of operations for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. FAS 128 requires restatement of
all prior-period EPS data presented. The Company will adopt FAS 128 in its
consolidated financial statements as of and for the year ending December 31,
1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
2. REORGANIZATION
Effective in July 1995, the Company issued 4,934,667 shares of its common
stock in exchange for all of the outstanding capital stock of THISCO and 83.3%
of the outstanding capital stock of HCC (the Reorganization). Lodging Network,
Inc. (LNI) retained 210 shares of HCC preferred stock, representing a 16.7%
minority ownership interest in HCC. In conjunction with the Reorganization, LNI
was granted an option (LNI Option), expiring in July 1998, to exchange its 16.7%
ownership interest in HCC for 448,667 shares of the Company's common stock. The
LNI Option was subsequently canceled in June 1996, as part of the purchase of
all of LNI's minority interest ownership in HCC by the Company (see Note 3). The
Company incurred expenses of approximately $194,000 related to the
Reorganization. Such expenses have been included in the general and
administrative expenses in the Company's statement of operations for the year
ended December 31, 1995.
The Reorganization brought THISCO and HCC together under the control of
Pegasus and was initiated to integrate and expand the existing businesses of
THISCO and HCC. Pegasus was formed immediately prior to the transaction for the
purpose of combining the two operations into a single operating entity. Prior to
the Reorganization, THISCO and HCC were primarily controlled by a common (though
not identical) group of shareholders and a common management group. For
accounting purposes, the Reorganization was treated as an acquisition of HCC and
accounted for as a purchase business combination. Accordingly, the HCC assets
acquired and liabilities assumed have been recorded at their fair values at the
date of acquisition. The amount
F-13
<PAGE> 85
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of the purchase price ($2.7 million) in excess of the fair value of net assets
acquired has been recorded as goodwill and will be amortized on a straight-line
basis over 15 years (see Note 3). The Company's consolidated financial
statements include the consolidated accounts and operations of THISCO and HCC
for all periods subsequent to the July 1995 acquisition date.
Prior to the Reorganization, HCC had a special bonus plan for the
management of HCC. As part of the Reorganization, management of HCC agreed to
forfeit its rights to participate in the bonus plan to HCC in return for a cash
payment and the opportunity to purchase an aggregate of 283,333 shares of the
Company's common stock for $570,874. Compensation expense in the amount of
$570,874 related to this transaction has been included in the net loss for the
year ended December 31, 1995. These shares are restricted and are subject to
repurchase upon termination of employment (see Note 8).
3. ACQUISITION
In July 1995, the Company acquired 83.3% of HCC (the Acquisition) in
exchange for 2,242,800 shares of the Company's common stock. HCC markets and
operates an automated commission payment service which settles electronic
bookings for travel agencies and hotel chains. HCC acts as a clearinghouse to
consolidate, collect and pay member travel agent commissions for participating
hotels.
The Acquisition was recorded under the purchase method of accounting, and
accordingly, the results of operations of HCC for all periods subsequent to the
Acquisition date are included in the accompanying consolidated financial
statements. The fair value of HCC was determined based on certain arm's length
equity transactions occurring shortly before the Reorganization. The purchase
price has been allocated to assets acquired and liabilities assumed based on
estimated fair value at the date of the Acquisition. The approximate fair value
of assets acquired and liabilities assumed at the date of acquisition, after
giving effect to the write off of certain purchased research and development, is
summarized as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 505,000
Software.................................................... $ 3,523,000
Property and equipment...................................... $ 245,000
Goodwill.................................................... $ 1,746,000
Other noncurrent assets..................................... $ 18,000
Current liabilities......................................... $(1,034,000)
Long-term liabilities....................................... $(2,089,000)
Minority interest........................................... $(1,393,000)
</TABLE>
Approximately $1,223,000 was allocated to in-process research and
development projects that at the time of the Acquisition had not reached
technological feasibility and had no probable alternative future use. Such
amount of in-process research and development was charged to expense at the date
of acquisition. In addition, as indicated above, $3,523,000 was allocated to
software and is being amortized over a three year period ending June 1998. The
balance of the purchase price paid, approximately $1,746,000, was recorded as
the excess of cost over the fair value of net assets acquired (goodwill) and is
being amortized on a straight-line basis over a 15 year period ending June 2010.
Results of operations after the date of the Acquisition are included in the
1995 Consolidated Statement of Operations. Assuming the Acquisition took place
at January 1, 1994 and 1995, the pro forma net revenues would have been
approximately $7,413,000 and $11,455,000, respectively, and the pro forma net
loss would have been approximately $3,199,400 and $4,071,000, respectively. The
pro forma information for 1994 and 1995 includes adjustments for additional
amortization based on the fair market value of the acquired software and the
goodwill arising from the transaction. The pro forma information for 1994 also
includes the reorganization costs incurred in 1995. The pro forma financial
information is not necessarily indicative of the operations as they would have
been had the transaction been effected on the assumed date.
F-14
<PAGE> 86
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1996, the Company purchased 210 shares of HCC preferred stock from
LNI for $2,000,000 cash and 89,733 shares of Pegasus common stock. The 210 HCC
preferred shares purchased represented a 16.7% minority ownership of HCC. After
the purchase, Pegasus owned 100% of the outstanding shares of HCC. The
transaction was accounted for as a purchase. The price paid in excess of the
minority interest value of $1,445,245 on the date of purchase was approximately
$833,000 and was accounted for as $119,000 of goodwill to be amortized ratably
over a 15 year period with the remaining excess allocated to $245,000 of
in-process research and development costs and $469,000 of step-up in the fair
value of capitalized software costs. Such amount of in-process research and
development was charged to expense at the date of acquisition. The fair value of
the Company's common stock given as consideration was determined using an
independent valuation.
4. ACCOUNTS RECEIVABLE
HCC collects travel agents' commissions from hotel chains and, after
retaining a portion of these commissions as a fee for services, remits the net
commissions to the travel agents. At December 31, 1995 and 1996, trade accounts
receivable were stated net of commissions of $6,059,362 and $8,149,815,
respectively.
Net accounts receivable from affiliates included in the accompanying
consolidated balance sheets were as follows at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Amounts due to HCC from hotel chains........................ $ 27,813 $ 34,606
Amounts due to THISCO from hotel chains..................... 380,573 702,612
Amounts due to TravelWeb from hotel chains.................. 239,002 11,152
Employee travel advances.................................... 8,368 6,035
-------- --------
Accounts receivable from affiliates......................... $655,756 $754,405
======== ========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Computer equipment.......................................... $4,657,439 $4,261,482
Furniture and equipment..................................... 363,801 640,507
Office equipment............................................ 394,055 712,245
Leasehold improvements...................................... 87,061 93,777
---------- ----------
5,502,356 5,708,011
Less: accumulated depreciation.............................. (2,841,889) (2,706,999)
---------- ----------
Property and equipment, net................................. $2,660,467 $3,001,012
========== ==========
</TABLE>
In 1995, the Company purchased assets previously recorded as capital
leases. These capitalized assets were being amortized over the life of the
lease, which was due to expire in the first quarter of 1996. The Company
financed the purchase of the assets and extended the assets' estimated lives by
one year. The effect of these changes was to decrease the net loss during 1995
by approximately $108,000 and increase the net loss during 1996 by $72,000.
6. CAPITAL LEASES
Assets recorded under capital leases, primarily consisting of computer
equipment, are recorded at the lower of the present value of future minimum
lease payments or the fair value of the asset. In 1995, the Company charged off
$246,000 related to switch equipment which was considered obsolete. The assets
were
F-15
<PAGE> 87
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
written down to the estimated salvage value of approximately $20,000. Total
assets recorded under capital leases in 1995 and 1996 were approximately
$4,664,000 and $3,829,000, respectively, net of accumulated amortization of
$2,392,000 and $1,591,000, respectively. Amortization of assets under capital
leases is included in depreciation and amortization expense.
Future minimum lease payments and related interest are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997..................................................... $ 1,322,130
1998..................................................... 1,203,738
1999..................................................... 644,825
2000..................................................... 86,680
-----------
Aggregate minimum lease payments............................ 3,257,373
Less: amount representing interest.......................... (459,236)
-----------
2,798,137
Less current portion........................................ (1,048,238)
-----------
$ 1,749,899
===========
</TABLE>
Interest rates on capital leases range from approximately 7% to 15%.
Interest expense on capital leases for the years ended December 31, 1994, 1995
and 1996 was approximately $123,000, $238,000 and $351,000, respectively.
7. NOTES PAYABLE TO AFFILIATES
Notes payable to affiliates at December 31 consisted of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Note payable to shareholder, bearing interest at prime plus
2.0% on the last day of the previous quarter (the prime
rate at September 30, 1995 and 1996 was 8.75% and 8.25%,
respectively); principal and accrued interest due in full
June 30, 2001 (see Note 13)............................... $4,261,482 $4,261,482
Notes and accrued interest payable to shareholders, bearing
interest at prime plus 1.0%; principal and accrued
interest due in full July 21, 2000, (the prime rate at
December 31, 1995 and 1996 was 8.5% and 8.25%,
respectively)............................................. 509,261 554,474
Notes and accrued interest payable to shareholders, bearing
interest at prime plus 1.0%; principal and accrued
interest due in full July 21, 2000 (the prime rate at
December 31, 1995 and 1996 was 8.5% and 8.25%,
respectively)............................................. 526,415 573,129
Note payable to shareholder, bearing interest at prime plus
2.0%; due March 29, 1996; uncollateralized; beginning
December 31, 1995 the interest rate increased to prime
plus 3.0%; paid in full in 1996........................... 200,000 --
Note payable to shareholder, bearing interest at prime plus
2.0%; due December 31, 1995; paid-in-full in 1996......... 35,000 --
---------- ----------
5,532,158 5,389,085
Less current portion........................................ (235,000) (785,517)
---------- ----------
$5,297,158 $4,603,568
========== ==========
</TABLE>
F-16
<PAGE> 88
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of notes and accrued interest payable to affiliates (including
the change in payment terms discussed in Note 13) as of December 31, 1996, were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- ------------
<S> <C> <C>
1997.................................................................. $ 785,517
1998.................................................................. 869,924
1999.................................................................. 963,402
2000.................................................................. 2,194,528
2001.................................................................. 575,714
----------
$5,389,085
==========
</TABLE>
In 1995 and 1996, no principal or interest payments were due on the note
payable to shareholder of $4,261,482, according to the terms of the agreement,
as THISCO had not reported a consolidated net income. During 1995 and 1996, the
Company elected to make certain payments of interest totaling $465,000 and
$478,000, respectively. Interest expense related to these notes was
approximately $469,000, $578,000 and $539,000 during the years ended December
31, 1994, 1995 and 1996.
In July 1995, simultaneous with the Acquisition, the Company negotiated new
note agreements with all but one shareholder. The new note agreements,
representing obligations of subsidiaries guaranteed by Pegasus, converted
$450,000 in principal to additional paid-in capital, financed $255,203 of unpaid
interest, reduced the interest rate from prime plus two percent to prime plus
one percent and extended the due dates from December 31, 1995 to July 21, 2000.
The note agreement related to the one shareholder which was not renegotiated was
reduced in principal by $75,000 in exchange for Pegasus agreeing to guarantee
the remaining THISCO debt. The reduction of principal was recorded as a capital
contribution.
8. SHAREHOLDERS' EQUITY (DEFICIT)
During 1995, the Company issued 283,333 shares of restricted common stock
to certain members of management in connection with the termination of the HCC
special bonus plan (see Note 2). A compensation charge was recorded in 1995 for
the fair value of the shares issued. For a period of three years from date of
issuance, these shares cannot be sold. If an employee leaves the Company, the
Company has the right to repurchase the shares at the lesser of fifty percent of
the original purchase price or the current market value. During 1996, the
Company repurchased 25,467 shares from a terminated employee.
As a result of the Reorganization effective July 1995, certain shareholders
exchanged shares of THISCO for shares of Pegasus. Additionally, in order to
effect the purchase of HCC, the Company issued Pegasus shares to HCC
shareholders in exchange for 83.3% of the outstanding capital stock of HCC. Some
of the Pegasus shares exchanged for HCC shares were subject to repurchase. The
repurchase was based upon an agreement by the HCC shareholders that some value
for the HCC shares exchanged should be assigned based upon the number of
transactions that an HCC shareholder committed to process through HCC in 1996.
If a shareholder did not fulfill its commitment by processing the agreed number
of transactions through HCC in 1996, the Company had the option to repurchase
such shares for $0.01 per share. The total number of shares repurchased from
each shareholder is based upon the percentage of their transaction commitment
actually processed by HCC during 1996. Effective December 31, 1996, the Company
repurchased 91,017 shares of the 477,733 shares subject to repurchase.
In June 1996, the Company declared a one hundred-for-one stock split
effected in the form of a stock dividend to stockholders of record on that date.
The number of common shares the Company is authorized to issue was also
increased from 100,000 to 20 million and the number of authorized preferred
shares was increased from 10,000 to 2 million.
F-17
<PAGE> 89
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1996, Information Associates, L.P. and Information Associates, C.V.
purchased 1,538,463 shares of the Company's Series A preferred stock (par value
$0.01) for $4.88 per share or $7,500,005. Total shares outstanding increased
from 5,191,249 (including the 89,733 issued to LNI as part of the purchase of
minority interest in HCC) to 6,729,712 shares, with the Information Associates,
L.P. and Information Associates, C.V. ownership representing 22.9% of the total
shares outstanding after the purchase. Additionally, the Company has reserved
866,667 shares as part of the Company's 1996 Stock Option Plan which after
issuance would reduce the 1,538,463 Series A preferred shares to 20.3% of the
total shares outstanding. The Series A preferred shares carry special provisions
which include: conversion rights to exchange one share of Series A preferred
stock for one share of Pegasus common stock; the right to elect two of nine
persons to the board of directors; preferred status as to the payment of any
dividends that are declared by the board of directors; and preferred status in
the event of any liquidation, dissolution or winding up of the corporation.
9. STOCK-BASED COMPENSATION
The Company's 1996 stock option plan was approved by the board of directors
in June 1996 and authorizes the grant of up to 866,667 shares of the Company's
common stock in the form of incentive stock options (ISOs) and nonqualified
stock options. The plan is administered and grant prices are determined by the
Stock Option Committee of the board of directors (Committee). Options normally
extend for a period of 10 years, and under Committee policy become exercisable
in installments of 25% per year commencing one year from the date of grant, or
over a vesting period determined by the Committee. Shares granted come from the
Company's authorized but unissued or reacquired common stock. In 1996, the
Company issued to executives and employees options to purchase an aggregate of
771,733 shares of common stock. These options will become exercisable over a
period of four years.
The Company's 1997 stock option plan was approved by the board of directors
in March 1997 and authorizes the grant of up to 333,333 shares of the Company's
common stock in the form of incentive stock options (ISOs) and nonqualified
stock options. The plan is administered and grant prices are determined by the
Committee. Options normally extend for a period of 10 years, and under Committee
policy become exercisable in installments of 25% per year commencing one year
from the date of grant, or over a vesting period determined by the Committee.
Shares granted come from the Company's authorized but unissued or reacquired
common stock. These options will become exercisable over a period of four years.
The Company has adopted the disclosure-only provisions of FAS 123. As
discussed in Note 1, the Company has elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in APB 25.
Accordingly, unearned compensation of $551,150 related to options is being
recognized ratably over the vesting period for stock option grants with exercise
prices which are less than fair market value of the stock at the date of grant.
Compensation expense of $65,213 was charged to operations in 1996.
There were no stock option awards granted prior to 1996; however, had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant date for awards issued in 1996 consistent with the
provisions of FAS 123, the Company's net loss would have been increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996
-----------
<S> <C>
Net loss -- as reported..................................... $(3,484,801)
Net loss -- pro forma....................................... $(3,511,531)
Pro forma net loss per share -- as reported................. $ (0.48)
Pro forma net loss per share -- as adjusted for pro forma
impact of FAS 123......................................... $ (0.49)
</TABLE>
F-18
<PAGE> 90
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average fair value at date of grant for options granted during
1996 was $1.22 per option. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used:
<TABLE>
<S> <C>
Dividend yield.............................................. --
Expected volatility......................................... 0.0%
Risk-free rate of return.................................... 6.5%
Expected life............................................... 4 years
</TABLE>
The following table summarizes activity under the Company's stock option
plan during the year ended December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
PRICE EXERCISE
OPTIONS PER SHARE PRICE PER SHARE
-------- ----------- ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1995................. -- -- --
Granted........................................ 771,733 $2.01-$3.11 $2.39
Canceled....................................... -- -- --
-------- ----------- -----
Outstanding at December 31, 1996................. 771,733 $2.01-$3.11 $2.39
======== =========== =====
Options exercisable at December 31, 1996......... -- -- --
</TABLE>
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING AT REMAINING
EXERCISE PRICES DECEMBER 31, 1996 CONTRACTUAL LIFE
- --------------- ----------------- ----------------
<C> <C> <C>
$2.01 503,333 9.5 years
$3.11 268,400 9.8 years
</TABLE>
In conjunction with the Reorganization described in Note 2, LNI was granted
an option, expiring in July 1998, to exchange its 210 shares of HCC preferred
stock for 448,667 shares of the Company's common stock. The option was canceled
in June 1996 in conjunction with the Company's purchase of LNI's minority
interest in HCC.
10. INCOME TAXES
Pretax income (loss) from continuing operations for the years ended
December 31 was taxed under the following jurisdictions:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ----------- -----------
<S> <C> <C> <C>
Domestic..................................... $(423,213) $(3,527,122) $(3,528,503)
Foreign...................................... -- (43,782) 58,702
--------- ----------- -----------
$(423,213) $(3,570,904) $(3,469,801)
========= =========== ===========
</TABLE>
F-19
<PAGE> 91
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred taxes consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward......................... $ 4,475,200 $ 4,975,949
Bad debt reserves....................................... 6,800 15,234
Depreciation and amortization........................... 36,623 1,896
Stock option compensation expense....................... -- 22,172
Rent expense............................................ -- 37,213
Various expense accruals................................ 7,248 53,793
Other................................................... 573 2,164
----------- -----------
Total gross deferred tax assets................. 4,526,444 5,108,421
Valuation allowance..................................... (3,528,272) (4,549,452)
Deferred tax liability:
Software amortization................................... (998,172) (558,969)
----------- -----------
Net deferred tax assets................................... $ -- $ --
=========== ===========
</TABLE>
The net deferred tax asset is fully reserved because of uncertainty
regarding the Company's ability to recognize the benefit of the asset in future
years. At December 31, 1994, 1995 and 1996, the Company had net operating loss
carryforwards of approximately $7,538,000, $13,162,000 and $14,635,000,
respectively, which begin to expire in 2003, if not previously utilized.
Utilization of the net operating loss carryforwards may be limited by the
separate return loss year rules and could be affected by ownership changes which
have occurred or could occur in the future.
The components of the income tax provision for the years ended December 31
were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current provision:
Federal............................................. $ -- $ -- $ --
State............................................... -- -- --
Foreign............................................. -- -- 15,000
------- ------- -------
$ -- $ -- $15,000
======= ======= =======
Deferred provision (benefit):
Federal............................................. $ -- $ -- $ --
State............................................... -- -- --
------- ------- -------
Provision for income taxes............................ $ -- $ -- $15,000
======= ======= =======
</TABLE>
A reconciliation of taxes based on the federal statutory rate of 34.0% and
the provision for income taxes is summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Income taxes at the federal statutory rate.................. (34.0%) (34.0%) (34.0%)
Valuation allowance......................................... 31.8% 19.8% 29.4%
Permanent differences....................................... 2.2% 14.3% 5.1%
Other, net.................................................. 0.0% (0.1%) (0.5%)
----- ----- -----
Provision for income taxes.................................. 0.0% 0.0% 0.0%
===== ===== =====
</TABLE>
F-20
<PAGE> 92
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
The Company leases its corporate office space and certain office equipment
under noncancelable operating leases. The Company incurred rent expense of
approximately $146,000, $318,000 and $697,000 in 1994, 1995 and 1996,
respectively.
Approximate future minimum lease payments at December 31, 1996, under
noncancelable operating leases with original terms exceeding one year, including
the Pegasus UK operating lease translated at the rate in effect at December 31,
1996, were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1997............................................................. $ 673,000
1998............................................................. 621,000
1999............................................................. 597,000
2000............................................................. 567,000
2001............................................................. 557,000
Thereafter.......................................................... 552,000
----------
$3,567,000
==========
</TABLE>
In June 1993, HCC received $2,000,000 from Citicorp in exchange for a
five-year noncancelable data processing contract and recorded the amount as
deferred income. The noncancelable contract requires Citicorp to process
transactions and generate various reports in exchange for a processing fee. The
contract requires HCC to maintain an annual minimum volume of transactions. If
the annual minimum volume is not attained, HCC is required to pay Citicorp an
additional processing fee for each transaction under the minimum volume. At the
date of the Acquisition there was approximately $1,583,000 of deferred income to
be amortized over the remaining life of the contract according to the volume of
guaranteed transactions, as defined by the contract. During 1995 and 1996, the
Company recognized approximately $210,000 and $431,000, respectively, of the
deferred income. However, because the Company did not meet its annual minimum
volume of transactions during 1995, it also recorded an additional processing
fee of approximately $44,700 for the year ended December 31, 1995. In 1996, the
Company exceeded the annual minimum volume requirement.
12. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) defined contribution retirement plan (401(k)
Plan) covering full-time employees who have completed one year of service and
attained the age of twenty-one.
Effective January 1, 1995, the 401(k) Plan was amended to change the pro
rata vesting schedule from two to five years. The sponsor can make discretionary
matching contributions up to five percent of employees' annual contributions.
During 1994, 1995 and 1996, the Company contributed approximately $34,000,
$101,000 and $160,000, respectively, to the 401(k) Plan.
Prior to the Acquisition of HCC by THISCO, both companies participated in
the 401(k) Plan. Accordingly, prior to the Acquisition, HCC contributed $20,000
and $18,000 in 1994 and 1995, respectively.
13. SUBSEQUENT EVENTS
The Company has a note payable to a shareholder with a principal balance
outstanding of $4,261,482 at December 31, 1995 and 1996. The original terms of
the note called for five equal payments of principal and interest beginning in
the year that THISCO generated a net profit, but due in full no later than June
30, 2001. Effective January 1997, the Company began remitting equal monthly
payments of principal and interest.
F-21
<PAGE> 93
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1997, the Company issued a warrant to a customer for the purchase of
345,723 shares of the Company's common stock. The warrants are immediately
exercisable during the two year period ending May 12, 1999 at an exercise price
equal to the lower of $7.20 per share or 85.0% of the price per share.
14. RELATED PARTIES
As explained in Note 1, the Company derives a substantial portion of its
revenue from shareholders and shareholder-owned companies through the operation
of its international automated interface called Ultraswitch. Also, as a result
of the Acquisition of HCC in July 1995, a significant portion of the Company's
revenue is generated indirectly by shareholders as a function of the Company's
role as the consolidator and payor of commissions to travel agencies. The
Company receives a fee from hotels for consolidating and remitting commission
payments to travel agencies on behalf of the hotel properties and receives a fee
from travel agencies through the retention of a percentage of commission
payments remitted to travel agencies. A summary of revenues is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------ -------------------
SOURCE OF REVENUE AMOUNT % AMOUNT % AMOUNT %
----------------- ---------- ----- ---------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Shareholders -- direct......... $3,772,458 80.9% $4,950,266 53.2% $ 6,458,380 40.7%
Shareholders -- indirect....... 719,527 15.4% 2,450,326 26.4% 5,503,065 34.7%
---------- ----- ---------- ----- ----------- -----
Total generated by shareholders
directly and indirectly...... 4,491,985 96.3% 7,400,592 79.6% 11,961,445 75.4%
All other revenue.............. 174,466 3.7% 1,895,136 20.4% 3,907,567 24.6%
---------- ----- ---------- ----- ----------- -----
Total................ $4,666,451 100.0% $9,295,728 100.0% $15,869,012 100.0%
========== ===== ========== ===== =========== =====
</TABLE>
A shareholder provides services to the Company, including facility
management, consulting and software development. During 1994, 1995 and 1996, the
Company recognized expense in the amount of approximately $454,000, $495,000 and
$774,000, respectively, for those services. Further, the Company capitalized
$42,000 and $210,000 related to software development and property and equipment
during 1994 and 1995, respectively.
Persons related to an officer of the Company have provided printing, design
and procurement services to the Company. During 1994, 1995 and 1996, the Company
paid approximately $95,000, $48,000 and $143,000, respectively, relating to
these services, the majority of which related to capitalized furniture
purchases.
15. STOCK SPLIT
The Company plans to proceed with an IPO in 1997. Consequently, the Company
approved the declaration of a four-for-three stock split of the outstanding
common and preferred stock effected in the form of a dividend to shareholders of
record on the effective date of the Registration Statement on Form S-1 with
respect to the IPO. The number of shares of common stock the Company is
authorized to issue will increase from 20 million to 100 million and the number
of authorized shares of preferred stock will remain 2.0 million. As stated in
Note 1, the financial statements have been adjusted retroactively for the
four-for-three split.
F-22
<PAGE> 94
PEGASUS SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, PRO FORMA
1996 1997 (NOTE 7)
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents.......................... $ 1,796,311 $ 2,441,474 $ 2,441,474
Restricted cash.................................... 690,206 845,665 845,665
Short-term investments............................. 2,705,076 983,604 983,604
Accounts receivable, net of allowance for doubtful
accounts of $44,805, $61,262 and $61,262,
respectively..................................... 924,951 1,189,889 1,189,889
Accounts receivable from affiliates................ 754,405 1,261,241 1,261,241
Other current assets............................... 190,976 248,199 248,199
------------ ------------ ------------
Total current assets..................... 7,061,925 6,970,072 6,970,072
Software development costs......................... 2,113,758 1,761,465 1,761,465
Property and equipment, net........................ 3,001,012 3,163,499 3,163,499
Goodwill, net of accumulated depreciation of
$178,943, $210,161 and $210,161, respectively.... 1,685,772 1,654,554 1,654,554
Other noncurrent assets............................ 29,269 51,074 51,074
------------ ------------ ------------
Total assets............................. $ 13,891,736 $ 13,600,664 $ 13,600,664
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities........... $ 2,574,186 $ 2,499,065 $ 2,499,065
Accounts payable to affiliates..................... 115,049 140,729 140,729
Unearned income.................................... 470,588 1,029,107 1,029,107
Current portion of capital lease obligations....... 1,048,238 1,090,121 1,090,121
Current portion of notes payable to affiliates..... 785,517 805,818 805,818
------------ ------------ ------------
Total current liabilities................ 4,993,578 5,564,840 5,564,840
Capital lease obligations, net of current
portion.......................................... 1,749,899 1,539,710 1,539,710
Notes payable to affiliates, net of current
portion.......................................... 4,603,568 4,417,010 4,417,010
Unearned income.................................... 470,588 352,941 352,941
Other noncurrent liabilities....................... 119,709 125,684 125,684
Minority interest.................................. -- -- --
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; 1,538,463 shares issued and
outstanding (actual); no shares outstanding (pro
forma)........................................... 15,385 15,385 --
Common stock, $.01 par value; 100,000,000 shares
authorized, 5,307,733 shares issued (actual);
6,846,196 shares issued (pro forma).............. 53,077 53,077 68,462
Additional paid-in capital......................... 16,968,364 16,968,364 16,968,364
Unearned compensation.............................. (485,937) (451,488) (451,488)
Accumulated deficit................................ (14,570,157) (14,958,521) (14,958,521)
Less treasury stock (116,484, at cost)............. (26,338) (26,338) (26,338)
------------ ------------ ------------
Total shareholders' equity............... 1,954,394 1,600,479 1,600,479
------------ ------------ ------------
Total liabilities and shareholders'
equity................................. $ 13,891,736 $ 13,600,664 $ 13,600,664
============ ============ ============
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-23
<PAGE> 95
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Net revenues
Shareholder............................................... $3,052,212 $3,120,692
Nonshareholder............................................ 750,955 1,255,871
---------- ----------
Total revenues.................................... 3,803,167 4,376,563
Cost of services............................................ 1,637,870 1,557,656
Research and development.................................... 627,112 622,727
General and administrative expenses......................... 692,071 855,531
Marketing and promotion expenses............................ 643,884 865,307
Depreciation and amortization............................... 909,493 707,458
---------- ----------
Operating income (loss)..................................... (707,263) (232,116)
Other (income) expense:
Interest expense.......................................... 211,573 212,150
Interest income........................................... -- (55,902)
---------- ----------
Loss before income taxes and minority interest.............. (918,836) (388,364)
Income taxes................................................ -- --
---------- ----------
Loss before minority interest............................... (918,836) (388,364)
Minority interest........................................... (47,961) --
---------- ----------
Net loss.................................................... $ (966,797) $ (388,364)
========== ==========
Unaudited pro forma data (Notes 3 and 4):
Pro forma net loss per share................................ $ (0.05)
==========
Weighted average shares outstanding used in the pro forma
net loss per share calculation............................ 7,480,899
==========
Supplemental pro forma net loss per share................... $ (0.03)
==========
Weighted average shares used in the supplemental pro forma
net loss per share calculation............................ 8,005,689
==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-24
<PAGE> 96
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------- ------------------- ADDITIONAL
NUMBER OF NUMBER OF PAID-IN UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
--------- ------- --------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996............ 1,538,463 $15,385 5,307,733 $53,077 $16,968,364 $(485,937)
Compensation expense for vesting of
stock options......................... 34,449
Net loss................................ -- -- -- -- -- --
--------- ------- --------- ------- ----------- ---------
Balance at March 31, 1997............... 1,538,463 $15,385 5,307,733 $53,077 $16,968,364 $(451,488)
========= ======= ========= ======= =========== =========
<CAPTION>
TREASURY STOCK
--------------------
NUMBER OF ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
--------- -------- ------------ ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996............ (116,484) $(26,338) $(14,570,157) $1,954,394
Compensation expense for vesting of
stock options......................... 34,449
Net loss................................ -- -- (388,364) (388,364)
-------- -------- ------------ ----------
Balance at March 31, 1997............... (116,484) $(26,338) $(14,958,521) $1,600,479
======== ======== ============ ==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-25
<PAGE> 97
PEGASUS SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(966,797) $ (388,364)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Minority share of net gain (loss)...................... 47,961 --
Loss (gain) on sale of equipment....................... 9,988 --
Depreciation and amortization.......................... 909,493 707,458
Adjustment for discontinued software................... 316,698 --
Proceeds from increase in long-term notes payable
accrued interest...................................... 21,229 22,671
Changes in assets and liabilities:
Restricted cash...................................... 1,254 (155,459)
Accounts receivable.................................. 59,349 (264,938)
Accounts receivable from affiliates.................. (777,980) (506,836)
Short-term investments............................... -- 446,040
Other current and noncurrent assets.................. (41,083) (79,028)
Accounts payable and accrued liabilities............. 676,004 (75,121)
Accounts payable to affiliates....................... 393,668 25,680
Unearned income...................................... (102,847) 440,872
Unearned compensation................................ -- 34,449
Other noncurrent liabilities......................... 25,867 5,976
--------- -----------
Net cash provided by operating activities......... $ 572,804 $ 213,400
========= ===========
Cash flows from investing activities:
Purchase of software, property and equipment.............. $(158,441) $ (407,291)
Proceeds from sale of software, property and equipment.... 132,328 --
Purchase of marketable securities......................... -- (1,429,645)
Proceeds from maturities of marketable securities......... -- 2,705,076
--------- -----------
Net cash provided by (used in) investing
activities....................................... (26,113) 868,140
--------- -----------
Cash flows from financing activities:
Repayments of notes payable............................... (235,000) (188,928)
Repayments of capital leases.............................. (168,833) (251,362)
Proceeds from capital leases.............................. -- 3,913
--------- -----------
Net cash used in financing activities............. (403,833) (436,377)
--------- -----------
Net increase in cash and cash equivalents................... 142,858 645,163
Cash and cash equivalents, beginning year................... 93,831 1,796,311
--------- -----------
Cash and cash equivalents, end of year...................... $ 236,689 $ 2,441,474
========= ===========
Supplemental schedule of noncash investing and financing
activities:
Acquisition of equipment under capital leases............. $ -- $ 79,144
========= ===========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-26
<PAGE> 98
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In July 1995, Pegasus Systems, Inc. (Pegasus or the Company) was formed as
a Delaware holding company to combine the operations of two existing companies
operating in the same industry, The Hotel Industry Switch Company, Inc. (THISCO)
and The Hotel Clearing Corporation (HCC). For accounting purposes, the
combination was recorded as a purchase of HCC.
The accompanying financial statements include the consolidated accounts of
Pegasus and its wholly owned subsidiaries, THISCO and HCC. THISCO is
consolidated with its wholly owned subsidiary, TravelWeb, Inc. (TravelWeb), and
HCC is consolidated with its wholly owned subsidiary, Pegasus Systems Inc. (UK)
Limited (Pegasus UK, formerly The Hotel Clearing Corporation (UK) Limited),
(collectively, the Company). All significant intercompany balances have been
eliminated in consolidation.
THISCO was formed in September 1988 as a Delaware corporation. The
Company's THISCO service provides an electronic interface from hotel central
reservation systems to travel agencies through Global Distribution Systems
("GDSs"), which are electronic travel information and reservation systems such
as SABRE.
HCC, acquired by the Company in July 1995 (see Note 3), was formed in July
1991 as a Delaware corporation. The Company's HCC service consolidates
commissions paid by participating hotels to a participating travel agency into a
single monthly payment and provides participants with comprehensive transaction
reports. Hotel properties and travel agencies worldwide utilize the HCC service
to increase the efficiency and reduce costs associated with preparing, paying
and reconciling hotel room reservation commissions.
TravelWeb was formed in October 1995 as a Delaware corporation. The
Company's TravelWeb service provides individual travelers direct access to
online hotel information and the ability to make reservations electronically at
hotel properties. In addition, through its recently introduced NetBooker
service, the Company offers TravelWeb's comprehensive hotel database and
Internet hotel reservation capabilities to third-party Web sites.
Pegasus UK, a wholly-owned subsidiary of HCC, was formed in September 1993
in England to market and provide services for travel agents and hotel chains
operating in Europe, Africa and Asia.
The financial information presented herein should be read in conjunction
with the Company's annual consolidated financial statements for the year ended
December 31, 1996. The foregoing unaudited interim consolidated financial
statements reflect all adjustments (all of which are of a normal recurring
nature) which are, in the opinion of management, necessary for a fair
presentation of the results of the interim periods. The results for interim
periods are not necessarily indicative of results to be expected for the year.
2. STOCK SPLITS
A one hundred-for-one stock split was effected in June 1996. All references
in the consolidated financial statements to shares, share prices, per share
amounts and stock plans have been adjusted retroactively for the one
hundred-for-one stock split.
The Company plans to proceed with an IPO in 1997. Consequently, in May 1977
the Board of Directors approved the declaration of a four-for-three stock split
of the outstanding common and preferred stock effected in the form of a dividend
to stockholders of record on the effective date of the Registration Statement on
Form S-1 with respect to the IPO. The number of shares of common stock the
Company is authorized to issue will increase from 20 million to 100,000,000 and
the number of authorized shares of preferred stock will remain two million. All
references in the consolidated financial statements to shares, share prices, per
share amounts and stock plans have been adjusted retroactively for the
four-for-three stock split.
F-27
<PAGE> 99
PEGASUS SYSTEMS, INC.
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
3. PRO FORMA NET LOSS PER SHARE
Historical loss per share has been excluded from the Company's statements
of operations on the basis that it is irrelevant due to the planned conversion
of all outstanding Series A preferred stock to common stock on a one-for-one
basis concurrent with the effectiveness of the Company's initial public
offering. Pro forma net loss per share has been computed using the weighted
average number of common shares outstanding after giving retroactive effect to
the four-for-three stock split to be effected upon effectiveness of the
Company's Registration Statement on Form S-1 (see Note 7) and assuming that (i)
all shares of Series A preferred stock have been converted to shares of common
stock as of the date of issuance (see Note 8) and (ii) all shares, options and
warrants issued subsequent to June 1, 1996, at an exercise price less the
initial public offering (IPO) price have been included in the calculation as if
they were outstanding for the entire period presented using the treasury stock
method and the IPO price.
4. SUPPLEMENTAL PRO FORMA NET LOSS PER SHARE
Supplemental pro forma net loss per share is based on the weighted average
number of shares of common stock used in the calculation of pro forma net loss
per share, plus the number of shares (524,790 for the three months ended March
31, 1997) that the Company would need to repay $5,222,828 of indebtedness
outstanding under notes payable to certain stockholders of the Company at March
31, 1997. For purposes of computing supplemental pro forma net loss per share
(unaudited), the pro forma net loss for the three months ended March 31, 1997
was reduced by $130,639, representing elimination of the related interest
expense on such notes payable.
5. EARNINGS PER SHARE
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (FAS 128), was issued. FAS 128 specifies the computation,
presentation and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock. FAS 128
simplifies the standards for computing EPS previously found in Accounting
Principles Board Opinion No. 15, "Earnings per Share" (APB 15), and makes them
comparable to international EPS standards. It replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the statement of operations for all
entities with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application is not permitted. FAS 128 requires restatement of
all prior-period EPS data presented. The Company will adopt FAS 128 in the year
ending December 31, 1997 and, based on current circumstances, does not believe
the effect of adoption will be material.
6. SUBSEQUENT EVENT
In May 1997, the Company issued a warrant to a customer for the purchase of
345,723 shares of the Company's common stock. The warrants are exercisable
during the two year period ended May 12, 1999 at an exercise price equal to the
lower of $7.20 per share or 85.0% of the IPO price per share.
7. PRO FORMA BALANCE SHEET
In conjunction with the Company's planned IPO, all outstanding shares of
Series A preferred stock will be converted on a one-for-one basis to common
stock concurrent with the effectiveness of the Company's Registration Statement
on Form S-1. Accordingly, the pro forma balance sheet at March 31, 1997 gives
effect to the conversion of the 1,538,463 shares of Series A preferred stock to
1,538,463 shares of Series A common stock as if such conversion had occurred as
of the balance sheet date.
F-28
<PAGE> 100
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
The Hotel Clearing Corporation
We have audited the accompanying consolidated balance sheets of The Hotel
Clearing Corporation and its subsidiary as of December 31, 1993 and 1994, and
the related consolidated statements of operations, shareholders' deficit and
cash flows for the years then ended. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Hotel
Clearing Corporation as of December 31, 1993 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Belew Averitt LLP
Dallas, Texas
April 4, 1995, except for
Note 12, as to which the
date is August 21, 1995
F-29
<PAGE> 101
THE HOTEL CLEARING CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
ASSETS
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 37,835 $ 7,612
Accounts receivable, net (Note 3)......................... 215,382 194,493
Accounts receivable from affiliates....................... 14,496 17,732
Prepaid expenses.......................................... 21,230 15,923
----------- -----------
Total current assets.............................. 288,943 235,760
Property and equipment, net (Note 4)........................ 210,445 209,640
----------- -----------
Total assets...................................... $ 499,388 $ 445,400
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.................. $ 368,920 $ 601,177
Accounts payable to affiliates............................ 29,126 187,472
Current portion of unearned income........................ 274,510 352,941
Line-of-credit (Note 6)................................... 180,000 --
Current portion of notes payable to affiliates (Note 6)... -- 786,478
Current portion of capital lease obligations (Note 5)..... 33,500 52,528
----------- -----------
Total current liabilities......................... 886,056 1,980,596
Capital lease obligations, net of current portion (Note
5)........................................................ 58,381 48,929
Notes payable to affiliates (Note 6)........................ 747,139 --
Unearned income, net of current portion (Note 12)........... 1,725,490 1,372,549
----------- -----------
Total liabilities................................. 3,417,066 3,402,074
Commitments and contingencies (Notes 8 and 12).............. -- --
Shareholders' deficit (Note 7):
Preferred stock:
Series A............................................... 2 2
Series B............................................... 1 1
Common stock.............................................. 10 10
Additional paid-in capital................................ 1,702,885 1,702,885
Accumulated deficit....................................... (4,620,576) (4,659,572)
----------- -----------
Total shareholders' deficit....................... (2,917,678) (2,956,674)
----------- -----------
Total liabilities and shareholders' deficit....... $ 499,388 $ 445,400
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE> 102
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
----------- ----------
<S> <C> <C>
Net revenues (Note 8):
Shareholder............................................... $ 1,515,686 $2,397,236
Nonshareholder............................................ 8,691 349,255
----------- ----------
1,524,377 2,746,491
Operating expenses:
General and administrative expenses....................... 2,215,356 1,763,754
Other operating expenses.................................. 531,345 878,444
Depreciation and amortization............................. 113,064 65,216
----------- ----------
Total operating expenses.......................... 2,859,765 2,707,414
----------- ----------
Operating income (loss)..................................... (1,335,388) 39,077
Interest expense............................................ 97,448 78,073
----------- ----------
Loss before income taxes and extraordinary gain............. (1,432,836) (38,996)
Income taxes (Note 9)....................................... -- --
----------- ----------
Loss before extraordinary gain.............................. (1,432,836) (38,996)
Extraordinary gain (Note 11)................................ 269,310 --
----------- ----------
Net loss.................................................... $(1,163,526) $ (38,996)
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE> 103
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ ------------------ ADDITIONAL
NUMBER OF NUMBER OF PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992............. -- $-- 9 $ 1 $ 550,997 $(3,457,050) $(2,906,052)
105-for-1 stock split.................. -- -- 936 9 (9) -- --
Preferred stock issuance:
Series A............................. 210 2 -- -- 1,049,998 -- 1,050,000
Series B............................. 20 1 -- -- 1,899 -- 1,900
Conversion of note payable into common
stock................................ -- -- 105 -- 100,000 -- 100,000
Net loss............................... -- -- -- -- -- (1,163,526) (1,163,526)
--- --- ----- --- ---------- ----------- -----------
Balance, December 31, 1993............. 230 3 1,050 10 1,702,885 (4,620,576) (2,917,678)
Net loss............................... -- -- -- -- -- (38,996) (38,996)
--- --- ----- --- ---------- ----------- -----------
Balance, December 31, 1994............. 230 $ 3 1,050 $10 $1,702,885 $(4,659,572) $(2,956,674)
=== === ===== === ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE> 104
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,163,526) $ (38,996)
Adjustments to reconcile net loss to cash provided (used)
by operating activities:
Loss on sale of equipment.............................. -- 125
Depreciation and amortization.......................... 113,064 65,216
Reclassification of accrued interest to notes payable
to affiliates......................................... 56,107 58,614
Gain on extinguishment of debt......................... (269,310) --
Deferred income recognition............................ -- (274,510)
(Increase) decrease in:
Accounts receivable, net............................. (166,190) 20,889
Accounts receivable from affiliates.................. (14,496) (3,236)
Prepaid expenses..................................... (6,230) 5,307
Increase (decrease) in:
Accounts payable and accrued liabilities............. (55,410) 232,257
Accounts payable to affiliate........................ (14,163) 158,346
----------- ---------
Net cash provided (used) by operating
activities...................................... (1,520,154) 224,012
Cash flows from investing activities:
Purchase of property and equipment........................ (34,266) (42,612)
Proceeds from sale of equipment........................... -- 21,152
----------- ---------
Net cash used by investing activities............. (34,266) (21,460)
Cash flows from financing activities:
Proceeds from issuance of stock........................... 1,900 --
Proceeds from installment payments on stock purchase...... 1,050,000 --
Proceeds from contract commitment -- deferred income...... 2,000,000 --
Proceeds (repayment) of line-of-credit.................... 180,000 (180,000)
Repayment of notes payable................................ (1,640,000) (19,275)
Repayment of capital leases............................... (14,437) (33,500)
----------- ---------
Net cash provided (used) by financing
activities...................................... 1,577,463 (232,775)
----------- ---------
Net increase (decrease) in cash and cash equivalents........ 23,043 (30,223)
Cash and cash equivalents, beginning of period.............. 14,792 37,835
----------- ---------
Cash and cash equivalents, end of period.................... $ 37,835 $ 7,612
=========== =========
Supplemental disclosures of cash flow information --Interest
paid...................................................... $ 70,789 $ 19,458
=========== =========
Supplemental schedule of noncash investing and financing
activities:
Issuance of capital lease obligation for computer
equipment.............................................. $ 106,318 $ 43,076
=========== =========
Conversion of note payable to common stock................ $ 100,000 $ --
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE> 105
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1994
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and background -- The Hotel Clearing Corporation (HCC) was
incorporated as a Delaware corporation on July 25, 1991, to market and operate
an automated commission payment processing service that consolidates commissions
paid by participating hotels to a participating travel agency into a single
monthly payment and provides participants with comprehensive transaction
reports. HCC collects commissions from participating hotel chains and remits
these commissions to participating travel agents.
Consolidation -- The consolidated financial statements include the accounts
of HCC and its wholly-owned subsidiary, The Hotel Clearing Corporation (U.K.)
Limited (HCC U.K.) (collectively, the Company). HCC U.K. commenced operations in
England on September 2, 1993 to market and provide related services for travel
agents and hotel chains operating in Europe. All significant intercompany
balances and transactions have been eliminated.
Cash and cash equivalents -- The Company considers all highly-liquid
investments with an original maturity of three months or less when purchased to
be cash equivalents.
Software development costs -- All costs incurred in the internal
development of computer software used in delivery of the Company's services are
expensed until a product design and a working model of the software have been
tested and completed. Thereafter, any further development or production costs
are capitalized. Maintenance and customer support costs are expensed when
incurred. Capitalized costs are being amortized over three to five years using
the straightline method. During 1993, the Company amortized approximately
$78,000 of capitalized software costs. No software development costs were
capitalized in 1993 or 1994.
Property and equipment -- Property and equipment are recorded at cost and
are depreciated using the straight-line method over their estimated useful
lives, ranging from five to seven years. Expenditures for maintenance and
repairs, as well as minor renewals, are charged to operations as incurred.
Betterments and major renewals are capitalized. Upon retirement or sale of an
asset, the cost of the asset and the related accumulated depreciation and
amortization are removed from the accounts and any resulting gain or loss is
credited or charged to operations.
Leasehold improvements -- Leasehold improvements are recorded at cost and
are amortized using the straight-line method over four years, which is the life
of the lease.
Revenues -- HCC's revenues are derived primarily from travel agencies. HCC
processes commission payments to travel agencies on behalf of both shareholder
and nonshareholder hotels. HCC also provides transaction detail reports and
hotel booking reconciliation services to travel agencies. For these services,
HCC receives a percentage of the travel agencies' commissions paid through HCC.
HCC also earns transaction fees from the participating hotels. These revenues
are recorded as earned throughout the year. Revenue related to term contracts
are deferred and amortized into income over the life of the contracts. For the
years ended December 31, 1993 and 1994, HCC's revenues from hotels are presented
net of commission payments to travel agencies of $22,211,781 and $34,218,496,
respectively.
Federal income taxes -- Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes" which requires an asset and liability approach to financial
accounting for income taxes. In the event differences between the financial
reporting basis and the tax basis of HCC's assets and liabilities result in
deferred tax assets, SFAS 109 requires an evaluation of the probability of being
able to realize the future benefits indicated by such assets. A valuation
allowance is provided for a portion or all of the deferred tax assets when there
is an uncertainty regarding the Company's ability to recognize the benefits of
the assets in future years.
F-34
<PAGE> 106
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Concentration of credit risk -- The Company's financial instruments exposed
to concentration of credit risk consist primarily of its trade receivables. The
majority of receivables are due from shareholders who are well-established
entities in the travel industry. As a result, credit risk is considered limited.
Reclassifications -- Certain 1993 balances have been reclassified to
conform to the 1994 presentation.
2. OPERATIONS
During 1994, the Company increased revenues $1,222,114 to $2,746,491,
reduced operating expenses $152,351 to $2,707,414 and generated positive cash
flows of $224,012 from operations, yet the Company incurred a net loss of
$38,996 and has a shareholders' deficit of $2,956,674 at December 31, 1994. The
Company's business plan contemplates additional revenue increases through the
addition of more hotels and travel agents to its commission payment services
sufficient to meet current working capital needs to nonshareholders.
In addition, the Company has plans to negotiate an extension of payment
terms on existing short-term debt to shareholders of $655,725 and accrued
interest of $130,756. However, the Company may continue to require additional
capital contributions and borrowings from shareholders. Common stock agreements
contain provisions whereby the shareholders are required, as defined, to
contribute additional capital and lend additional amounts to the Company. There
can be no guarantee, however, that funds from these sources or any other source
will be available to the Company (see Note 13).
3. ACCOUNTS RECEIVABLE
The Company collects travel agents' commissions from hotel chains and,
after retaining a portion of these commissions, remits net commissions to the
travel agents. Net accounts receivable included in the accompanying consolidated
balance sheets were as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Amounts due from hotel chains........... $ 2,256,086 $ 3,021,542
Net commissions due to travel agents.... (2,040,704) (2,827,049)
----------- -----------
$ 215,382 $ 194,493
=========== ===========
</TABLE>
The accounts receivable from affiliates results from transaction fees
charged to shareholder hotels.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consisted of the following:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Computer equipment...................... $ 111,587 $ 129,031
Furniture and equipment................. 85,105 112,697
Office equipment........................ 58,022 75,359
Leasehold improvements.................. 1,724 1,724
----------- -----------
256,438 318,811
Less accumulated depreciation........... (45,993) (109,171)
----------- -----------
$ 210,445 $ 209,640
=========== ===========
</TABLE>
F-35
<PAGE> 107
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. CAPITAL LEASES
Assets recorded under capital leases are recorded at the lower of present
value of future minimum lease payments or the fair value of the asset. Total
assets recorded under capital leases at December 31, 1993 and 1994 were $106,318
and $149,394, respectively, net of accumulated amortization of $11,375 and
$51,615, respectively. The assets are amortized using the straight-line method
over the shorter of their useful lives or the term of the related leases.
Amortization of assets under capital leases are included in depreciation and
amortization expense.
Future minimum lease payments and related interest are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1995.................................. $ 62,937
1996.................................. 37,404
1997.................................. 15,828
--------
Total minimum lease payments............ 116,169
Less interest........................... 14,712
--------
101,457
Less current portion.................... 52,528
--------
$ 48,929
========
</TABLE>
The interest rates on the capital leases range from 11.0% to 12.1%, which
were imputed at the inception of the leases.
6. NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
<S> <C> <C>
Notes payable to shareholders, bearing interest at the prime
rate plus 2.0% due December 31, 1995; the prime rate at
December 31, 1994 was 8.5%; uncollateralized.............. $ 747,139 $ 786,478
Convertible line-of-credit to a preferred stock shareholder;
accruing interest at the prime rate plus 2.0%; expires
June 1, 1994; uncollateralized; paid on June 1, 1994...... 180,000 --
--------- ---------
927,139 786,478
Less current portion........................................ (180,000) (786,478)
--------- ---------
$ 747,139 $ --
========= =========
</TABLE>
7. SHAREHOLDERS' DEFICIT
In October, 1992, the Company entered into a non-refundable agreement with
an investment group to purchase 210 shares of the Company's preferred stock for
$1,500,000. The purchase was to be made in monthly installments of $150,000
which began October 1, 1992. On August 10, 1993, the investment group completed
the funding of $1,500,000, at which time the 210 shares of preferred stock were
issued.
On August 10, 1993, the Board of Directors amended the Articles of
Incorporation to increase the authorized number of common shares from 105,000 to
210,000 shares. In addition, the Board of Directors established a Series A and
Series B preferred stock with 52,500 shares authorized for each series at a par
value
F-36
<PAGE> 108
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of $.01 per share. Such shares have preferential dividend rights. The Board of
Directors' declared stock split of 105-for-1 for both common and preferred
shares has been reflected in the financial statements. In August, 1993, the
Company sold 20 shares of the Series B preferred stock to an officer of the
Company for $95 per share.
On December 31, 1993, a $100,000 note payable to a company was converted to
105 shares of common stock. The conversion did not result in a gain or loss.
At December 31, 1994, the Company had the following shares issued and
outstanding:
<TABLE>
<CAPTION>
STOCK STOCK PAR
AUTHORIZED ISSUED VALUE
---------- ------ -----
<S> <C> <C> <C>
Common stock.............................................. 210,000 1,050 $.01
Preferred stock:
Series A................................................ 52,500 210 $.01
Series B................................................ 52,500 20 $.01
</TABLE>
The Company has agreements with its common shareholders whereby it can
require them to make additional capital contributions. Also under the provisions
of the agreements, the Company can require all common shareholders to lend
additional funds to the Company in such amounts as determined by the Board of
Directors. In the event a shareholder fails to contribute capital or lend funds
to the Company, the Company can acquire the shareholder's shares at $.01 per
share.
8. RELATED PARTIES
The Company derives a substantial portion of its revenue from
shareholder-owned companies. Also, much of the revenue is generated indirectly
by shareholders as a function of HCC's role as the consolidator and payor of
commissions to travel agencies. HCC makes commission payments to travel agencies
on behalf of hotel properties and receives a percentage of the commission
payment from the travel agent for this service. A summary of revenues is as
follows:
<TABLE>
<CAPTION>
1993 1994
------------------- -------------------
REVENUES AMOUNT % AMOUNT %
-------- ---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Shareholders -- direct..................... $ 168,749 11.0% $ 232,173 8.5%
Shareholders -- indirect................... 1,346,937 88.4% 2,165,063 78.8%
---------- ----- ---------- -----
Total generated by shareholders directly
and indirectly........................... 1,515,686 99.4% 2,397,236 87.3%
All other revenue.......................... 8,691 0.6% 349,255 12.7%
---------- ----- ---------- -----
Total............................ $1,524,377 100.0% $2,746,491 100.0%
========== ===== ========== =====
</TABLE>
The Company and The Hotel Industry Switch Company (THISCO) have management
and certain shareholders in common. The Company pays a management fee to THISCO,
which represents a portion of THISCO's management salaries and related benefits
attributable to the Company's operations. Management fees paid to THISCO during
1993 and 1994 were $156,928 and $290,465, respectively.
The Company utilizes THISCO's telecommunications network and various
equipment. During 1993 and 1994, the Company paid THISCO $101,490 and $46,096,
respectively, for the use of the network and this equipment. In 1993, THISCO
also transferred $22,537 of furniture and equipment and the related capital
lease obligation to HCC.
F-37
<PAGE> 109
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A shareholder provided services to the Company, including facility
management, consulting and software development. During 1993 and 1994, the
Company recognized expense in the amount of approximately $30,000 and $33,000,
respectively, for those services.
Persons related to an officer of the Company have provided printing, design
and procurement services to the Company. During 1993 and 1994, the Company paid
approximately $17,000 and $11,000, respectively, relating to these services.
The Company has an agreement to sublease office space from THISCO for a
four-year period under an operating lease agreement. Amounts paid to THISCO
under this agreement during 1993 and 1994 were $106,454 and $105,863,
respectively. Estimated future minimum lease payments due to THISCO at December
31, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1995............................................ $119,000
1996............................................ 126,000
1997............................................ 21,000
--------
$266,000
========
</TABLE>
9. INCOME TAXES
During 1994, the Company recorded a long-term deferred tax asset of
approximately $1,514,000, derived from net operating loss carryforwards and
excess book depreciation over tax depreciation. The deferred tax asset is fully
reserved because of uncertainty regarding the Company's ability to recognize the
benefit of the asset in future years.
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1993 1994
----------- -----------
<S> <C> <C>
Net operating loss carryforward........................... $ 1,542,591 $ 1,509,551
Depreciation and amortization............................. (4,619) 4,391
Valuation allowance....................................... (1,537,972) (1,513,942)
----------- -----------
Net deferred tax asset.................................... $ -- $ --
=========== ===========
</TABLE>
At December 31, 1994, the Company had net operating loss carryforwards for
tax reporting purposes of approximately $4,440,000. The net operating loss
carryforwards will expire beginning in the year 2006, if not previously
utilized.
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Current:
Federal................................................... $ -- $ --
State..................................................... -- --
-------- --------
Deferred.................................................... -- --
-------- --------
$ -- $ --
======== ========
</TABLE>
F-38
<PAGE> 110
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between the statutory Federal income tax rate and the
effective income tax rates is as follows:
<TABLE>
<CAPTION>
1993 1994
------ ------
<S> <C> <C>
Statutory Federal income tax rate........................... 34.0% 34.0%
Valuation allowance......................................... (34.0%) (34.0%)
Provision for income taxes.................................. 0.0% 0.0%
</TABLE>
10. EMPLOYEE BENEFIT PLAN
The Company co-sponsors, with THISCO, a 401(k) defined contribution
retirement plan covering full-time employees who have completed one year of
service and obtained the age of twenty-one. According to the plan agreement, the
Company has committed to match employee contributions up to 3.0% of the
employee's qualified salary through December 31, 1994 and 5.0% thereafter. The
Company contributed $20,904 and $19,791 to the Plan during 1993 and 1994,
respectively.
11. EXTRAORDINARY GAIN
The 1993 extraordinary gain of $269,310 represents the Company's net gain
on the settlement of a note payable to a vendor.
12. CONTINGENCIES AND COMMITMENTS
In June, 1993, HCC received $2,000,000 from Citicorp in exchange for a
five-year non-cancelable data processing contract and recorded the amount as
deferred income. The non-cancelable contract requires Citicorp to process
transactions and generate various reports in exchange for a processing fee. The
contract requires HCC to maintain an annual minimum volume of transactions. If
the annual minimum volume is not attained, HCC is required to pay Citicorp an
additional processing fee for each transaction under the minimum volume. HCC is
recognizing the $2,000,000 of deferred income over the life of the contract,
according to the volume of guaranteed transactions, as defined by the contract.
During 1994, HCC recognized $274,510 of the $2,000,000 deferred income. However,
because HCC did not meet its annual minimum volume of transactions, it also
recorded an additional processing fee of $215,351.
13. SUBSEQUENT EVENTS
Subsequent to December 31, 1994, the Company issued an additional 105
shares of common stock for $250,000 and obtained a short-term loan from a
shareholder in the amount of $200,000. The short-term loan accrues interest at
the prime rate plus 2.0% and is due on or before December 30, 1995. In August,
1995 the Company repurchased the 105 shares for $250,000.
Pegasus Systems, Inc. (Pegasus) was formed to combine the operations of HCC
and THISCO. For accounting purposes, the combination was recorded as a purchase
of HCC. In July, 1995, Pegasus issued 4,934,667 shares of its common stock in
exchange for all of the outstanding capital stock of THISCO and 83.3% of the
ownership of HCC (the Reorganization). Lodging Network, Inc. (LNI) retained 210
shares of HCC preferred stock, representing a 16.7% minority ownership interest
in HCC. In conjunction with the Reorganization, LNI was granted an option (LNI
Option), expiring in July 1998, to exchange its 16.67% ownership interest in HCC
for 448,667 shares of Pegasus' common stock.
Also as part of this Reorganization, certain shareholders of the Company
agreed to contribute outstanding debt totaling $337,500 to capital, effective
immediately prior to closing. The remaining debt, after these contributions were
renewed and extended, expires five years from the Agreement's closing date at an
interest rate of prime plus 1.0%.
F-39
<PAGE> 111
THE HOTEL CLEARING CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1995
-----------
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 88,102
Accounts receivable, net.................................. 297,890
Accounts receivable from affiliates....................... 25,853
Prepaid expenses.......................................... 2,842
-----------
Total current assets.............................. 414,687
Property and equipment, net................................. 245,082
Other non-current assets.................................... 18,432
-----------
Total assets...................................... $ 678,201
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.................. $ 454,136
Accounts payable to affiliates............................ 244,020
Current portion of unearned income........................ 425,722
Current portion of notes payable to affiliates............ 855,725
Current portion of capital lease obligations.............. 51,727
-----------
Total current liabilities......................... 2,031,330
Capital lease obligations, net of current portion........... 21,793
Unearned income, net of current portion..................... 1,156,863
-----------
Total liabilities................................. 3,209,986
Shareholders' deficit:
Preferred stock:
Series A............................................... 2
Series B............................................... 1
Common stock.............................................. 11
Additional paid-in capital................................ 1,953,834
Accumulated deficit....................................... (4,485,633)
-----------
Total shareholders' deficit....................... (2,531,785)
-----------
Total liabilities and shareholders' deficit....... $ 678,201
===========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-40
<PAGE> 112
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1994 1995
---------- ----------
<S> <C> <C>
Net revenues:
Shareholder............................................... $1,122,007 $1,481,282
Nonshareholder............................................ 144,303 677,993
---------- ----------
Total revenues.................................... 1,266,310 2,159,275
Cost of services............................................ 245,760 674,880
Research and development.................................... 205,694 356,439
General and administrative expenses......................... 256,229 372,779
Marketing and promotion expenses............................ 406,199 486,555
Depreciation and amortization............................... 31,093 44,103
---------- ----------
Operating income............................................ 121,335 224,519
Other expense:
Interest expense............................................ 40,562 50,580
---------- ----------
Income before income taxes.................................. 80,773 173,939
Income taxes................................................ -- --
---------- ----------
Net income.................................................. $ 80,773 $ 173,939
========== ==========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-41
<PAGE> 113
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ ------------------ ADDITIONAL
NUMBER OF NUMBER OF PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.......... 230 $ 3 1,050 $10 $1,702,885 $(4,659,572) $(2,956,674)
Issuance of common stock.............. -- -- 105 1 249,999 -- 250,000
Issuance of series B preferred stock,
par value $.01...................... 10 -- -- -- 950 -- 950
Net income............................ -- -- -- -- -- 173,939 173,939
--- --- ----- --- ---------- ----------- -----------
Balance at June 30, 1995.............. 240 $ 3 1,155 $11 $1,953,834 $(4,485,633) $(2,531,785)
=== === ===== === ========== =========== ===========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-42
<PAGE> 114
THE HOTEL CLEARING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1994 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................ $ 80,773 $ 173,939
Adjustments to reconcile net income to
cash provided (used) by operating
activities:
Depreciation and amortization...... 31,093 44,103
Proceeds from increase in long-term
note payable accrued interest..... 27,109 --
Deferred income recognition........ (81,483) (142,905)
(Increase) decrease in:
Accounts receivable, net......... 15,087 (103,397)
Accounts receivable from
affiliates...................... (1,488) (8,121)
Prepaid expenses................. 21,230 (5,351)
Increase (decrease) in:
Accounts payable and accrued
liabilities..................... (190,688) (277,794)
Accounts payable to affiliates... 220,575 56,548
--------- ---------
Net cash provided (used) by
operating activities........ 122,208 (262,978)
--------- ---------
Cash flows used by investing
activities --
Purchase of property and equipment.... (3,060) (79,545)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of stock....... -- 250,950
Proceeds from line-of-credit.......... 120,000 200,000
Repayment of line-of-credit........... (250,000) --
Repayment of notes payable............ (10,732) --
Repayment of capital leases........... (16,251) (27,937)
--------- ---------
Net cash provided (used) by
financing activities........ (156,983) 423,013
--------- ---------
Net increase (decrease) in cash and cash
equivalents........................... (37,835) 80,490
Cash and cash equivalents, beginning of
period................................ 37,835 7,612
--------- ---------
Cash and cash equivalents, end of
period................................ $ -- $ 88,102
========= =========
</TABLE>
See accompanying notes to consolidated interim financial statements.
F-43
<PAGE> 115
THE HOTEL CLEARING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements include the consolidated accounts of
The Hotel Clearing Corporation (HCC) and its wholly owned subsidiary, The Hotel
Clearing Corporation (U.K.) Limited (HCC U.K.) (collectively, the Company). All
significant intercompany balances have been eliminated in consolidation.
HCC was formed in July 1991 as a Delaware corporation to market and operate
an international automated commission payment processing service that
consolidates commissions paid by participating hotels to a participating travel
agency into a single monthly payment and provides participants with
comprehensive transaction reports. HCC collects commissions from participating
hotel chains and remits these commissions to participating travel agents.
HCC U.K., a wholly-owned subsidiary of HCC, was formed in September 1993 in
England to market and provide services for travel agents and hotel chains
operating in Europe, Africa and Asia.
The financial information presented herein should be read in conjunction
with the Company's consolidated financial statements as of and for the year
ended December 31, 1994. The foregoing unaudited interim consolidated financial
statements have been prepared to comply with the format of Pegasus Systems, Inc.
(see Note 2) and reflect all adjustments (of a normal recurring nature) which
are, in the opinion of management, necessary for a fair presentation of the
results of the interim periods. The results for interim periods are not
necessarily indicative of results to be expected for the year.
2. SUBSEQUENT EVENTS
The accompanying unaudited interim consolidated financial statements
present the operations of HCC for the period from January 1, 1995 through June
30, 1995. In July 1995, Pegasus Systems, Inc. (Pegasus) was formed as a Delaware
holding company to combine the operations of HCC and The Hotel Industry Switch
Company (THISCO). THISCO was formed in September 1988 to market and operate an
international automated interface between travel agency, hotel and global travel
reservation systems.
Effective in July 1995, Pegasus issued 4,934,667 shares of its common stock
in exchange for all of the outstanding capital stock of THISCO and 83.3% of the
ownership of HCC (the Reorganization). Lodging Network, Inc. (LNI) retained 210
shares of HCC preferred stock, representing a 16.7% minority ownership interest
in HCC.
The Reorganization brought THISCO and HCC together under the control of
Pegasus and was initiated to integrate and expand the existing businesses of
THISCO and HCC. Pegasus was formed immediately prior to the transaction for the
purpose of combining the two operations into a single operating entity. Prior to
the Reorganization, THISCO and HCC were primarily controlled by a common (though
not identical) group of shareholders and a common management group. For
accounting purposes, the Reorganization was treated as an acquisition of HCC and
accounted for as a purchase business combination. Accordingly, the HCC assets
acquired and liabilities assumed were acquired at their fair values. The amount
of the purchase price ($2.7 million) in excess of the fair value of net assets
acquired has been recorded as goodwill and will be amortized on a straight-line
basis over 15 years.
Subsequent to June 30, 1995, the 105 shares issued during the six months
ended June 30, 1995 were reacquired and retired by the Company at the original
issuance price.
F-44
<PAGE> 116
DESCRIPTION OF INSIDE BACK COVER
Pegasus Systems Inc. logo.
Depiction of computer screens showing pages from the TravelWeb site. Pages
show a hotel's information and picture, resource information available from
TravelWeb, TravelWeb home page and information for Click-it! Weekends.
THISCO logo with caption reading:
The THISCO service improves the efficiency and effectiveness of the
hotel room reservation process by enabling travel agents to
electronically access hotel room inventory information and conduct
reservation transactions.
TravelWeb logo with caption reading:
The TravelWeb service enables consumers to access hotel room inventory
information and conduct reservation transactions over the Internet.
HCC logo with caption reading:
The HCC service improves the efficiency and effectiveness of the hotel
commission payment process for travel agents by consolidating payments
and providing comprehensive transaction reports.
<PAGE> 117
- ------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Prospectus Summary................ 3
Risk Factors...................... 7
Use of Proceeds................... 15
Dividend Policy................... 15
Capitalization.................... 16
Dilution.......................... 17
Selected Consolidated Financial
Data........................... 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 20
Business.......................... 31
Management........................ 51
Certain Transactions.............. 59
Principal and Selling
Stockholders................... 61
Description of Capital Stock...... 62
Shares Eligible for Future Sale... 64
Underwriting...................... 66
Legal Matters..................... 67
Experts........................... 67
Additional Information............ 68
Index to Consolidated Financial
Statements..................... F-1
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
======================================================
- ------------------------------------------------------
2,953,300 SHARES
[PEGASUS SYSTEMS, INC. LOGO]
PEGASUS SYSTEMS, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
VOLPE BROWN WHELAN
& COMPANY
, 1997
------------------------------------------------------
- ------------------------------------------------------
<PAGE> 118
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following fees are estimated, except for the SEC and NASD filing fees:
<TABLE>
<S> <C>
SEC filing fee.............................................. $ 12,426
NASD filing fee............................................. 4,601
Blue Sky fees and expenses.................................. 5,000
Printing and engraving fees................................. 220,000
Accountants' fees and expenses.............................. 210,000
Legal fees and expenses..................................... 280,000
Transfer Agent's fees and expenses.......................... 8,000
Miscellaneous............................................... 9,973
--------
Total............................................. $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of the Company may and, in
certain cases, must be indemnified by the Company against, in the case of a non-
derivative action, judgments, fines, amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred by him as a result of such action,
and in the case of a derivative action, against expenses (including attorney's
fees), if in either type of action he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. This indemnification does not apply, in a derivative action, to matters
as to which it is adjudged that the director, officer, employee or agent is
liable to the Company, unless upon court order it is determined that, despite
such adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Article Eight of the Company's Second Amended and Restated Certificate of
Incorporation provides that no director of the Company shall be liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by the DGCL.
Article Eight of the Company's Second Amended and Restated Certificate of
Incorporation also provides that the Company may indemnify to the fullest extent
permitted by Delaware law any and all of its directors and officers, or former
directors and officers, or any person who may have served at the Company's
request as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise. In addition, Section 7.7 of the Company's
Amended and Restated Bylaws provides that the Company shall indemnify to the
fullest extent permitted by Delaware law any and all of its directors and
officers, or former directors and officers, or any person who may have served at
the Company's request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise and may indemnify to the
fullest extent permitted by Delaware law any employees and agents of the
Company.
Reference is made to the Underwriting Agreement filed as part of Exhibit
1.1 hereto, pursuant to which the Company has agreed to indemnify the
underwriters against certain liabilities under the Securities Act. Reference is
also made to the Rights Agreement filed as Exhibit 4.3 hereto, pursuant to which
certain holders of capital stock of the Company named therein have agreed to
indemnify officers and directors of the Company against certain liabilities
under the Securities Act or the Exchange Act in the event Registrable Securities
(as defined therein) held by such holders are included in the securities to be
registered pursuant to a public offering by the Company.
The Company has purchased directors' and officers' liability insurance.
Subject to conditions, limitations and exclusions in the policy, the insurance
covers amounts required to be paid for a claim or claims made
II-1
<PAGE> 119
against directors and officers for any act, error, omission, misstatement,
misleading statement or breach of duty by directors and officers in their
capacity as directors and officers of the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to all securities issued or sold by the
Company within the past three years and not registered under the Securities Act.
Effective in July 1995, the Company issued 4,934,667 shares of Common Stock
in exchange for all of the outstanding capital stock of The Hotel Industry
Switch Company ("THISCO") and 83.3% of the outstanding capital stock of The
Hotel Clearing Corporation ("HCC") (the "Reorganization") in accordance with
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").
In connection with the Reorganization, the Company granted to Lodging Network,
Inc. an option (the "LNI Option") to exchange the remaining 16.7% of capital
stock of HCC, which was held by LNI, for 448,667 shares of the Company's Common
Stock. In addition, certain members of HCC management agreed to forfeit their
rights to participate in a special HCC bonus plan in return for a cash payment
and the opportunity to purchase an aggregate of 283,333 shares of Common Stock
for $570,874. These shares were issued in accordance with Section 4(2) of the
Securities Act.
In June 1996, the Company issued to Information Associates, L.P. and
Information Associates, C.V. an aggregate of 1,538,463 shares of Series A
Preferred Stock for $4.88 per share in accordance with Section 4(2) of the
Securities Act. In June 1996, the Company issued in accordance with Section 4(2)
of the Securities Act 89,733 shares of the Common Stock and paid $2.0 million to
LNI for the remaining outstanding capital stock of HCC held by LNI, and in
connection therewith, the LNI Option was cancelled. In May 1997, the Company
issued in accordance with Section 4(2) of the Securities Act warrants to
purchase 345,723 shares of the Common Stock to Holiday Inn in connection with
the Distribution Services Agreement between the Company and Holiday Inn.
In June 1996, the Company adopted its 1996 Stock Option Plan, and the
Company has issued to participants in such plan under Section 4(2) of the
Securities Act and Rule 701 of the Securities Act options to purchase an
aggregate of 771,733 shares of Common Stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
+1.1 -- Form of Underwriting Agreement by and among the Company,
the Selling Stockholders named therein and the
Underwriters
2.1 -- Contribution and Restructuring Agreement dated effective
as of July 21, 1995 by and among the Company and all of
the stockholders of the Company
3.1 -- Amended and Restated Certificate of Incorporation
3.2 -- Amended and Restated Bylaws
3.3 -- Second Amended and Restated Certificate of Incorporation
3.4 -- Second Amended and Restated Bylaws (document submitted
herewith corrects electronic formatting error in
previously filed document)
+4.1 -- Specimen of Common Stock Certificate
4.2 -- Amended and Restated Certificate of Incorporation,
Amended and Restated Bylaws, Second Amended and Restated
Certificate of Incorporation and Second Amended and
Restated Bylaws (see Exhibits 3.1, 3.2, 3.3 and 3.4)
4.3 -- Rights Agreement dated June 25, 1996 by and among the
Company and certain holders of capital stock of the
Company named therein
4.4 -- Common Stock Purchase Warrant issued to Holiday
Hospitality Corporation
</TABLE>
II-2
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
+5.1 -- Opinion of Locke Purnell Rain Harrell (A Professional
Corporation)
10.1 -- Employment Agreement dated June 25, 1996 between the
Company and John F. Davis, III
10.2 -- Employment Agreement dated June 25, 1996 between the
Company and Joseph W. Nicholson
10.3 -- Employment Letter Agreement dated August 29, 1996 between
the Company and Jerome L. Galant
10.4 -- Employment Letter Agreement dated May 18, 1997 between
the Company and Michael R. Donahue
10.5 -- 1996 Stock Option Plan, as amended
10.6 -- 1997 Stock Option Plan
10.7 -- Client Service Agreement, as amended, between the Company
and Citibank, N.A.
10.8 -- Facilities Management Agreement dated January 1, 1996
between the Company and Anasazi, Inc.
10.9 -- Service Agreement dated December 13, 1996 between the
Company and Comdisco, Inc.
10.10 -- Service Agreement dated January 17, 1997 between the
Company and Genuity, Inc.
10.11 -- Intentionally Omitted
10.12 -- TravelWeb Participant Agreement dated January 17, 1996
between the Company and Hyatt Corporation
10.13 -- TravelWeb Participant Agreement dated July 15, 1995
between the Company and Inter-Continental Hotels
Corporation
10.14 -- TravelWeb Participant Agreement dated April 27, 1995
between the Company and Hilton Hotels Corporation
10.15 -- TravelWeb Participant Agreement dated May 30, 1995
between the Company and Hilton International Co.
10.16 -- TravelWeb Participant Agreement dated September 3, 1996
between the Company and Choice Hotels International, Inc.
10.17 -- TravelWeb Participant Agreement dated April 18, 1996
between the Company and La Quinta Inns, Inc.
10.18 -- TravelWeb Participant Agreement dated May 31, 1996
between the Company and HFS Incorporated
10.19 -- TravelWeb Participation Agreement dated April 18, 1996
between the Company and ITT Sheraton Corporation
10.20 -- Letter Agreement relating to the TravelWeb service dated
December 20, 1995 between the Company and Marriott
International, Inc.
*10.21 -- HCC Participant Agreement, as amended, between the
Company and Hyatt Hotels Corporation
*10.22 -- HCC Participant Agreement, as amended, between the
Company and Inter-Continental Hotel Corp.
*10.23 -- HCC Participant Agreement between Company and ITT
Sheraton Corporation
*10.24 -- HCC Participant Agreement between the Company and La
Quinta Inns, Inc.
</TABLE>
II-3
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
*10.25 -- HCC Participant Agreement between the Company and HFS
Incorporated (more current version filed as Exhibit
10.57)
*10.26 -- HCC Participant Agreement, as amended, between the
Company and Westin Hotels Company (more current version
filed as Exhibit 10.58)
*10.27 -- HCC Participant Agreement, as amended between the Company
and Best Western International, Ltd. (more current
version filed as Exhibit 10.59)
*10.28 -- HCC Participant Agreement, as amended, between the
Company and Utell International, Inc.
*10.29 -- HCC Participant Agreement between the Company and Anasazi
Service Corporation
*10.30 -- HCC Participant Agreement between the Company and
Marriott International, Inc.
*10.31 -- HCC Participation Agreement, as amended, between the
Company and Choice Hotels International, Inc.
*10.32 -- HCC Participation Agreement, as amended, between the
Company and Forte Hotels, Inc.
*10.33 -- HCC Participation Agreement, as amended, between the
Company and Promus Hotels, Inc.
*10.34 -- UltraSwitch User Agreement dated November 17, 1995
between the Company and Westin Hotels & Resorts
*10.35 -- UltraSwitch User Agreement dated February 23, 1996
between the Company and Best Western International
*10.36 -- UltraSwitch User Agreement dated February 13, 1996
between the Company and Inter-Continental Hotels
Corporation
*10.37 -- UltraSwitch User Agreement dated January 4, 1996 between
the Company and HFS Incorporated
*10.38 -- UltraSwitch User Agreement dated February 1, 1996 between
the Company and Hyatt Hotels Corporation
*10.39 -- UltraSwitch User Agreement dated December 15, 1995
between the Company and Promus Hotels, Inc.
*10.40 -- UltraSwitch User Agreement dated February 23, 1996
between the Company and La Quinta Inns, Inc.
*10.41 -- UltraSwitch User Agreement dated January 8, 1997 between
the Company and ITT Sheraton Corporation
*10.42 -- UltraSwitch User Agreement dated April 25, 1996 between
the Company and Hilton Hotels Corporation
*10.43 -- UltraSwitch User Agreement dated August 16, 1995 between
the Company and Choice Hotels International, Inc.
*10.44 -- UltraSwitch User Agreement dated February 10, 1996
between the Company and Utell International Ltd.
10.45 -- Intentionally Omitted
*10.46 -- UltraSwitch User Agreement dated December 31, 1995
between the Company and Marriott International, Inc.
*10.47 -- UltraSwitch User Agreement dated February 23, 1996
between the Company and Forte Hotels, Inc.
</TABLE>
II-4
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
*10.48 -- Property Information Distribution Agreement dated March
7, 1997 between the Company and Anasazi, Inc.
*10.49 -- Property Information Distribution Agreement dated March
4, 1997 between the Company and La Quinta Inns, Inc.
*10.50 -- Property Information Distribution Agreement, as amended,
dated April 2, 1997, between the Company and HFS
Incorporated
*10.51 -- Property Information Distribution Agreement dated June 2,
1997 between the Company and Promus Hotels, Inc.
*10.52 -- Property Information Distribution Agreement dated May 2,
1997 between the Company and Best Western International,
Inc.
*10.53 -- Property Information Distribution Agreement dated March
11, 1997 between the Company and Hyatt Hotels Corporation
*10.54 -- United States Subscriber Agreement dated October 12, 1993
between the Company and American Express Travel Related
Services Company, Inc. (more current version filed as
Exhibit 10.60)
*10.55 -- Distribution Services Agreement dated May 12, 1997
between the Company and Holiday Hospitality Corporation
10.56 -- Office Lease dated October 1, 1995 between the Company
and the Utah State Retirement Investment Fund relating to
property located at 3811 Turtle Creek Blvd., Suite 1100,
Dallas, Texas 75219
*10.57 -- HCC Participant Agreement between the Company and HFS
Incorporated (filed herewith as a more current version of
Exhibit 10.25)
+*10.58 -- HCC Participant Agreement between the Company and Westin
Hotels Company (filed herewith as a more current version
of Exhibit 10.26)
+*10.59 -- HCC Participant Agreement between the Company and Best
Western International, Inc. (filed herewith as a more
current version of Exhibit 10.27)
+*10.60 -- HCC Subscriber Agreement between the Company and American
Express Travel Related Services, Inc. (filed herewith as
a more current version of Exhibit 10.54)
+*10.61 -- Netbooker Agreement dated June 10, 1997 between the
Company and ITT Sheraton Corporation
11.1 -- Computation of Per Share Loss
16.1 -- Letter regarding Change in Certifying Accountant
21.1 -- Subsidiaries of the Company
+23.1 -- Consents of Price Waterhouse LLP (including consent for
Amendment No. 1 not previously filed)
+23.2 -- Consents of Belew Averitt LLP (including consent for
Amendment No. 1 not previously filed)
+23.3 -- Consent of Locke Purnell Rain Harrell (A Professional
Corporation) (included in its opinion filed as Exhibit
5.1)
+++24.1 -- Power of Attorney
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
Unless otherwise indicated, exhibits were previously filed and are filed
herewith. Such exhibits filed herewith, unless otherwise indicated, are the same
in all material respects as the exhibits included in previous filings, except
that conformed signatures have been added to conform to the original document as
needed.
II-5
<PAGE> 123
+ Filed herewith and not previously filed.
+++ Filed previously and not filed herewith.
* Information contained in such agreement has been omitted subject to a
confidential treatment request, marked with asterisks and filed separately
with the Commission. Information disclosed in such agreement filed
herewith includes the term of such agreement, which (if such agreement was
previously filed) was excluded in previous filings.
(b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions, are not
applicable or the information has been provided in the Consolidated Financial
Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes to provide the representatives of
the Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Company, the Company 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 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by any director, officer
or controlling person in connection with the securities being registered, the
Company 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 and will be governed by the final adjudication
of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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 Company 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, 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-6
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 2 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on this 4th day of August, 1997.
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III
----------------------------------
John F. Davis, III
Chief Executive Officer, President
and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed by the following persons in the
capacities indicated on August 4, 1997.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ JOHN F. DAVIS, III Chief Executive Officer, President and
- ----------------------------------------------------- Director (Principal Executive Officer)
John F. Davis, III
/s/ JEROME L. GALANT* Chief Financial Officer (Principal Financial
- ----------------------------------------------------- and Accounting Officer)
Jerome L. Galant
/s/ JOHN W. BIGGS* Director
- -----------------------------------------------------
John W. Biggs
/s/ DONALD R. DIXON* Director
- -----------------------------------------------------
Donald R. Dixon
/s/ WILLIAM C. HAMMETT, JR.* Director
- -----------------------------------------------------
William C. Hammett, Jr.
/s/ IAN MALCOLM HIGHET* Director
- -----------------------------------------------------
Ian Malcolm Highet
/s/ ROCKWELL A. SCHNABEL* Director
- -----------------------------------------------------
Rockwell A. Schnabel
/s/ PAUL J. TRAVERS* Director
- -----------------------------------------------------
Paul J. Travers
/s/ MARK C. WELLS* Director
- -----------------------------------------------------
Mark C. Wells
/s/ BRUCE WOLFF* Director
- -----------------------------------------------------
Bruce Wolff
</TABLE>
*By: /s/ JOHN F. DAVIS, III
-----------------------------------
John F. Davis, III
Attorney-in-Fact
II-7
<PAGE> 125
SCHEDULE II
PEGASUS SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO FROM BALANCE
BEGINNING COSTS AND ACQUIRED AT END
CLASSIFICATION OF PERIOD EXPENSES COMPANIES DEDUCTIONS OF PERIOD
-------------- ---------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Allowance for doubtful accounts........ $ -- $ -- $ -- $ -- $ --
Income tax valuation allowance......... 2,400 132 -- -- 2,532
------ ------ ---- ------- ------
Total reserves and
allowances................... $2,400 $ 132 $ -- $ -- $2,532
====== ====== ==== ======= ======
December 31, 1995:
Allowance for doubtful accounts........ $ -- $ 20 $ -- $ -- $ 20
Income tax valuation allowance......... 2,532 289 707 -- 3,528
------ ------ ---- ------- ------
Total reserves and
allowances................... $2,532 $ 309 $707 $ -- $3,548
====== ====== ==== ======= ======
December 31, 1996:
Allowance for doubtful accounts........ $ 20 $ 25 $ -- $ -- $ 45
Income tax valuation allowance......... 3,528 1,060 -- (39) 4,549
------ ------ ---- ------- ------
Total reserves and
allowances................... $3,548 $1,085 $ -- $ (39) $4,594
====== ====== ==== ======= ======
</TABLE>
- ---------------
(a) This schedule should be read in conjunction with the Company's audited
consolidated financial statements and related notes thereto.
S-1
<PAGE> 126
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
+1.1 -- Form of Underwriting Agreement by and among the Company,
the Selling Stockholders named therein and the
Underwriters
2.1 -- Contribution and Restructuring Agreement dated effective
as of July 21, 1995 by and among the Company and all of
the stockholders of the Company
3.1 -- Amended and Restated Certificate of Incorporation
3.2 -- Amended and Restated Bylaws
3.3 -- Second Amended and Restated Certificate of Incorporation
3.4 -- Second Amended and Restated Bylaws (document submitted
herewith corrects electronic formatting error in
previously filed document)
+4.1 -- Specimen of Common Stock Certificate
4.2 -- Amended and Restated Certificate of Incorporation,
Amended and Restated Bylaws, Second Amended and Restated
Certificate of Incorporation and Second Amended and
Restated Bylaws (see Exhibits 3.1, 3.2, 3.3 and 3.4)
4.3 -- Rights Agreement dated June 25, 1996 by and among the
Company and certain holders of capital stock of the
Company named therein
4.4 -- Common Stock Purchase Warrant issued to Holiday
Hospitality Corporation
+5.1 -- Opinion of Locke Purnell Rain Harrell (A Professional
Corporation)
10.1 -- Employment Agreement dated June 25, 1996 between the
Company and John F. Davis, III
10.2 -- Employment Agreement dated June 25, 1996 between the
Company and Joseph W. Nicholson
10.3 -- Employment Letter Agreement dated August 29, 1996 between
the Company and Jerome L. Galant
10.4 -- Employment Letter Agreement dated May 18, 1997 between
the Company and Michael R. Donahue
10.5 -- 1996 Stock Option Plan, as amended
10.6 -- 1997 Stock Option Plan
10.7 -- Client Service Agreement, as amended, between the Company
and Citibank, N.A.
10.8 -- Facilities Management Agreement dated January 1, 1996
between the Company and Anasazi, Inc.
10.9 -- Service Agreement dated December 13, 1996 between the
Company and Comdisco, Inc.
10.10 -- Service Agreement dated January 17, 1997 between the
Company and Genuity, Inc.
10.11 -- Intentionally Omitted
10.12 -- TravelWeb Participant Agreement dated January 17, 1996
between the Company and Hyatt Corporation
10.13 -- TravelWeb Participant Agreement dated July 15, 1995
between the Company and Inter-Continental Hotels
Corporation
10.14 -- TravelWeb Participant Agreement dated April 27, 1995
between the Company and Hilton Hotels Corporation
10.15 -- TravelWeb Participant Agreement dated May 30, 1995
between the Company and Hilton International Co.
10.16 -- TravelWeb Participant Agreement dated September 3, 1996
between the Company and Choice Hotels International, Inc.
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.17 -- TravelWeb Participant Agreement dated April 18, 1996
between the Company and La Quinta Inns, Inc.
10.18 -- TravelWeb Participant Agreement dated May 31, 1996
between the Company and HFS Incorporated
10.19 -- TravelWeb Participation Agreement dated April 18, 1996
between the Company and ITT Sheraton Corporation
10.20 -- Letter Agreement relating to the TravelWeb service dated
December 20, 1995 between the Company and Marriott
International, Inc.
*10.21 -- HCC Participant Agreement, as amended, between the
Company and Hyatt Hotels Corporation
*10.22 -- HCC Participant Agreement, as amended, between the
Company and Inter-Continental Hotel Corp.
*10.23 -- HCC Participant Agreement between Company and ITT
Sheraton Corporation
*10.24 -- HCC Participant Agreement between the Company and La
Quinta Inns, Inc.
*10.25 -- HCC Participant Agreement between the Company and HFS
Incorporated (more current version filed as Exhibit
10.57)
*10.26 -- HCC Participant Agreement, as amended, between the
Company and Westin Hotels Company (more current version
filed as Exhibit 10.58)
*10.27 -- HCC Participant Agreement, as amended between the Company
and Best Western International, Ltd. (more current
version filed as Exhibit 10.59)
*10.28 -- HCC Participant Agreement, as amended, between the
Company and Utell International, Inc.
*10.29 -- HCC Participant Agreement between the Company and Anasazi
Service Corporation
*10.30 -- HCC Participant Agreement between the Company and
Marriott International, Inc.
*10.31 -- HCC Participation Agreement, as amended, between the
Company and Choice Hotels International, Inc.
*10.32 -- HCC Participation Agreement, as amended, between the
Company and Forte Hotels, Inc.
*10.33 -- HCC Participation Agreement, as amended, between the
Company and Promus Hotels, Inc.
*10.34 -- UltraSwitch User Agreement dated November 17, 1995
between the Company and Westin Hotels & Resorts
*10.35 -- UltraSwitch User Agreement dated February 23, 1996
between the Company and Best Western International
*10.36 -- UltraSwitch User Agreement dated February 13, 1996
between the Company and Inter-Continental Hotels
Corporation
*10.37 -- UltraSwitch User Agreement dated January 4, 1996 between
the Company and HFS Incorporated
*10.38 -- UltraSwitch User Agreement dated February 1, 1996 between
the Company and Hyatt Hotels Corporation
*10.39 -- UltraSwitch User Agreement dated December 15, 1995
between the Company and Promus Hotels, Inc.
*10.40 -- UltraSwitch User Agreement dated February 23, 1996
between the Company and La Quinta Inns, Inc.
*10.41 -- UltraSwitch User Agreement dated January 8, 1997 between
the Company and ITT Sheraton Corporation
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
*10.42 -- UltraSwitch User Agreement dated April 25, 1996 between the Company and Hilton Hotels
Corporation
*10.43 -- UltraSwitch User Agreement dated August 16, 1995 between the Company and Choice Hotels
International, Inc.
*10.44 -- UltraSwitch User Agreement dated February 10, 1996 between the Company and Utell
International Ltd.
10.45 -- Intentionally Omitted
*10.46 -- UltraSwitch User Agreement dated December 31, 1995 between the Company and Marriott
International, Inc.
*10.47 -- UltraSwitch User Agreement dated February 23, 1996 between the Company and Forte
Hotels, Inc.
*10.48 -- Property Information Distribution Agreement dated March 7, 1997 between the Company and
Anasazi, Inc.
*10.49 -- Property Information Distribution Agreement dated March 4, 1997 between the Company and
La Quinta Inns, Inc.
*10.50 -- Property Information Distribution Agreement, as amended, dated April 2, 1997, between
the Company and HFS Incorporated
*10.51 -- Property Information Distribution Agreement dated June 2, 1997 between the Company and
Promus Hotels, Inc.
*10.52 -- Property Information Distribution Agreement dated May 2, 1997 between the Company and
Best Western International, Inc.
*10.53 -- Property Information Distribution Agreement dated March 11, 1997 between the Company
and Hyatt Hotels Corporation
*10.54 -- United States Subscriber Agreement dated October 12, 1993 between the Company and
American Express Travel Related Services Company, Inc. (more current version filed as
Exhibit 10.60)
*10.55 -- Distribution Services Agreement dated May 12, 1997 between the Company and Holiday
Hospitality Corporation
10.56 -- Office Lease dated October 1, 1995 between the Company and the Utah State Retirement
Investment Fund relating to property located at 3811 Turtle Creek Blvd., Suite 1100,
Dallas, Texas 75219
*10.57 -- HCC Participant Agreement between the Company and HFS Incorporated (filed herewith as a
more current version of Exhibit 10.25)
+*10.58 -- HCC Participant Agreement between the Company and Westin Hotels Company (filed herewith
as a more current version of Exhibit 10.26)
+*10.59 -- HCC Participant Agreement between the Company and Best Western International, Inc.
(filed herewith as a more current version of Exhibit 10.27)
+*10.60 -- HCC Subscriber Agreement between the Company and American Express Travel Related
Services, Inc. (filed herewith as a more current version of Exhibit 10.54)
+*10.61 -- Netbooker Agreement dated June 10, 1997 between the Company and ITT Sheraton
Corporation
11.1 -- Computation of Per Share Loss
16.1 -- Letter regarding Change in Certifying Accountant
21.1 -- Subsidiaries of the Company
+23.1 -- Consents of Price Waterhouse LLP (including consent for Amendment No. 1 not previously
filed)
+23.2 -- Consents of Belew Averitt LLP (including consent for Amendment No. 1 not previously
filed)
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
+23.3 -- Consent of Locke Purnell Rain Harrell (A Professional
Corporation) (included in its opinion filed as Exhibit
5.1)
+++24.1 -- Power of Attorney
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
Unless otherwise indicated, exhibits were previously filed and are filed
herewith. Such exhibits filed herewith, unless otherwise indicated, are the same
in all material respects as the exhibits included in previous filings, except
that conformed signatures have been added to conform to the original document as
needed.
+ Filed herewith and not previously filed.
+++ Filed previously and not filed herewith.
* Information contained in such agreement has been omitted subject to a
confidential treatment request, marked with asterisks and filed separately
with the Commission. Information disclosed in such agreement filed
herewith includes the term of such agreement, which (if such agreement was
previously filed) was excluded in previous filings.
<PAGE> 1
EXHIBIT 1.1
PEGASUS SYSTEMS, INC.
_________ SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
____________, 1997
HAMBRECHT & QUIST LLC
MONTGOMERY SECURITIES
VOLPE BROWN WHELAN & COMPANY, LLC
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
Pegasus Systems, Inc., a Delaware corporation (herein called the
Company), proposes to issue and sell ____________ shares of its authorized but
unissued Common Stock, $.01 par value (herein called the Common Stock), and the
stockholders of the Company named in Schedule II hereto (herein collectively
called the Selling Securityholders) propose to sell an aggregate of
____________ shares of Common Stock of the Company (said ____________ shares of
Common Stock being herein called the Underwritten Stock). The Company proposes
to grant to the Underwriters (as hereinafter defined) an option to purchase up
to ____________ additional shares of Common Stock (herein called the Option
Stock and with the Underwritten Stock herein collectively called the Stock).
The Common Stock is more fully described in the Registration Statement and the
Prospectus hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent
and warrant that you have been authorized by each of the other Underwriters to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
- --------------------
(1) Plus an option to purchase from the Company up to _____________
additional shares to cover over-allotments.
1.
<PAGE> 2
1. REGISTRATION STATEMENT. The Company has filed with the
Securities and Exchange Commission (herein called the Commission) a
registration statement on Form S-1 (No. 333-28595), including the related
preliminary prospectus, for the registration under the Securities Act of 1933,
as amended (herein called the Securities Act) of the Stock. Copies of such
registration statement and of each amendment thereto, if any, including the
related preliminary prospectus (meeting the requirements of Rule 430A of the
rules and regulations of the Commission) heretofore filed by the Company with
the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto
after the effective date of such registration statement (herein called the
Effective Date), shall also mean (from and after the effectiveness of such
amendment) such registration statement as so amended (including any Rule 462(b)
registration statement). The term Prospectus as used in this Agreement shall
mean the prospectus relating to the Stock first filed with the Commission
pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as
included in the Registration Statement) and, in the event of any supplement or
amendment to such prospectus after the Effective Date, shall also mean (from
and after the filing with the Commission of such supplement or the
effectiveness of such amendment) such prospectus as so supplemented or amended.
The term Preliminary Prospectus as used in this Agreement shall mean each
preliminary prospectus included in such registration statement prior to the
time it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) The Company hereby represents and warrants as follows:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has full
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement and the
Prospectus and as being conducted, and is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which the
character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary (except where the failure
to be so qualified would not have a material adverse effect on the
business,
2.
<PAGE> 3
properties, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole).
(ii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any materially adverse change in the business, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions
in the ordinary course of business, other than as set forth in the
Registration Statement and the Prospectus, and since such dates, except
in the ordinary course of business, neither the Company nor any of its
subsidiaries has entered into any material transaction not referred to
in the Registration Statement and the Prospectus which is required to be
so referred to.
(iii) The Registration Statement and the Prospectus comply, and
on the Closing Date (as hereinafter defined) and any later date on which
Option Stock is to be purchased, the Prospectus will comply, in all
material respects, with the provisions of the Securities Act and the
rules and regulations of the Commission thereunder; on the Effective
Date, the Registration Statement did not contain any untrue statement of
a material fact and did not omit to state any material fact required to
be stated therein or necessary in order to make the statements therein
not misleading; and, on the Effective Date the Prospectus did not and,
on the Closing Date and any later date on which Option Stock is to be
purchased, will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that none of the
representations and warranties in this subparagraph (iii) shall apply to
statements in, or omissions from, the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
herein or otherwise furnished in writing to the Company by or on behalf
of the Underwriters for use in the Registration Statement or the
Prospectus.
(iv) The Stock is duly and validly authorized, is (or, in the
case of shares of the Stock to be sold by the Company, will be, when
issued and sold to the Underwriters against payment therefor as provided
herein) duly and validly issued, fully paid and nonassessable and
conforms to the description thereof in the Prospectus. No further
approval or authority of the stockholders or the Board of Directors of
the Company will be required for the transfer and sale of the Stock to
be sold by the Selling Securityholders or the issuance and sale of the
Stock as contemplated herein.
(v) Prior to the Closing, the Common Stock will be authorized
for listing on the Nasdaq National Market upon official notice of
issuance of the Stock.
(b) Each of the Selling Securityholders hereby severally and not
jointly represents and warrants as follows:
3.
<PAGE> 4
(i) Such Selling Securityholder has good and valid title to
all the shares of Stock to be sold by such Selling Securityholder
hereunder, free and clear of all liens, encumbrances, equities, security
interests and claims whatsoever, with full right and authority to
deliver the same hereunder, subject, in the case of each Selling
Securityholder, to the rights of the Company, as Custodian (herein
called the Custodian), and that upon the delivery of and payment for
such shares of the Stock hereunder and under the Custody Agreement and
the Power of Attorney (as such terms are defined below), the several
Underwriters will receive good and valid title thereto, free and clear
of all liens, encumbrances, equities, security interests and claims
whatsoever.
(ii) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in
custody under a Custody Agreement for delivery under this Agreement with
the Custodian; such Selling Securityholder specifically agrees that the
shares of the Stock represented by the certificates so held in custody
for such Selling Securityholder are subject to the interests of the
several Underwriters and the Company, that the arrangements made by such
Selling Securityholder for such custody, including the Power of Attorney
provided for in such Custody Agreement, are to that extent irrevocable,
and that the obligations of such Selling Securityholder shall not be
terminated by any act of such Selling Securityholder or by operation of
law, whether by the death or incapacity of such Selling Securityholder
(or, in the case of a Selling Securityholder that is not an individual,
the dissolution or liquidation of such Selling Securityholder) or the
occurrence of any other event; if any such death, incapacity,
dissolution, liquidation or other such event should occur before the
delivery of such shares of the Stock hereunder, certificates for such
shares of the Stock shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such death,
incapacity, dissolution, liquidation or other event had not occurred,
regardless of whether the Custodian shall have received notice of such
death, incapacity, dissolution, liquidation or other event.
(iii) Such Selling Securityholder has reviewed the Registration
Statement and Prospectus and, although such Selling Securityholder has
not independently verified the accuracy or completeness of all the
information contained therein, nothing has come to the attention of such
Selling Securityholder that would lead such Selling Securityholder to
believe that on the Effective Date, the Registration Statement contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; or that would lead such Selling
Securityholder to believe that on the Effective Date the Prospectus
contained and, on the Closing Date, contains any untrue statement of a
material fact or omitted or omits to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to
the terms and conditions herein set forth, the Company agrees to issue and sell
____________ shares of the
4.
<PAGE> 5
Underwritten Stock to the several Underwriters, each Selling Securityholder
severally agrees to sell to the several Underwriters the number of shares of
the Underwritten Stock set forth in Schedule II opposite the name of such
Selling Securityholder, and each of the Underwriters agrees to purchase from
the Company and the Selling Securityholders the respective aggregate number of
shares of Underwritten Stock set forth opposite its name in Schedule I. The
price at which such shares of Underwritten Stock shall be sold by the Company
and the Selling Securityholders and purchased by the several Underwriters shall
be $___ per share. The obligation of each Underwriter to the Company and each
of the Selling Securityholders shall be to purchase from the Company and the
Selling Securityholders that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the
Underwritten Stock to be sold by each of the Company and the Selling
Securityholders pursuant to this Agreement as the number of shares of the
Underwritten Stock set forth opposite the name of such Underwriter in Schedule
I hereto represents of the total number of shares of the Underwritten Stock to
be purchased by all Underwriters pursuant to this Agreement, as adjusted by you
in such manner as you deem advisable to avoid fractional shares. In making
this Agreement, each Underwriter is contracting severally and not jointly;
except as provided in paragraphs (b) and (c) of this Section 3, the agreement
of each Underwriter is to purchase only the respective number of shares of the
Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or
refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter
or Underwriters and upon the terms herein set forth, all or any part of the
shares of the Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such shares and portion, the number of shares of the Stock
which each non-defaulting Underwriter is otherwise obligated to purchase under
this Agreement shall be automatically increased on a pro rata basis to absorb
the remaining shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase; provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the shares and portion which
the defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such shares of the Stock exceeds 10% of the total number of shares of
the Stock which all Underwriters agreed to purchase hereunder. If the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance with the
two preceding sentences, the Company and the Selling Securityholders shall have
the right, within 24 hours next succeeding the 24-hour period above referred
to, to make arrangements with other underwriters or purchasers satisfactory to
you for purchase of such shares and portion on the terms herein set forth. In
any such case, either you or the Company and the Selling Securityholders shall
have the right to postpone the Closing Date determined as provided in Section 5
hereof for not more than seven business days after the date originally fixed as
the Closing Date pursuant to said Section 5 in order that any necessary changes
in the Registration
5.
<PAGE> 6
Statement, the Prospectus or any other documents or arrangements may be made.
If neither the non-defaulting Underwriters nor the Company and the Selling
Securityholders shall make arrangements within the 24-hour periods stated above
for the purchase of all the shares of the Stock which the defaulting
Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall
be terminated without further act or deed and without any liability on the part
of the Company or the Selling Securityholders to any non-defaulting Underwriter
and without any liability on the part of any non-defaulting Underwriter to the
Company or the Selling Securityholders. Nothing in this paragraph (b), and no
action taken hereunder, shall relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Company grants an option to the several Underwriters to purchase, severally and
not jointly, up to __________ shares in the aggregate of the Option Stock from
the Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of
the Option Stock as to which the several Underwriters are exercising the option
and the date on which such shares of the Option Stock are to be delivered, as
determined by you but in no event earlier than the date that the Underwritten
Stock is delivered hereunder. Delivery of certificates for the shares of
Option Stock, and payment therefor, shall be made as provided in Section 5
hereof. The number of shares of the Option Stock to be purchased by each
Underwriter shall be the same percentage of the total number of shares of the
Option Stock to be purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten Stock, as adjusted by you in such manner as you
deem advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of
the Stock to be purchased by them hereunder shall be as set forth in the
Prospectus. The Underwriters may from time to time change the public offering
price after the closing of the initial public offering and increase or decrease
the concessions and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front
cover page, in the last paragraph on the page following the front cover page
and under "Underwriting" in the Registration Statement, any Preliminary
Prospectus and the Prospectus relating to the Stock filed by the Company
(insofar as such information relates to the Underwriters) constitutes the only
information furnished by the Underwriters to the Company for inclusion in the
Registration Statement, any Preliminary Prospectus, and the Prospectus, and you
on behalf of the respective Underwriters represent and warrant to the Company
and the Selling Securityholders that the statements made therein are correct.
6.
<PAGE> 7
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 7:00 a.m., San Francisco time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of the Company, 3811 Turtle Creek Boulevard, Suite 1100, Dallas,
Texas, at 9:00 a.m., Dallas time, on the [fourth] business day after the date
of this Agreement, or at such time on such other day, not later than seven full
business days after such [fourth] business day, as shall be agreed upon in
writing by the Company, the Selling Securityholders and you. The date and hour
of such delivery and payment (which may be postponed as provided in Section
3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised
after 7:00 a.m., San Francisco time, on the date two business days preceding
the Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of the Company, 3811 Turtle Creek
Boulevard, Suite 1100, Dallas, Texas, at 9:00 a.m., Dallas time, on the third
business day after the exercise of such option; provided that any such payment
and delivery that under the terms of this subsection 5(b) should occur on the
first or second business day immediately following the Closing Date shall occur
on the third business day following the Closing Date, unless otherwise agreed
by the parties hereto.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order, and payment for the Stock purchased from the Selling
Securityholders shall be made to the Custodian, for the account of the Selling
Securityholders, in each case by one or more certified or official bank check
or checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the
Stock to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Certificates for the Underwritten Stock will be made available to the
Underwriters for inspection, checking and packaging at the offices of Lewco
Securities Corporation, 2 Broadway, New York, New York 10004 on the business
day prior to the Closing Date or, in the case of the Option Stock, by 3:00
p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any
later date on which Option Stock is purchased for the account of such
Underwriter. Any such payment by you shall not relieve such Underwriter from
any of its obligations hereunder.
7.
<PAGE> 8
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The Company and, only to the extent expressly applicable to
the Selling Securityholders, each Selling Securityholder severally covenants
and agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A and (ii) not file any amendment to
the Registration Statement or supplement to the Prospectus of which you
shall not previously have been advised and furnished with a copy or to
which you shall have promptly and reasonably objected in writing or
which is not in compliance with the Securities Act or the rules and
regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the
event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, (iii)
the institution or notice of intended institution of any action or
proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice
of the initiation or threatening of any proceeding for such purpose.
The Company will make every reasonable effort to prevent the issuance of
such a stop order and, if such an order shall at any time be issued, to
obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as originally
filed and of each amendment thereto filed prior to the time the
Registration Statement becomes effective and, promptly upon the filing
thereof, a signed copy of each post-effective amendment, if any, to the
Registration Statement (together with, in each case, all exhibits
thereto unless previously furnished to you) and will also deliver to
you, for distribution to the Underwriters, a sufficient number of
additional conformed copies of each of the foregoing (but without
exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as practicable deliver to you and send to
the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably
request, and (iii) thereafter from time to time during the period in
which a prospectus is required by law to be delivered by an Underwriter
or dealer, likewise send to the Underwriters as many additional copies
of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission,
as you may reasonably request for the purposes contemplated by the
Securities Act.
(d) If at any time during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer any event
relating to or affecting the Company, or of which the Company shall be
advised in writing by you, shall occur as a result of which it is
necessary, in the reasonable opinion of counsel for the Company
8.
<PAGE> 9
or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a purchaser
of the Stock, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended prospectus so
that the Prospectus as so supplemented or amended will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, at any time during the period in which a
prospectus is required by law to be delivered by an Underwriter or a
dealer, the Underwriters shall propose to vary the terms of offering of
the Stock by reason of changes in general market conditions or
otherwise, you will advise the Company in writing of the proposed
variation, and, if in the reasonable opinion either of counsel for the
Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or amended, the Company
will forthwith prepare and file with the Commission a supplement to the
Prospectus or an amended prospectus setting forth such variation. The
Company authorizes the Underwriters and all dealers to whom any of the
Stock may be sold by the several Underwriters to use the Prospectus, as
from time to time amended or supplemented, in connection with the sale
of the Stock in accordance with the applicable provisions of the
Securities Act and the applicable rules and regulations thereunder for
such period.
(e) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any post-
effective amendment to the Registration Statement and any supplement to
the Prospectus or any amended prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you,
in the qualification of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate
and, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, in keeping such qualifications in
good standing under said securities or blue sky laws; provided, however,
that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified. The Company will, from
time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for
distribution of the Stock.
(g) During a period of five years commencing with the date
hereof, the Company will furnish to you, and to each Underwriter who may
so request in writing, copies of all periodic and special reports
furnished to stockholders of the Company and of all information,
documents and reports filed with the Commission (including, if required,
the Report on Form SR required by Rule 463 of the Commission under the
Securities Act).
9.
<PAGE> 10
(h) Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its
security holders an earnings statement in accordance with Section 11(a)
of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses
incident to (i) the preparation, printing and filing with the Commission
and the National Association of Securities Dealers, Inc. ("NASD") of the
Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters of copies of any Preliminary
Prospectus and of the several documents required by paragraph (c) of
this Section 6 to be so furnished, (iii) the printing of this Agreement
and related documents delivered to the Underwriters, (iv) the
preparation, printing and filing of all supplements and amendments to
the Prospectus referred to in paragraph (d) of this Section 6, (v) the
furnishing to you and the Underwriters of the reports and information
referred to in paragraph (g) of this Section 6 and (vi) the printing and
issuance of stock certificates, including the transfer agent's fees.
The Selling Securityholders will pay any transfer taxes incident to the
transfer to the Underwriters of the shares the Stock being sold by the
Selling Securityholders.
(j) The Company agrees to reimburse you, for the account of
the several Underwriters, for blue sky fees and related disbursements
(including counsel fees and disbursements and cost of copying memoranda
for the Underwriters) paid by or for the account of the Underwriters or
their counsel in qualifying the Stock under state securities or blue sky
laws and in the review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this Section
are intended to relieve the Underwriters from the payment of the
expenses and costs which the Company hereby agrees to pay and shall not
affect any agreement which the Company may make, or may have made, for
the sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders hereby
agrees that, without the prior written consent of Hambrecht & Quist LLC
on behalf of the Underwriters, the Company or such Selling
Securityholder, as the case may be, will not, for a period of 180 days
from the effective date of the Registration Statement, directly or
indirectly, sell, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or
acquire Common Stock. The foregoing sentence shall not apply to (A) the
Stock to be sold to the Underwriters pursuant to this Agreement, (B)
shares of Common Stock issued by the Company upon the exercise of
options granted under the stock option plans of the Company (the "Option
Plans") or upon the exercise of warrants outstanding as of the date
hereof, all as described in footnote (2) to the table under the caption
"Capitalization" in the Preliminary Prospectus, and (C) options to
purchase Common Stock granted under the Option Plans.
10.
<PAGE> 11
(m) The Company agrees to use all reasonable efforts to cause
all directors that are securityholders of the Company, officers, and
stockholders to agree that, without the prior written consent of
Hambrecht & Quist LLC on behalf of the Underwriters, such person or
entity will not, for a period of 180 days from the effective date of the
Registration Statement, directly or indirectly, sell, offer, contract to
sell, transfer the economic risk of ownership in, make any short sale,
pledge or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for or any
other rights to purchase or acquire Common Stock; provided, that,
individuals may transfer any shares of Common Stock or securities
convertible into or exchangeable or exercisable for the Company's Common
Stock either during his or her lifetime or on death by will or intestacy
to his or her immediate family or to a trust the beneficiaries of which
are exclusively such individual and/or a member or members of his or her
immediate family; provided, however, that prior to any such transfer
each transferee shall execute an agreement, satisfactory to Hambrecht &
Quist LLC, pursuant to which each transferee shall agree to receive and
hold such shares of Common Stock, or securities convertible into or
exchangeable or exercisable for the Common Stock, subject to the
foregoing restrictions, and there shall be no further transfer except in
accordance with such restrictions.
(n) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in
your reasonable opinion the market price for the Stock has been or is
likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising
the Company to the effect set forth above, forthwith prepare, consult
with you concerning the substance of, and disseminate a press release or
other public statement, reasonably satisfactory to you, responding to or
commenting on such rumor, publication or event.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and each of the Selling Securityholders severally and not jointly agree
to indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Securities
Exchange Act of 1934, as amended (herein called the Exchange Act), or the
common law or otherwise, and the Company and the Selling Securityholders
severally and not jointly agree to reimburse each such Underwriter and
controlling person for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection with
any investigation or inquiry of, or other proceeding which may be brought
against, the respective indemnified parties, in each case arising out of or
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in
11.
<PAGE> 12
the Registration Statement (including the Prospectus as part thereof and any
Rule 462(b) registration statement) or any post-effective amendment thereto
(including any Rule 462(b) registration statement), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) or the omission or alleged omission to state therein a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided,
however, that (1) the indemnity agreements of the Company and the Selling
Securityholders contained in this paragraph (a) shall not apply to any such
losses, claims, damages, liabilities or expenses if such statement or omission
was made in reliance upon and in conformity with information furnished as
herein stated or otherwise furnished in writing to the Company by or on behalf
of any Underwriter for use in any Preliminary Prospectus or the Registration
Statement or the Prospectus or any such amendment thereof or supplement
thereto, (2) the indemnity agreement contained in this paragraph (a) shall not
inure to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages, liabilities or expenses purchased the Stock which is
the subject of the Preliminary Prospectus (or to the benefit of any person
controlling such Underwriter) if at or prior to the written confirmation of the
sale of such Stock a copy of the Prospectus (or the Prospectus as amended or
supplemented) was not sent or delivered to such person (excluding the documents
incorporated therein by reference) and the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented) unless the failure is
the result of noncompliance by the Company with clauses (ii) or (iii) of
paragraph (c) of Section 6 hereof, and (3) each Selling Securityholder shall
only be liable under this paragraph with respect to (A) information pertaining
to such Selling Securityholder furnished by or on behalf of such Selling
Securityholder expressly for use in any Preliminary Prospectus or the
Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto or (B) facts that would constitute a breach of any
representation or warranty of such Selling Securityholder set forth in Section
2(b) hereof. The indemnity agreements of the Company and the Selling
Securityholders contained in this paragraph (a) and the representations and
warranties of the Company and the Selling Securityholders contained in Section
2 hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its officers who signs the Registration Statement on his
own behalf or pursuant to a power of attorney, each of its directors, each
other Underwriter and each person (including each partner or officer thereof)
who controls the Company or any such other Underwriter within the meaning of
Section 15 of the Securities Act, and the Selling Securityholders and each
person, if any, who controls the Selling Securityholder within the meaning of
Section 15 of the Securities Act, from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Exchange Act, or
the common law or otherwise and to reimburse each of them for any legal or
other expenses (including, except as otherwise hereinafter provided, reasonable
fees and
12.
<PAGE> 13
disbursements of counsel) incurred by the respective indemnified parties in
connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto) or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished as herein stated or otherwise
furnished in writing to the Company by or on behalf of such indemnifying
Underwriter for use in the Registration Statement, any Preliminary Prospectus
or the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall
not relieve such indemnifying party or parties from any liability which it or
they may have to the indemnified party for contribution or otherwise than on
account of the indemnification provided for herein. Any indemnifying party
shall be entitled at its own expense to participate in the defense of any
action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(herein called the Notice of Defense) to the indemnified party, to assume
(alone or in conjunction with any other indemnifying party or parties) the
entire defense of such action, suit, investigation, inquiry or proceeding, in
which event such defense shall be conducted, at the expense of the indemnifying
party or parties, by counsel chosen by such indemnifying party or parties and
reasonably satisfactory to the indemnified party or parties; provided, however,
that (i) if the indemnified party or parties reasonably determine that there
may be a conflict between the positions of the
13.
<PAGE> 14
indemnifying party or parties and of the indemnified party or parties in
conducting the defense of such action, suit, investigation, inquiry or
proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then, upon prior written notice to the
indemnifying party or parties, counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, upon prior written notice to the indemnifying
party or parties, the indemnified party or parties shall be entitled to have
counsel chosen by such indemnified party or parties participate in, but not
conduct, the defense. If, within a reasonable time after receipt of the
Notice, an indemnifying party gives a Notice of Defense and the counsel chosen
by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or
other expenses subsequently incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding, except that (A) the indemnifying party or parties shall bear the
legal and other expenses incurred in connection with the conduct of the defense
as referred to in clause (i) of the proviso to the preceding sentence and (B)
the indemnifying party or parties shall bear such other expenses as it or they
have authorized to be incurred by the indemnified party or parties. If, within
a reasonable time after receipt of the Notice, no Notice of Defense has been
given, the indemnifying party or parties shall be responsible for any legal or
other expenses incurred by the indemnified party or parties in connection with
the defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such
proportion as is appropriate to reflect the relative benefits received by each
indemnifying party from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of each indemnifying party
in connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, or actions in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Securityholders on the one hand and the Underwriters on
the other shall be deemed to be in the same respective proportions as the total
net proceeds from the offering of the Stock received by the Company and the
Selling Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. Relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by each indemnifying
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
14.
<PAGE> 15
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this
paragraph (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities, or actions in respect thereof, referred
to in the first sentence of this paragraph (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigation, preparing to defend or defending against any
action or claim which is the subject of this paragraph (d). Notwithstanding the
provisions of this paragraph (d), no Underwriter shall be required to
contribute any amount in excess of the underwriting discount applicable to the
Stock purchased by such Underwriter. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this paragraph
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise (except as specifically
provided in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Securityholders will, without
the prior written consent of each Underwriter, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Underwriter or any person who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(f) The liability of each Selling Securityholder under the indemnity,
contribution and reimbursement agreements contained in the provisions of this
Section 7 shall be limited to an amount equal to the net proceeds of the stock
sold by such Selling Securityholder to the Underwriters. The Company and the
Selling Securityholders may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts
of such liability for which they each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the United States
on or after
15.
<PAGE> 16
the date hereof, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change in economic or
political conditions in the financial markets of the United States would, in
the Underwriters' reasonable judgment, make the offering or delivery of the
Stock impracticable, (iii) suspension of trading in securities generally or a
material adverse decline in value of securities generally on the New York Stock
Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or
limitations on prices (other than limitations on hours or numbers of days of
trading) for securities on either such exchange or system, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of, or commencement of any proceeding or
investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and
adversely affects or will materially or adversely affect the business or
operations of the Company, (v) declaration of a banking moratorium by either
federal or New York State authorities or (vi) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs which in the Underwriters' reasonable opinion has a material
adverse effect on the securities markets in the United States. If this
Agreement shall be terminated pursuant to this Section 8, there shall be no
liability of the Company or the Selling Securityholders to the Underwriters
(including without limitation any liability for loss of anticipated profit) and
no liability of the Underwriters to the Company or the Selling Securityholders
(including without limitation any liability for loss of anticipated profit);
provided, however, that in the event of any such termination the Company agrees
to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing
Date or any later date on which Option Stock is to be purchased, as the case
may be, and to the following further conditions:
(a) The Registration Statement shall have become effective;
and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings therefor shall be pending or threatened by the
Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing the
Stock, all corporate proceedings and other legal matters incident to the
foregoing, and the form of the Registration Statement and of the
Prospectus (except as to the financial statements contained therein),
shall have been approved at or prior to the Closing Date by Cooley
Godward LLP, counsel for the Underwriters.
(c) You shall have received from Locke Purnell Rain Harrell (A
Professional Corporation) and other counsel for the Company and the
Selling Securityholders satisfactory to you, one or more opinions,
addressed to the Underwriters and dated the
16.
<PAGE> 17
Closing Date, covering the matters set forth in Annex A hereto, and if
Option Stock is purchased at any date after the Closing Date, additional
opinions from each such counsel, addressed to the Underwriters and dated
such later date, confirming that the statements expressed as of the
Closing Date in such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date,
the statements made in the Registration Statement and the Prospectus
were true and correct and neither the Registration Statement nor the
Prospectus omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein,
respectively, not misleading, (ii) since the Effective Date, no event
has occurred which should have been set forth in a supplement or
amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
business, properties, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, and, since
such dates, except in the ordinary course of business, neither the
Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in
which it originally became effective and the Prospectus contained
therein, (iv) neither the Company nor any of its subsidiaries has any
material contingent obligations which are not disclosed in the
Registration Statement and the Prospectus, (v) there are not any pending
or known threatened legal proceedings to which the Company or any of its
subsidiaries is a party or of which property of the Company or any of
its subsidiaries is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus, (vi) there
are not any franchises, contracts, leases or other documents which are
required to be filed as exhibits to the Registration Statement which
have not been filed as required, (vii) the representations and
warranties of the Company herein are true and correct in all material
respects as of the Closing Date or any later date on which Option Stock
is to be purchased, as the case may be, and (viii) there has not been
any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably
foreseeable as to render it impracticable in your reasonable judgment to
make a public offering of the Stock, or a material adverse change in
market levels for securities in general (or those of companies in
particular) or financial or economic conditions which render it
inadvisable to proceed.
(e) You shall have received on the Closing Date and on any
later date on which Option Stock is purchased a certificate, dated the
Closing Date or such later date, as the case may be, and signed by the
President and the Chief Financial Officer of the Company, stating that
the respective signers of said certificate have carefully examined the
Registration Statement in the form in which it originally became
effective and the Prospectus contained therein and any supplements or
amendments thereto, and that the statements included in clauses (i)
through (vii) of paragraph (d) of this Section 9 are true and correct.
17.
<PAGE> 18
(f) You shall have received from Price Waterhouse LLP, a
letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is purchased, confirming
that they are independent public accountants with respect to the Company
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder and based upon the procedures described
in their letter delivered to you concurrently with the execution of this
Agreement (herein called the Original Letter), but carried out to a date
not more than three business days prior to the Closing Date or such
later date on which Option Stock is purchased (i) confirming, to the
extent true, that the statements and conclusions set forth in the
Original Letter are accurate as of the Closing Date or such later date,
as the case may be, and (ii) setting forth any revisions and additions
to the statements and conclusions set forth in the Original Letter which
are necessary to reflect any changes in the facts described in the
Original Letter since the date of the Original Letter or to reflect the
availability of more recent financial statements, data or information.
The letters shall not disclose any change, or any development involving
a prospective change, in or affecting the business or properties of the
Company or any of its subsidiaries which, in your sole reasonable
judgment, makes it impractical or inadvisable to proceed with the public
offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus.
(g) You shall have received from Price Waterhouse LLP a letter
stating that their review of the Company's system of internal accounting
controls, to the extent they deemed necessary in establishing the scope
of their examination of the Company's financial statements as at
December 31, 1996, did not disclose any weakness in internal controls
that they considered to be material weaknesses.
(h) You shall have been furnished evidence in usual written or
telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the
qualification, if required, referred to in paragraph (f) of Section 6
hereof.
(i) Prior to the Closing Date, the Stock to be issued and sold
by the Company shall have been duly authorized for listing by the Nasdaq
National Market upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have received
from all directors that are securityholders of the Company, officers,
and stockholders agreements, in form reasonably satisfactory to
Hambrecht & Quist LLC, stating that without the prior written consent of
Hambrecht & Quist LLC on behalf of the Underwriters, such person or
entity will not, for a period of 180 days from the effective date of the
Registration Statement, directly or indirectly, offer, contract to sell,
transfer the economic risk of ownership in, make any short sale, pledge
or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any other rights
to purchase or acquire Common Stock, subject to the applicable
exceptions set forth in Section 6(l) and (m) hereof.
18.
<PAGE> 19
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if Cooley Godward LLP, counsel for the Underwriters,
shall be reasonably satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving written notice to
the Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters (including without limitation loss of anticipated profits) and
without liability of the Underwriters to the Company or the Selling
Securityholders (including without limitation loss of anticipated profits);
provided, however, that (i) in the event of such termination, the Company
agrees to indemnify and hold harmless the Underwriters from all costs or
expenses incident to the performance of the obligations of the Company and the
Selling Securityholders under this Agreement, including all costs and expenses
referred to in paragraphs (i) and (j) of Section 6 hereof, and (ii) if this
Agreement is terminated by you because of any refusal, inability or failure on
the part of the Company or the Selling Securityholders to perform any agreement
herein, to fulfill any of the conditions herein (other than Section
9(d)(viii)), or to comply with any provision hereof other than by reason of a
default by any of the Underwriters, the Company will reimburse the Underwriters
severally upon demand for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters
(including without limitation any liability for loss of anticipated profits)
and without liability of the Underwriters to the Company or the Selling
Securityholders (including without limitation any liability for loss of
anticipated profits); provided, however, that in the event of any such
termination the Company agrees to indemnify and hold harmless the Underwriters
from all costs or expenses incident to the performance of the obligations of
the Company and the Selling Securityholders under this Agreement, including all
costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in paragraph (a) of Section 7 of this Agreement, notwithstanding the
absence of a judicial
19.
<PAGE> 20
determination as to the propriety and enforceability of the obligations under
this Section 11 and the possibility that such payments might later be held to
be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, the Selling Securityholders and the
several Underwriters and, with respect to the provisions of Section 7 hereof,
the several parties (in addition to the Company, the Selling Securityholders
and the several Underwriters) indemnified under the provisions of said Section
7, and their respective personal representatives, successors and assigns.
Nothing in this Agreement is intended or shall be construed to give to any
other person, firm or corporation any legal or equitable remedy or claim under
or in respect of this Agreement or any provision herein contained. The term
"successors and assigns" as herein used shall not include any purchaser, as
such purchaser, of any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by facsimile (with written confirmation of
receipt) or telegraph and, if to the Underwriters, shall be mailed, faxed (with
written confirmation of receipt), telegraphed or delivered to Hambrecht & Quist
LLC, One Bush Street, San Francisco, California 94104; and if to the Company,
shall be mailed, faxed (with written confirmation of receipt), telegraphed or
delivered to it at its office, 3811 Turtle Creek Boulevard, Suite 1100, Dallas,
Texas 75219, Attention: John F. Davis, III, Fax: (214) 528-5675; and if to the
Selling Securityholders, shall be mailed, telegraphed or delivered to the
Selling Securityholders in care of ________________________ at
________________________. All notices given by telegraph shall be promptly
confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and
effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Underwriter or controlling person
thereof, or by or on behalf of the Company or the Selling Securityholders or
their respective directors or officers, and (c) delivery and payment for the
Stock under this Agreement; provided, however, that if this Agreement is
terminated prior to the Closing Date, the provisions of paragraphs (l), (m) and
(n) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
Please sign and return to the Company and to the Selling Securityholders
in care of the Company the enclosed duplicates of this letter, whereupon this
letter will become a binding
20.
<PAGE> 21
agreement among the Company, the Selling Securityholders and the several
Underwriters in accordance with its terms.
21.
<PAGE> 22
Very truly yours,
PEGASUS SYSTEMS, INC.
By
---------------------------
Title
------------------------
SELLING SECURITYHOLDERS:
------------------------------
------------------------------
------------------------------
By
---------------------------
Attorney-In-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
MONTGOMERY SECURITIES
VOLPE BROWN WHELAN & COMPANY, LLC
By: HAMBRECHT & QUIST LLC
By
----------------------------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
22.
<PAGE> 23
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS
------------
PURCHASED
- ---------
<S> <C>
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . . .
Montgomery Securities . . . . . . . . . . . . . . . . . . . . .
Volpe Brown Whelan & Company, LLC . . . . . . . . . . . . . .
____________
Total . . . . . . . . . . . . . . . . . . . . . .
============
</TABLE>
<PAGE> 24
SCHEDULE II
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS SHARES
OF SELLING SECURITYHOLDERS TO BE SOLD
-------------------------- -----------
<S> <C>
___________
Total . . . . . . . . . . . . . . . . . . . . . .
===========
</TABLE>
<PAGE> 25
ANNEX A
MATTERS TO BE COVERED IN THE OPINIONS OF
COUNSEL FOR THE COMPANY AND THE SELLING SECURITYHOLDERS
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, is duly
qualified as a foreign corporation and in good standing in each state of
the United States of America in which its ownership or leasing of
property requires such qualification (except where the failure to be so
qualified would not have a material adverse effect on the business,
properties, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole), and has full corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement; all the issued and outstanding
capital stock of each of the subsidiaries of the Company has been duly
authorized and validly issued and is fully paid and nonassessable, and
is owned by the Company free and clear of all liens, encumbrances and
security interests, and to such counsel's knowledge, no options,
warrants or other rights to purchase, agreements or other obligations to
issue or other rights to convert any obligations into shares of capital
stock or ownership interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company
consists of ____________ shares of Preferred Stock, of which there are
outstanding ____________ shares, and ____________ shares of Common
Stock, $.01 par value, of which there are outstanding ____________
shares (including the Underwritten Stock plus the number of shares of
Option Stock issued on the date hereof); proper corporate proceedings
have been taken validly to authorize such authorized capital stock; all
of the outstanding shares of such capital stock (including the
Underwritten Stock and the shares of Option Stock issued, if any) have
been duly and validly issued and are fully paid and nonassessable; any
Option Stock purchased after the Closing Date, when issued and delivered
to and paid for by the Underwriters as provided in the Underwriting
Agreement, will have been duly and validly issued and be fully paid and
nonassessable; and no preemptive rights of, or rights of refusal in
favor of, stockholders exist with respect to the Stock, or the issue and
sale thereof, pursuant to the Certificate of Incorporation or Bylaws of
the Company and, to the knowledge of such counsel, there are no
contractual preemptive rights that have not been waived, rights of first
refusal or rights of co-sale which exist with respect to the Stock being
sold by the Selling Securityholders or the issue and sale of the Stock;
(iii) the Registration Statement has become effective
under the Securities Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or suspending
or preventing the use of the Prospectus is in effect and no proceedings
for that purpose have been instituted or are pending or contemplated by
the Commission;
<PAGE> 26
(iv) the Registration Statement and the Prospectus
(except as to the financial statements and schedules and other financial
data contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act and with the rules and regulations of
the Commission thereunder;
(v) such counsel have no reason to believe that the
Registration Statement (except as to the financial statements and
schedules and other financial data contained or incorporated by
reference therein, as to which such counsel need not express any opinion
or belief) at the Effective Date contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
that the Prospectus (except as to the financial statements and schedules
and other financial data contained or incorporated by reference therein,
as to which such counsel need not express any opinion or belief) as of
its date or at the Closing Date (or any later date on which Option Stock
is purchased), contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(vi) the information required to be set forth in the
Registration Statement in answer to Items 9, 10 (insofar as it relates
to such counsel) and 11(c) of Form S-1 is to such counsel's knowledge
accurately and adequately set forth therein in all material respects or
no response is required with respect to such Items, and the description
of the Company's stock option plans and the options granted and which
may be granted thereunder in the Prospectus accurately and fairly
presents the information required to be shown with respect to said plans
and options to the extent required by the Securities Act and the rules
and regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises,
contracts, leases or documents which in the opinion of such counsel are
of a character required to be described in the Registration Statement or
the Prospectus or to be filed as exhibits to the Registration Statement,
which are not described and filed as required;
(viii) the Underwriting Agreement has been duly
authorized, executed and delivered by the Company;
(ix) the Underwriting Agreement has been duly executed
and delivered by or on behalf of each of the Selling Securityholders.
The Custody Agreement between the Selling Securityholders and
____________, as Custodian, and the Power of Attorney referred to in
such Custody Agreement have been duly executed and delivered by such
Selling Securityholder. The Custody Agreement entered into by, and the
Power of Attorney given by, such Selling Securityholder is valid and
binding on such Selling Securityholder and each Selling Securityholder
has full legal right and authority to enter into the Underwriting
Agreement and to sell, transfer and deliver in the manner provided
<PAGE> 27
in the Underwriting Agreement the shares of Stock sold by such Selling
Securityholder hereunder;
(x) the issue and sale by the Company of the shares of
Stock sold by the Company as contemplated by the Underwriting Agreement
will not conflict with, or result in a breach of, the Certificate of
Incorporation or Bylaws of the Company or any of its subsidiaries or, to
such counsel's knowledge any agreement or instrument to which the
Company or any of its subsidiaries is a party or any applicable law or
regulation, or so far as is known to such counsel, any order, writ,
injunction or decree, of any jurisdiction, court or governmental
instrumentality;
(xi) all holders of securities of the Company having
rights to the registration of shares of Common Stock, or other
securities, because of the filing of the Registration Statement by the
Company have waived such rights or such rights have expired by reason of
lapse of time following notification of the Company's intent to file the
Registration Statement;
(xii) good and valid title to the shares of Stock sold by
the Selling Securityholders under the Underwriting Agreement, free and
clear of all liens, encumbrances, equities, security interests and
claims, has been transferred to the Underwriters who have severally
purchased such shares of Stock under the Underwriting Agreement,
assuming for the purpose of this opinion that the Underwriters purchased
the same in good faith without notice of any adverse claims;
(xiii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation of
the transactions contemplated in the Underwriting Agreement, except such
as have been obtained under the Securities Act and such as may be
required under state securities or blue sky laws in connection with the
purchase and distribution of the Stock by the Underwriters or as may be
required by the NASD; and
(xiv) the Common Stock will been duly authorized for
listing by the Nasdaq National Market upon official notice of issuance.
<PAGE> 1
EXHIBIT 2.1
CONFIDENTIAL
CONTRIBUTION AND RESTRUCTURING AGREEMENT
This Contribution and Restructuring Agreement (this "Agreement"), dated
effective as of July 21, 1995, among Pegasus Systems, Inc., a Delaware
corporation (the "Company"), and all of the stockholders of The Hotel Clearing
Corporation, a Delaware corporation ("HCC"), and all of the stockholders of The
Hotel Industry Switch Company, a Delaware corporation ("THISCO"), set forth in
Schedule A attached hereto (collectively referred to herein as the
"Stockholders").
WITNESSETH:
WHEREAS, the Stockholders, as the only stockholders of HCC and/or
THISCO, desire to combine the businesses of HCC and THISCO as subsidiaries of a
common parent corporation pursuant to the terms of this Agreement; and
WHEREAS, the Company has been formed to serve as the parent corporation
in connection with such restructuring; and
WHEREAS, as part of a single plan to be effectuated pursuant to this
Agreement, the Stockholders, other than Lodging Network, Inc. ("LNI"), agree to
contribute all of their respective shares of capital stock (whether preferred
or common) and any other stock interests in HCC and THISCO (collectively, the
"Stock") to the Company in exchange for Company Common Stock as part of a
transaction intended to qualify as a tax free transaction under Section 351 of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Company has agreed to grant LNI an option to exchange its
entire stock interest in HCC for shares of Company Common Stock and LNI has
agreed to join in this Agreement on the terms herein specified.
NOW, THEREFORE, for and in consideration of the mutual covenants,
agreements and provisions contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
TRANSACTIONS
1.1 Closing Transactions. Subject to and upon the terms and conditions
contained herein, the closing pursuant to this Agreement (the "Closing") shall
take place at the Company's address at 3811 Turtle Creek Blvd., Suite 1100,
Dallas, Texas 75219, at 10:00 a.m., local time, on July 21, 1995, or at such
other time as shall be agreed to by the parties (the "Closing Date"). The
parties hereto (as applicable) shall simultaneously take the following actions
and execute and deliver the following documents:
<PAGE> 2
(a) HCC Stock Contribution. Each HCC stockholder, other than LNI,
shall contribute all of such stockholder's Stock of HCC to the Company
by delivering to the Company all necessary stock certificates, stock
powers or other documents as may be necessary to effect the transfer of
the Stock to the Company. In exchange, the Company shall issue and
deliver to each of them a certificate for the number of shares of
Company Common Stock as specified in Schedules A and C attached hereto.
(b) THISCO Stock Contribution. Each THISCO stockholder shall
contribute all of such stockholder's shares of THISCO to the Company by
delivering to the Company all necessary stock certificates, stock powers
or other documents as may be necessary to effect the transfer of the
Stock to the Company. In exchange, the Company shall issue and deliver
to each of them a certificate for the number of shares of Company Common
Stock as specified in Schedule A attached hereto.
(c) Stockholders Agreement. The Company and each Stockholder,
other than LNI, shall execute and deliver to one another the
Stockholders Agreement (herein so called) dated the Closing Date in
substantially the form of Exhibit 1 to this Agreement.
(d) HCC Debt. Each HCC stockholder who previously made one or
more loans to HCC hereby elects to contribute to the capital of HCC,
effective immediately prior to the Closing, the amount of such debt owed
by HCC to such stockholder as and to the extent indicated on Schedule
B-1 attached hereto. These capital contributions are reflected in the
number of shares of Company Common Stock in Schedule A which are to be
issued to such stockholders at the Closing. The amount of debt remaining
after these capital contributions (as set forth on Schedule B-1 hereto)
shall be renewed and extended and evidenced by new promissory notes to
be executed and delivered by HCC to the applicable stockholders, which
notes shall mature upon the expiration of five (5) years from the
Closing Date and bear interest at the prime rate published daily in the
Wall Street Journal plus 1% per annum. Such notes shall be guaranteed by
the Company.
(e) THISCO Debt. Each THISCO stockholder who previously made one
or more loans to THISCO hereby elects to contribute to the capital of
THISCO, effective immediately prior to the Closing, the amount of such
debt owed by THISCO to such stockholder as and to the extent indicated
on Schedule B-2 attached hereto. These capital contributions are
reflected in the number of shares of Company Common Stock in Schedule A
which are to be issued to such stockholders at the Closing. The amount
of debt remaining after these capital contributions (as set forth on
Schedule B-2 hereto) shall be renewed and extended and evidenced by new
promissory notes to be executed and delivered by THISCO to the
applicable stockholders, which notes shall mature upon the expiration of
five (5) years from the
-2-
<PAGE> 3
Closing Date and shall bear interest at the prime rate published daily
in the Wall Street Journal plus 1% per annum. Such notes shall be
guaranteed by the Company.
(f) Reed Accommodation. Reed Travel Group, a division of Reed
Elsevier Inc. ("Reed") agrees to forgive $75,000 of outstanding debt
owed by THISCO to Reed and the Company agrees to guaranty up to
$4,261,482 of the remaining outstanding debt owed by THISCO to Reed,
such guaranty to be in form and substance satisfactory to Reed and the
Company.
(g) Delivery of Company Guarantees. The Company shall execute and
deliver the guarantees contemplated within Subsections (d), (e) and (f)
of this Section 1.1.
(h) HCC Projected Volume Shares. In addition to the shares of
Company Common Stock to be issued as reflected on Schedule A, each HCC
stockholder, other than LNI, shall also receive the number of shares of
Company Common Stock specified on Schedule C attached hereto. In
connection therewith, the Company shall cause HCC to prepare and deliver
to each such HCC stockholder at the Closing a written confirmation of,
and each such HCC stockholder shall deliver to the Company at the
Closing a written acceptance of, the number of commissionable
reservation transactions that such holder projects it will process
through HCC from January 1, 1996 through December 31, 1996 ("Projected
Volume Confirmation"). The shares specified in Schedule C, referred to
herein as the "Projected Volume Shares," shall, in addition to any other
purchase rights set forth in the Stockholders Agreement, be subject to
purchase by the Company as follows: As soon as reasonably practicable
after December 31, 1996, the Company shall determine and certify to each
holder of Projected Volume Shares the actual number of commissionable
reservation transactions that were processed through HCC ("Actual
Transactions") by such holder from January 1, 1996 through December 31,
1996, compared to such holder's projected number of transactions
("Projected Transactions") set forth in its Projected Volume
Confirmation. With respect to each holder of Projected Volume Shares,
if such holder's Actual Transactions exceeds its Projected Transactions,
then the Projected Volume Shares held by such holder shall not be
subject to the purchase option contemplated by this paragraph. If the
Actual Transactions by any holder of Projected Volume Shares are less
than its Projected Transactions, then the Company may, at its option,
purchase, at a purchase price of $1.00 per share, the percentage of such
holder's Projected Volume Shares (rounded to the nearest whole share)
equal to the corresponding percentage by which such holder's Actual
Transactions were less than its Projected Transactions. For example, if
stockholder X's Actual Transactions for 1996 were 97.5% of its Projected
Transactions, then 2.5% of stockholder X's Projected Volume Shares would
be subject to purchase in accordance with the Stockholders Agreement.
-3-
<PAGE> 4
(i) Participant and User Agreements. As specified by Article V
of the Stockholders Agreement, each HCC stockholder and each THISCO
stockholder, as the case may be, shall execute and deliver the HCC
Participant Agreement and/or Ultra Switch User Agreement applicable to
it.
(j) LNI Stock Purchase Option. The Company and LNI shall
execute and deliver to one another the Stock Purchase Option dated the
Closing Date in substantially the form of Exhibit 2 to this Agreement
(the "LNI Option").
(k) Management Stock Purchase. At or within 30 days of the
Closing, management of the Company, HCC and/or THISCO shall purchase an
aggregate of 2,125 restricted shares of Common Stock, representing five
percent (5%) of the shares of the Company's Common Stock to be
outstanding as of the Closing (assuming the LNI Option were fully
exercised as of the Closing). The aggregate purchase price for these
shares shall be $570,874, which price reflects a discounted value based
on the restrictions imposed on such shares as outlined in Section 3 of
the Arthur Andersen report entitled "Pegasus Systems, Inc. Long-Term
Compensation Strategy" delivered to each of the parties hereto and such
shares are being purchased in exchange for management's rights to a five
percent (5%) preferred dividend as set forth in the Arthur Andersen
Report. These shares shall be in addition to any other shares which may
be reserved for the management of the Company under any future
compensation or ownership plan adopted by the Company.
1.2 Compliance with Section 351. The transactions contemplated by
this Agreement, to the extent subject thereto, are intended to qualify under
Section 351 of the Code.
1.3 Amendment or Waiver of Conflicting Provisions. Notwithstanding any
representation or warranty herein to the contrary, the parties to this
Agreement hereby acknowledge that the transactions contemplated by this
Agreement, including but not limited to the LNI Option, may conflict with or
violate certain provisions of the respective certificate of incorporation,
bylaws and stockholders agreement of HCC and THISCO or may now or hereafter
have an effect upon the capital structure of the Company. Accordingly, the
parties hereby agree to execute and deliver, or cause to be executed and
delivered, any required approvals, waivers, consents or amendments and to take,
or cause to be taken, any other action necessary to complete the transactions
contemplated herein in a timely fashion and in a manner which does not conflict
with or violate any documents or agreements binding upon or applicable to HCC,
THISCO and/or the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Stockholders, effective upon the Closing, as
follows:
(a) Organization. The Company is a corporation duly organized,
validly and in good standing under the laws of the State of Delaware and
has full corporate power and authority to conduct its business as it is
now being conducted.
-4-
<PAGE> 5
(b) Authority. The Company has all requisite corporate power and
authority to enter into and perform its obligations under this
Agreement, the Stockholders Agreement and the transactions contemplated
hereby and thereby and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement
and the Stockholders Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby, other than as provided or
contemplated herein. This Agreement constitutes, and the Stockholders
Agreement, when executed and delivered by the parties thereto will
constitute, valid and binding obligations of the Company, enforceable
against it in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other laws affecting
creditors generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(c) No Conflict. No filing with and no permit, authorization,
consent or approval of, any public body or authority is necessary for
the execution, delivery or performance by the Company of this Agreement
or the consummation by the Company of the transactions contemplated
hereby that has not already been made or obtained, which if not made or
obtained would have an adverse effect on its ability to consummate the
transactions contemplated hereby. Neither the execution, delivery or
performance by the Company of this Agreement nor the consummation by it
of the transactions contemplated hereby, nor compliance by it with any
of the provisions hereof will (i) conflict with or result in any breach
of any provision of its Certificate of Incorporation or Bylaws, (ii)
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any note, bond,
mortgage, license, agreement or other instrument or obligation to which
it is a party or by which it or any of its properties may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it or any of its properties.
(d) Title. The shares of Company Common Stock to be issued to the
Stockholders (as specified in Schedule A attached hereto), when issued,
will be duly authorized, legally and validly issued, fully paid and
non-assessable. The Company has the requisite legal right, power and
authority to issue such shares. The issuance of such shares and the
delivery of certificates representing such shares to such Stockholders
pursuant to the provisions of this Agreement will transfer to each of
such persons good and marketable title to the shares issuable to each of
such persons, free and clear of any pledge, lien, security interest,
encumbrance, claim or restriction on transferability, except for such
restrictions on resale as are set forth in
-5-
<PAGE> 6
this Agreement or the Stockholders Agreement, Certificate of
Incorporation or Bylaws and any applicable state and federal securities
laws.
2.2 Representations and Warranties of Certain Stockholders. Each of the
Stockholders, other than LNI, (as set forth on Schedule A attached hereto)
hereby severally represents and warrants to the Company and the other
Stockholders, effective upon the Closing, as follows:
(a) Authority. Such Stockholder has full legal right, power,
authority and capacity to enter into and perform this Agreement and the
Stockholders Agreement, and the consent, agreement or concurrence of no
other person or entity is required for such Stockholder to execute,
deliver and perform this Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby. This Agreement and the
Stockholders Agreement constitute the valid and binding obligations of
such Stockholder; enforceable against such Stockholders in accordance
with their terms, except as such enforceability may be limited by
bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) No Conflict. No filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for
the execution, delivery or performance by such Stockholder of this
Agreement or the Stockholders Agreement or for the consummation by such
Stockholder of the transactions contemplated hereby or thereby that has
not been made or obtained, which if not made or obtained would have an
adverse effect on the ability of such Stockholder to consummate the
transactions contemplated hereby or thereby. Neither the execution,
delivery or performance by such Stockholder of this Agreement or the
Stockholders Agreement nor the consummation by any such Stockholder of
the transactions contemplated hereby or thereby, nor compliance by such
Stockholder with any of the provisions hereof or thereof will (i) result
in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any fight of
termination, cancellation or acceleration) under, any note, bond,
mortgage, license, agreement or other instrument or obligation to which
such Stockholder is a party or (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to such Stockholder.
(c) Title. Such Stockholder has the requisite legal right,
power and authority to transfer such Stockholder's shares of Stock. The
delivery of certificates representing such Stock to the Company pursuant
to the provisions of this Agreement will transfer to the Company good
and marketable tide to all of the Stock owned by such Stockholder, free
and clear of any pledge, lien, security interest, encumbrance, claim or
restriction on transferability, except for such restrictions on resale
as are
-6-
<PAGE> 7
provided for under (i) the certificate of incorporation, bylaws and
stockholders agreement of HCC and THISCO, as the case may be, and (ii)
any applicable state and federal securities laws.
(d) Investment Representations. Such Stockholder acknowledges
that the Company has relied upon, and each such Stockholder makes,
effective upon the Closing, the following investment representations:
(i) Such Stockholder is acquiring the shares of Company
Common Stock for such Stockholder's own account and not with a
view to or for sale in connection with any distribution thereof
in violation of the Securities Act of 1933, as amended (the "1933
Act");
(ii) Such shares of Company Common Stock are "restricted
securities" as that term is defined in Rule 144 promulgated under
the 1933 Act and may not be sold, transferred, pledged,
distributed or otherwise disposed of except in compliance with
applicable federal and state securities laws and the Stockholders
Agreement;
(iii) Such Stockholder has such knowledge and experience
in business matters that such Stockholder is capable of
evaluating, and has evaluated, the merits and risks of the
proposed investment;
(iv) Such Stockholder is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D promulgated under the
1933 Act;
(v) Such Stockholder has been furnished all materials
relating to the Company, the Company Common Stock and the
proposed transaction which such Stockholder has requested and has
been afforded the opportunity to obtain additional information;
and
(vi) Such Stockholder has reviewed the following legend
and acknowledges, but does not represent or warrant, that the
Company will affix the following legend or a similar legend to
all certificates and other documents evidencing or representing
the Company Common Stock:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
or any state securities laws, and neither such shares nor
any interest therein may be sold, assigned, pledged,
transferred, hypothecated, encumbered or in any other
manner transferred or disposed of, or be subject to
execution, attachment or similar process, in whole or in
part, except in compliance therewith and with all other
applicable federal and state securities and
-7-
<PAGE> 8
other laws and regulations, and unless an opinion of
counsel or other evidence relating to compliance with such
laws, in form and substance satisfactory to the Company,
is delivered to the Company in advance of any such
transfer. Further, the shares represented by this
certificate are subject to the conditions, restrictions
and obligations specified in that certain Stockholders
Agreement dated 1995, and any amendments thereto (the
"Stockholders Agreement"), among the Company and certain
of its Stockholders, including conditions and restrictions
with respect to voting rights and powers, disposition,
stock ownership rights and prerequisites, transfer, the
composition of the Company's Board of Directors; stock
repurchase rights, and otherwise, and no transfer of the
shares represented by this certificate shall be valid or
effective unless and until such conditions and
restrictions have been complied with in all respects, in
the determination of the Company's Board of Directors. A
copy of the Stockholders Agreement is on file with the
Secretary of the Company. The holder of this certificate,
by acceptance of this certificate, agrees to be bound by
the provisions of the Stockholders Agreement and to
indemnify and hold the Company harmless against loss or
liability arising from the disposition of the shares
represented by this certificate in violation of such
provisions or in violation of any of the aforementioned
laws or regulations."
2.3 Representations and Warranties of LNI. LNI hereby represents and
warrants to the Company and the other Stockholders, effective upon the Closing,
as follows:
(a) Authority. LNI has full legal right, power, authority and
capacity to enter into and perform this Agreement, and the consent,
agreement or concurrence of no other person or entity is required for
LNI to execute, deliver and perform this Agreement and the transactions
contemplated hereby. This Agreement constitutes the valid and binding
obligation of LNI, enforceable against LNI in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency
or other laws affecting creditors' rights generally or by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) No Conflict. No filing with, and no permit, authorization,
consent or approval of, any public body or authority is necessary for
the execution, delivery or performance by LNI of this Agreement or for
the consummation by LNI of the transactions contemplated hereby that has
not been made or obtained, which if not made or obtained would have an
adverse effect on the ability of LNI to consummate the transactions
contemplated hereby. Neither the execution, delivery or performance by
LNI of this Agreement nor the consummation by LNI of the
-8-
<PAGE> 9
transactions contemplated hereby, nor compliance by LNI with any of the
provisions hereof or thereof will (i) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any note, bond, mortgage, license, agreement or
other instrument or obligation to which LNI is a party or (ii) violate
any order, writ, injunction, decree, statute, rule or regulation
applicable to LNI.
(c) Investment Representations. LNI acknowledges that the Company
has relied upon, and LNI makes, effective upon the Closing, the
following investment representations:
(i) LNI is acquiring the LNI Option for its own account
and not with a view to or for sale in connection with any
distribution thereof in violation of the 1933 Act;
(ii) The LNI Option may not be sold, transferred,
pledged, distributed or otherwise disposed of except in
compliance with its terms and with applicable federal and state
securities laws;
(iii) LNI has such knowledge and experience in business
matters that LNI is capable of evaluating, and has evaluated, the
merits and risks of The LNI Option;
(iv) LNI has been furnished all materials relating to
The Company, and the proposed transaction which LNI has requested
and has been afforded the opportunity to obtain additional
information.
ARTICLE III
MISCELLANEOUS
3.1 Notices. All notices, requests, approvals and other communications
provided for herein to any person named hereunder shall be in writing
(including wire, facsimile or similar writing) and shall be given, if in
writing and delivered personally, by telegram or facsimile, or sent by
registered mail, postage prepaid, to such person at his address or facsimile,
number set number as such person may hereafter specify by forth below or such
other address or notice to the other person.
If to the Stockholders, at the addresses set forth on Schedule A.
-9-
<PAGE> 10
If to the Company: Pegasus Systems, Inc.
3811 Turtle Creek Blvd., Suite 1100
Dallas, Texas 75219
Attention: President
Fax No.: (214) 52&5675
Each such notice shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified in this subsection
and the appropriate answer back is received or (ii) if given by other means,
when actually received at the address specified in this section; provided,
however, that a notice given other than during normal business hours or on a
business day at the place of receipt shall not be effective until the opening
of business on the next business day.
3.2 Further Assurances. Each party hereto agrees that, from time to
time, upon request, it will execute and deliver, or cause to be executed and
delivered, such other instruments and take such other action as such other
party reasonably may require to evidence more effectively the transactions
effected pursuant hereto.
3.3 Integration. This Agreement, and any other schedule, exhibit,
agreement, document or instrument attached hereto or referred to herein,
integrates all of the terms and conditions mentioned herein or incidental
hereto, and supersedes all other negotiations and prior writings in respect of
the subject matter hereof.
3.4 Governing Law. This Agreement shall be deemed to be a contract
made under the laws of the State of Delaware, and for all purposes shall be
governed by and construed in accordance with the laws of said State, without
regard to principles of conflicts of law.
3.5 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties in separate counterparts,
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement
3.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that no party hereto shall assign any of
its rights or delegate any of its duties hereunder without the prior written
consent of the other party hereto. Neither this Agreement nor any other
agreement contemplated hereby shall be deemed to confer upon any person not a
party hereto or thereto any rights or remedies hereunder or thereunder.
3.7 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
-10-
<PAGE> 11
3.8 Waived Any term or provision of this Agreement may be waived in
writing (or the time for performance of any of the obligations or other acts of
the parties hereto may be extended) by any party.
3.9 Headings. All headings contained in this Agreement are intended
for convenience only and shall not control or affect the meaning, construction
or effect of this Agreement or any of the provisions thereof.
3.10 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained herein shall survive the
Closing.
[Balance of page intentionally left blank]
-11-
<PAGE> 12
IN WITNESS WHEREOF, this Agreement is executed by the parties on the
respective dates set forth below to be effective as of the date first above
written.
COMPANY:
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III
------------------------------------
Its: President
-----------------------------------
Date: August 31, 1995
----------------------------------
---------------------------------------
ANASAZI, INC.
By: /s/ TOM CASTLEBERRY
------------------------------------
Its:
-----------------------------------
Date:
----------------------------------
---------------------------------------
BEST WESTERN INTERNATIONAL
By: /s/ BILL WATSON
------------------------------------
Its: Sr. VP Worldwide Marketing
-----------------------------------
Date: July 18th 1995
----------------------------------
---------------------------------------
-12-
<PAGE> 13
CHOICE HOTELS INTERNATIONAL
By: James E. Rempe
-------------------------------------
Its: Senior Vice President and Secretary
------------------------------------
Date: August 16, 1995
-----------------------------------
/s/ JAMES E. REMPE
----------------------------------------
TRUSTHOUSE FORTE CALIFORNIA INC.
By: William J. Hanley
------------------------------------
Its: Exec. V.P. Sales & Marketing
-----------------------------------
Date: July 20, 1995
----------------------------------
/s/ WILLIAM J. HANLEY
---------------------------------------
HILTON HOTELS CORPORATION
By: RoSat E. Dirks
-------------------------------------
Its: Sr. VP Mktg - HHC
------------------------------------
Date: 7/20/95
-----------------------------------
/s/ ROSAT E. DIRKS
----------------------------------------
HOSPITALITY FRANCHISE SYSTEMS, INC.
By: Douglas L. Patterson
-------------------------------------
Its: Senior Vice President
------------------------------------
Date: 8/28/95
-----------------------------------
/s/ DOUGLAS L. PATTERSON
----------------------------------------
-13-
<PAGE> 14
REED TRAVEL GROUP, A DIVISION OF REED
ELSEVIER INC.
By: Mac Highet
------------------------------------
Its: COO
-----------------------------------
Date: July 21, 1995
----------------------------------
/s/ MAC HIGHET
---------------------------------------
HYATT HOTELS CORPORATION
By: John W. Biggs
----------------------------------------------
Its: Ex. V. P.
---------------------------------------------
Date: 8/8/95
--------------------------------------------
/s/ JOHN W. BIGGS
-------------------------------------------------
INTER-CONTINENTAL HOTELS CORPORATION
By: Paul J. Travels
----------------------------------------------
Its: Senior Vice President- Property Management
--------------------------------------------
Date: 1st August 1995
--------------------------------------------
/s/ PAUL J. TRAVELS
-------------------------------------------------
ITT SHERATON CORPORATION
By: Richard L. Nauman
----------------------------------------------
Its: SVP
---------------------------------------------
Date: 7-28-95
--------------------------------------------
/s/ RICHARD L. NAUMAN
-------------------------------------------------
-14-
<PAGE> 15
LA QUINTA INNS, INC.
By: WC Hammet Jr.
------------------------------------
Its: Sr. VP Accounting & Administration
-----------------------------------
Date: 7/19/95
----------------------------------
/s/ WC HAMMET JR.
---------------------------------------
LODGING NETWORK, INC.
By: Scott H. Shuford
------------------------------------
Its: Vice President
-----------------------------------
Date: July 14, 1995
----------------------------------
/s/ SCOTT H. SHUFORD
---------------------------------------
MARRIOTT INTERNATIONAL, INC.
By: Bruce W. Wolf
------------------------------------
Its: Vice President, Distribution Sales
-----------------------------------
Date: August 16, 1995
----------------------------------
/s/ BRUCE W. WOLF
---------------------------------------
PROMUS HOTELS INC.
By: Don Kolodz
------------------------------------
Its: V.P. Reservations
-----------------------------------
Date: 7-18-95
----------------------------------
/s/ DON KOLODZ
---------------------------------------
-15-
<PAGE> 16
UTELL INTERNATIONAL LTD.
By: Mike Hope
------------------------------------
Its: President
-----------------------------------
Date:
----------------------------------
/s/ MIKE HOPE
---------------------------------------
WESTIN HOTELS COMPANY
By: Marc Pujalet
------------------------------------
Its: Sr. V.P., Sales and Marketing
-----------------------------------
Date: July 25, 1995
----------------------------------
/s/ MARC PUJALET
---------------------------------------
/s/ JOHN F. DAVIS, III
---------------------------------------
John F. Davis, III
Date: August 31, 1995
----------------------------------
---------------------------------------
-16-
<PAGE> 17
SCHEDULE A
<TABLE>
<CAPTION>
SHARES OF COMPANY
COMMON STOCK TO BE ISSUED
STOCKHOLDERS AND ADDRESSES TO HCC AND/OR THISCO STOCKHOLDERS
- -------------------------- ---------------------------------
<S> <C>
ANASAZI SERVICE CORPORATION 842
7500 N. Dreamy Draw Drive
Suite 120
Phoenix, Arizona 85020
Attention: Tom Castleberry
Fax No.: (602) 861-7687
BEST WESTERN INTERNATIONAL 2,726
6201 N. 24th Parkway
Phoenix, AZ 85016
Attention: William S. Watson
Fax No.: (602) 957-5966
CHOICE HOTELS INTERNATIONAL 1,281
4225 E. Windrose Dr.
Phoenix, AZ 85032
Attention: James R. Yoakum
Fax No.: (602) 996-0192
FORTE HOTELS 1,618
1973 Friendship Drive
El Cajon, CA 92020
Attention: William Hanley
Fax No.: (619) 562-0901
HILTON HOTELS CORPORATION 1,281
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Mike Ing
Fax No.: (310) 859-2513
HOSPITALITY FRANCHISE SYSTEMS, INC. 3,101
3838 E. Van Buren
Phoenix, AZ 85008
Attention: Douglas L. Patterson
Fax No.: (602) 389-3909
</TABLE>
-17-
<PAGE> 18
<TABLE>
<CAPTION>
SHARES OF COMPANY
COMMON STOCK TO BE ISSUED
STOCKHOLDERS AND ADDRESSES TO HCC AND/OR THISCO STOCKHOLDERS
- -------------------------- ---------------------------------
<S> <C>
REED TRAVEL GROUP, A DIVISION OF 4,821
REED ELSEVIER INC
500 Plaza Drive
Secaucus, NJ 07096
Attention: Malcolm Highet
Fax No.: (201) 319-1643
HYATT HOTELS CORPORATION 2,725
200 W. Madison Avenue, #39
Chicago, IL 60606
Attention: John Biggs
Fax No.: (708) 990-6357
INTER-CONTINENTAL HOTELS CORPORATION 2,185
Devonshire House
Mayfair Place
London, England W1X 5FH
Attention: Paul Travers
Fax No.: 011 44 71 355 6591
ITT SHERATON CORPORATION 2,307
Sixty State Street
World Headquarters
Boston, MA 02109
Attention: Richard Nauman
Fax No.: (617) 367-5182
LA QUINTA INNS, INC. 2,311
112 E. Pecan St.
P.O. Box 2636
San Antonio, TX 78299
Attention: W.C. Hammett, Jr.
Fax No.: (210) 302-6016
LODGING NETWORK, INC. *
8235 Douglas Avenue, LB 77
Suite 200
Dallas, Texas 75225
Attention: Michael Barnett
Fax No.: (214) 363-1615
</TABLE>
-18-
<PAGE> 19
<TABLE>
<CAPTION>
SHARES OF COMPANY
COMMON STOCK TO BE ISSUED
STOCKHOLDERS AND ADDRESSES TO HCC AND/OR THISCO STOCKHOLDERS
- -------------------------- ---------------------------------
<S> <C>
MARRIOTT INTERNATIONAL, INC. 1,281
One Marriott Drive, Dept. 939.07
Washington, D.C. 20058
Attention: Bruce W. Wolff
Fax No.: (301) 380-6094
PROMUS HOTELS INC. 2,955
3239 Players Cub Parkway
Memphis, TN 38125
Attention: Donald M. Kolodz
Fax No.: (901) 748-8102
UTELL INTERNATIONAL LTD. 844
2 Kew Bridge Road
Brentford, London TW8 0JF
Attention: Mike Hope
Fax No.: 011 44 81 490 5855
WESTIN HOTELS & RESORTS 2,265
2001 6th Avenue, 13th Floor
Seattle, WA 98121
Attention: Marc Pujalet
Fax No.: (206) 443-8997
JOHN F. DAVIS, III 884
3811 Turtle Creek Blvd., Suite 1100
Dallas, Texas 75219
Fax No.: (214) 528-5675
------
Total Schedule A Shares 33,427
Total Schedule C Shares 3,583
Total Management Shares 2,125
*Shares subject to LNI Option 3,365
------
MAXIMUM TOTAL SHARES SUBJECT
TO ISSUANCE PURSUANT TO
CONTRIBUTION AND RESTRUCTURING
AGREEMENT 42,500
======
</TABLE>
-19-
<PAGE> 20
SCHEDULE B-1
<TABLE>
<CAPTION>
DEBT
HCC CONTRIBUTED HCC
TOTAL TO EQUITY REMAINING
P&I* CAPITAL DEBT
--- ------- ----
<S> <C> <C> <C>
BEST WESTERN INTERNATIONAL $ 94,009.01 $ 37,500.00 $ 56,509.01
HYATT HOTELS CORPORATION 93,325.61 37,500.00 55,825.61
INTER-CONTINENTAL HOTELS 93,910.31 37,500.00 56,410.31
ITT SHERATON CORPORATION 93,666.46 37,500.00 56,166.46
IA QUINTA INNS, INC. 92,661.69 37,500.00 55,161.69
PROMUS HOTELS INC. 72,697.27 37,500.00 35,197.27
HOSPITALITY FRANCHISE
SYSTEMS, INC 93,846.44 37,500.00 56,346.44
UTELL INTERNATIONAL 93,695.48 37,500.00 56,195.48
WESTIN HOTELS & RESORTS 93,637.42 37,500.00 56,137.42
----------- ----------- -----------
TOTAL $821,449.69 $337,500.00 $483,949.69
</TABLE>
*HCC TOTAL P&I INCLUDES INTEREST THROUGH JUNE 30, 1995.
INTEREST WILL BE ACCRUED THROUGH CLOSING DATE OF PEGASUS TRANSACTION.
-20-
<PAGE> 21
SCHEDULE B-2
<TABLE>
<CAPTION>
DEBT
THISCO CONTRIBUTED THISCO
TOTAL TO EQUITY REMAINING
P&I* CAPITAL DEBT
--- ------- ----
<S> <C> <C> <C>
BEST WESTERN INTERNATIONAL $ 90,994.59 $ 37,500.00 $ 53,494.59
CHOICE HOTELS INTERNATIONAL 91,118.76 37,500.00 53,618.76
FORTE HOTELS 90,554.46 37,500.00 53,054.46
HILTON HOTELS CORPORATION 81,168.91 37,500.00 43,668.91
HYATT HOTELS CORPORATION 77,191.71 37,500.00 39,691.71
INTER-CONTINENTAL HOTELS 82,306.98 37,500.00 44,806.98
ITT SHERATON CORPORATION 90,770.15 37,500.00 53,270.15
LA QUINTA INNS, INC. 82,900.62 37,500.00 45,400.62
MARRIOTT INTERNATIONAL, INC. 69,338.49 37,500.00 31,838.49
PROMUS HOTELS INC. 91,207.39 37,500.00 53,707.39
HOSPITALITY FRANCHISE
SYSTEMS, INC. 54,931.14 37,500.00 17,432.14
WESTIN HOTELS & RESORTS 89,703.55 37,500.00 52.203.55
----------- ----------- -----------
TOTAL $992,187.75 $450,000.00 $542,187.75
</TABLE>
*THISCO TOTAL P&I INCLUDES INTEREST THROUGH JUNE 30, 1995.
INTEREST WILL BE ACCRUED THROUGH CLOSING DATE OF PEGASUS TRANSACTION.
-21-
<PAGE> 22
SCHEDULE C
<TABLE>
<CAPTION>
NUMBER OF PEGASUS
-----------------
HCC STOCKHOLDER SHARES SUBJECT TO REPURCHASE
- --------------- ----------------------------
<S> <C>
Anasazi Service Corporation 87
Best Western International 544
Forte Hotels 303
Hospitality Franchise Systems, Inc. 703
Hyatt Hotels Corporation 455
Inter-Continental Hotels Corporation 165
ITT Sheraton Corporation 215
La Quinta Inns, Inc. 142
Promus Hotels Inc. 769
Utell International Ltd. 78
Westin Hotels & Resorts 122
-----
Total 3,583
</TABLE>
-22-
<PAGE> 23
EXHIBIT 1
Stockholders Agreement
-23-
<PAGE> 24
CONFIDENTIAL
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (the "Agreement"), dated effective as of
July __, 1995, among Pegasus Systems, Inc., a Delaware corporation (the
"Company"), and all of the holders of Common Stock, $.01 par value, of the
Company (collectively referred to herein as the "Stock") set forth on Schedule
A hereto. The holders of Stock are collectively referred to as the
"Stockholders."
WITNESSETH:
WHEREAS, the Company is a corporation duly organized and validly
existing under the laws of the State of Delaware with authorized capital of One
Hundred Thousand (100,000) shares of Common Stock and Ten Thousand (10,000)
shares of Preferred Stock; and
WHEREAS, the Company and the Stockholders wish to enter into an
agreement respecting future sales of shares of the Stock, certain limitations
on the transfer of shares of the Stock, the election and voting power of
directors, and certain other matters;
NOW, THEREFORE, in consideration of the promises and mutual covenants,
conditions and agreements herein contained, the parties hereto, intending to be
legally bound, do hereby agree as follows:
ARTICLE I
RESTRICTIONS AND OBLIGATIONS RELATING TO
DISPOSITION AND OWNERSHIP OF STOCK
Except as permitted below, no Stockholder shall sell, assign, devise,
bequeath, transfer, give, pledge, encumber, hypothecate, or in any manner
dispose of, or part with, any or all of its right, title or interest in any
share or shares of Stock of the Company now or at any time hereafter held by it
(any such action being referred to herein as a "Transfer"), or attempt to make
such a Transfer without the prior written consent of the Company (which consent
may be withheld by the Company in its sole discretion). A merger, sale of all
or substantially all assets or other business combination by a Stockholder
shall not be considered a "Transfer" hereunder. The Company, by its execution
of this Agreement, agrees that it will not cause or permit the Transfer of any
shares of Stock held by the Stockholders to be made on its books except in
accordance with the terms of this Agreement.
Notwithstanding the foregoing, any Stockholder may freely Transfer its
share of Stock to any one (1) of its affiliates provided that, such
Stockholder, with its affiliates, will not on
EXHIBIT 1
<PAGE> 25
account of such Transfer beneficially hold more than twenty-five percent (25%)
of the issued Stock of the Company and provided further that such affiliate
agrees in writing to be bound by the terms of this Agreement. The term
"affiliate" as used in this Agreement shall have the meaning ascribed to it
under Rule 12b-2, promulgated under the Securities Exchange Act of 1934, as in
effect on June 1, 1995.
Any Transfer or attempted Transfer by any Stockholder other than as
permitted by this Agreement shall be void ab initio and be deemed to be a
breach of this Agreement.
Within three years of the date of the Corporation's Certificate of
Incorporation, no Stockholder, together with its affiliates, may at any time be
the beneficial holder of more than twenty-five percent (25%) of the issued
Stock of the Company.
ARTICLE II
RIGHT OF FIRST REFUSAL
Subject to the provisions of Article I, should any Stockholder receive a
bona fide offer from an unaffiliated party or wish to enter into any agreement
relating to the Transfer of any or all of the Stock held by such Stockholder,
the Company shall have a right of first refusal to purchase the Stock which is
the subject of such bona fide offer or agreement (the "Subject Stock").
Pursuant to this right of first refusal, the Stockholder receiving the offer or
wishing to enter into any such Agreement shall notify the Board of Directors of
the Company, in writing, of the offer or agreement and all of the terms
thereof, including, without limitation, the name and address of the proposed
purchaser, the exact number of shares that are the subject of the proposed
Transfer, the offered purchase price or other consideration, any terms and
conditions of payment, and whether the selling Stockholder intends to accept
the offer on the offered terms. If the Stockholder receiving the offer or
wishing to enter into any such agreement has decided to accept the offer
subject to the provisions hereof, the Board of Directors of the Company, within
thirty (30) days after such notice of the proposed sale by such Stockholder,
shall notify the selling Stockholder whether the Company wishes to purchase all
of the Subject Stock on substantially the same terms and conditions as those
set forth in the notice; and if the Company does wish to so purchase all such
shares, such Stockholder shall sell such shares as the Company desires to the
Company, on a timely basis, and shall cooperate in all such respects. If the
Board of Directors of the Company declines to undertake to so purchase all of
the Subject Stock, the Stockholder receiving the offer or wishing to enter into
any such agreement may proceed to sell such Subject Stock on the same terms and
conditions as proposed in the notice. If no such sale of the Subject Stock is
consummated within a ninety (90) day period following the expiration of the
thirty (30) day period during which the Company may accept the offer to
undertake the transaction, the sale of the Subject Stock shall again become
subject to this Article II.
2
<PAGE> 26
Notwithstanding the foregoing, any Stockholder may Transfer shares of
Stock pursuant to the second paragraph of Article I hereof without such
Transfer being subject to the above right of first refusal.
ARTICLE III
BUY BACK OF PROJECTED VOLUME SHARES
(a) Attached hereto as Schedule B is a list of certain shares of
Stock, referred to herein as the "Projected Volume Shares", and the holders
thereof. In addition to any other purchase rights set forth in this Agreement,
the Projected Volume Shares held by such holders shall be subject to purchase
by the Company as follows: As soon as reasonably practicable after December 31,
1996, the Company shall determine and certify to each holder the actual number
of commissionable reservation transactions that were processed through The
Hotel Clearing Corporation ("HCC") ("Actual Transactions") by such holder of
the Projected Volume Shares from January 1, 1996 through December 31, 1996,
compared to such holder's projected number of transactions ("Projected
Transactions") set forth in the Projected Volume Confirmation (herein so
called) delivered by such holder to the Company and accepted as of the date of
this Agreement. With respect to each holder of Projected Volume Shares, if such
holder's Actual Transactions equal or exceed its Projected Transactions, then
the Projected Volume Shares held by such person shall not be subject to the
purchase option provided for in this paragraph. If the Actual Transactions by
any holder of Projected Volume Shares are less than its Projected Transactions,
then the Company may, at its option, purchase, at a purchase price of one
dollar ($1.00) per share, the percentage of such holder's Projected Volume
Shares (rounded to the nearest whole share) equal to the corresponding
percentage by which such holder's Actual Transactions were less than its
Projected Transactions. If this purchase option is exercised, the holder of any
Projected Volume Shares subject thereto shall be required to, and shall, sell
the required percentage of its Projected Volume Shares (rounded to the nearest
whole share) to the Company and shall cooperate with the Company in all
respects. The Company shall have one hundred and eighty (180) days after
delivery of the required certification regarding Actual Transactions to
exercise this purchase right by notifying any affected Stockholder of such
exercise and tendering payment of the required purchase price to the affected
Stockholder(s). Each such affected Stockholder (i) shall cooperate in all
respects with such purchase and (ii) hereby irrevocably appoints the Company as
its agent and attorney-in-fact to transfer such shares as provided above and to
do all things necessary or appropriate to accomplish such transfer.
ARTICLE IV
DIRECTORS
(a) Each holder of record of at least one and one-half percent (1.5%)
of the shares of the Company's issued and outstanding Stock entitled to vote
shall be entitled to
3
<PAGE> 27
designate and nominate one (1) person for election to the Company's Board of
Directors by the Stockholders. For such calculation, the percentage of the
shares of the Company's issued and outstanding Stock held by any Stockholder
shall be inclusive of the shares held by all affiliates of such Stockholder;
provided, however that Reed Travel Group, a division of Reed Elsevier Inc.
("Reed") and Utell International Ltd. ("Utell") shall each be entitled to
designate and nominate one (1) person for election to the Board notwithstanding
that they are affiliates of each other, as long as each of Reed and Utell hold
at least 1.5% of the shares of Stock entitled to vote in the election of
directors. The person so nominated must be an officer or employee of such
holder of such share of Stock designating or nominating such person. As
required by the Bylaws of the Company, in the event that management is not
represented by at least one member of the Board of Directors through such
director's ownership of at least one and one-half percent (1.5%) of the shares
of the capital stock, the number of directors shall be increased by one (1).
The President of the Company, with the advice of the Chairman of the Board,
shall designate and nominate one (1) person for election to the Company's Board
of Directors as the representative of the management of the Company. All
nominations for directors shall be submitted to the Board of Directors at such
time and in such manner as is determined by the Board of Directors,
(b) All holders of Stock entitled to vote shall vote for, and shall
take all necessary steps to accomplish, the election of each of the respective
person(s) appropriately designated and nominated by a holder of Stock and/or by
the management of the Company for a seat on the Company's Board of Directors in
accordance with foregoing paragraph, and shall cooperate and act in accordance
therewith, in a timely manner and in good faith, to the maximum extent
possible.
(c) If a Stockholder or Stockholders wish(es) to remove or proposes
the removal of the director(s) that it or they had designated or nominated to
the Board of Directors, all of the Stockholders entitled to vote shall vote
for, and shall take all necessary steps to accomplish, the removal of such
director. Except in cases where a director is being removed for cause, each
Stockholder entitled to vote hereby agrees to refrain from voting in favor of
the removal of any director who had been elected by the Stockholders, unless
the Stockholder that had designated and nominated such director also votes in
favor of such removal.
(d) If any director is removed from office, resigns, dies or
otherwise leaves the Board of Directors (except as provided in the following
paragraphs, the Stockholder or Stockholders that had designated or nominated
such director in accordance with paragraph (a) of this Article IV shall be
entitled to designate and nominate a new director to fill the vacancy so
created in the Company's Board of Directors, and the other Stockholders
entitled to vote shall act in the manner provided in paragraph (b) of this
Article IV.
(e) If the Company purchases the Stock of any Stockholder entitled to
vote, or if a Stockholder surrenders its Stock to the Company as provided for
in Article XI(b) hereof, such Stockholder's representative on the Board of
Directors shall immediately be terminated as a director and, as provided in the
Bylaws of the Company, the seat on the Board of Directors previously held by
such director shall be eliminated, reducing the total number of directors by
one and creating no vacancy on the Board of Directors by reason of such
termination.
4
<PAGE> 28
ARTICLE V
UTILIZATION OF SUBSIDIARY COMPANIES' SERVICES
Each Stockholder listed on Schedule A hereto shall execute the HCC
Participant Agreement and/or UltraSwitch User Agreement listed next to its name
on Schedule A and comply with all obligations set forth in each such agreement.
ARTICLE VI
CONFIDENTIAL INFORMATION; RESTRICTIONS ON THE COMPANY
The Company shall, and shall cause its officers, directors, employees,
consultants and agents (collectively, "Company Representatives") to, keep
secret and retain in strictest confidence any and all confidential matters
relating to the business of any Stockholder or affiliate thereof (including,
but not limited to, all confidential data provided by the Stockholders to the
Company) that are (i) not otherwise in the public domain, (ii) not otherwise in
the rightful possession of the Company from third parties having no obligation
of confidentiality to a Stockholder, (iii) not required under compulsion of law
to be disclosed by the Company or Company Representatives (through oral
question, interrogatory, subpoena, civil investigative demands, or similar
process), or (iv) not edited, masked, aggregated, summarized, compiled or
otherwise modified in such a way as to delete or obscure references or data
directly identifying any Stockholder, and shall not disclose them, and shall
cause the Company Representatives not to disclose them, to anyone outside such
Stockholder, such Stockholder's affiliates, the Company or Company
Representatives; nor may the Company or any Company Representatives exploit
such confidential matters for its or their respective benefit or the benefit of
other relationships with customers of the Company; and all such confidential
information that is proprietary in nature shall remain the sole property of the
Stockholder that furnished such information to the Company. The confidentiality
obligations hereunder shall continue in perpetuity. For purposes of this
Article VI, information furnished by any Stockholder to the Company shall be
deemed to be confidential only if, in addition to the above, the information in
question is clearly designated as being confidential by the Stockholder or
other person furnishing such information to the Company.
If the Company or any Company Representative breaches, or threatens to
commit a breach of, any of the provisions of this Article VI, the Stockholder
furnishing such confidential information shall have the right and remedy to
have this Article VI specifically enforced by any court having jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to such Stockholder and that money damages will not
provide an adequate remedy to such Stockholder. Nothing in this Article VI
shall be construed to limit the right of any such Stockholder to collect money
damages in the event of a breach of this Article VI.
5
<PAGE> 29
Notwithstanding the above, the provisions of this Article VI shall not
apply in the case of any information furnished by any Stockholder (or affiliate
thereof who has entered into an agreement with the Company specifically
providing that this Article VI's provisions shall not apply to the extent they
are inconsistent with such other agreement.
ARTICLE VII
CONFIDENTIAL INFORMATION; RESTRICTIONS ON STOCKHOLDERS
Each Stockholder and its affiliates shall, and each Stockholder shall
cause its and its affiliates' officers, directors, stockholders, employees,
consultants and agents (collectively, "Stockholder Representatives") to, keep
secret and retain in strictest confidence any and all confidential matters
relating to the business of the Company and any other Stockholder or affiliate
thereof (including, but not limited to, all information provided by the other
Stockholders to the Company, the technology and design of the clearinghouse
service system developed by the Company and, to the extent that it is released
to them by the Company, all data and information generated by the Company's
clearinghouse service system) that are (i) not otherwise in the public domain,
(ii) not otherwise in the rightful possession of such Stockholder (or
affiliate) from third parties having no obligation of confidentiality to a
Stockholder or the Company, or (iii) not required under compulsion of law to be
disclosed by such Stockholder, its affiliates or Stockholder Representatives
(through oral question, interrogatory, subpoena, civil investigative demands,
or similar process), and shall not disclose them, and shall cause the
Stockholder Representatives not to disclose them, to anyone outside such
Stockholder, such affiliates, or the Company and its agents, except as
otherwise determined by the Board of Directors, nor may a Stockholder or its
affiliates or any Stockholder Representative exploit such confidential matters
for its or their respective benefit or the benefit of other relationships with
customers of such Stockholder and its affiliates, except as otherwise
determined by the Board of Directors. The confidentiality obligations hereunder
shall continue in perpetuity. For purposes of this Article VII, information
furnished by any Stockholder to the Company shall be deemed to be confidential
only if, in addition to the above, the information in question is clearly
designated as being confidential by the Stockholder or other person furnishing
such information to the Company.
If a Stockholder or any of its affiliates or Stockholder Representative
breaches, or threatens to commit a breach of, any of the provisions of this
Article VII, any of the other Stockholders and/or the Company shall have the
right and remedy to have this Article VII specifically enforced by any court
having jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to such other Stockholders and
the Company and that money damages will not provide an adequate remedy to such
other Stockholders or the Company. Nothing in this Article VII shall be
construed to limit the right of any Stockholder or the Company to collect money
damages in the event of a breach of this Article VII.
6
<PAGE> 30
Notwithstanding the above, the provisions of this Article VII shall not
apply in the case of any information furnished by any Stockholder (or affiliate
thereof) who has entered into an agreement with the Company specifically
providing that this Article VII's provision shall not apply to the extent they
are inconsistent with such other agreement.
ARTICLE VIII
LEGENDS ON STOCK CERTIFICATES
The certificates for all shares of the Stock of the Company are
concurrently with the issuance thereof to be endorsed with the legends in
substantially the form below:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities
laws, and neither such shares nor any interest therein may be sold,
assigned, pledged, transferred, hypothecated, encumbered or in any other
manner transferred or disposed of, or be subject to execution,
attachment or similar process, in whole or in part, except in compliance
therewith and with all other applicable federal and state securities and
other laws and regulations, and unless an opinion of counsel or other
evidence relating to compliance with such laws, in form and substance
satisfactory to the Company, is delivered to the Company in advance of
any such transfer. Further, the shares represented by this certificate
are subject to the conditions, restrictions and obligations specified in
that certain Stockholders Agreement dated __,1995, and any amendments
thereto (the "Stockholders Agreement"), among the Company and certain of
its Stockholders, including conditions and restrictions with respect to
voting rights and powers, disposition, stock ownership rights and
prerequisites, transfer, the composition of the Company's Board of
Directors, stock repurchase rights, and otherwise, and no transfer of
the shares represented by this certificate shall be valid or effective
unless and until such conditions and restrictions have been complied
with in all respects, in the determination of the Company's Board of
Directors. A copy of the Stockholders Agreement is on file with the
Secretary of the Company. The holder of this certificate, by acceptance
of this certificate, agrees to be bound by the provisions of the
Stockholders Agreement and to indemnify and hold the Company harmless
against loss or liability arising from the disposition of the shares
represented by this certificate in violation of such provisions or in
violation of any of the aforementioned laws or regulations."
Said certificates, and all certificates representing shares of the Stock of the
Company at any time hereafter issued or transferred, shall include similar
endorsements. Any transfer of any shares of Stock of the Company shall be made
upon the books of the Company only in accordance with this provision.
7
<PAGE> 31
ARTICLE IX
NOTICES
All notices, requests, consents, payments and other communications
contemplated hereby shall be in writing and (a) personally delivered, (b)
deposited in the United States mail, first-class, registered or certified mail,
return receipt requested, with postage prepaid, or (c) sent by overnight
courier service (for next business day delivery), shipping prepaid, as follows:
If to the Stockholders, at the addresses set forth on Schedule A.
If to the Company:
Pegasus Systems, Inc.
3811 Turtle Creek Blvd., Suite 1100
Dallas, Tx 75219
Attention: President
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending. The foregoing notice provision shall apply
equally with respect to any process which either party may desire to serve on
the other party, pursuant to judicial process or otherwise, it being expressly
understood and agreed that such mode of service shall be in addition to and not
in derogation of any other valid forms of service provided by law.
ARTICLE X
ADDITIONAL STOCKHOLDERS
No persons or entity other than those listed on Schedule A may be a
stockholder of the Company's Stock unless and until such person or entity
agrees in writing as a condition to their ownership of the Stock to become a
party to this Agreement, by executing and delivering to the Company a letter
substantially in the following form, in form and substance satisfactory to the
Company:
8
<PAGE> 32
"To Pegasus Systems, Inc.:
The undersigned hereby agrees to become a party to the
Stockholders Agreement dated as of, 1995, among Pegasus Systems,
Inc. and the stockholders named in such agreement, and agrees to
be bound by all of the terms and provisions thereof in all
respects. This election shall be binding upon the heirs,
executors, administrators, successors, and assigns of the
undersigned.
Very truly yours,
------------------------------
Dated: "
-----------------
ARTICLE XI
TERMINATION
(a) Except as otherwise provided in Articles VI and VII hereof, all
provisions in this Agreement shall continue until the earliest to occur of the
following: (i) such time as the parties and the Company mutually agree in
writing to terminate this Agreement; (ii) such time as the Board of Directors
shall determine in connection with a public offering, if any, of the Company's
securities; or (ii) ten (10) years from the date hereof unless this Agreement
is extended as provided in Article XIX hereof.
(b) Notwithstanding any other provision hereof except for the
provisions of Articles VI and VII, any Stockholder may at any time surrender
(for no consideration) to the Company all of its shares of the Company's Stock,
and in such event, such Stockholder shall no longer be deemed to be a
Stockholder and shall have no further obligations hereunder, except to abide by
the perpetual confidentiality provisions of Articles VI and VII hereof.
ARTICLE XII
BENEFIT, USE OF TERMS
This Agreement and each of its provisions, whether so expressed or not,
shall be binding upon the parties and their heirs, executors, administrators,
successors and assigns. This Agreement shall inure to the benefit of each of
the foregoing but rights and interests under this Agreement shall be assignable
only in accordance with this Agreement and to the extent expressly permitted
herein.
9
<PAGE> 33
Terms used in the singular shall be read in the plural, and vice versa,
and terms used in the masculine gender shall be read in the feminine or neuter
gender, when the context so requires. The term "person" as used herein refers
to a natural person, a corporation, or any other entity or association, as the
context requires.
ARTICLE XIII
APPLICABLE LAW
This Agreement shall be governed by, and construed according to, the
laws of the State of Delaware, without giving effect to the choice of law
principles thereof.
ARTICLE XIV
ARBITRATION
Any controversy or claim arising out of, or relating to, this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by a single Arbitrator may be entered in any
Court having jurisdiction thereof. The place of arbitration shall be Dallas
County, Texas or as otherwise agreed by the parties.
ARTICLE XV
SEVERABILITY
The provisions of this Agreement shall be deemed severable, and if any
part of any provision is held to be illegal, void, voidable, invalid, non-
binding or unenforceable in its entirety or partially or as to any party, for
any reason, such provision may be changed, consistent with the intent of the
parties hereto, to the extent reasonably necessary to make the provision, as so
changed, legal, valid, binding and enforceable. If any provision of this
Agreement is held to be legal, void, voidable, invalid, non-binding or
unenforceable in its entirely or partially or as to any party, for any reason,
and if such provision cannot be changed consistent with intent of the parties
hereto to make it fully legal, valid, binding and enforceable, then such
provisions shall be stricken from this Agreement, and the remaining provisions
of this Agreement shall not in any way be affected or impaired, but shall
remain in full force and effect.
ARTICLE XVI
NO PARTNERSHIP
Notwithstanding anything to the contrary in this Agreement, the parties
agree that nothing contained or provided for herein creates a partnership or
joint venture.
10
<PAGE> 34
ARTICLE XVII
ENTIRE AGREEMENT
This Agreement and all Schedules hereto set forth the entire
understanding of the parties with respect to the subject matter hereof, and
incorporate and merges any and all previous communications, understandings,
oral or written.
ARTICLE XVIII
COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement binding on all of the parties, notwithstanding that
all parties are not signatories to the original or the same counterpart. It is
expressly contemplated that such counterparts may be executed at different
times and from time to time; each party shall become bound by this Agreement
immediately upon affixing its signature hereto, independently of the signature
of any other party.
ARTICLE XIX
RENEWAL OF VOTING AGREEMENT
The parties acknowledge and understand that the Stockholders' covenants
contained in Article IV hereof to vote their stock in accordance with the
provisions thereof are permitted to remain in effect only for a ten (10) year
period, unless renewed, as provided herein. Therefore, the Company may, prior
to such expiration and the expiration of any renewed terms, request that all
Stockholders agree to an additional ten (10) year extension of such voting
provisions. Each Stockholder agrees to use its best efforts to accomplish each
such extension.
ARTICLE XX
REPRESENTATIONS AND WARRANTIES
Each Stockholder hereby represents and warrants to the other parties
hereto, as of the date on which it becomes a party hereto, and as of any other
dates on which such Stockholder contributes additional capital to, makes a loan
to, or purchases securities from, the Company (or agrees to do any of the
foregoing), as follows:
(a) The Stockholder has the full and entire right, power, and authority
and has taken all necessary action, including without limitation requisite
approval of its board of Directors, required to authorize (i) the execution and
delivery of this Agreement; (ii) the
11
<PAGE> 35
receipt of a stock certificate for the number and class of shares owned by such
Stockholder; (iii) the tendering of full payment of the purchase price for such
stock; and (iv) the performances of all other acts and obligations required in
order to carry out in full this Agreement. The Stockholder will not, by
becoming a stockholder of the Company, by entering into this Agreement or by
taking any action contemplated hereunder, default under, breach or otherwise be
in conflict with any other agreement, document or instrument to which the
Stockholder is subject or by which the Stockholder is bound.
(b) The Stockholder is acquiring the shares of the Company's stock
(the "Share(s)") for its own account for investment, and not with a view to, or
for offering it for sale in connection with, the transfer, distribution or
resale thereof, and agrees not to sell, transfer, assign, pledge, hypothecate,
or otherwise dispose or attempt to dispose of its Share(s) (i) unless the
Shares represented thereby has been registered under the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws or, in the
opinion of counsel acceptable to the Company and its counsel, an exemption from
the registration requirements of the Act and such laws is available, or (ii) in
any manner which would either result in such Stockholder being deemed under the
Act to be an underwriter of such Share(s) within the meaning of the Act or
result in the loss to the Company of its exemption from registration under the
Act relating to the issuance of such Share(s) to the Stockholder or to any
other person. The Stockholder acknowledges that registration of Share(s) for
resale under the Act and such other laws is unlikely at any time in the future.
(c) The Stockholder has a sufficient degree of sophistication,
knowledge and experience in financial affairs to understand and evaluate the
merits and risks associated with investment in the Share(s) and in the Company,
and (i) its overall commitment to investments that are not readily marketable
is not disproportionate to its net worth and if so investment in the Share(s)
will not cause such overall commitment to become excessive; (ii) it has
adequate net worth and means of providing for any current needs and
contingencies such that it is able to sustain a complete loss of its investment
in the Share(s), and it has no need for liquidity in this investment; and (iii)
it has evaluated the risk of investing in Share(s) and the Company.
(d) The Stockholder recognizes that investment in the Share(s) and
the Company involves certain risks, and it has taken full cognizance of and
understands all of the risk factors related to an investment in the Share(s).
(e) The Stockholder has been provided with ample opportunities to
discuss and raise questions with the Company and its founders, promoters,
officers and directors, concerning the detailed operations and business plans
of the Company.
(f) The Stockholder shall indemnify and hold the Company harmless
from and against any and all damage (including, without limitation, any
liability, cost, or expense, including, without limitation, attorney's fees and
disbursements) arising out of any breach of any of the representations,
warranties, covenants, or provisions contained in this Agreement.
12
<PAGE> 36
ARTICLE XXI
POWER OF DECISIONS
It is understood and agreed that, except as otherwise provided herein or
in the Company's Certificate of Incorporation or Bylaws, as amended from time
to time, all actions and decisions which the Company may or must take or make
hereunder shall be taken or made by the Company's Board of Directors acting in
accordance with the quorum and voting power provisions set forth in the
Company's Certificate of Incorporation and Bylaws, as amended from time to
time.
ARTICLE XXII
AMENDMENTS
This Agreement may be amended, modified, or repealed, or a new Agreement
may be adopted, only by, in addition to all applicable requirements of law, a
writing executed and delivered by the Company and by Stockholders holding of
record at least two-thirds (2/3) of the then outstanding shares of Stock;
provided, however, that no provision of this Agreement may be amended,
modified, repealed or replaced without the Company and all holders of all of
the then outstanding shares of Stock agreeing in writing thereto, if such
amendment, modification, repeal or replacement would in any manner increase or
expand the Company's or any other person's or entity's ability to force, compel
or require any holder of shares of Stock to sell any such shares of Stock to
the Company or to any other person or entity under any circumstance not
otherwise permitted by this Agreement, the Bylaws or the Certificate of
Incorporation.
13
<PAGE> 37
IN WITNESS WHEREOF, this Agreement is executed by the parties on the
respective dates set forth below to be effective as of the date first above
written.
COMPANY:
PEGASUS SYSTEMS, INC.
By: /s/ John F. Davis
-----------------------------
Its: President
----------------------------
Date:
---------------------------
--------------------------------
ANASAZI, INC.
By: Tom Castleberry
-----------------------------
Its:
----------------------------
Date:
---------------------------
/s/ TOM CASTLEBERRY
--------------------------------
BEST WESTERN INTERNATIONAL
By: William Watson
-----------------------------
Its: Sr. VP Worldwide Marketing
----------------------------
Date:
---------------------------
/s/ WILLIAM WATSON
--------------------------------
14
<PAGE> 38
CHOICE HOTELS INTERNATIONAL
By: James R. Yoakum
-----------------------------
Its:
----------------------------
Date:
---------------------------
/s/ JAMES R. YOAKUM
--------------------------------
FORTE HOTELS
By: William J. Harley
-----------------------------
Its: Executive VP Sales & Marketing
----------------------------
Date: July 20, 1995
---------------------------
/s/ WILLIAM J. HARLEY
--------------------------------
HILTON HOTELS CORPORATION
By: Robert R. Dirks
-----------------------------
Its: Sr. VP Marketing
----------------------------
Date:
---------------------------
/s/ ROBERT R. DIRKS
--------------------------------
HOSPITALITY FRANCHISE SYSTEMS,
INC.
By: Douglas L. Patterson
-----------------------------
Its: Senior Vice President
----------------------------
Date: 8/28/95
---------------------------
/s/ DOUGLAS L. PATTERSON
--------------------------------
15
<PAGE> 39
REED TRAVEL GROUP, A DIVISION OF
REED ELSEVIER INC.
By: Mac Highet
-----------------------------
Its: COO
----------------------------
Date: 7/21/95
---------------------------
/s/ MAC HIGHET
--------------------------------
HYATT HOTELS CORPORATION
By: John W. Biggs
-----------------------------
Its: Executive Vice President
----------------------------
Date: 8/4/95
---------------------------
/s/ JOHN W. BIGGS
--------------------------------
INTER-CONTINENTAL HOTELS
By: Paul Travers
-----------------------------
Its: Senior VP Property Management
----------------------------
Date:
---------------------------
/s/ PAUL TRAVERS
--------------------------------
ITT SHERATON CORPORATION
By: Richard L. Nauman
-----------------------------
Its: Senior Vice President
----------------------------
Date: 7/28/95
---------------------------
/s/ RICHARD L. NAUMAN
--------------------------------
16
<PAGE> 40
LA QUINTA INNS, INC.
By: WC Hammett, Jr.
------------------------------------
Its: Sr. VP Accounting & Administration
-----------------------------------
Date: 8/29/95
----------------------------------
/s/ WC HAMMETT, JR.
---------------------------------------
MARRIOTT INTERNATIONAL, INC.
By: Bruce W. Wolff
------------------------------------
Its: VP Distribution Sales
-----------------------------------
Date: 8/16/95
----------------------------------
/s/ BRUCE W. WOLFF
---------------------------------------
PROMUS HOTELS INC.
By: Don Kolodz
------------------------------------
Its: VP Reservations
-----------------------------------
Date: 7/18/95
----------------------------------
/s/ DON KOLODZ
---------------------------------------
UTELL INTERNATIONAL LTD.
By: Mike Hope
------------------------------------
Its: President
-----------------------------------
Date:
----------------------------------
/s/ MIKE HOPE
---------------------------------------
17
<PAGE> 41
WESTIN HOTELS & RESORTS
By: Marc Pujalet
-----------------------------
Its: Sr. VP Sales & Marketing
----------------------------
Date: 7/25/95
---------------------------
/s/ MARC PUJALET
--------------------------------
--------------------------------
John F. Davis, III
Date:
---------------------------
/s/ JOHN F. DAVIS, III
--------------------------------
18
<PAGE> 42
SCHEDULE A
APPLICABLE AGREEMENT TO BE
STOCKHOLDERS AND ADDRESSES EXECUTED PURSUANT TO ARTICLE V
- -------------------------- ------------------------------
ANASAZI SERVICE CORPORATION HCC Participant Agreement
7500 N. Dreamy Draw Drive
Suite 120
Phoenix, Arizona 85020
Attention: Tom Castleberry
Fax No.: (602) 861-7687
BEST WESTERN INTERNATIONAL HCC Participant Agreement/
6201 N. 24th Parkway THISCO UltraSwitch User
Phoenix, AZ 85016
Attention: William S. Watson
Fax No.: (602) 957-5966
CHOICE HOTELS INTERNATIONAL THISCO UltraSwitch User
4225 E. Windrose Dr.
Phoenix, AZ 85032
Attention: James R. Yoakum
Fax No.: (602) 996-0192
FORTE HOTELS HCC Participant Agreement/
1973 Friendship Drive THISCO UltraSwitch User
El Cajon, CA 92020
Attention: William Hanley
Fax No.: (619) 562-0901
HILTON HOTELS CORPORATION THISCO Ultraswitch User
9336 Civic Center Drive
Beverly Hills, CA 90210
Attention: Mike Ing
Fax No.: (310) 859-2513
HOSPITALITY FRANCHISE SYSTEMS, INC. HCC Participant Agreement/
3838 E. Van Buren THISCO UltraSwitch User
Phoenix, AZ 85008
Attention: Douglas L. Patterson
Fax No.: (602) 389-3909
19
<PAGE> 43
APPLICABLE AGREEMENT TO BE
STOCKHOLDERS AND ADDRESSES EXECUTED PURSUANT TO ARTICLE V
- -------------------------- ------------------------------
REED TRAVEL GROUP, A DIVISION OF Not Applicable
REED ELSEVIER INC.
500 Plaza Drive
Secaucus, NJ 07096
Attention: Malcolm Highet
Fax No.: (201) 319-1643
HYATT HOTELS CORPORATION HCC Participant Agreement/
200 W. Madison Avenue #39 THISCO UltraSwitch User
Chicago, IL 60606
Attention: John Biggs
Fax No.: (708) 990-6357
INTER-CONTINENTAL HOTELS HCC Participant Agreement/
Devonshire House THISCO UltraSwitch User
Mayfair Place
London, England W1X 5FH
Attention: Paul Travers
Fax No.: 011 44 71 355 6591
ITT SHERATON CORPORATION HCC Participant Agreement/
Sixty State Street, THISCO UltraSwitch User
World Headquarters
Boston, MA 02109
Attention: Richard Nauman
Fax No.: (617) 367-5182
LA QUINTA INNS, INC. HCC Participant Agreement/
112 E. Pecan St. THISCO UltraSwitch User
P.O. Box 2636
San Antonio, Tx 78299
Attention: W.C. Hammett, Jr.
Fax No.: (210) 302-6016
MARRIOTT INTERNATIONAL, INC. THISCO UltraSwitch User
One Marriott Drive, Dept. 939.07
Washington, D.C. 20058
Attention: Bruce W. Wolff
Fax No.: (301) 380-6094
20
<PAGE> 44
APPLICABLE AGREEMENT TO BE
STOCKHOLDERS AND ADDRESSES EXECUTED PURSUANT TO ARTICLE V
- -------------------------- ------------------------------
PROMUS HOTELS INC. HCC Participant Agreement/
3239 Players Club Parkway THISCO UltraSwitch User
Memphis, TN 38125
Attention: Donald M. Kolodz
Fax No.: (901) 748-8102
UTELL INTERNATIONAL LTD. HCC Participant Agreement/
2 Kew Bridge Road THISCO UltraSwitch User
Brentford, London TW8 0JF
Attention: Mike Hope
Fax No.: 011 44 81 490 5855
WESTIN HOTELS & RESORTS HCC Participant Agreement/
2001 6th Avenue, 13th Floor THISCO UltraSwitch User
Seattle, WA 98121
Attention: Marc Pujalet
Fax No.: (206) 443-8997
JOHN F. DAVIS, III Not Applicable
3811 Turtle Creek Blvd., Suite 1100
Dallas, Texas 75219
Fax No.: (214) 528-5675
21
<PAGE> 45
SCHEDULE B TO STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
HOLDER OF PROJECTED VOLUME SHARES NUMBER OF PROJECTED VOLUME SHARES
- --------------------------------- ---------------------------------
<S> <C>
Anasazi Service Corporation 87
Best Western International 544
Forte Hotels 303
Hospitality Franchise Systems, Inc. 703
Hyatt Hotels Corporation 455
Inter-Continental Hotels Corporation 165
ITT Sheraton Corporation 215
La Quinta Inns, Inc. 142
Promus Hotels Inc. 769
Utell International Ltd. 78
Westin Hotels & Resorts 122
-----
Total 3,583
</TABLE>
22
<PAGE> 46
EXHIBIT 2
STOCK PURCHASE OPTION
-24-
<PAGE> 47
STOCK PURCHASE OPTION
This document certifies that LODGING NETWORK, INC. ("LODGING") is,
subject to the terms and conditions set forth herein below, entitled to Three
Thousand Three Hundred Sixty Five (3,365) shares of fully paid and non
assessable Common Stock of Pegasus System, Inc. (hereinafter referred to as
"Pegasus") (the "Pegasus Stock"), upon exercise of this Option and the timely,
full and complete satisfaction of the terms set forth herein.
TERMS AND CONDITIONS
The exercise of this Option is conditioned upon and subject to the below
stated terms and conditions:
1. This Option may only be exercised during a period beginning on
the Effective Date hereof and expiring on the last day of the
thirty sixth (36th) month after the Effective Date hereof (the
"Option Term"). LODGING must take all action required by this
Option for the issuance of the stock during the Option Term.
2. To exercise this Option, LODGING shall deliver to Pegasus the
original of this document and the original of Stock Certificate
No. 002 of The Hotel Clearing Corporation representing Two
Hundred Ten (210) shares of Preferred Stock issued to Lodging
Network, Inc. dated August 10,1993 (the "HCC Stock") and any and
all other Stock Certificates of The Hotel Clearing Corporation
and any other document evidencing any right, title or interest in
or to any current or future ownership of The Hotel Clearing
Corporation in the possession of LODGING. Upon satisfaction by
LODGING of the requirements set forth herein to exercise this
Option, Pegasus shall issue the Pegasus Stock to LODGING.
3. This Option is non-transferable, non assignable, non negotiable
and may not be encumbered, pledged or given as security for any
purpose.
4. This Option shall be fully protected from dilution resulting from
a reverse split of the Common Stock of Pegasus and shall be
entitled to the benefits of any split of the shares of common
stock of Pegasus. Any split or reverse split of the Common Stock
of Pegasus shall result in the proportionate adjustment of the
Pegasus Stock hereunder.
5. LODGING represents and warrants to Pegasus that it is the sole
true and lawful owner of the HCC Stock with full right, title and
interest in and to the HCC Stock as provided herein and with the
full and unencumbered right to sell, transfer, assign and convey
the HCC Stock as provided herein and
EXHIBIT 2 - PAGE 1 OF 3
<PAGE> 48
that the HCC Stock is free and clear of any and all debts, liens,
restrictions (except as restricted by the terms and provisions of
the Amended and Restated Stockholders' Agreement for The Hotel
Clearing Corporation dated February 9, 1994) or other
encumbrances and shall remain so during the term of this Option.
The above and foregoing warranties and representations shall be
affirmed upon the exercise of this Option and the transfer of the
HCC Stock as provided herein.
6. As a prospective purchaser of stock of Pegasus, LODGING
acknowledges represents and warrants that the stock is being
purchased as an investment for its own account and without any
present intention of dividing the interest with others,
reselling, or otherwise distributing the stock. In making this
warranty, LODGING acknowledges that representatives of Pegasus
have advised LODGING that (1) the stock is not being registered
under the Federal Securities Act of 1933 on the ground that this
transaction does not involve any public offering, and is
therefore, exempt under Section 4(2) of the Act; (2) Pegasus'
reliance on such exemption is predicated in pad on LODGING's
representation that LODGING has no present intention of dividing
the stock with others or of reselling or otherwise disposing of
it; and (3) although LODGING has the right to dispose of its own
property when and as it sees fit, in the view of the United
States Securities and Exchange Commission, the exemption under
Section 4(2) of the Act is not available to Pegasus if LODGING is
merely acquiring the stock for resale on the occurrence or
nonoccurrence of some predetermined event such as the passage of
one year, a market rise, if the market does not rise, or any
other fixed or determinable event.
7. Following the merger of one or more entities into Pegasus, or any
consolidation of Pegasus and one or more entities in which
Pegasus is the surviving corporation, the exercise of this Option
shall apply to the shares of the surviving corporation.
8. By accepting this Option LODGING agrees, upon exercise of this
Option, to execute and abide by the Stockholders' Agreement
binding upon the stockholders of Pegasus and agrees to be bound
by all other restrictions and agreements generally applicable to
owners of Pegasus Common Stock.
9. Pegasus agrees that it will not hereafter cause or permit The
Hotel Clearing Corporation ("HCC") to merge with The Hotel
Industry Switch Company without the prior written consent of
LODGING (which shall not be unreasonably withheld), for so long
as LODGING holds the HCC Stock.
10. Pegasus agrees to provide LODGING with monthly financial
statements, including a balance sheet and statement of income and
expenses, for each of Pegasus, HCC, and any other subsidiaries of
Pegasus for so long as this Option is outstanding.
EXHIBIT 2 - PAGE 2 OF 3
<PAGE> 49
11. Pegasus confirms that LODGING, as the holder of the HCC Stock,
has the rights of the Series A Preferred Stockholder of HCC as
set forth in the HCC Stockholders' Agreement. Upon the exercise
of this Option and the issuance of the Pegasus Stock all of
LODGING's rights as set forth in the Stockholder Agreement for
HCC shall be assigned to Pegasus.
12. Pegasus agrees to act in good faith with respect to the future
operation of the business of HCC, and specifically agrees not to
divert business opportunities or income away from HCC in any
manner inconsistent with the current business plan for HCC and
Pegasus.
13. Notwithstanding any provision hereof to the contrary, this Option
may be assigned by LODGING to a purchaser of the HCC Stock
provided the sale of the HCC Stock is in compliance with the HCC
Stockholders' Agreement.
14. Pegasus agrees to cause the amendment of Article l of the HCC
Stockholders' Agreement to provide that company approval of any
proposed sale of company stock shall not be unreasonably
withheld.
15. Pegasus agrees that it will not cause or permit HCC to make any
cash loans to Pegasus in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) (in the aggregate) without written consent
of LODGING for so long as LODGING remains a Series A Preferred
Stockholder of HCC.
The corporation has caused this Option to be executed by its duly authorized
officer and the corporate seal is affixed hereto.
PEGASUS SYSTEMS INC.
By:
--------------------------------
John F. Davis, III
President
Effective Date:
--------------------
AGREED:
LODGING NETWORK, INC.
By:
------------------------------
Its:
------------------------------
EXHIBIT 2 - PAGE 3 OF 3
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF PEGASUS SYSTEMS, INC.
This Amended and Restated Certificate of Incorporation amends and
restates the Certificate of Incorporation, as amended to date, of Pegasus
Systems, Inc., a corporation originally incorporated in Delaware as "Pegasus
Systems, Inc." on July 10, 1995. This Amended and Restated Certificate of
Incorporation has been duly adopted pursuant to Section 245 of the Delaware
General Corporation Law,
ARTICLE I
The name of this corporation is Pegasus Systems, Inc. (the
"Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, New Castle County, Wilmington, Delaware
19805-1297, The name of the registered agent of the Corporation at that address
is The Prentice-Hall Corporation Systems, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful business, act or activity for which
Corporations may be organized under the General Corporation Law of the State of
Delaware. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE IV
This Corporation is authorized to issue two classes of stock,
designated "Common Stock" and "Preferred Stock". The total number of shares
which this Corporation is authorized to issue is 22,000,000 shares. The number
of shares of Common Stock which this Corporation is authorized to issue is
20,000,000 shares, par value $0.01 per share. The number of shares of Preferred
Stock which this Corporation is authorized to issue is 2,000,000 shares, par
value $0.01 per share, of which 1,153,847 shall be designated Series A
Preferred Stock (the "Series A Preferred") and 846,153 shall initially be
undesignated as to series.
Any Preferred Stock not previously designated as to series may be
issued from time to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the Board of Directors
(authority to do so being hereby expressly vested in the Board), and such
resolution or resolutions shall also set forth the voting powers, full or
limited or none, of each such series of Preferred Stock and shall fix the
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of each such
series of Preferred Stock. The Board of Directors is authorized to alter
<PAGE> 2
the designation, rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and, within the
limits and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series of
Preferred Stock, to increase or decrease (but not below the number of shares of
any such series then outstanding) the number of shares of any such series
subsequent to the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired
by the Corporation (whether by redemption, repurchase, conversion to Common
Stock or other means), shall upon such reacquisition resume the status of
authorized and unissued shares of Preferred Stock, undesignated as to series
and available for designation and issuance by the Corporation in accordance
with the immediately preceding paragraph.
The relative rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes of Common Stock and Series A
Preferred Stock or the holders thereof are as follows:
Section 1. Dividends.
(a) The holders of Series A Preferred shall be entitled
to receive, when and as declared by the Board of Directors, out of funds
legally available therefor, dividends at the rate of $0.39 per annum for each
share of Series A Preferred (as adjusted for stock splits, stock dividends,
reclassifications and like events) held by them, payable in preference and
priority to any payment of any dividend or other distribution on Common Stock
of the Corporation. In each year in which any shares of Series A Preferred are
outstanding, no cash dividends shall be declared on the Common Stock unless or
until a cash dividend in an amount equal to or greater than the dividend
declared on the Common Stock shall have been paid to, or declared and a sum
sufficient for payment thereof set apart for the Series A Preferred. Such
dividends on the Series A Preferred shall be cumulative whether or not earned
or declared so that if such dividends in respect of any previous or current
annual dividend period, at the annual rate specified above, shall not be paid
or declared, the deficiency shall be fully paid to the holders of Series A
Preferred before any dividend or other distribution shall be paid on or
declared and set apart for the holders of the Common Stock.
(b) For purposes of this Section 1, unless the context
otherwise requires, a "distribution" shall mean the transfer of cash or other
property without consideration whether by way of dividend or otherwise, payable
other than in Common Stock, or the purchase or redemption of shares of the
Corporation for cash or property. For purposes of this Section 1, a
"distribution" shall not mean (i) a repurchase of Common Stock issued to or
held by employees, officers, directors or consultants of the Corporation or its
subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase, (ii) a repurchase of any
"Projected Volume Shares" as contemplated by the Stockholders Agreement dated
July 21, 1995 among the Company and certain holders of Common Stock or (iii)
the repurchase of certain outstanding shares of capital stock of The Hotel
-2-
<PAGE> 3
Clearing Corporation ("HCC"), a subsidiary of the Corporation, held by Lodging
Network Inc., in exchange for $2,000,000 in cash and the conversion of the
balance of the shares of HCC owned by LNI into 67,300 shares of Common Stock of
the Corporation, as contemplated by the Series A Preferred Stock Purchase
Agreement of the Corporation entered into in June 1996.
Section 2. Liquidation Preference.
In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, distributions to the shareholders
of the Corporation shall be made in the following manner:
(a) The holders of Series A Preferred shall be entitled
to receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Common Stock by reason
of their ownership of such stock, the amount of $6.50 for each share of Series
A Preferred then held by them (as adjusted for all stock splits, dividends,
combinations, reclassifications, and the like with respect to such shares) and,
in addition, an amount equal to all declared but unpaid dividends, if any, on
the shares of Series A Preferred then held by them. If the assets and funds
thus distributed among the holders of Series A Preferred shall be insufficient
to permit the payment to such holders of the full aforesaid preferential
amount, then the entire assets and funds of the Corporation legally available
for distribution shall be distributed ratably among the holders of Series A
Preferred in a manner that the amount distributed to each holder of Series A
Preferred shall equal the amount obtained by multiplying the entire assets and
funds of the Corporation legally available for distribution hereunder by a
fraction, the numerator of which shall be the number of shares of Series A
Preferred then held by the holder and the denominator of which shall be the
total number of shares of Series A Preferred then outstanding.
(b) After payment has been made to or set apart for the
holders of Series A Preferred of the full amounts to which they shall be
entitled as set forth in Section 2(a) above, then the entire remaining assets
and funds of the Corporation legally available for distribution, if any, shall
be distributed ratably among the holders of Common Stock in a manner such that
the amount distributed to each such holder shall equal the amount obtained by
multiplying the entire remaining assets and funds of the Corporation legally
available for distribution hereunder by a fraction, the numerator of which
shall be the number of shares of Common Stock then held by such holder and the
denominator of which shall be the total number of shares of Common Stock then
outstanding.
(c) (i) A merger or consolidation of the Corporation with
or into any other corporation or corporations, (ii) the merger of any other
corporation or corporations into the Corporation, in which consolidation or
merger the shareholders of the Corporation receive distributions in cash or
securities of another corporation or corporations as a result of such
consolidation or merger, and (iii) a sale of all or substantially all of the
assets of the Corporation, shall be treated as a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 2, unless the
shareholders of the Corporation immediately prior to such
-3-
<PAGE> 4
transaction are holders (by virtue of shares held in the Corporation) of at
least a majority of the voting securities of the surviving or successor
corporation to the business of the Corporation immediately following such
transaction.
(d) Notwithstanding Sections 2(a) through 2(c) hereof,
the Corporation may at any time, out of funds legally available therefor, (i)
repurchase Common Stock issued to or held by employees, officers, directors or
consultants of the Corporation or its subsidiaries upon termination of their
employment or services pursuant to agreements providing for the right of said
repurchase, (ii) repurchase any "Projected Volume Shares" as contemplated by
the Amended and Restated Stockholders Agreement entered into in June 1996 among
the Company and certain holders of Common Stock, or (iii) repurchase of certain
outstanding shares of capital stock of The Hotel Clearing Corporation ("HCC"),
a subsidiary of the Corporation, held by Lodging Network, Inc., in exchange for
$2,000,000 in cash and the conversion of the balance of the shares of HCC owned
by LNI into 67,300 shares of Common Stock, as contemplated by the Series A
Preferred Stock Purchase Agreement of the Corporation entered into in June
1996.
Section 3. Conversion.
The holders of Series A Preferred Stock shall have conversion rights
as follows (the "CONVERSION RIGHTS"):
(a) Right to Convert. Each share of Series A Preferred
shall be convertible, at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation or any
transfer agent for the Series A Preferred, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $6.50 by the
Series A Conversion Price, determined as hereinafter provided, in effect at the
time of conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of Series A Preferred (the "SERIES A
CONVERSION PRICE") shall initially be $6.50 per share of Common Stock and shall
be subject to adjustment as hereinafter provided.
Upon any conversion into Common Stock, all accumulated and unpaid
dividends on the shares of Series A Preferred so converted shall terminate
without any requirement of payment.
(b) Automatic Conversion. Each share of Series A
Preferred shall automatically be converted into one share of Common Stock upon
the earlier to occur of (i) the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, relating to the offer and sale of Common Stock for the
account of the Corporation to the public at a price per share (prior to
underwriter commissions and discounts and offering expenses) of not less than
$13.00 (as adjusted for stock splits, stock dividends, reclassifications and
like events) and in which the Corporation receives aggregate gross proceeds of
not less than $10,000,000 (A "QUALIFIED IPO"), or (ii) such effective date as
the Corporation shall set no more than ten (10) days following the affirmative
vote at a duly noticed meeting or by duly solicited written consent, of the
holders of more than sixty-six and two-thirds percent (66-2/3%) of the then
outstanding shares of Series A Preferred,
-4-
<PAGE> 5
in favor of the conversion of all outstanding shares of Series A Preferred into
Common Stock. Prior to the closing of a Qualified IPO, upon the closing of an
offering pursuant to which any holder of Series A Preferred has exercised
registration rights pursuant to the Rights Agreement originally entered into by
and among the Corporation and the Purchasers named therein in June 1996, each
share of Series A Preferred for which such registration rights were exercised
shall automatically be converted into one share of Common Stock. In the event
of the automatic conversion of the Series A Preferred upon a Qualified IPO, the
person(s) entitled to receive the Common Stock issuable upon such conversion of
Series A Preferred shall not be deemed to have converted such Series A
Preferred until immediately prior to the closing of such transaction.
(c) Mechanics of Conversion. No fractional shares of
Common Stock shall be issued upon conversion of Series A Preferred. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Before any holder of Series A Preferred shall be
entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred, and shall give written notice to the
Corporation at such office that he elects to convert the same; provide,
however, that in the event of an automatic conversion pursuant to Section 3(b),
the outstanding shares of Series A Preferred shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent; provided, further, that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of Series A
Preferred are either delivered to the Corporation or its transfer agent as
provided above, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The Corporation
shall, as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Series A Preferred, a certificate or certificates for
the number of shares of Common Stock to which he shall be entitled as aforesaid
and a check payable to the holder in the amount of any cash amounts payable as
the result of a conversion into fractional shares of Common Stock. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred to
be converted, or in the case of automatic conversion on the date of closing of
the public offering or the effective date set by the Corporation as provided in
paragraph 3(b) following the requisite stockholder approval, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) Adjustments to Series A Conversion Price for Dilutive
Issues.
(i) Special Definitions. For purposes of this
Section 3(d), the following definitions shall apply:
-5-
<PAGE> 6
(1) "OPTIONS" shall mean rights, options
or warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.
(2) "CONVERTIBLE SECURITIES" shall mean
any evidences of indebtedness, Preferred Stock (other than Series A Preferred)
or other securities convertible into or exchangeable for Common Stock.
(3) "ADDITIONAL SHARES OF COMMON" shall
mean all shares of Common Stock issued (or, pursuant to Section 3(d)(iii),
deemed to be issued) by the Corporation after the Series A Original Issue Date,
other than shares of Common Stock issued, issuable or, pursuant to Section
3(d)(iii), deemed to be issued:
(A) upon conversion of shares of
the Series A Preferred;
(B) to officers, directors or
employees of, or consultants to, the Corporation or any subsidiary pursuant to
a stock grant, option plan or purchase plan or other employee stock incentive
program or arrangement approved by the Board of Directors, but not exceeding an
aggregate of 600,000 shares of Common Stock (net of any repurchases of such
shares or any other shares of Common Stock originally issued to officers,
directors, employees or consultants to the Corporation, and net of cancellation
or expiration of options), subject to appropriate adjustment for all stock
splits, dividends, subdivisions, combinations, recapitalizations and the like;
(C) as a dividend or distribution
on the Series A Preferred;
(D) in connection with any
transaction for which adjustment is made pursuant to Section 3(e)(i), (ii) and
(iii) hereof,
(E) shares of Common Stock issued
to reacquire shares from existing stockholders, provided such shares of Common
Stock are issued at a substantially identical price to the shares being
reacquired.
(F) any shares of Common Stock
issued or issuable, if the holders of more than sixty-six and two-thirds
percent (66-2/3%) of the Series A Preferred then outstanding agree in writing
that such shares shall not constitute Additional Shares of Common Stock; or
(G) up to an aggregate of 50,000
additional shares of Common Stock issued by the Corporation from time to time.
(ii) No Adjustment of Series A Conversion Price.
No adjustment in the Series A Conversion Price shall be made in respect of the
issuance of Additional Shares of Common unless the consideration per share
(determined pursuant to Section 3(d)(v) hereof) for
-6-
<PAGE> 7
an Additional Share of Common issued or deemed to be issued by the Corporation
is less than the Series A Conversion Price in effect on the date of, and
immediately prior to such issue.
(iii) Options add Convertible Securities. In the
event that the Corporation at any time or from time to time after the Series A
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the
maximum number of shares of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common issued as of the time of such issue or, in case
such a record date shall have been fixed, as of the close of business on such
record date; provided, however, that Additional Shares of Common shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 3(d)(v) hereof) for such Additional Shares of Common would
be less than the Series A Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
provided further that in any such case in which Additional Shares of Common are
deemed to be issued:
(1) no further adjustment in the Series
A Conversion Price shall be made upon the subsequent issue of such Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities, in each case, pursuant
to their respective terms;
(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in
the number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Series A Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(A) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
issued were shares of Common Stock, if any, actually issued upon the exercise
of such Options or the conversion or exchange of such Convertible Securities
and the consideration received therefor was the consideration actually received
by the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration actually received by the Corporation upon such exercise,
or for the issue of all
-7-
<PAGE> 8
such Convertible Securities which were actually converted upon or exchanged,
plus the additional consideration, if any, actually received by the Corporation
upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for the Additional
Shares of Common deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to which
such Options were actually exercised;
(4) no readjustment pursuant to clauses
(2) or (3) above shall have the effect of increasing the Series A Conversion
Price to an amount which exceeds the lower of (i) the Series A Conversion Price
on the original adjustment date, or (ii) the Series A Conversion Price that
would have resulted from any issuance of Additional Shares of Common between
the original adjustment date and such readjustment date; and
(5) in the case of an Option which
expires by its terms not more than 30 days after the date of issue thereof, no
adjustment of the Series A Conversion Price shall be made until the expiration
or exercise of such Option, whereupon such adjustment shall be made in the same
manner provided in clause (3) above.
(iv) Adjustment of Series A Conversion Price Upon
Issuance of Additional Shares of Common. In the event that this Corporation
shall issue Additional Shares of Common (including Additional Shares of Common
deemed to be issued pursuant to Section 3(d)(iii)) without consideration or for
a consideration per share less than the Series A Conversion Price in effect on
the date of and immediately prior to such issue, then and in such event such
Series A Conversion Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Series A
Conversion Price theretofore in effect by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common so issued would purchase at such Series A Conversion Price in
effect immediately prior to such issue, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of such Additional Shares of Common so issued; provided,
however, that, for the purposes of this Section 3(d)(iv), all shares of Common
Stock issuable upon exercise, conversion or exchange of outstanding Options or
Convertible Securities, as the case may be, shall be deemed to be outstanding,
and immediately after any Additional Shares of Common are deemed issued
pursuant to Section 3(d)(iii), such Additional Shares of Common shall be deemed
to be outstanding.
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<PAGE> 9
(v) Determination of Consideration. For purposes
of this Section 3(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common shall be computed as follows:
(1) Cash and Property. Such consideration
shall:
(A) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board; and
(C) in the event Additional Shares
of Common are issued together with other shares or securities or other assets
of the Corporation for consideration which covers both, be the proportion of
such consideration so received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(2) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of Common deemed to have been issued pursuant to Section 3(d)(iii), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of shares of
Common Stock issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, as determined in Section 3(d)(iii)
hereof.
(e) Adjustments to Conversion Price for Other Dilutive
Events.
(i) Adjustments for Subdivisions, Stock
Dividends, Combinations or Consolidations of Common Stock. In the event that
the Corporation at any time or from time to time shall declare or pay, without
consideration, any dividend on Common Stock payable in Common Stock or in any
right to acquire Common Stock for no consideration, or effects a subdivision or
combination of its outstanding shares of Common Stock into a greater or smaller
number of shares without a proportionate and corresponding subdivision or
combination of its
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<PAGE> 10
outstanding shares of Series A Preferred, then and in each such event the
Series A Conversion Price shall be appropriately increased or decreased
proportionally.
(ii) Adjustments for Reclassification, Exchange
and Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than in an event provided for in Section
3(e)(i) above), the Series A Conversion Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted such that the shares of Series A Preferred shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of shares of such Series A Preferred immediately before that change.
(iii) Adjustments for Other Dividends and
Distributions. In the event that the Corporation shall declare a distribution
payable in securities of other issuers, evidences of indebtedness issued by
this Corporation or other issuers, assets (excluding cash dividends) or options
or rights not referred to in subsection 2(d)(iii) and for which no adjustment
is made pursuant to Section 3(e)(i) or Section 3(e)(ii), the holders of Series
A Preferred shall be entitled to a proportionate share of any such distribution
as though they were the holders of the number of shares of Common Stock of the
Corporation into which their shares of Series A Preferred are convertible as of
the record date fixed for the determination of the holders of Common Stock of
the Corporation entitled to receive such distribution.
(f) No Impairment. Except as provided in Sections 5 and 6
hereof, the Corporation will not, by amendment of its Certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation but will at all times in
good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the holders of Series A Preferred
against impairment.
(g) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price of any Series A
Preferred pursuant to this Section 3, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of Series A Preferred a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of such Series A Preferred, furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Series A Conversion Price at the
time in effect, and (iii) the number of shares of Common Stock and the amount,
if any,
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<PAGE> 11
of other property which at the time would be received upon the conversion of
such holder's shares of Series A Preferred.
(h) Notices of Record Date. In the event that this
Corporation shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding involving a change in the
Common Stock; or
(iv) to merge or consolidate with or into any
other corporation, or sell, lease or convey all or substantially all its
property or business, or to liquidate, dissolve or wind up; then, in connection
with each such event, this Corporation shall send to the holders of Series A
Preferred:
(A) at least 20 days' prior written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in (iii) and (iv) above; and
(B) in the case of the matters
referred to in (iii) and (iv) above, at least 20 days' prior written notice of
the date when the same shall take place (and specifying the date on which the
holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such event).
Each such written notice shall be delivered personally or given by
first class mail, postage prepaid, addressed to the holders of Series A
Preferred at the address for each such holder as shown on the books of this
Corporation.
(i) Reservation of Shares. The Corporation shall at all
times reserve and keep available, out of its authorized but unissued Common
Stock, solely for the purpose of effecting the conversion of the Series A
Preferred, the full number of shares of Common Stock deliverable upon the
conversion of all Series A Preferred from time to time outstanding. The
Corporation shall from time to time (subject to obtaining necessary director
and stockholder consent), in accordance with the laws of the State of Delaware,
increase the number of authorized shares of Common Stock if at any time the
authorized number of shares of its Common Stock remaining unissued shall not be
sufficient to permit the conversion of all of the shares of Series A Preferred
at the time outstanding.
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<PAGE> 12
(j) Issuance Taxes. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of Series A Preferred pursuant to this
Section 3.
Section 4. Redemption of Series A Preferred.
(a) On each of the fifth, sixth, seventh and eighth
anniversaries of the date of the initial sale of Series A Preferred (the
"Series A Original Issue Date"), to the extent the shares of Series A Preferred
have not been redeemed or converted prior to such date and to the extent
requested by any holder thereof, the Corporation shall redeem, subject to the
proviso at the end of the third sentence of this paragraph, at the Redemption
Price, as defined below, an amount equal to up to one-quarter, one-half,
three-quarters and all (respectively) of the issued, outstanding, and
unconverted shares of Series A Preferred held by such holder, from any source
of funds legally available therefor. Not less than 30 and not more than 60
days before the fifth, sixth, seventh and eighth anniversaries of the Series A
Original Issue Date (and each anniversary thereafter so long as any shares of
Series A Preferred remain unredeemed and unconverted), the Corporation shall
send to each holder of Series A Preferred the audited financial statements of
the Corporation for the prior fiscal year (unless previously furnished to such
holder) together with a notice advising such holders of their rights under this
subsection. Each such holder shall have until each such anniversary date to
request redemption of all or part of such shares which may as of such
anniversary date be redeemed; provided, however, that no redemption shall be
made on such anniversary date unless holders of more than sixty-six and
two-thirds percent (66-2/3%) of the then outstanding shares of Series A
Preferred request redemption pursuant to such notice. If no funds or
insufficient funds are available to the Corporation at any time to meet the
Corporation's redemption obligations pursuant to this subsection, or if any
holder does not request the Corporation to redeem such holder's shares of
Series A Preferred to the full extent permitted by this subsection, then the
Corporation's obligations to redeem such shares shall in both cases be carried
over to the succeeding year (subject to the same limitations on payment as set
forth above) until all shares entitled to be redeemed pursuant to this
subsection have been redeemed, and such holders shall have similar rights
during the corresponding 30 to 60 day period of each succeeding year; provided,
however, that the shares of Series A Preferred which were not redeemed on the
anniversary on which such shares were initially eligible for redemption
hereunder (that is, on the applicable fifth, sixth or seventh anniversary of
the Series A Original Issue Date, without regard to whether the Corporation had
sufficient funds available on such dates for such redemption hereunder) shall
be (i) redeemed at the Redemption Price, as defined below and (ii) entitled to
the dividend, conversion and other rights, preferences, privileges and
restrictions of the Series A Preferred until such shares have been redeemed.
(b) The redemption price for Series A Preferred
repurchased pursuant to this Section 4 (the "REDEMPTION PRICE") shall be an
amount equal to the sum of (i) $6.50 per share, plus (ii) $0.39 per share for
each full year from the Series A Original Issue Date to the date of actual
redemption plus a pro rata fraction thereof for any additional portion of a
full year to the date of redemption (each such full year or such additional
portion of a full year being referred to as a "Dividend Period"), provided that
the amount payable under this clause (ii) in respect
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<PAGE> 13
of any Dividend Period shall be reduced by an amount equal to the difference,
if any, between (x) the amount of dividends declared and paid or set aside for
payment on each share of Series A Preferred during such Dividend Period, less
(y) the amount of dividends declared and paid or set aside for payment during
such Dividend Period on the number of shares of Common Stock into which such
share of Series A Preferred shall then be convertible, plus (iii) any dividends
declared but not paid or set aside for payment on such share of Series A
Preferred.
(c) In the event insufficient funds are available to
redeem all shares of Series A Preferred entitled and electing to be redeemed
pursuant to Section 4(a), the Corporation shall effect each such redemption pro
rata among the holders of the Series A Preferred based upon the number of
shares of Series A Preferred then held by each holder and electing to be
redeemed.
(d) At least 30 but not more than 60 days' previous
notice by certified mail, postage prepaid, shall be given to the holders of
record of the Series A Preferred for any redemption pursuant to this
subsection, such notice to be addressed to each holder at the address shown in
the Corporation's records and which shall specify the date of redemption, the
number of shares of the holder to be redeemed and the date at which conversion
rights terminate which date shall be no earlier than five days prior to the
date fixed for redemption. Subject to approval by more than sixty- six and
two-thirds percent (66-2/3%) of the outstanding shares of Series A Preferred
pursuant to Section 4(a), on or after the date of redemption as specified in
such notice, each holder shall surrender his certificate for the number of
shares to be redeemed as stated in the notice (except that such number of
shares shall be reduced by the number of shares which have been converted
pursuant to Section 3 hereof between the date of notice and the date on which
conversion rights terminate) to this Corporation at the place specified in such
notice. Provided such notice is duly given, and provided that on the redemption
date specified there shall be a source of funds legally available for such
redemption, and funds necessary for the redemption shall have been paid or made
available at the place fixed for redemption, then all rights with respect to
such shares shall, after the specified redemption date, terminate whether or
not said certificates have been surrendered, excepting only that in the latter
instance the right of the holder to receive the redemption price thereof,
without interest, upon such surrender will not terminate.
Section 5. Voting.
Except as otherwise required by law or by Section 6 hereof, the holder
of each share of Common Stock issued and outstanding shall have one vote with
respect to such share and the holder of each share of Series A Preferred shall
be entitled with respect to such share to a number of votes equal to the number
of shares of Common Stock into which such share of Series A Preferred could be
converted at the record date for determination of the stockholders entitled to
vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of stock of the Corporation
having general voting power and not separately as a class. All holders of
Series A Preferred shall have full voting rights and powers equal to the
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<PAGE> 14
voting rights and powers of the holders of Common Stock, and shall be entitled
to vote, together with the holders of Common Stock, with respect to any
question upon which holders of Common Stock have the right to vote. Holders of
Common Stock and Series A Preferred shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes by the holders of Series A Preferred shall not, however, be
permitted and any fractional voting rights shall (after aggregating all shares
into which shares of Series A Preferred held by each holder could be converted)
be rounded to the nearest whole number.
Section 6. Covenants.
(a) Required Consent of Series A Preferred. In addition
to any other rights provided by law, so long as at least 180,000 shares of
Series A Preferred shall be outstanding (as appropriately adjusted for all
stock splits, dividends, combinations, recapitalizations and the like), this
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than a majority of such outstanding shares
of the Series A Preferred, voting together as a single class:
(i) amend or repeal any provision of, or add any
provision to, this Corporation's Amended and Restated Certificate of
Incorporation or Bylaws;
(ii) designate any new series of Preferred Stock,
or increase the authorized number of shares of any series or Preferred Stock;
(iii) authorize (or increase the authorized number
of) any class or series of capital stock or any other security convertible into
or exchangeable for shares of any class or series of capital stock having
rights, preferences or privileges senior to or on parity with the Series A
Preferred;
(iv) increase or decrease (other than by
redemption or conversion) the total number of authorized shares of Series A
Preferred or change the existing rights, preferences or privileges of the
Series A Preferred,
(v) authorize (A) a liquidation or dissolution of
the Corporation, or (B) a recapitalization or reorganization of the
Corporation, sale or transfer of all or substantially all of the assets of the
Corporation or merger or consolidation of the Corporation if, as a result of
such recapitalization, reorganization, sale, transfer, merger or consolidation,
the stockholders of the Corporation immediately prior to the closing of such
recapitalization, reorganization, sale, transfer, merger or consolidation (and
prior to any related transfers of shares and other transactions) shall own less
than [75%] of the voting securities of the successor corporation to the
business of the Corporation;
(vi) sell, transfer, or grant an exclusive license
to, any material, patents, copyrights, trademarks, or applications therefor,
proprietary or confidential information of the Corporation or any other
material asset, except for licenses or sublicenses granted by the
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<PAGE> 15
Corporation in the ordinary course of its business, and other than to a direct
or indirect subsidiary of the Corporation;
(vii) approve the repurchase, redemption or other
acquisition of any Common Stock of the Corporation, other than (A) repurchases
pursuant to agreements approved by the Board of Directors that grant to the
Corporation a right to repurchase such Common Stock upon the termination of the
service or employment of a consultant, director or employee, or (B) repurchases
of any "Projected Volume Shares" as contemplated by the Stockholders Agreement
dated July 21, 1995 among the Company and certain holders of Common Stock; or
(viii) authorize the payment of a cash dividend to
any holders of any class or series of capital stock of the Corporation.
Section 7. Common Stock.
(a) Dividend Rights. Subject to the prior rights of
holders of all classes of stock at the time outstanding having prior rights as
to dividends, the holders of the Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any assets of the
Corporation legally available therefor, such dividends as may be declared from
time to time by the Board of Directors.
(b) Liquidation Rights. Upon the liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of this Article IV.
(c) Redemption. The Common Stock is not redeemable.
(d) Voting Rights. The holder of each share of Common
Stock shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
Section 8. Residual Rights.
All rights accruing to the outstanding shares of this Corporation not
expressly provided for to the contrary herein shall be vested in the Common
Stock.
ARTICLE V
The Corporation is to have perpetual existence.
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<PAGE> 16
ARTICLE VI
Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins or unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized to
make, alter, amend or repeal the Bylaws of the Corporation.
ARTICLE VIII
(a) To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or as may hereafter
be amended, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.
(b) The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he, his estate or legal representative is or was a
director, officer, employee or agent of the Corporation or any predecessor of
the Corporation or serves or served at any other enterprise as a director,
officer, employee or agent at the request of the Corporation or any other
predecessor to the Corporation.
(c) No amendment nor repeal of this Article VIII, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article VIII, shall eliminate or reduce the effect of
this Article VIII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VIII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Vacancies created by newly created directorships, created in
accordance with the Bylaws of this Corporation, may be filled by the vote of a
majority, although less than a quorum, of the directors then in office, or by a
sole remaining director.
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<PAGE> 17
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided
in the Bylaws of the Corporation.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
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EXHIBIT 3.1
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated of Certificate to be duly executed this ____ day of ___________, 1997.
By: /s/ JOHN F. DAVIS, III
-------------------------------------
John F. Davis, III
President and Chief Executive Officer
ATTEST:
/s/ RIC L. FLOYD
- ----------------------------------
Ric L. Floyd, Secretary
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<PAGE> 1
EXHIBIT 3.2
CONFIDENTIAL
------------
AS OF JUNE 25, 1996
AMENDED AND RESTATED BYLAWS
OF
PEGASUS SYSTEMS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES AND FISCAL YEAR
SECTION 1.01. REGISTERED OFFICE. The registered office of the
Corporation shall be as stated in the Certificate of Incorporation until a
change in such office is established by resolution of the Board of Directors
and a statement of such change is filed in the manner provided by applicable
law.
SECTION 1.02. OTHER OFFICES. The Corporation may also have offices
and keep its books, documents, and records at such other places within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
SECTION 1.03. FISCAL YEAR. The fiscal year of the Corporation shall
end on the 31st day of December in each year or on such other date as the Board
of Directors may designate by resolution.
ARTICLE II
THE STOCKHOLDERS
SECTION 2.01. TYPES OF STOCK.
(a) The Corporation's Certificate of Incorporation, as
amended (the "Certificate of Incorporation") currently authorizes two classes
of capital stock - Common Stock and Series A Preferred Stock ("Series A
Preferred"). The aggregate number of shares of Common Stock and Series A
Preferred which the Corporation has authority to issue is set forth in the
Certificate of Incorporation. Unless otherwise specified, references in these
Bylaws to the issued and outstanding shares of capital stock of the Corporation
shall mean the issued and outstanding shares of Common Stock as if all issued
and outstanding shares of Series A Preferred had been converted to Common
Stock.
(b) Except as provided herein or in the Certificate of
Incorporation, or except as may be provided by the laws of the State of
Delaware, the holders of Common Stock and Series A Preferred shall have
exclusively all rights of stockholders. Each holder of Common Stock or Series A
Preferred shall be entitled to one (1) vote per share of stock owned by such
<PAGE> 2
holder, except as otherwise provided or limited herein or in the Certificate of
Incorporation, or as otherwise provided or limited in (i) that certain Amended
and Restated Stockholders Agreement dated as of June 25, 1996 to which the
Corporation is a party (as it may be amended, the "Stockholders Agreement") and
(ii) that certain Rights Agreement dated as of June 25, 1996 to which the
Corporation is a party (as it may be amended, the "Rights Agreement"). Any
holder of stock may enter into an agreement with the Corporation whereby such
holder agrees not to vote such stock in all or certain circumstances; and in
such case such shares held by such holder as to which such an agreement applies
shall, for all purposes, not be considered to be entitled to vote on any
matters as to which such holder has agreed not to vote such shares. No person
or entity, together with all "affiliates" (as that term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as in effect as of June 1,
1995) of that person or entity, may beneficially own more than twenty-five
percent (25%) of the issued stock. The limitation in the preceding sentence
shall terminate on the earliest to occur of (x) the termination of the
Stockholders Agreement, (y) July 21, 1998 or (z) the closing of a Qualified
Public Offering. A "Qualified Public Offering" shall mean any underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, relating to the offering and sale of Common
Stock for the account of the Corporation to the public at a price per share
(prior to underwriter commissions and offering expenses) of not less than
$13.00 (as adjusted for stock splits, stock dividends, reclassifications and
like events) and in which the Corporation receives aggregate gross proceeds of
not less than $10,000,000.
(c) Neither the Corporation nor any other stockholder
shall have any power or authority (i) to require any stockholder to unwillingly
resell his or its stock to the Corporation or to any other person or entity, or
(ii) to force the purchase of any stockholder's stock, except in the case of
(i) or (ii) as part of a merger or sale of the Corporation approved by the
Board of Directors or as set forth herein, in the Corporation's Certificate of
Incorporation or the Stockholders Agreement.
SECTION 2.02. PLACE OF MEETING; ANNUAL MEETING. All meetings of the
stockholders of the Corporation shall be held at the principal offices of the
Corporation, or at such other place within or without the State of Delaware as
shall be designated by the Board of Directors in the notice of such meeting.
The Board of Directors may fix by resolution the date and time of the annual
meeting of the stockholders, and at said meeting the stockholders then entitled
to vote shall elect directors to serve until the next annual meeting of
stockholders and until their successors are duly nominated, qualified and
elected, and shall transact such other business as may properly be brought
before the meeting.
SECTION 2.03. SPECIAL MEETINGS. Except as otherwise provided by
applicable law, the Certificate of Incorporation, or these Bylaws, a special
meeting of the stockholders of the Corporation entitled to vote may be called
at any time only by the affirmative vote of at least two of the directors then
in office, or the President. Except for actions relating to the conduct of the
meeting under Section 2.05 of these Bylaws or the appointment of judges under
Section 2.10 of these Bylaws, at a special meeting of the stockholders, no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting unless all of the stockholders of
record entitled to vote for or against such an action are present in person or
by proxy in which case any and all business may be transacted at the meeting
even if the meeting is held without notice.
2
<PAGE> 3
SECTION 2.04. NOTICE OF MEETINGS. Unless otherwise provided by
applicable law, the Certificate of Incorporation, or these Bylaws, written
notice of the place, date, and hour of every meeting of the stockholders,
whether annual or special, shall be given to each stockholder of record
entitled to vote at the meeting at the address of such stockholder as it
appears on the records of the Corporation, not less than ten (10) nor more than
sixty (60) calendar days before the date of the meeting. Every notice of a
special meeting shall state the purpose or purposes thereof.
SECTION 2.05 QUORUM. MANNER OF ACTING AND ADJOURNMENT. (a) Except
as otherwise provided by the Certificate of Incorporation or these Bylaws, the
record holders of at least two-thirds (2/3) of the shares of capital stock of
the Corporation issued and outstanding and entitled to vote thereat, must be
present in person or represented by proxy to constitute a quorum at any annual
or special meeting of the stockholders. Whether or not a quorum is present or
represented at any meeting of the stockholders, the record holders of
two-thirds (2/3) of the shares of capital stock present or so represented shall
have the power to adjourn the meeting from time to time. When a meeting is
adjourned to another time or place, no notice need be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At any adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the original meeting. If an adjournment is for more than thirty
(30) calendar days, or if after an adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting. Except as
otherwise provided by the Certificate of Incorporation or these Bylaws, the
affirmative vote of the record holders of two-thirds (2/3) of the shares of
capital stock of the Corporation present in person or represented by proxy and
entitled to vote on the subject matter at a meeting duly called and held with
the necessary quorum, shall be the act of the stockholders at any annual or
special meeting of stockholders. At any meeting at which amendment of the
Certificate of Incorporation, or a merger, consolidation, sale of all or
substantially all the assets, dissolution or liquidation of the Corporation, or
any other matter requiring under applicable law a vote different than that set
forth in the immediately preceding sentence for the taking of such action, is
to be voted upon, then, in addition to the vote required under applicable law
at the meeting in question, such matter or action, in order to be approved,
must also be approved at such meeting by the affirmative vote of the record
holders of at least two-thirds (2/3) of the shares of stock present in person
or represented by proxy and entitled to vote thereon at such a meeting at which
the record holders of at least two-thirds (2/3) of the shares of stock then
issued and outstanding and entitled to vote thereat are present in person or by
proxy. Except as otherwise required by applicable law or provided by the
Certificate of Incorporation or these Bylaws, the stockholders present in
person or by proxy at a meeting duly called and held can continue to do
business with respect to any matters properly brought before the meeting, until
adjournment, notwithstanding withdrawal of enough stockholders to leave less
than a quorum.
(b) Shares of its own capital stock belonging to the Corporation,
or to another corporation if a majority of the shares entitled to vote in the
election of directors of such other corporation is held directly or indirectly
by the Corporation, shall not be entitled to vote and shall not be counted for
quorum purposes.
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(c) Notwithstanding the requirements of paragraph (a) of this
Section 2.05, the following corporate actions shall require the affirmative
vote of the record holders of two-thirds (2/3) or more of the issued and
outstanding shares of capital stock of the Corporation: (i) the transfer and/or
assumption of all or substantially all of the assets or liabilities of, or the
dissolution of, the Corporation, The Hotel Industry Switch Company, and/or The
Hotel Clearing Corporation; (ii) any material acquisition, disposition,
consolidation, or merger effected by the Corporation; (iii) the execution of
any contract by the Corporation involving a liability or obligation to the
Corporation in excess of five million dollars ($5,000,000.00) other than in
connection with a public offering of securities; (iv) the incurrence of debt in
excess of one million dollars ($1,000,000.00) other than in connection with a
public offering of securities; and (vii) the liquidation, dissolution or
declaration of bankruptcy by the Corporation. This Subsection (c) shall
terminate upon a Qualified Public Offering of the Corporation's stock.
SECTION 2.06. ORGANIZATION. At every meeting of the stockholders,
the Chairman of the Board, or in the case of a vacancy in the office or absence
of the Chairman of the Board, one of the following persons present in the order
stated: the Vice Chairmen in their order of rank, the President, the
Vice-Presidents in their order of rank, a chairman designated by the Board of
Directors, or a chairman chosen by the stockholders entitled to cast two-thirds
(2/3) of the votes that all stockholders present in person or by proxy are
entitled to cast, shall act as chairman of the meeting, and the Secretary, or,
in such person's absence, an Assistant Secretary, if any, or any person
appointed by the chairman of the meeting, shall act as secretary of the
meeting.
SECTION 2.07. PROXIES. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
such stockholder by proxy, but no such proxy shall be voted or acted upon after
three (3) years from its date, unless the proxy provides for a longer period.
Every proxy shall be executed in writing by the stockholder, or by the
stockholder's duly authorized attorney-in-fact, and shall be filed with the
Secretary of the Corporation. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A proxy may be
made irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the Corporation generally.
SECTION 2.08. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Except
as otherwise provided by statute, any action that may be taken at a meeting of
stockholders by a vote of the stockholders may be taken with the written
consent of stockholders owning (and by such written consent, voting) in the
aggregate not less than the minimum percentage of the total number of shares
that by statute, the Certificate of Incorporation or these Bylaws are required
to be voted with respect to such proposed corporate action; provided, however,
that the written consent of a stockholder who would not have been entitled to
vote upon the action if a meeting were held shall not be counted; and further
provided, that prompt notice shall be given to all stockholders of the taking
of such corporate action without a meeting if less than unanimous written
consent of all stockholders who would have been entitled to vote on the action
if a meeting were held is obtained.
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SECTION 2.09. VOTING LISTS. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) calendar
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting. The list shall be arranged in alphabetical
order showing the address of each stockholder and the number of shares
registered in the name of such stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least (10) calendar 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 during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger of the Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section, or the books of the Corporation or are entitled to vote in person or
by proxy at any annual or special meeting of the stockholders.
SECTION 2.10. VOTING PROCEDURES; JUDGES OF ELECTION. Except as
otherwise provided by applicable law, the Certificate of Incorporation, or
these Bylaws, or as directed by the chairman of the meeting, the election of
directors and the vote upon any other matter need not be by written ballot. In
advance of any meeting of stockholders, the Board of Directors may appoint one
or more judges of election, who need not be stockholders, to act at such
meeting or any adjournment thereof. If judges of election are not so appointed,
the chairman of any such meeting may, and, upon the demand of any stockholder
entitled to vote or such stockholder's proxy, at the meeting and before voting
begins, shall appoint judges of election. In the case of judges appointed upon
demand of a stockholder, the number of judges shall be either one (1) or three
(3), as determined by the stockholders present or represented by proxy,
entitled to cast a majority of votes that all stockholders present or so
represented are entitled to cast thereon. No person who is a candidate for
office shall act as a judge. In case any person appointed as judge fails to
appear or refuses to act, the vacancy may be filled by appointment made by the
Board of Directors in advance of the convening of the meeting, or at the
meeting by the chairman of the meeting.
Except as provided in the Certificate of Incorporation, if judges of
election are appointed as aforesaid, they shall (a) determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity, and effect
of proxies; (b) receive votes or ballots; (c) hear and determine all challenges
and questions in any way arising in connection with the right to vote; (d)
count and tabulate all votes; (e) determine the results of the election or
other vote; and (f) do such acts as may be proper to conduct the election or
vote with fairness to all stockholders. If there be three (3) or more judges of
election, the decision, act, or certificate of a majority shall be effective in
all respects as the decision, act, or certificate of all.
On request of the chairman of the meeting or of any stockholder
entitled to vote or such stockholder's proxy, the judges shall make a report in
writing of any challenge, question, or other matter determined by them, and
shall execute a certificate of any fact found by them.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. POWERS. The Board of Directors shall have full power
to manage the business and affairs of the Corporation, and all powers of the
Corporation, except those specifically reserved or granted to the stockholders
by applicable law, the Certificate of Incorporation, these Bylaws, the
Stockholders Agreement or the Rights Agreement, are hereby granted to and
vested in the Board of Directors. Without limiting the foregoing, the Board of
Directors may, if it so desires, appoint one or more advisory councils to the
Board of Directors, consisting of such numbers and with such duties as the
Board may deem appropriate.
SECTION 3.02. NUMBER, NOMINATIONS, ELECTION, TERM OF OFFICE,
REMOVAL, TERMINATION AND VACANCIES. The Board of Directors of the Company shall
consist of nine (9) members, (i) one (1) of whom shall be the Chief Executive
Officer of the Corporation, (ii) six (6) of whom shall be designated by the
holders (the "Existing Stockholders") from time to time of Common Stock (other
than any holders who acquired Common Stock upon conversion or exchange of
Series A Preferred), and (iii) two (2) of whom shall be designated by the
holders from time to time of Series A Preferred or Common Stock issued upon
conversion or otherwise in respect of Series A Preferred (the "Preferred
Holders"). If the number of directors serving on the Board of Directors shall
be increased or decreased, the Preferred Holders shall be entitled to designate
a minimum of twenty percent (20%) of the total number of directors elected to
serve on the Board of Directors. All nominations for directors shall be
submitted to the Board of Directors prior to each annual meeting of
stockholders of the Corporation and any other meeting of stockholders at which
directors are to be elected (or prior to the circulation of any written consent
of stockholders in lieu of such meeting(s)). The designated nominees of the
Existing Stockholders (the "Designees") shall be determined as follows: Each
Existing Stockholder shall be requested to nominate one individual. This list
of nominees shall be submitted to the Existing Stockholders who shall then
select the requisite number of Designees by voting their shares of Common Stock
on a non-cumulative basis for the number of Designees to be selected. The
individual(s) receiving a plurality of votes shall be the Designee(s).
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Elections of directors need not be by written ballot. Each director
shall serve for the term for which he or she is elected and until his or her
successor shall have been duly nominated, elected and qualified (except in the
event of his or her earlier death, resignation or removal).
If the Existing Stockholders or the Preferred Holders wish to cause
the removal of the director(s) which they had designated for the Board of
Directors, the other stockholders entitled to vote shall vote in favor of such
removal, as provided in the Stockholders Agreement and the Rights Agreement.
Any vacancies on the Board of Directors resulting from death,
resignation, termination, removal by the stockholders or from any increase in
the number of directors may be filled by the stockholders at the next annual
meeting thereof or at a special meeting called for that purpose in accordance
with Section 2.03 of Article II of these Bylaws. In such event, the
stockholder(s) that had designated such director(s) shall be entitled to
designate and nominate as provided herein a successor to fill the vacancy so
created, and in such instance the stockholder(s) shall vote in favor of such
designee or nominee as provided herein. Any director elected in accordance with
the two preceding sentences of this Section 3.02 shall hold office for the
remainder of the full term of the directorship being filled by such director
and until a successor shall have been elected and qualified. This Section 3.02
shall terminate upon a Qualified Public Offering of the Corporation's stock.
SECTION 3.03. QUALIFICATIONS. All directors of the Corporation
shall be natural persons, but need not be residents of Delaware or stockholders
of the Corporation.
SECTION 3.04. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to the Chairman of the Board, the
President, or the Secretary of the Corporation. Such resignation shall take
effect at the date of the 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. Upon the effectiveness
of such resignation, the vacancy created thereby shall be filled in the manner
provided in Section 3.02 hereof.
SECTION 3.05. ORGANIZATION. At every meeting of the Board of
Directors, the Chairman of the Board, or in the case of a vacancy in the office
or absence of the Chairman of the Board, one of the following officers present
in the order stated: the President, the Vice Presidents in their order of rank,
or a chairman chosen by the affirmative vote of the directors holding
two-thirds (2/3) of the votes of the Board of Directors present, shall act as
chairman of the meeting, and the Secretary, or, in the absence of the
Secretary, an Assistant Secretary, if any, or any other person appointed by the
chairman of the meeting, shall act as secretary of the meeting.
SECTION 3.06. PLACE OF MEETING. All meetings of the Board of
Directors of the Corporation shall be held at the principal offices of the
Corporation, or at such other place within or without the State of Delaware as
shall be designated in a notice of such meeting or otherwise.
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SECTION 3.07. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and place as shall be
designated from time to time by the Board of Directors. At such meetings, the
directors shall transact such business as may properly be brought before the
meeting.
SECTION 3.08. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held whenever called by the Chairman of the Board, the
President or by the affirmative vote of twenty percent (20%) or more of the
directors then in office. Except as otherwise provided by applicable law, the
Certificate of Incorporation, or these Bylaws, notice of each such meeting
shall be given to each director by telephone or in writing at least three (3)
calendar days (in the case of notice by telephone, telegram, cable, or
facsimile transmission) or seven (7) calendar days (in the case of notice by
mail) before the time at which the meeting is to be held. Each such notice
shall state the time and place of the meeting to be so held, and shall be
deemed to be given at the time when so made by telephone, sent by telegram,
cable, or facsimile transmission, or deposited in the U.S. mail. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at any special meeting.
SECTION 3.09. QUORUM, MANNER OF ACTING, AND ADJOURNMENT. (a) Each
director shall have one (1) vote on any matter voted upon by the Board of
Directors. The voting and other rights of the Corporation's directors and
stockholders are further defined and limited by the Certificate of
Incorporation, the Stockholders Agreement and the Rights Agreement.
(b) Except as otherwise provided by applicable law, the
Certificate of Incorporation, the Stockholders Agreement, the Rights Agreement
or these Bylaws, as amended from time to time, two-thirds (2/3) of the total
number of directors then in office shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors, and the act
of two-thirds (2/3) or more of the directors present at any meeting at which
there is a quorum shall be the act of the Board. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting to another date and time by giving notice to each
director not less than five (5) calendar days before the time at which said
adjourned meeting is to be held, in the manner set forth in Section 3.08
hereof. Following any Qualified Public Offering of the Corporation's stock, a
majority of the total number of directors then in office shall constitute a
quorum for the transaction of business at all meetings of the Board of
Directors, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board.
(c) Notwithstanding paragraph (b) above, (i) the appointment or
removal of the Chairman of the Board or the President; (ii) the approval of
annual business plans, budgets, or strategic plans, (iii) any material change
in the scope of the business of the Corporation; (iv) the approval of policies
concerning the payment of dividends or other distributions; (v) the approval of
capital expenditures in excess of one million dollars ($1,000,000.00); and (vi)
the approval of changes in the Corporation's accounting or tax policies
inconsistent with generally accepted accounting principles shall require the
affirmative vote of three-fourths (3/4) or more of the directors present at any
meeting at which there is a quorum. This Subsection (c) shall terminate upon a
qualified public offering of the Corporation's stock and shall not apply with
respect to any action required to effectuate such public offering.
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SECTION 3.10. CONSENT IN LIEU OF MEETING. Except as otherwise
provided by applicable law, the Certificate of Incorporation, or these Bylaws,
and notwithstanding Section 3.08 hereof, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or the committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or the committee, as the
case may be.
SECTION 3.11. CONFERENCE TELEPHONE MEETINGS. Except as otherwise
provided by applicable law, the Certificate of Incorporation, or these Bylaws,
one or more directors may participate in a meeting of the Board of Directors,
or of any committee thereof, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.12. EXECUTIVE AND OTHER COMMITTEES. The Board of
Directors may, by resolution adopted by the affirmative vote of a majority of
the whole Board of Directors, designate and name an Executive Committee and one
or more other committees, each committee to consist of one (1) or more
directors, provided that any Executive Committee shall have at least three (3)
directors. The Board may designate one (1) or more directors as alternate
members of any committee to replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member (and
the alternate or alternates, if any, designated for such member) of any
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another director to act at the meeting in the
place of any such absent or disqualified member.
Any such committee (to the extent provided in the resolution
establishing such committee) shall conduct itself, including with respect to
provisions for votes of its members, as set forth in resolutions adopted by the
Board of Directors, and shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, expressly including the power and authority to
declare a dividend, to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law (the "GCL"), and to
authorize the seal of the Corporation to be affixed to all papers which may
require it. Notwithstanding the foregoing, no such committee shall have the
power or authority (a) to amend the Certificate of Incorporation or to fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation, or the conversion into, or the exchange of such shares of any
other class or classes or any other series of the same or any other class or
classes of stock of the Corporation, or to fix the number of shares of any
series of stock, or to authorize the increase or decrease of the shares of any
series; (b) to adopt an agreement of merger or consolidation under Sections 251
or 252 of the GCL; (c) to recommend to the stockholders the sale, lease, or
exchange of all or substantially all of the Corporation's property and assets;
(d) to recommend to the stockholders a dissolution of the Corporation or a
revocation of a dissolution; (e) to amend the Bylaws of the Corporation; or (f)
to authorize the issuance of stock.
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Each committee designated pursuant to this section shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
SECTION 3.13. COMPENSATION OF DIRECTORS. The Board of Directors
shall have the authority to fix the compensation of directors. The directors
may be paid their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor; provided that, the Board, in its discretion,
may reduce the compensation of any director who is concurrently receiving
compensation for services rendered to the Corporation as an officer thereof.
Members of special or standing committees may be paid like compensation for
attending committee meetings.
SECTION 3.14. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one (1) or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board or of a committee thereof which
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if:
(a) The material facts as to his or her relationship or
interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good
faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested
directors, even though the disinterested directors
comprise less than a quorum;
(b) The material facts as to his or her relationship or
interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(c) the contract or transaction is fair to the
Corporation as of the time it is authorized, approved
or ratified by the Board of Directors, a committee
thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV
NOTICE-WAIVERS
SECTION 4.01. NOTICE. WHAT CONSTITUTES. Except as otherwise
provided in the Bylaws, any provision of applicable law, the Certificate of
Incorporation or these Bylaws which
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requires notice to be given to any director or stockholder of the Corporation
shall not be deemed or constituted to require personal notice (unless otherwise
expressly provided therein), but rather such notice may be given via telephone,
facsimile or first class mail addressed to such director or stockholder at his
or her address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same is deposited in the U.S. mail.
SECTION 4.02. WAIVERS OF NOTICE. Whenever any notice is required to
be given under applicable law, the Certificate of Incorporation or these
Bylaws, a written waiver hereof, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise provided by applicable law, the
Certificate of Incorporation or these Bylaws, neither the business to be
transacted at nor the purposes of, any regular or special meeting of the
stockholders, directors, or a committee of directors need be specified in any
written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting
shall constitute a waiver of notice of such meeting, except when a person
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting has not been
lawfully called or convened.
Notwithstanding any of the foregoing, except in the case of written
consents of less than all of the stockholders as provided in Section 2.08 of
these Bylaws, no waiver of notice shall be valid or shall be deemed equivalent
to notice unless all directors or stockholders entitled to vote on any matters
which are a subject of the meeting in question shall give such a waiver of
notice, whether before, at or after the meeting.
ARTICLE V
OFFICERS
SECTION 5.01. NUMBER, QUALIFICATIONS AND DESIGNATION. The officers
of the Corporation shall be chosen by the Board of Directors and shall be a
President and a Secretary, and may include one or more Vice Presidents, a
Treasurer, and such other officers as may be elected in accordance with the
provisions of Section 5.03 of this Article V. One person may hold more than one
(1) office. Except as provided below with respect to the Chairman of the Board,
and Vice Chairmen of the Board, officers may, but need not be, directors or
stockholders of the Corporation. The Board of Directors shall also elect, from
among the members of the Board, a Chairman of the Board, and one or more Vice
Chairmen of the Board, each of which shall be deemed to be an officer of the
Corporation.
SECTION 5.02. ELECTION, TERM OF OFFICE, RESIGNATION, AND REMOVAL.
The officers of the Corporation, except those elected by delegated authority
pursuant to Section 5.03 of this Article V, shall be elected annually by the
Board of Directors, and each such officer shall hold his or her office until
his or her successor shall have been duly elected and qualified, or until his
or her earlier death, resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. Subject to the terms of any
applicable employment or service agreement, all officers, agents, and employees
shall be subject to removal, with or without
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cause, at any time by the Board of Directors. The election or appointment of an
officer shall not of itself create contract rights. Any vacancy caused by the
death, resignation, or removal of any officer, or otherwise, may be filled by
the Board of Directors or pursuant to delegated authority as provided in
Section 5.03 hereof.
SECTION 5.03. OTHER OFFICERS, COMMITTEES, AND AGENTS. The Board of
Directors may from time to time elect such other officers, including Assistant
Secretaries and Assistant Treasurers, and appoint such committees, employees,
or other agents as it deems necessary. Such officers, committee members,
employees, or other agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine by resolution. By
resolution, the Board of Directors may delegate to any officer or committee the
power to elect subordinate officers and to retain or appoint employees or other
agents, or committees thereof, and to prescribe the authority and duties of
such subordinate officers, committees, employees, or other agents. Subject to
the terms of any applicable employment or service agreement, all such
subordinate officers, agents, and employees shall also be subject to removal,
with or without cause, at any time by the officers or committee appointing
them.
SECTION 5.04. THE CHAIRMAN OF THE BOARD. The Chairman of the Board
shall preside at meetings of the Board of Directors and at meetings of the
stockholders. The Chairman of the Board shall counsel with and advise the
President and perform such other duties as may be from time to time assigned to
the Chairman of the Board of Directors. Except as otherwise provided by
resolution of the Board, the Chairman of the Board shall be ex-officio a member
of all committees of the Board.
SECTION 5.05. THE VICE CHAIRMEN OF THE BOARD. The Vice Chairmen of
the Board shall perform the duties of the Chairman of the Board in the
Chairman's absence (in their order of rank) and such other duties as may from
time to time be assigned to them by the Board of Directors, the Chairman of the
Board, or the President.
SECTION 5.06. THE PRESIDENT. The President shall perform all of the
duties usually incident to such office, and such other duties as may from time
to time be assigned to the President by the Board of Directors. In the absence
of the Chairman of the Board and any Vice Chairmen of the Board, the President
shall preside at all meetings of the stockholders and of the Board of
Directors.
SECTION 5.07. THE SECRETARY. The Secretary, or in the Secretary's
absence an Assistant Secretary, (a) shall attend all meetings of the
stockholders and of the Board of Directors and shall record the proceedings of
the meetings of the stockholders and the Board of Directors and of committees
of the Board in a book or books to be kept for that purpose; (b) shall see that
notices are given and records and reports properly kept and filed by the
Corporation as required by law; (c) shall be the custodian of the seal of the
Corporation and see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and, (d) in general, shall perform
all duties incident to the office of Secretary, and such other duties as may
from time to time be assigned to the Secretary by the Board of Directors, the
Chairman of the Board, or the President.
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SECTION 5.08. THE TREASURER. The Treasurer, or in Treasurer's
absence, an Assistant Treasurer, (a) shall have or provide for the custody of,
and when proper pay out, disburse, or otherwise dispose of, the funds or other
property of the Corporation; (b) shall collect and receive or provide for the
collection and receipt of moneys earned by or in any manner due to or received
by the Corporation; (c) shall deposit all funds in his custody as Treasurer in
such banks or other places of deposit as the Board of Directors may from time
to time designate; (d) shall keep accurate financial records and accounts and,
whenever so required by the Board of Directors, render statements showing his
transactions as Treasurer and the financial condition of the Corporation; and
(e) in general, shall discharge such other duties as may from time to time by
assigned to the Treasurer by the Board of Directors, the Chairman of the Board,
or the President.
SECTION 5.09. SALARIES. The salaries and other compensation of the
officers and agents of the Corporation elected or appointed by the Board of
Directors shall be fixed from time to time by the Board of Directors. The
salaries and other compensation of subordinate officers appointed pursuant to
delegated authority under Section 5.03 hereof shall be fixed from time to time
by the officers or committee appointing them.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 6.01. ISSUANCE. Each stockholder shall be entitled to a
certificate or certificates for shares of stock of the Corporation owned by
such stockholder upon request therefor. The stock certificates of the
Corporation shall be consecutively numbered and shall be registered in the
stock ledger and transfer books of the Corporation as they are issued. They
shall be signed by the Chairman of the Board or by the President or a Vice
President, and by the Secretary or an Assistant Secretary, if any, or by the
Treasurer or an Assistant Treasurer, if any, and shall bear the corporate seal,
which may be a facsimile, engraved, or printed. Any and all of the signatures
upon such certificate may be a facsimile, engraved, or printed. In case any
officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer, transfer agent, or registrar before the certificate is issued, it
may be issued with the same effect as if such person were such officer,
transfer agent, or registrar at the date of its issue.
SECTION 6.02. RESTRICTION ON TRANSFER. No stockholder shall sell,
transfer, or otherwise dispose of such stockholder's shares of stock without
first offering said shares to the Corporation if and to the extent required by
the terms of the Stockholders Agreement or the Rights Agreement. This Section
6.02 shall terminate upon a Qualified Public Offering of the Corporation's
stock.
SECTION 6.03 TRANSFER, LEGENDS, ETC. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignation, or authority to transfer the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books. The Board of Directors may by
resolution, (a) impose restrictions on transfer or registration of transfer of
shares of stock of the Corporation, and (b) require as
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<PAGE> 14
a condition to the issuance or transfer of such shares that the person or
persons to whom such shares are to be issued or transferred agree in writing to
such restrictions. In the event that any such restrictions on transfer or
registration of transfer are so imposed, the Corporation shall require that
such restrictions be conspicuously noted on all certificates representing such
shares. In addition, all shares of the Corporation's stock are subject to
several restrictions and limitations as set forth in the Stockholders Agreement
and the Rights Agreement, which are to be noted on all certificates
representing such shares.
SECTION 6.04. LOST, STOLEN, DEFACED, WORN OUT, OR DESTROYED. The
Board of Directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen, defaced, worn-out, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, defaced, worn out, or destroyed. When authorizing
such issuance of a new certificate or certificates, the Corporation may, as a
condition precedent thereto, (a) require the owner of any defaced or worn out
certificate to deliver such certificate to the Corporation and order the
cancellation of the same, and (b) require the owner of any lost, stolen or
destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as the Corporation shall require and 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. Thereupon, the Corporation may
cause to be issued to such person a new certificate in replacement for the
certificate alleged to have been lost, stolen, defaced, worn out, or destroyed.
Upon the stub of every new certificate so issued shall be noted the fact of
such issue and the number, date, and name of the registered owner of the lost,
stolen, defaced, worn out, or destroyed certificate in lieu of which the new
certificate is issued. Every certificate issued hereunder shall be issued
without payment to the Corporation for such certificate; provided that, there
shall be paid to the Corporation a sum equal to any exceptional expenses
incurred by the Corporation in providing for or obtaining any such indemnity
and security as is referred to herein.
SECTION 6.05. RECORD HOLDER OF SHARES. Except as otherwise provided
by applicable law, the Certificate of Incorporation, or these Bylaws, the
Corporation (a) 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, (b) shall be entitled to hold liable for any required calls and
assessments a person so registered, and (c) shall not be bound to recognize (i)
any entity or person as a transferee of stock unless such entity or person both
complies with all transfer and other restriction imposed hereby or by the
Certificate of Incorporation and Stockholders Agreement and first becomes a
party to Stockholders Agreement, or (ii) any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof.
The Corporation may treat a fiduciary as having capability and
authority to exercise all rights of ownership in respect of shares of record in
the name of a decedent holder, a person, firm, or corporation in conservation,
receivership, or bankruptcy, a minor, an incompetent person, or a person under
disability, as the case may be, for whom such fiduciary is acting, and the
Corporation, its transfer agent, and its registrar, if any, upon presentation
of evidence of appointment of such fiduciary shall be under no duty to inquire
as to the powers of such
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<PAGE> 15
fiduciary and shall not be liable for any loss caused by any act done or
omitted to be done by the Corporation or its transfer agent or registrar, if
any, in reliance thereon.
SECTION 6.06. DETERMINATION OF STOCKHOLDERS OF RECORD. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or to express
consent to corporate action in writing without a meeting, or entitled to
receive payments of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than (10) calendar days before the date of
such meeting, nor more than sixty (60) calendar days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day next
preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled
to consent to corporate action in writing without a
meeting, when no prior action by the Board of
Directors is necessary, shall be the first date on
which a signed written consent setting forth the
action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office
in Delaware, its principal place of business, or an
officer or agent of the Corporation having custody of
the book in which proceedings of meetings of
stockholders are recorded.
(c) The record date for determining stockholders for any
other purpose shall be at the close of business on
the day on which the Board of Directors adopts the
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting provided
that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6.07. APPOINTMENT OF TRANSFER AGENTS, REGISTRARS, ETC. The
Board of Directors may from time to time by resolution appoint (a) one (1) or
more transfer agents and registrars for the shares of stock of the Corporation,
(b) a plan agent to administer any employee benefit, dividend reinvestment, or
similar plan of the Corporation, and (c) a dividend disbursing agent to
disburse any and all dividends authorized by the Board and payable with respect
to the shares of stock of the Corporation. The Board of Directors shall also
have authority to make such other rules and regulations not inconsistent with
applicable law, the Certificate of Incorporation, or these Bylaws, as it deems
necessary or advisable with respect to the issuance, transfer, and registration
of certificates for shares and the shares of stock represented thereby.
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<PAGE> 16
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. DIVIDENDS. Dividends, if any, upon the capital stock
of the Corporation may be declared only by the affirmative vote of at least
three-fourths (3/4) of the members of the Board of Directors then in office, at
any regular or special meeting of the Board of Directors. Dividends may be paid
in cash, in property, or in shares of the capital stock of the Corporation, or
in any combination thereof, but only out of funds available for the payment of
dividends as provided by applicable law. Any dividends declared upon the stock
of the Corporation shall be payable on such date or dates as the Board of
Directors shall determine by resolution. If the date fixed for the payment of
any dividend shall in any year fall upon a legal holiday, then the dividend
payable on such date shall be paid on the next day not a legal holiday.
Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its discretion, shall determine by
resolution is proper as a reserve or reserves to meet contingencies, for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall so
determine is in the best interests of the Corporation and its stockholders. The
Board may modify or abolish any such reserves in the manner in which it was
created.
SECTION 7.02. CONTRACTS, ETC. Except as otherwise provided by
applicable law, the Certificate of Incorporation, or these Bylaws, the Board of
Directors may authorize any officer or officers, any employee or employees, or
any agent or agents, to enter into any contract or to execute, acknowledge, or
deliver any agreement, deed, mortgage, bond, or other instrument in the name of
and on behalf of the Corporation and to affix the Corporation's seal thereon.
Such authority may be general or confined to specific instances.
SECTION 7.03. CHECKS. All checks, notes, obligations, bills of
exchange, acceptances, or other orders in writing shall be signed by such
person or persons as the Board of Directors may from time to time designate by
resolution.
SECTION 7.04. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization,
and the words "Corporate Seal, Delaware." The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
SECTION 7.05. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to credit of the Corporation in such banks, trust
companies, or other depositories as the Board of Directors may approve or
designate, and all such funds shall be withdrawn only upon checks or other
orders signed by such one or more officers, employees, or agents as the Board
of Directors shall from time to time designate.
SECTION 7.06. EXAMINATION OF CORPORATE RECORDS. Upon written demand
under oath stating the purpose thereof, every stockholder of record shall have
a right to examine, in person or by attorney or other agent, during ordinary
business hours and for any proper purpose,
16
<PAGE> 17
the Corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent shall be the person who
seeks the right of inspection, the demand under oath shall be accompanied by a
power of attorney or other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the Corporation as its registered office in Delaware or at its principal
place of business.
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders, and its other books and records during
ordinary business hours for a purpose reasonably related to his or her position
as a director.
SECTION 7.07. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify to the fullest extent authorized or permitted by
law any current or former director or officer of the Corporation (or his or her
testator or estate) made or threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether criminal, civil
administrative, or investigative, by reason of the fact that he or she is or
was a director or officer of the Corporation or is or was serving, at the
request of the Corporation, as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. Subject to applicable law, the Corporation may indemnify
an employee or agent of the Corporation to the extent that and with respect to
such proceedings as, the Board of Directors may determine by resolution, in its
discretion.
SECTION 7.08. AMENDMENT OF BYLAWS. (a) These Bylaws may be amended,
modified, or repealed, or new Bylaws may be adopted by the Board of Directors
of the Corporation, subject to (i) the consent of the holders of Series A
Preferred as provided in the Rights Agreement and (ii) amendment, modification
or repeal, by the Corporation's stockholders. Any such amendment, modification
or repeal by the Corporation's stockholders shall require, in addition to all
applicable requirements of law and the Certificate of Incorporation, the
affirmative vote of the record holders of two-thirds (2/3) or more of the
outstanding shares of Common Stock, at any annual meeting of stockholders or at
any special meeting thereof, if notice of such amendment, modification, repeal
or adoption of new Bylaws is contained in the notice of such special meeting.
Notwithstanding any of the foregoing to the contrary, Section 2.01 (c) hereof
may not be amended, modified or repealed by either the Board of Directors or
the stockholders without the unanimous vote of all holders of record of stock.
(b) Notwithstanding the above paragraph, this paragraph (b) of
Section 7.08 and paragraph (c) of Section 3.09 may only be amended, modified,
or repealed by the Board of Directors of the Corporation with the affirmative
vote of three-fourths (3/4) or more of the Board of Directors at any meeting of
the Board at which there is a quorum.
(c) Following a Qualified Public Offering of the Corporation's
stock, these Bylaws may be amended, modified, or repealed, or new Bylaws may be
adopted by the Board of Directors of the Corporation, subject to amendment,
modification or repeal by the Corporation's stockholders and applicable law.
17
<PAGE> 1
EXHIBIT 3.3
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF PEGASUS SYSTEMS, INC.
This Second Amended and Restated Certificate of Incorporation amends and
restates the Amended and Restated Certificate of Incorporation filed in the
office of the Secretary of State of the State of Delaware on June 25, 1996,
which amended and restated the Certificate of Incorporation of Pegasus Systems,
Inc., a corporation originally incorporated in Delaware as "Pegasus Systems,
Inc." on July 10, 1995. This Second Amended and Restated Certificate of
Incorporation has been duly adopted pursuant to Section 245 of the Delaware
General Corporation Law,
ARTICLE I
The name of this corporation is Pegasus Systems, Inc. (the "Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, New Castle County, Wilmington, Delaware
19805-1297, The name of the registered agent of the Corporation at that address
is The Prentice-Hall Corporation Systems, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful business, act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
ARTICLE IV
This Corporation is authorized to issue two classes of stock, designated
"Common Stock" and "Preferred Stock". The total number of shares which this
Corporation is authorized to issue is 102,000,000 shares. The number of shares
of Common Stock which this Corporation is authorized to issue is 100,000,000
shares, par value $0.01 per share. The number of shares of Preferred Stock
which this Corporation is authorized to issue is 2,000,000 shares, par value
$0.01 per share, which shall initially be undesignated as to series.
Any Preferred Stock not previously designated as to series may be issued
from time to time in one or more series pursuant to a resolution or resolutions
providing for such issue duly adopted by the Board of Directors (authority to
do so being hereby expressly
<PAGE> 2
vested in the Board), and such resolution or resolutions shall also set forth
the voting powers, full or limited or none, of each such series of Preferred
Stock and shall fix the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of each such series of Preferred Stock. The Board of Directors is
authorized to alter the designation, rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired by
the Corporation (whether by redemption, repurchase, conversion to Common Stock
or other means), shall upon such reacquisition resume the status of authorized
and unissued shares of Preferred Stock, undesignated as to series and available
for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The relative rights, preferences, privileges and restrictions granted to
or imposed upon the Common Stock or the holders thereof are as follows:
(a) Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
(b) Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation and of any amounts to which the holders of all classes of stock at
the time outstanding having prior rights as to liquidation are entitled, the
holders of all outstanding shares of Common Stock shall be entitled to share
ratably in the remaining assets of the Corporation.
(c) Redemption. The Common Stock is not redeemable.
(d) Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
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<PAGE> 3
(e) Residual Rights. All rights accruing to the outstanding shares of
this Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
ARTICLE VIII
(a) To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or as may hereafter be amended, a
director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director.
(b) The Corporation may indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he, his estate or legal representative is or was a director,
officer, employee or agent of the Corporation or any predecessor of the
Corporation or serves or served at any other enterprise as a director, officer,
employee or agent at the request of the Corporation or any other predecessor to
the Corporation.
(c) No amendment nor repeal of this Article VIII, nor the adoption of
any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article VIII, shall eliminate or reduce the effect of this Article
VIII, in respect of any matter occurring, or any action or proceeding accruing
or arising or that, but for this Article VIII, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
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<PAGE> 4
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided
in the Bylaws of the Corporation.
ARTICLE XI
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. The Board of Directors may exercise
all such authority and powers of the Corporation and do all such lawful acts
and things as are not by statute or this Certificate of Incorporation directed
or required to be exercised or done by the stockholders.
1. Number of Directors
The number of directors of the Corporation shall be fixed from time to
time only by action of not less than a majority of the members of the Board of
Directors then in office. The number of directors comprising the Board of
Directors of the Corporation shall not be less than two (2) or more than
twenty-five (25).
2. Classes
Subject to the rights, if any, of any series of Preferred Stock then
outstanding, the directors shall be divided into three classes, designated
Class I, Class II and Class III. The number of directors in each class shall be
the whole number contained in the quotient arrived at by dividing the
authorized number of directors by three, and if a fraction is also contained in
such quotient then if such fraction is one-third (1/3) the extra director shall
be a member of Class III and if the fraction is two-thirds (2/3) then one of
the extra directors shall be a member of Class III and the other shall be a
member of Class II. Upon filing of this Second Amended and Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware, Donald
R. Dixon, John Biggs and W.C. Hammett, Jr. shall be members of Class I, Malcolm
Highet, Bruce W. Wolff and Mark C. Wells shall be members of Class II, and
Rockwell A. Schnabel, John F. Davis, III and Paul Travers shall be
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<PAGE> 5
members of Class III. The term of office of directors in each class shall
expire as follows: Class I shall expire at the 1998 annual meeting of
stockholders, Class II shall expire at the 1999 annual meeting of stockholders,
Class III shall expire at the 2000 annual meeting of stockholders. At each such
meeting of stockholders, directors shall be elected to succeed those directors
whose terms expire for a term of office to expire at the third succeeding
annual meeting of stockholders after their election. All directors shall hold
office until the annual meeting of stockholders for the year in which their
term expires and until their successors are duly elected and qualified, or
until their earlier death, resignation, disqualification or removal.
3. Vacancies
Subject to the rights, if any, of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, disqualification or removal may be
filled only by a majority vote of the directors then in office, though less
than a quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires and until such director's successor shall
have been duly elected and qualified.
4. Removal
Any director or the entire Board of Directors may be removed only for
cause and only by the vote of the holders of two-thirds (2/3) of the securities
of the Corporation then entitled to vote at an election of directors voting
together as a single class.
ARTICLE XII
Any action required or permitted to be taken at any annual or special
meeting of stockholders may only be taken upon the vote of the stockholders at
an annual or special meeting duly called and may not be taken by written
consent of the stockholders. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time only by the Chairman
of the Board or the Chief Executive Officer of the Corporation or the Board of
Directors.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation. In addition to any affirmative
vote required by applicable law or any other provision of this Certificate of
Incorporation or specified in any agreement, the affirmative
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<PAGE> 6
EXHIBIT 3.3
vote of the holders of not less than two-thirds (2/3) of the voting power of
all securities of the Corporation entitled to vote generally in the election of
directors shall be required to amend, add, alter, change, repeal or adopt any
provisions inconsistent with Sections 1, 2 or 3 of Article XI, Article XII or
this Article XIII of this Certificate of Incorporation and the affirmative vote
of not less than eighty percent (80%) of the voting power of all securities of
the Corporation entitled to vote generally in the election of directors shall
be required to amend, add, alter, change, repeal or adopt any provisions
inconsistent with Section 4 of Article XI or this Article XIII with respect to
Section 4 of Article XI.
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and
Restated of Certificate to be duly executed this ____ day of ___________, 1997.
By: /s/ JOHN F. DAVIS, III
--------------------------------------
John F. Davis, III
President and Chief Executive Officer
ATTEST:
/s/ RIC L. FLOYD
- -----------------------------------
Ric L. Floyd, Secretary
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<PAGE> 1
EXHIBIT 3.4
SECOND AMENDED AND RESTATED BYLAWS
OF
PEGASUS SYSTEMS, INC.
(A DELAWARE CORPORATION)
ARTICLE I.
OFFICES AND FISCAL YEAR
SECTION 1.1 REGISTERED OFFICE. The registered office of the Corporation
shall be as stated in the Certificate of Incorporation until a change in such
office is established by resolution of the Board of Directors and a statement
of such change is filed in the manner provided by applicable law.
SECTION 1.2 OTHER OFFICES. The Corporation may also have offices and keep
its books, documents, and records at such other places within or without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.
SECTION 1.3 FISCAL YEAR. The fiscal year of the Corporation shall end on
the 31st day of December in each year or on such other date as the Board of
Directors may designate by resolution.
ARTICLE II.
THE STOCKHOLDERS
SECTION 2.1 TYPES OF STOCK.
(a) The Corporation's Certificate of Incorporation, as amended (the
"Certificate of Incorporation") currently authorizes two classes of capital
stock - Common Stock and Preferred Stock. The aggregate number of shares of
Common Stock and Series A Preferred which the Corporation has authority to
issue is set forth in the Certificate of Incorporation.
(b) Except as provided herein or in the Certificate of Incorporation,
or except as may be provided by the laws of the State of Delaware, the holders
of Common Stock shall have exclusively all rights of stockholders.
SECTION 2.2 PLACE OF MEETING; ANNUAL MEETING. All meetings of the
stockholders of the Corporation shall be held at the principal offices of the
Corporation, or
<PAGE> 2
at such other place within or without the State of Delaware as shall be
designated by the Board of Directors in the notice of such meeting. The Board
of Directors may fix by resolution the date and time of the annual meeting of
the stockholders, and at said meeting the stockholders then entitled to vote
shall elect directors to serve until the next annual meeting of stockholders
and until their successors are duly nominated, qualified and elected, and shall
transact such other business as may properly be brought before the meeting.
SECTION 1.023 SPECIAL MEETINGS. Except as otherwise provided by applicable
law, the Certificate of Incorporation, or these Bylaws, a special meeting of
the stockholders of the Corporation entitled to vote may be called at any time
only by the Chairman of the Board or the President of the Corporation or the
Board of Directors.
SECTION 1.024 NOTICE OF MEETINGS. Unless otherwise provided by applicable
law, the Certificate of Incorporation, or these Bylaws, written notice of the
place, date, and hour of every meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting at the address of such stockholder as it appears on the records of the
Corporation, not less than ten (10) nor more than sixty (60) calendar days
before the date of the meeting. Every notice of a special meeting shall state
the purpose or purposes thereof.
SECTION 1.025 QUORUM. MANNER OF ACTING AND ADJOURNMENT. (a) Except as
otherwise provided by the Certificate of Incorporation or these Bylaws, the
record holders of at least a majority of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote thereat, must be
present in person or represented by proxy to constitute a quorum at any annual
or special meeting of the stockholders. Whether or not a quorum is present or
represented at any meeting of the stockholders, the record holders of a
majority of the shares of capital stock present or so represented shall have
the power to adjourn the meeting from time to time. When a meeting is adjourned
to another time or place, no notice need be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At any adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the original meeting. If an adjournment is for more than thirty
(30) calendar days, or if after an adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting. Except as
otherwise provided by applicable law, the Certificate of Incorporation or these
Bylaws, the affirmative vote of the record holders of a majority of the shares
of capital stock of the Corporation present in person or represented by proxy
and entitled to vote on the subject matter at a meeting duly called and held
with the necessary quorum, shall be the act of the stockholders at any annual
or special meeting of stockholders. Except as otherwise required by applicable
law or provided by the Certificate of Incorporation or these Bylaws, the
stockholders present in person or by proxy at a meeting duly called and held
can continue to do business with respect to any matters properly brought before
the meeting,
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until adjournment, notwithstanding withdrawal of enough stockholders to leave
less than a quorum.
(b) Shares of its own capital stock belonging to the Corporation, or
to another corporation if a majority of the shares entitled to vote in the
election of directors of such other corporation is held directly or indirectly
by the Corporation, shall not be entitled to vote and shall not be counted for
quorum purposes.
SECTION 1.026 ORGANIZATION. At every meeting of the stockholders, the
Chairman of the Board, or in the case of a vacancy in the office or absence of
the Chairman of the Board, one of the following persons present in the order
stated: the Vice Chairmen in their order of rank, the President, the
Vice-Presidents in their order of rank, a chairman designated by the Board of
Directors, or a chairman chosen by the stockholders entitled to cast two-thirds
(2/3) of the votes that all stockholders present in person or by proxy are
entitled to cast, shall act as chairman of the meeting, and the Secretary, or,
in such person's absence, an Assistant Secretary, if any, or any person
appointed by the chairman of the meeting, shall act as secretary of the
meeting.
SECTION 1.027 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after
three (3) years from its date, unless the proxy provides for a longer period.
Every proxy shall be executed in writing by the stockholder, or by the
stockholder's duly authorized attorney-in-fact, and shall be delivered to the
secretary of the meeting at or prior to the time designated in the order of
business for so delivering such proxies. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power.
A proxy may be made irrevocable regardless of whether the interest with which
it is coupled is an interest in the stock itself or an interest in the
Corporation generally.
SECTION 1.028 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Any action
required or permitted to be taken at any annual or special meeting of
stockholders may only be taken upon the vote of the stockholders at an annual
or special meeting duly called and may not be taken by written consent of the
stockholders.
SECTION 1.029 VOTING LISTS. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) calendar days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting. The list shall be arranged in alphabetical
order showing the address of each stockholder and the number of shares
registered in the name of such stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least (10) calendar days prior to
the meeting, either at a place within the city where the
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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
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger of the Corporation shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list
required by this section, or the books of the Corporation or are entitled to
vote in person or by proxy at any annual or special meeting of the
stockholders.
SECTION 1.0210 VOTING PROCEDURES; JUDGES OF ELECTION. Except as otherwise
provided by applicable law, the Certificate of Incorporation, or these Bylaws,
or as directed by the chairman of the meeting, the election of directors and
the vote upon any other matter need not be by written ballot. In advance of any
meeting of stockholders, the Board of Directors may appoint one or more judges
of election, who need not be stockholders, to act at such meeting or any
adjournment thereof. If judges of election are not so appointed, the chairman
of any such meeting may, and, upon the demand of any stockholder entitled to
vote or such stockholder's proxy, at the meeting and before voting begins,
shall appoint judges of election. In the case of judges appointed upon demand
of a stockholder, the number of judges shall be either one (1) or three (3), as
determined by the stockholders present or represented by proxy, entitled to
cast a majority of votes that all stockholders present or so represented are
entitled to cast thereon. No person who is a candidate for office shall act as
a judge. In case any person appointed as judge fails to appear or refuses to
act, the vacancy may be filled by appointment made by the Board of Directors in
advance of the convening of the meeting, or at the meeting by the chairman of
the meeting.
Except as provided in the Certificate of Incorporation, if judges of
election are appointed as aforesaid, they shall (a) determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity, and effect
of proxies; (b) receive votes or ballots; (c) hear and determine all challenges
and questions in any way arising in connection with the right to vote; (d)
count and tabulate all votes; (e) determine the results of the election or
other vote; and (f) do such acts as may be proper to conduct the election or
vote with fairness to all stockholders. If there be three (3) or more judges of
election, the decision, act, or certificate of a majority shall be effective in
all respects as the decision, act, or certificate of all.
On request of the chairman of the meeting or of any stockholder entitled
to vote or such stockholder's proxy, the judges shall make a report in writing
of any challenge, question, or other matter determined by them, and shall
execute a certificate of any fact found by them.
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ARTICLE III.
BOARD OF DIRECTORS
SECTION 1.031 POWERS. The Board of Directors shall have full power to
manage the business and affairs of the Corporation, and all powers of the
Corporation, except those specifically reserved or granted to the stockholders
by applicable law, the Certificate of Incorporation, these Bylaws, or that
certain Rights Agreement dated as of June 25, 1996 to which the Corporation is
a party (as it may be amended, the "Rights Agreement"), are hereby granted to
and vested in the Board of Directors. Without limiting the foregoing, the Board
of Directors may, if it so desires, appoint one or more advisory councils to
the Board of Directors, consisting of such numbers and with such duties as the
Board may deem appropriate.
SECTION 1.032 NUMBER, NOMINATIONS, ELECTION, TERM OF OFFICE, REMOVAL,
TERMINATION AND VACANCIES.
1. Number of Directors. The number of directors of the Corporation
shall be fixed from time to time only by action of not less than a
majority of the members of the Board of Directors then in office. The
number of directors comprising the Board of Directors of the Corporation
shall not be less than two (2) or more than twenty-five (25).
2. Classes. Subject to the rights, if any, of any series of Preferred
Stock then outstanding, the directors shall be divided into three classes,
designated Class I, Class II and Class III. The number of directors in
each class shall be the whole number contained in the quotient arrived at
by dividing the authorized number of directors by three, and if a fraction
is also contained in such quotient then if such fraction is one-third
(1/3) the extra director shall be a member of Class III and if the
fraction is two-thirds (2/3) then one of the extra directors shall be a
member of Class III and the other shall be a member of Class II. Upon
filing of the Corporation's Second Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, Donald
R. Dixon, John Biggs and W.C. Hammett, Jr. shall be members of Class I,
Malcolm Highet, Bruce W. Wolff and Mark C. Wells shall be members of Class
II, and Rockwell A. Schnabel, John F. Davis, III and Paul Travers shall be
members of Class III. The term of office of directors in each class shall
expire as follows: Class I shall expire at the 1998 annual meeting of
stockholders, Class II shall expire at the 1999 annual meeting of
stockholders, Class III shall expire at the 2000 annual meeting of
stockholders. At each such meeting of stockholders, directors shall be
elected to succeed those directors whose terms expire for a term of office
to expire at the third succeeding annual meeting of stockholders after
their election. All directors shall hold office until the annual meeting
of stockholders for the year in which their term expires and until their
successors are duly elected and qualified, or until their earlier death,
resignation, disqualification or removal.
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3. Vacancies. Subject to the rights, if any, of the holders of any
series of Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death, resignation,
disqualification or removal may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have
been elected expires and until such director's successor shall have been
duly elected and qualified.
4. Removal. Any director or the entire Board of Directors may be
removed only for cause and only by the vote of the holders of two-thirds
(2/3) of the securities of the Corporation then entitled to vote at an
election of directors voting together as a single class.
SECTION 1.033 QUALIFICATIONS. All directors of the Corporation shall be
natural persons, but need not be residents of Delaware or stockholders of the
Corporation.
SECTION 1.034 RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board, the President,
or the Secretary of the Corporation. Such resignation shall take effect at the
date of the 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. Upon the effectiveness of such
resignation, the vacancy created thereby shall be filled in the manner provided
in Section 3.2 hereof.
SECTION 1.035 ORGANIZATION. At every meeting of the Board of Directors,
the Chairman of the Board, or in the case of a vacancy in the office or absence
of the Chairman of the Board, one of the following officers present in the
order stated: the President, the Vice Presidents in their order of rank, or a
chairman chosen by the affirmative vote of the directors holding two-thirds
(2/3) of the votes of the Board of Directors present, shall act as chairman of
the meeting, and the Secretary, or, in the absence of the Secretary, an
Assistant Secretary, if any, or any other person appointed by the chairman of
the meeting, shall act as secretary of the meeting.
SECTION 1.036 PLACE OF MEETING. All meetings of the Board of Directors of
the Corporation shall be held at the principal offices of the Corporation, or
at such other place within or without the State of Delaware as shall be
designated in a notice of such meeting or otherwise.
SECTION 1.037 ANNUAL AND REGULAR MEETINGS. The Board of Directors shall
meet for the purpose of organization, the election of officers and the
transaction of other business, as soon as practicable after each annual meeting
of stockholders, on the same day and at the same place where such annual
meeting shall be held. Notice of such meeting need not be given. If such annual
meeting is not so held, then the annual meeting
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of the Board of Directors may be held at such other time or place (within
or without the State of Delaware) as shall be specified in a notice thereof
given as required herein. Regular meetings of the Board of Directors may be
held without notice at such time and place as shall be designated from time to
time by the Board of Directors. At such regular meetings, the directors shall
transact such business as may properly be brought before the meeting. Notice of
regular meetings of the Board of Directors need not be given except as
otherwise required by applicable law or these Bylaws.
SECTION 1.038 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be held whenever called by the Chairman of the Board, the President or by
the affirmative vote of twenty percent (20%) or more of the directors then in
office. Except as otherwise provided by applicable law, the Certificate of
Incorporation, or these Bylaws, notice of each such meeting shall be given to
each director by telephone or in writing at least three (3) calendar days (in
the case of notice by telephone, telegram, cable, or facsimile transmission) or
seven (7) calendar days (in the case of notice by mail) before the time at
which the meeting is to be held. Each such notice shall state the time and
place of the meeting to be so held, and shall be deemed to be given at the time
when so made by telephone, sent by telegram, cable, or facsimile transmission,
or deposited in the U.S. mail. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at any special meeting.
SECTION 1.039 QUORUM, MANNER OF ACTING, AND ADJOURNMENT. (a) Each director
shall have one (1) vote on any matter voted upon by the Board of Directors. The
voting and other rights of the Corporation's directors and stockholders are
further defined and limited by the Certificate of Incorporation and the Rights
Agreement.
(b) Except as otherwise provided by applicable law, the Certificate
of Incorporation, the Rights Agreement or these Bylaws, as amended from time to
time, a majority of the total number of directors then in office shall
constitute a quorum for the transaction of business at all meetings of the
Board of Directors, and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting to another date and time by giving
notice to each director not less than five (5) calendar days before the time at
which said adjourned meeting is to be held, in the manner set forth in Section
3.8 hereof. At any adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted at the meeting as originally
called.
SECTION 1.0310 CONSENT IN LIEU OF MEETING. Except as otherwise provided by
applicable law, the Certificate of Incorporation, or these Bylaws, and
notwithstanding Section 3.8 hereof, any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or the committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board or the committee, as the
case may be.
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SECTION 1.0311 CONFERENCE TELEPHONE MEETINGS. Except as otherwise
provided by applicable law, the Certificate of Incorporation, or these Bylaws,
one or more directors may participate in a meeting of the Board of Directors,
or of any committee thereof, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 1.0312 EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may,
by resolution adopted by the affirmative vote of a majority of the whole Board
of Directors, designate and name an Executive Committee and one or more other
committees, each committee to consist of one (1) or more directors, provided
that any Executive Committee shall have at least three (3) directors. The Board
may designate one (1) or more directors as alternate members of any committee
to replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member (and the alternate or
alternates, if any, designated for such member) of any committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another director to act at the meeting in the place of any such absent
or disqualified member.
Any such committee (to the extent provided in the resolution establishing
such committee) shall conduct itself, including with respect to provisions for
votes of its members, as set forth in resolutions adopted by the Board of
Directors, and shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, expressly including the power and authority to declare a dividend,
to adopt a certificate of ownership and merger pursuant to Section 253 of the
Delaware General Corporation Law (the "GCL"), and to authorize the seal of the
Corporation to be affixed to all papers which may require it.
Each committee designated pursuant to this section shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
SECTION 1.0313 COMPENSATION OF DIRECTORS. The Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor; provided that, the Board, in its discretion,
may reduce the compensation of any director who is concurrently receiving
compensation for services rendered to the Corporation as an officer thereof.
Members of special or standing committees may be paid like compensation for
attending committee meetings.
SECTION 1.0314 INTERESTED DIRECTORS. No contract or transaction between
the Corporation and one (1) or more of its directors or officers, or between
the Corporation and
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any other corporation, partnership, association, or other organization in which
one or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or of a committee thereof which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if:
(a) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to
the Board of Directors or the committee, and the Board or
committee in good faith authorizes the contract or transaction
by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors comprise less
than a quorum;
(b) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
the stockholders; or
(c) the contract or transaction is fair to the Corporation as of the
time it is authorized, approved or ratified by the Board of
Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV.
NOTICE-WAIVERS
SECTION 1.041 NOTICE. WHAT CONSTITUTES. Except as otherwise provided by
applicable law, the Certificate of Incorporation or the Bylaws, any provision
of applicable law, the Certificate of Incorporation or these Bylaws which
requires notice to be given to any director or stockholder of the Corporation
shall not be deemed or constituted to require personal notice (unless otherwise
expressly provided therein), but rather such notice may be given via telephone,
facsimile or first class mail addressed to such director or stockholder at his
or her address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same is deposited in the U.S. mail.
SECTION 1.042 WAIVERS OF NOTICE. Whenever any notice is required to be
given under applicable law, the Certificate of Incorporation or these Bylaws, a
written waiver thereof, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise
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provided by applicable law, the Certificate of Incorporation or these Bylaws,
neither the business to be transacted at nor the purposes of, any regular or
special meeting of the stockholders, directors, or a committee of directors
need be specified in any written waiver of notice of such meeting.
Attendance of a person, either in person or by proxy, at any meeting shall
constitute a waiver of notice of such meeting, except when a person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting has not been lawfully
called or convened.
ARTICLE V.
OFFICERS
SECTION 1.051 NUMBER, QUALIFICATIONS AND DESIGNATION. The officers of the
Corporation shall be chosen by the Board of Directors and shall be a President
and a Secretary, and may include one or more Vice Presidents, a Treasurer, and
such other officers as may be elected in accordance with the provisions of
Section 5.3 of this Article V. One person may hold more than one (1) office.
Except as provided below with respect to the Chairman of the Board, and Vice
Chairmen of the Board, officers may, but need not be, directors or stockholders
of the Corporation. The Board of Directors shall also elect, from among the
members of the Board, a Chairman of the Board, and one or more Vice Chairmen of
the Board, each of which shall be deemed to be an officer of the Corporation.
SECTION 1.052 ELECTION, TERM OF OFFICE, RESIGNATION, AND REMOVAL. The
officers of the Corporation, except those elected by delegated authority
pursuant to Section 5.3 of this Article V, shall be elected annually by the
Board of Directors, and each such officer shall hold his or her office until
his or her successor shall have been duly elected and qualified, or until his
or her earlier death, resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. Subject to the terms of any
applicable employment or service agreement, all officers, agents, and employees
shall be subject to removal, with or without cause, at any time by the Board of
Directors [, the Chairman of the Board or the President]. The election or
appointment of an officer shall not of itself create contract rights. Any
vacancy caused by the death, resignation, or removal of any officer, or
otherwise, may be filled by the Board of Directors or pursuant to delegated
authority as provided in Section 5.3 hereof.
SECTION 1.053 OTHER OFFICERS, COMMITTEES, AND AGENTS. The Board of
Directors may from time to time elect such other officers, including Assistant
Secretaries and Assistant Treasurers, and appoint such committees, employees,
or other agents as it deems necessary. Such officers, committee members,
employees, or other agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as are provided in these Bylaws or
as the Board of Directors may from time to time determine by resolution. By
resolution, the Board of Directors may delegate to any officer or committee the
power to elect subordinate officers and to retain or appoint employees
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or other agents, or committees thereof, and to prescribe the authority and
duties of such subordinate officers, committees, employees, or other agents.
Subject to the terms of any applicable employment or service agreement, all
such subordinate officers, agents, and employees shall also be subject to
removal, with or without cause, at any time by the officers or committee
appointing them.
SECTION 1.054 THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at meetings of the Board of Directors and at meetings of the
stockholders. The Chairman of the Board shall counsel with and advise the
President and perform such other duties as may be from time to time assigned to
the Chairman of the Board of Directors. Except as otherwise provided by
resolution of the Board, the Chairman of the Board shall be ex-officio a member
of all committees of the Board.
SECTION 1.055 THE VICE CHAIRMEN OF THE BOARD. The Vice Chairmen of the
Board shall perform the duties of the Chairman of the Board in the Chairman's
absence (in their order of rank) and such other duties as may from time to time
be assigned to them by the Board of Directors, the Chairman of the Board, or
the President.
SECTION 1.056 THE PRESIDENT. The President shall perform all of the duties
usually incident to such office, and such other duties as may from time to time
be assigned to the President by the Board of Directors. In the absence of the
Chairman of the Board and any Vice Chairmen of the Board, the President shall
preside at all meetings of the stockholders and of the Board of Directors.
SECTION 1.057 THE SECRETARY. The Secretary, or in the Secretary's absence
an Assistant Secretary, (a) shall attend all meetings of the stockholders and
of the Board of Directors and shall record the proceedings of the meetings of
the stockholders and the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose; (b) shall see that notices are given
and records and reports properly kept and filed by the Corporation as required
by law; (c) shall be the custodian of the seal of the Corporation and see that
it is affixed to all documents to be executed on behalf of the Corporation
under its seal; and (d) in general, shall perform all duties incident to the
office of Secretary, and such other duties as may from time to time be assigned
to the Secretary by the Board of Directors, the Chairman of the Board, or the
President.
SECTION 1.058 THE TREASURER. The Treasurer, or in Treasurer's absence, an
Assistant Treasurer, (a) shall have or provide for the custody of, and when
proper pay out, disburse, or otherwise dispose of, the funds or other property
of the Corporation; (b) shall collect and receive or provide for the collection
and receipt of moneys earned by or in any manner due to or received by the
Corporation; (c) shall deposit all funds in his custody as Treasurer in such
banks or other places of deposit as the Board of Directors may from time to
time designate; (d) shall keep accurate financial records and accounts and,
whenever so required by the Board of Directors, render statements showing his
transactions as Treasurer and the financial condition of the Corporation; and
(e) in general, shall discharge
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such other duties as may from time to time by assigned to the Treasurer by the
Board of Directors, the Chairman of the Board, or the President.
SECTION 1.059 SALARIES. The salaries and other compensation of the
officers and agents of the Corporation elected or appointed by the Board of
Directors shall be fixed from time to time by the Board of Directors. The
salaries and other compensation of subordinate officers appointed pursuant to
delegated authority under Section 5.03 hereof shall be fixed from time to time
by the officers or committee appointing them.
ARTICLE VI.
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 1.061 ISSUANCE. Each stockholder shall be entitled to a
certificate or certificates for shares of stock of the Corporation owned by
such stockholder upon request therefor. The stock certificates of the
Corporation shall be consecutively numbered and shall be registered in the
stock ledger and transfer books of the Corporation as they are issued. They
shall be signed by the Chairman of the Board or by the President or a Vice
President, and by the Secretary or an Assistant Secretary, if any, or by the
Treasurer or an Assistant Treasurer, if any, and shall bear the corporate seal,
which may be a facsimile, engraved, or printed. Any and all of the signatures
upon such certificate may be a facsimile, engraved, or printed. In case any
officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed upon, any share certificate shall have ceased to be
such officer, transfer agent, or registrar before the certificate is issued, it
may be issued with the same effect as if such person were such officer,
transfer agent, or registrar at the date of its issue.
SECTION 1.062 TRANSFER, LEGENDS, ETC. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation, or authority to
transfer the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
The Board of Directors may by resolution, (a) impose restrictions on transfer
or registration of transfer of shares of stock of the Corporation, and (b)
require as a condition to the issuance or transfer of such shares that the
person or persons to whom such shares are to be issued or transferred agree in
writing to such restrictions. In the event that any such restrictions on
transfer or registration of transfer are so imposed, the Corporation shall
require that such restrictions be conspicuously noted on all certificates
representing such shares. [In addition, all shares of the Corporation's stock
are subject to several restrictions and limitations as set forth in the Rights
Agreement, which are to be noted on all certificates representing such shares.]
SECTION 1.063 LOST, STOLEN, DEFACED, WORN OUT, OR DESTROYED. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen, defaced, worn-out, or destroyed, upon the making of
an affidavit of that fact by the
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person claiming the certificate of stock to be lost, stolen, defaced, worn out,
or destroyed. When authorizing such issuance of a new certificate or
certificates, the Corporation may, as a condition precedent thereto, (a)
require the owner of any defaced or worn out certificate to deliver such
certificate to the Corporation and order the cancellation of the same, and (b)
require the owner of any lost, stolen or destroyed certificate or certificates,
or his legal representative, to advertise the same in such manner as the
Corporation shall require and 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. Thereupon, the Corporation may cause to be issued to such person
a new certificate in replacement for the certificate alleged to have been lost,
stolen, defaced, worn out, or destroyed. Upon the stub of every new certificate
so issued shall be noted the fact of such issue and the number, date, and name
of the registered owner of the lost, stolen, defaced, worn out, or destroyed
certificate in lieu of which the new certificate is issued. Every certificate
issued hereunder shall be issued without payment to the Corporation for such
certificate; provided that, there shall be paid to the Corporation a sum equal
to any exceptional expenses incurred by the Corporation in providing for or
obtaining any such indemnity and security as is referred to herein.
SECTION 1.064 RECORD HOLDER OF SHARES. Except as otherwise provided by
applicable law, the Certificate of Incorporation, or these Bylaws, the
Corporation (a) 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, (b) shall be entitled to hold liable for any required calls and
assessments a person so registered, and (c) shall not be bound to recognize (i)
any entity or person as a transferee of stock unless such entity or person both
complies with all transfer and other restrictions, if any, imposed hereby or by
the Certificate of Incorporation, or (ii) any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof.
Unless otherwise required under applicable law, the Corporation may treat
a fiduciary as having capability and authority to exercise all rights of
ownership in respect of shares of record in the name of a decedent holder, a
person, firm, or corporation in conservation, receivership, or bankruptcy, a
minor, an incompetent person, or a person under disability, as the case may be,
for whom such fiduciary is acting, and the Corporation, its transfer agent, and
its registrar, if any, upon presentation of evidence of appointment of such
fiduciary shall be under no duty to inquire as to the powers of such fiduciary
and shall not be liable for any loss caused by any act done or omitted to be
done by the Corporation or its transfer agent or registrar, if any, in reliance
thereon.
SECTION 1.065 DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the
Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payments of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, the
13
<PAGE> 14
Board of Directors may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than (10) calendar days before the date of such
meeting, nor more than sixty (60) calendar days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting provided
that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 1.066 APPOINTMENT OF TRANSFER AGENTS, REGISTRARS, ETC. The Board
of Directors may from time to time by resolution appoint (a) one (1) or more
transfer agents and registrars for the shares of stock of the Corporation, (b)
a plan agent to administer any employee benefit, dividend reinvestment, or
similar plan of the Corporation, and (c) a dividend disbursing agent to
disburse any and all dividends authorized by the Board and payable with respect
to the shares of stock of the Corporation. The Board of Directors shall also
have authority to make such other rules and regulations not inconsistent with
applicable law, the Certificate of Incorporation, or these Bylaws, as it deems
necessary or advisable with respect to the issuance, transfer, and registration
of certificates for shares and the shares of stock represented thereby.
ARTICLE VII.
GENERAL PROVISIONS
SECTION 1.071 DIVIDENDS. Subject to applicable law, the Certificate of
Incorporation and the Rights Agreement, dividends upon the shares of capital
stock of the Corporation may be declared by the Board of Directors at any
regular or special meeting. Dividends may be paid in cash, in property, or in
shares of the capital stock of the Corporation, or in any combination thereof,
but only out of funds available for the payment of dividends as provided by
applicable law. Any dividends declared upon the stock of the Corporation shall
be payable on such date or dates as the Board of Directors shall determine by
resolution. If the date fixed for the payment of any dividend shall in any year
fall upon a legal holiday, then the dividend payable on such date shall be paid
on the next day not a legal holiday.
14
<PAGE> 15
Before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its discretion, shall determine by resolution
is proper as a reserve or reserves to meet contingencies, for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall so determine is in the
best interests of the Corporation and its stockholders. The Board may modify or
abolish any such reserves in the manner in which it was created.
SECTION 1.072 CONTRACTS, ETC. Except as otherwise provided by applicable
law, the Certificate of Incorporation, or these Bylaws, the Board of Directors
may authorize any officer or officers, any employee or employees, or any agent
or agents, to enter into any contract or to execute, acknowledge, or deliver
any agreement, deed, mortgage, bond, or other instrument in the name of and on
behalf of the Corporation and to affix the Corporation's seal thereon. Such
authority may be general or confined to specific instances.
SECTION 1.073 CHECKS. All checks, notes, obligations, bills of exchange,
acceptances, or other orders in writing shall be signed by such person or
persons as the Board of Directors may from time to time designate by
resolution.
SECTION 1.074 CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the
words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
SECTION 1.075 DEPOSITS. All funds of the Corporation shall be deposited
from time to time to credit of the Corporation in such banks, trust companies,
or other depositories as the Board of Directors may approve or designate, and
all such funds shall be withdrawn only upon checks or other orders signed by
such one or more officers, employees, or agents as the Board of Directors shall
from time to time designate.
15
<PAGE> 16
SECTION 1.076 EXAMINATION OF CORPORATE RECORDS. Upon written demand under
oath stating the purpose thereof, every stockholder of record shall have a
right to examine, in person or by attorney or other agent, during ordinary
business hours and for any proper purpose, the Corporation's stock ledger, a
list of its stockholders, and its other books and records and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably related to
such person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right of inspection, the demand
under oath shall be accompanied by a power of attorney or other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation as its registered
office in Delaware or at its principal place of business.
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders, and its other books and records during
ordinary business hours for a purpose reasonably related to his or her position
as a director.
SECTION 1.077 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation
shall indemnify to the fullest extent authorized or permitted by law any
current or former director or officer of the Corporation (or his or her
testator or estate) made or threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether criminal, civil
administrative, or investigative, by reason of the fact that he or she is or
was a director or officer of the Corporation or is or was serving, at the
request of the Corporation, as a director, officer, employee, or agent of
another corporation, partnership,
16
<PAGE> 17
joint venture, trust, employee benefit plan, or other enterprise. Subject to
applicable law, the Corporation may indemnify an employee or agent of the
Corporation to the extent that and with respect to such proceedings as, the
Board of Directors may determine by resolution, in its discretion.
SECTION 1.078 AMENDMENT OF BYLAWS. The Board of Directors is expressly
authorized to adopt, amend or repeal the Bylaws of the corporation. Any Bylaws
made by the directors under the powers conferred hereby may be amended or
repealed by the directors or by the stockholders. Notwithstanding the foregoing
and anything contained in the Bylaws to the contrary, the Bylaws shall not be
amended or repealed by the stockholders, and no provision inconsistent
therewith shall be adopted by the stockholders, without the affirmative vote of
the holders of at least two-thirds (2/3) 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.
17
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK $.01 PAR VALUE
NUMBER PEGASUS SHARES
SYSTEMS INC.
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR
NEW YORK, NY AND DENVER, CO CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
CUSIP 705906 10 5
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$.01 PAR VALUE PER SHARE, OF
Pegasus Systems, Inc., a corporation organized under the laws of the State of
Delaware, transferable on the books of the Corporation by the holder hereof, in
person or by a duly authorized attorney, upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned by a
Transfer Agent and registered by a registrar of the Corporation.
Witness the facsimile seal of the Corporation and the facsimile
signatures of the Corporation's duly authorized officers.
Dated:
/s/ RIC L. FLOYD /s/ JOHN F. DAVIS III
SECRETARY CHIEF EXECUTIVE OFFICER AND PRESIDENT
[PEGASUS SYSTEMS, INC. CORPORATE SEAL]
COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER & TRUST, INC.
P.O. Box 1596, Denver, Colorado 80201
BY
TRANSFER AGENT AND REGISTRAR AUTHORIZED SIGNATURE
<PAGE> 2
PEGASUS SYSTEMS, INC.
The Corporation will furnish without charge to each stockholder who so requests
a statement of (i) the designations, preferences, limitations and relative
rights, if any, of the shares of each class of stock of the Corporation and
(ii) the variations in the relative rights and preferences of the respective
series of each class of stock issuable in series in so far as they have been
fixed and determined, and the authority of the Board of Directors to fix and
determine the relative rights and preferences of subsequent series. Requests
may be directed to the Corporation or transfer agent named on the face of this
certificate.
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
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- Custodian
----------------------- -----------------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
------------------------------------------------------
(State)
UNIF TRF MIN ACT -- Custodian (until age )
------------- -------------
(Cust)
under Uniform Transfers
--------------
(Minor)
to Minors Act
-------------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, hereby sell, assign and transfer unto
-----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
POSTAL ZIP CODE, OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares
- ------------------------------------------------------------------------
of the capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
attorney-in-fact
- ---------------------------------------------------------
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
----------------------------
NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
X
-----------------------------------
(SIGNATURE)
X
-----------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.3
RIGHTS AGREEMENT
This Rights Agreement (the "AGREEMENT"), is entered into as of the 25th
day of June, 1996, by and among Pegasus Systems, Inc., a Delaware corporation
(the "COMPANY") and the purchasers of the Company's Series A Preferred Stock
listed on Schedule I attached hereto (the "PURCHASERS") and, for purposes of
certain provisions hereof, the stockholders listed on Schedule II hereto,
including without imitation Lodging Network, Inc., a Delaware corporation
("LNI") (each an "EXISTING STOCKHOLDER" and collectively the "Existing
Stockholders") and the stockholders listed on Schedule III hereto (each a
"Management Holder" and collectively the "MANAGEMENT HOLDERS").
RECITALS
A. The Purchasers and the Company are parties to that certain
Series A Preferred Stock Purchase Agreement dated as of the date hereof (the
"PURCHASE AGREEMENT"),
B. The Existing Stockholders (other than LNI) and the Management
Holders currently hold capital stock of the Company, and the parties desire to
provide certain rights to such holders as provided herein.
C. The Company and LNI have agreed that the Company shall
repurchase from LNI a portion of the shares of capital stock held by LNI in The
Hotel Clearing Corporation, a subsidiary of the Company ("HCC'') and shall issue
shares of Common Stock of the Company to LNI upon conversion by LNI of the
balance of the HCC shares held by LNI, and to grant certain rights to LNI as
set forth herein.
D. The execution of this Agreement is a condition to the closing
of the transactions contemplated by the Purchase Agreement.
E. The Purchasers, the Existing Stockholders, the Management
Holders and the Company desire that the transactions contemplated by the
Purchase Agreement be consummated.
NOW, THEREFORE, in reliance on the foregoing recitals, and in and for
the mutual covenants and consideration set forth herein, the parties hereto
agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
1.1 The terms "AFFILIATE" and "AFFILIATED" shall refer to
any person who is an "affiliate" as defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended. For
purposes of this definition, "person" shall mean any individual, firm,
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental authority or other entity of
any kind, and shall include any successor (by merger or otherwise of such
entity.
<PAGE> 2
1.2 "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
1.3 "COMMON STOCK" shall mean the Company's Common Stock,
$0.01 par value per share.
1.4 "CONVERSION STOCK" shall mean the Common Stock issued
or issuable pursuant to conversion of the Series A Preferred.
1.5 "EXISTING STOCKHOLDERS" shall mean the Existing
Stockholders as listed on Schedule II hereof and any person holding Other
Shareholder Stock to whom the rights under this Agreement have been transferred
in accordance with Section 14 hereof.
1.6 "HOLDER" shall mean any Purchaser, Existing
Stockholder or Management Holder holding Registrable Securities and any person
holding Registrable Securities to whom the rights under this Agreement have
been transferred in accordance with Section 14 hereof.
1.7 "INITIATING HOLDERS" shall mean any Holder or Holders
(other than Management Holders and Existing Stockholders) holding, in the
aggregate, at least forty percent (40%) of the then outstanding Registrable
Securities (not including Management Stock or Other Shareholder Stock).
1.8 The term "MAJOR HOLDER" shall mean each Holder (but
not any Management Holder or Existing Stockholder) who is a holder of at least
50,000 shares of Registrable Securities (as adjusted for any stock split, stock
dividend or similar capital reorganization), and permitted assignees under
Section 17(e) hereof.
1.9 "MANAGEMENT HOLDERS" shall mean the Management
Holders as listed on Schedule III hereof and any person holding Management
Stock to whom the rights under this Agreement have been transferred in
accordance with Section 14 hereof.
1.10 "REGISTRABLE SECURITIES" shall mean (a) the
Conversion Stock and any Common Stock of the Company issued or issuable in
respect of the Conversion Stock, or other securities issued or issuable
pursuant to the conversion of the Series A Preferred upon any stock split,
dividend, combination, recapitalization or similar event, or any Common Stock
otherwise issued or issuable with respect to the Series A Preferred; (b) all
shares of Common Stock of the Company currently held by the Existing
Stockholders as well as the 67,300 shares of Common Stock to be issued to LNI
in connection with the repurchase of HCC stock, as set forth on Schedule II
hereto (the "Other Shareholder Stock"), and any Common Stock of the Company
issued or issuable in respect of such Other Shareholder Stock upon any stock
split, dividend, combination, recapitalization or similar event (which
additional shares shall also be referred to as Other Shareholder Stock); and
(c) with respect to any registration subsequent to the Company's initial
Qualified Public Offering (as defined below), up to 25% of the shares of the
Common Stock currently held by the Management Holders, as specified on Schedule
III hereto, and held as of the time of such registration by Management Holders
who shall continue to be employees or consultants to the Company (the
"Management Stock"), and any Common Stock of the Company issued
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<PAGE> 3
or issuable in respect of such Management Stock upon any stock split, dividend,
combination, recapitalization or similar event (which additional shares shall
also be referred to as Management Stock); provided, however, that shares of
Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (i) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction, or (ii) subject to Section 16 below, sold or are available for
sale in the opinion of counsel to the Company in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale.
1.11 The terms "REGISTER," "REGISTEREd" and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement by the Commission.
1.12 "REGISTRATION EXPENSES" shall mean all expenses,
except as otherwise stated below, incurred by the Company in complying with
Sections 5, 6 and 7 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, fees and disbursements for one
counsel for the Holders selected by the Holders and approved by the Company
(which consent will not be unreasonably withheld), blue sky fees and expenses,
and the expense of any special audits incident to or required by any such
registration, but excluding (a) the compensation of regular employees of the
Company, which shall be paid in any event by the Company, and (b) Selling
Expenses.
1.13 "RESTRICTED SECURITIES" shall mean the securities of
the Company required to bear the legend set forth in Section 3 hereof.
1.14 "SECURITIES ACT" shall mean the Securities Act of
1933, as amended, or any similar federal statute and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
1.15 "SELLING EXPENSES" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders and, except as set forth above, all
reasonable fees and disbursements of counsel for any Holder other than the fees
and disbursements of counsel included in Registration Expenses.
1.16 "SERIES A PREFERRED" shall mean the Company's Series
A Preferred Stock, $0.01 par value per share, issued pursuant to the Purchase
Agreement.
1.17 "UNDERWRITER" shall mean the managing underwriter or
underwriters in a public offering pursuant to Section 5, Section 6 or Section 7
hereof.
2. RESTRICTIONS ON TRANSFERABILITY. The Series A Preferred and
the Conversion Stock shall not be sold, assigned, transferred or pledged except
upon the conditions specified in this Agreement, which conditions are intended
to ensure compliance with the provisions of the Securities Act and
-3-
<PAGE> 4
applicable state and foreign securities laws. Each Purchaser shall cause any
proposed purchaser, assignee, transferee, or pledgee of Series A Preferred or
Conversion Stock held by such Purchaser to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.
3. RESTRICTIVE LEGEND. Each certificate representing (a) the
Series A Preferred Stock, (b) the Conversion Stock and (c) any other securities
issued in respect of the Series A Preferred or the Conversion Stock upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event shall (unless otherwise permitted by the provisions of Section 4 below)
be stamped or otherwise imprinted with the following legends (in addition to
any legend required under applicable state or foreign securities laws):
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT. COPIES OF THE AGREEMENTS COVERING THE
PURCHASE OF THESE SHARES, IMPOSING CERTAIN RIGHTS OF
FIRST REFUSAL AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE COMPANY."
Each Purchaser consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Series A
Preferred or the Common Stock in order to implement the restrictions on
transfer established pursuant to this Agreement or applicable law.
4. NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in
all respects with the provisions of this Section 4. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (a) a
transfer not involving a change in beneficial ownership or (b) in transactions
involving the distribution without consideration of Restricted Securities by
any of the Purchasers to any of its partners, or retired partners, or to the
estate of any of its partners or retired partners, so long as each such
transferee agrees in writing to be bound by the terms of this Agreement),
unless there is in effect a registration statement under the Securities Act
covering the proposed transfer, the holder thereof shall give written notice to
the Company of such holder's intention to effect such transfer, sale,
assignment or pledge. Each such notice shall describe the manner and
circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, and shall be accompanied, at such holder's expense by either
(a) an unqualified written opinion of legal counsel addressed to the Company,
to the effect that the proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act, or (b) a "no action"
-4-
<PAGE> 5
letter from the Commission to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such Restricted Securities shall be entitled to transfer such Restricted
Securities in accordance with the terms of the notice delivered by the holder
to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144 (or similar successor provision), the appropriate
restrictive legend set forth in Section 3 above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for such
holder and the Company such legend is not required in order to establish
compliance with any provision of the Securities Act or this Agreement.
5. REQUESTED REGISTRATION.
5.1 Notice of Registration; Registration. In case the
Company shall receive from Initiating Holders a written request that the
Company effect any registration, qualification or compliance (other than a
registration on Form S-3 or any successor form) with respect to at least 20% of
the Registrable Securities then held by the Initiating Holders (or any lesser
percentage resulting in an aggregate offering price to the public of at least
$10,000,000 at a price of at least $13.00 per share (as adjusted for stock
splits, dividends, subdivision, combinations, reclassifications and like
events)), the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use all reasonable
efforts to effect such registration, qualification or compliance (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request given within twenty (20) days after
receipt of such written notice from the Company, provided, however, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 5:
(1) In any particular jurisdiction in
which the Company would be required to qualify to do business or execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act;
(2) Prior to the earlier of (a) three
(3) years following the date of this Agreement, or (b) six months after the
effective date of the registration statement pertaining to the first
underwritten firm commitment public offering of securities of the Company for
its own account (other than a registration relating solely to a Commission Rule
145 transaction or a registration relating solely to employee benefit plans);
-5-
<PAGE> 6
(3) After the Company has effected
two (2) registrations pursuant to this Section 5 and such registrations have
been declared or ordered effective and all or a portion of the securities
offered pursuant to such registrations have been sold; or
(4) If at the time of the request
to register Registrable Securities the Company gives notice within thirty (30)
days of such request that it is engaged or has bona fide plans to engage within
thirty (30) days of the time of the request in a firmly underwritten registered
public offering in which the Holders may include Registrable Securities
pursuant to Section 5, 6 or 7 hereof.
Subject to the foregoing clauses (l) through (4) and to Section 5.3,
the Company shall file a registration statement covering the Registrable
Securities so requested to be registered as soon as practicable after receipt
of the request of the Initiating Holders.
5.2 Underwriting
(a) If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 5 and the Company shall include such information in the
written notice referred to in Section 5.1. The right of any Holder to
registration pursuant to Section 5 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) as provided herein.
(b) The Company shall (together with all Holders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the Underwriter selected for
such underwriting by a majority in interest of the Initiating Holders. If any
Holder disapproves of the terms of the underwriting, such person may elect to
withdraw therefrom by written notice to the Company, the Underwriter and the
Initiating Holders. The Registrable Securities and/or other securities so
withdrawn from such underwriting shall also be withdrawn from such
registration; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed
by the underwriters), then the Company shall offer to all Holders who have
included Registrable Securities in the registration the right to include
additional Registrable Securities in proportion (as nearly as practicable) to
the total amount of Registrable Securities held by each such Holder.
(c) Notwithstanding any other provision of this
Section 5, if the Underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the Underwriter may
limit the number of Registrable Securities to be included in the registration
and underwriting; provided, however, that the number of shares of Registrable
Securities offered by the Holders that may be included in the registration and
underwriting shall be allocated among the Holders in proportion, as nearly as
practicable, to the respective aggregate amounts of Registrable Securities held
by such Holders at the time of filing the registration statement. If the
Underwriter has not so limited the
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<PAGE> 7
number of Registrable Securities to be underwritten, the Company may include
securities for its own account or the account of others in such registration if
the Underwriter so agrees and if the number of Registrable Securities which
would otherwise have been included in such registration and underwriting will
not thereby be limited or the price applicable to such included Registrable
Securities will not thereby be reduced.
5.3 Delay of Registration. If the Company shall furnish
to the Initiating Holders a certificate signed by the President of the Company
stating that, in the good faith judgment of the Board of Directors of the
Company, it would be not in the best interests of the Company and its
stockholders for such registration statement (including any supplement or
amendment thereto) to be filed on or before the date filing would be required
and it is therefore appropriate to defer such filing, then the Company may
direct that such request for registration be delayed for a period not in excess
of sixty (60) days, such right to delay a request to be exercised by the
Company no more than twice in any twelve month period.
6. COMPANY REGISTRATION.
6.1 Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its equity securities,
either for its own account or the account of a security holder or holders,
other than (a) a registration relating solely to employee benefit plans, or (b)
a registration relating solely to a Rule 145 transaction, the Company shall:
(i) promptly give to each Holder written notice thereof, and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of such
written notice from the Company, by any Holder.
6.2 Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 6.l(i). In such event the right of any
Holder to registration pursuant to this Section 6 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company) enter into an underwriting agreement in
customary form with the Underwriter, selected for such Underwriting by the
Company. Notwithstanding any other provision of this Section 6, if the
Underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the underwriter may limit, on a pro rata
basis, the Registrable Securities to be included in such registration;
provided, however, that in no public offering shall other holders of
"piggyback" registration rights participate in such offering unless the Holders
have participated to the full extent requested. The Company shall so advise
all Holders distributing their securities through such underwriting and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
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<PAGE> 8
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder
to the nearest one hundred (100) shares. If any Holder disapproves of the terms
of any such underwriting, he may elect to withdraw therefrom by written notice
to the Company and the managing underwriter.
6.3 Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 6 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
7. REGISTRATION ON FORM S-3.
(a) If Initiating Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form 5-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall (i) promptly give written notice of the
proposed registration to all other Holders, and (ii) as soon as practicable,
use all reasonable efforts to effect such registration, qualification or
compliance (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in such request as are specified in a written request given within twenty (20)
days after receipt of such written notice from the Company, use all reasonable
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Initiating Holders may reasonably request; provided,
however, that the Company shall not be obligated to effect more than four (4)
registrations under this Section 7. The substantive provisions of Section 6.2,
excluding all provisions relating to the rights of the Underwriter to exclude
certain percentages of Registrable Securities for a subject offering, shall be
applicable to each registration initiated under this Section 7.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 7: (i) more than once
in any twelve (12) month period; (ii) in any particular jurisdiction in which
the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act; (iii) if the Company, within ten (10) days of
the receipt of the request of Initiating Holders pursuant to this Section 7,
gives notice of its bona fide intention to effect the filing of a registration
statement with the Commission within sixty (60) days of receipt of such request
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities) in which such
Holders can exercise their rights pursuant to Section 6 hereof; or (iv) during
the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of, and ending on the date three (3) months
immediately following, the effective date of any registration statement
pertaining to securities of the Company (other
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<PAGE> 9
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective.
(c) Registrations effected pursuant to this Section 7
shall not be counted as demands for registration or registrations effected
pursuant to Section 5 or Section 6, respectively.
8. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the consent of (i)
Holders of in excess of 50% of the Registrable Securities then outstanding, and
(ii) Holders of in excess of 50% of the Registrable Securities held by Holders
other than Existing Holders and Management Holders, enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights, including standoff rights, superior to the registration
rights granted Holders hereunder.
9. EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with all registrations pursuant to Section 5, Section 6 and
Section 7 shall be borne by the Company. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders of such securities pro rata on the basis of the number of
shares so registered. In connection with any registration pursuant to Sections
5 and 6, if the participating Holders elect to be represented by counsel for
the Company, the Company shall pay reasonable fees and disbursements of one
counsel incurred in so representing such participating Holders.
10. REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company shall keep each Holder or its counsel advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof At its expense the Company shall:
(a) Prepare and file with the Commission a registration
statement, and all requisite supplements and amendments thereto, with respect
to such securities and use its best efforts to cause such registration
statement, as amended, to become and remain effective for at least one hundred
twenty (120) days;
(b) Furnish to the Holders or their counsel participating
in such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, and all
supplements and amendments thereto, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order
to facilitate the public offering of such securities and such other information
necessary to allow the Holders participating in such registration to remain
reasonably informed about the public offering;
(c) With respect to registrations effected pursuant to
Section 6 and Section 7 above, use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided, however, that the Company shall not be required in
connection therewith or as a condition
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<PAGE> 10
thereto to qualify to do business or to file a general consent to service for
process in any such states or jurisdictions;
(d) With respect to registrations effected pursuant to
Section 7 above, in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the Underwriter of such offering;
(e) Notify each Holder of Registrable Securities or its
counsel covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing; and
(f) At the request of any Holder requesting registration
of Registrable Securities pursuant to Section 5, Section 6 or Section 7 above,
furnish to the Holders participating in such registration and to the
underwriters, if any, of such offering, on the date that such Registrable
Securities are delivered to the underwriters for sale in connection with a
registration statement pursuant to SectionS, Section 6 or Section 7 above, if
such securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated such date, of counsel representing the Company for the purposes of
registration addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (ii) a letter, dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
11. INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, or the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), against all
expenses, claims, losses, damages or liabilities (joint or several) (or actions
in respect thereof), to which they become subject under the Securities Act or
the Exchange Act, including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading, or any violation by the Company of the Securities
Act or the Exchange Act or any rule or regulation promulgated thereunder
applicable to the Company in connection with any such registration,
qualification or
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<PAGE> 11
compliance, and the Company will pay to each such Holder, each of its officers
and directors, and each person controlling such Holder, each such underwriter
and each person who controls any such underwriter, any legal and any other
expenses reasonably incurred as such expenses are incurred in connection with
investigating, preparing or defending any such claim, loss, damage; liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder
controlling person or underwriter and stated to be specifically for use
therein; provided, however, that the indemnity agreement contained in this
Section 11(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act or the Exchange Act, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act or the Exchange Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) to
which any of the foregoing persons may become subject under the Securities Act
or the Exchange Act, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred as such expenses are incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the indemnity agreement
contained in this Section 11(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the liability of each
Holder under this Section 11(b) shall be limited to an amount equal to the
aggregate proceeds received by such Holder from the sale of Registrable
Securities hereunder, unless such liability arises out of or is based on
willful conduct by such Holder.
(c) Each party entitled to indemnification under this
Section 11 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of
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<PAGE> 12
such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Agreement
unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action and provided further, that
the Indemnifying Party shall not assume the defense for matters as to which
there is a conflict of interest or separate and different defenses. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
12. INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company or its
counsel such information regarding such Holder or Holders, the Registrable
Securities held by them and the distribution proposed by such Holder or Holders
as the Company or its counsel may reasonably request in writing and as shall
be required in connection with any registration, qualification or compliance
referred to in this Agreement.
13. RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market legally exists for the Common
Stock of the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);
(c) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such registration under Section 12 to be taken as soon
as practicable after the six-month period following the date on which the first
registration statement filed by the Company for the offering of its equity
securities to the general public is declared effective; and
(d) So long as a Purchaser owns any Restricted Securities
to furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its equity
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably
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<PAGE> 13
obtainable by the Company as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
14. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 5, 6 and 7 may be
assigned or transferred to any third party who acquires at least 50,000 shares
of Registrable Securities (as may be appropriately adjusted upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event), provided that (a) such transfer may otherwise be effected in accordance
with applicable securities laws, and (b) such assignee or transferee agrees to
be bound by the terms of this Agreement and assumes all of the obligations of
the transferring Holder hereunder. Notwithstanding the foregoing, however, the
rights to cause the Company to register securities may be assigned to partners
and constituent members, former partners and former constituent members and
Affiliates of that Holder without regard to the foregoing share threshold or
other requirements, provided that written notice thereof is promptly given to
the Company.
15. STANDOFF AGREEMENT. Each Holder and each of the Existing
Stockholders agree, in connection with the first registration of the Company's
securities which covers Common Stock (or other securities) to be sold on its
behalf to the general public in an underwritten initial public offering, upon
request of the Company or the Underwriter of such initial public offering, not
to sell, make any short sale of; loan, grant any option for the purchase of, or
otherwise dispose of any of the Company's equity securities (other than those
included in the registration) without the prior written consent of the Company
or such Underwriter, as the case may be, for a period of time not to exceed one
hundred eighty (180) days from the effective date of such registration;
provided, however, that all officers, directors and holders of registration
rights (including registration rights granted other than pursuant to this
Agreement) enter into similar agreements and the Company uses all reasonable
efforts to cause all of the holders of one percent (1%) or more of the
outstanding voting securities of the Company to enter into similar agreements.
16. TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to Sections 1 through 15 of this Agreement shall terminate as to any
Holder at such time as Holder holds less than 1% of the Company's outstanding
capital stock and may sell all of such Holder's shares under Rule 144 (or any
successor provisions) promulgated under the Securities Act, or a successor
rule, within a three-month period.
17. RIGHT OF FIRST REFUSAL FOR ISSUANCE OF NEW SECURITIES. The
Company hereby grants to each Major Holder and permitted assignee under Section
17(e) the right of first refusal to purchase a Pro Rata Share (as defined
below) of any New Securities (as defined in subsection 17(a)) which the Company
may, from time to time, propose to sell and issue. A "PRO RATA SHARE," for
purposes of this right of first refusal, shall be a fraction, the numerator of
which is the sum of the number of shares of Common Stock then held by such
Major Holder or issuable to such Major Holder upon conversion of the Series A
Preferred held by such Major Holder, and the denominator of which is the sum of
the total number of shares of Common Stock then outstanding and the number of
shares of Common Stock issuable upon conversion or exercise of all outstanding
capital stock options or warrants convertible into or exercisable for Common
Stock.
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<PAGE> 14
(a) Except as set forth below, "NEW SECURITIES" shall
mean any shares of capital stock of the Company, including Common Stock and
Preferred Stock whether now authorized or not. Notwithstanding the foregoing,
"NEW SECURITIES" does not include (i) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of all or
substantially all of the assets or other transaction whereby the Company or its
stockholders own not less than fifty-one percent (51%) of the voting power of
the surviving or successor corporation, (ii) shares of the Company's Common
Stock or Options exercisable for the purchase of Common Stock issued from and
after the date hereof to employees, officers and directors of, and consultants
to, the Company, pursuant to any incentive program or written agreement
approved by the Board of Directors of the Company (net of any repurchases of
such shares or any other shares of Common Stock originally issued to officers,
directors, employees or consultants to the Corporation, and net of cancellation
or expiration of options), (iii) securities issued in connection with lease or
debt financing transactions, (iv) Common Stock issuable upon conversion of the
Series A Preferred, and (v) securities issued solely pursuant to a stock split
or stock dividend.
(b) In the event that the Company proposes to undertake
an issuance of New Securities, it shall give each Major Holder written notice
of its intention, describing the type of New Securities, and the price and
terms upon which the Company proposes to issue the same. Each such Major Holder
shall have twenty (20) days from the date of receipt of any such notice to
agree to purchase all but not a portion of its respective Pro Rata Share of
such New Securities for the price and upon terms specified in the notice by
giving written notice to the Company.
(c) In the event that such Major Holder fails to exercise
the right of first refusal within said twenty (20) day period, the Company
shall have sixty (60) days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within thirty (30) days from the date of said agreement) to sell the
New Securities not elected to be purchased by such Major Holder at the price
and upon terms no more favorable to the purchasers of such securities than
specified in the Company's notice. In the event that the Company has not sold
the New Securities or entered into an agreement to sell the New Securities
within said sixty (60) day period (or sold and issued New Securities in
accordance with the foregoing within thirty (30) days from the date of said
agreement), the Company shall not thereafter issue or sell any New Securities
without first offering such securities in the manner provided above.
(d) The right of first refusal granted under this
Agreement shall terminate immediately prior to the closing of an initial public
offering of the Common Stock of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared
effective by, the Commission under the Securities Act.
(e) The right of first refusal granted Major Holders
under this Section may be in whole or in part assigned or transferred to any
third party who acquires at least 50,000 shares of Registrable Securities (as
may be appropriately adjusted upon a stock split, stock dividend,
recapitalization, merger, consolidation or similar event), provided that, (a)
such transfer may otherwise be effected in accordance with applicable
securities laws, and (b) such assignee or transferee agrees to be bound by this
Agreement and assumes the obligations of the transferring Major Holder
hereunder.
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<PAGE> 15
Notwithstanding the foregoing, however, the right of first refusal may be
assigned by a Major Holder that is a partnership to any of its partners, that
is a venture capital group or fund to an Affiliated entity or person, or that
is a corporation to any of its shareholders without regard to the foregoing
share threshold or other requirement, provided that (a) written notice thereof
is promptly given to the Company, (b) such transfer may otherwise be effected
in accordance with applicable securities laws, and (c) such assignee or
transferee agrees to be bound by this Agreement and assumes the obligations of
the transferring Major Holder hereunder.
18. AFFIRMATIVE COVENANTS. The Company and each Purchaser hereby covenants
and agrees as follows:
18.1 Financial Information.
(a) The Company shall mail the following reports
to each Major Holder:
(i) As soon as practicable after the end
of each fiscal year, and in any event within 90 days thereafter, a copy of the
annual audit report (prepared in accordance with generally accepted accounting
principles) for such year for the Company and any consolidated subsidiary,
including therein Consolidated balance sheets of the Company and any such
subsidiary as of the end of such fiscal year, Consolidated statements of income
and stockholders equity and statements of cash flow of the Company and any such
subsidiary for such fiscal year, setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year, all duly certified by
an independent public accounting firm selected by the Company's Board of
Directors;
(ii) As soon as practicable after the end
of the first, second, third and fourth quarterly accounting periods in each
fiscal year of the Company, and in any event within 45 days thereafter, a
Consolidated budget model balance sheet of the Company as of the end of each
such quarterly period, and Consolidated budget model statements of income and
stockholders equity and Consolidated budget model statements of cash flows of
the Company and any subsidiary for such period and for the current fiscal year
to date, prepared in accordance with generally accepted accounting principles
(other than for accompanying notes), subject to changes resulting from year-end
audit adjustments, and signed by the principal financial or accounting officer
of the Company;
(iii) As soon as practicable after the end of
each month, and in any event within 30 days thereafter, Consolidated budget
model balance sheets of the Company and any subsidiary as of the end of such
month, and Consolidated budget model statements of income and stockholders'
equity for each month and for the current fiscal year to date, and comparing
such results to the then current business plan, prepared in accordance with
generally accepted accounting principles (other than for accompanying notes),
subject to changes resulting from year-end audit adjustments and signed by the
principal financial or accounting officer of the Company;
(iv) As soon as available (but in any
event at least within 30 days before the commencement of its fiscal year), an
annual budget and business plan prepared on a monthly basis for each fiscal
year, together with any modifications thereto adopted through such fiscal year;
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<PAGE> 16
(v) With respect to the financial
statements called for in subsections (ii) and (iii) of this Section 18.1 (a),
an instrument executed by the Chief Financial Officer or President of the
Company and certifying that such financial statements were prepared in
accordance with generally accepted accounting principles consistently applied
with prior practice for earlier periods (with the exception of footnotes that
may be required by generally accepted accounting principles) and fairly present
the financial condition of the Company and its results of operation for the
period specified, subject to period-end adjustment; and
(vi) Such other information relating to
the financial condition, business, prospects or corporate affairs of the
Company as the Major Holder may from time to time reasonably request.
(b) The Company shall also afford each Major
Holder, at the principal offices of the Company, reasonable access to material
documents of the Company and rights to examine without undue disruption the
facilities and offices of the Company, upon at least five (5) days notice in
advance of such visit to the Company from such Major Holder and upon receipt of
a request from such Major Holder specifying which documents, offices and
facilities such Major Holder wishes to inspect five (5) days in advance of such
visit; but, in any event, not more than once every fiscal quarter.
(c) The Company shall afford each Major Holder,
reasonable Board of Directors' visitation rights. Such visitation rights shall
include the right to designate one representative of the Major Holders
(selected by the affirmative vote of a majority of the Major Holders) to (i)
receive reasonable notice in advance of all Board of Directors' meetings, (ii)
the right to receive, concurrently with receipt by members of the Board of
Directors, all materials, reports and other written communications received by
members of the Board of Directors and (iii) the right to attend all Board of
Directors meetings.
(d) The covenants set forth in this Section 18.1
shall terminate and be of no further force or effect at such time as the
Company is required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act.
(e) Notwithstanding any other provisions of this
Section 18.1 or Section 13(d), the Company may require as a condition precedent
to any Major Holder's rights under this Section 18.1 or Section 13(d), that
each person proposing to attend any meeting of the Board of Directors and each
person to have access to any of the information provided by the Company to its
Board of Directors shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so received during such
meetings or otherwise; and, provided further, that the Company reserves the
right not to provide such information to a Major Holder or its representative
(or not to provide to a Major Holder such portions of the information which is
sensitive vis & vis such Major Holder) and to exclude such Major Holder or its
representative from any meeting or portion thereof to the extent necessary in
order to prevent the breach of attorney client privilege or if such Major
Holder or its representative is a competitor of the Company (including any of
its direct or indirect subsidiaries).
-16-
<PAGE> 17
18.2 Confidential Information. Each Major Holder agrees
that any information obtained by such Major Holder pursuant to Section 18.1 or
Section 13(d) which is, or would reasonably be perceived to be, proprietary to
the Company or otherwise confidential will not be disclosed without the prior
written consent of the Company. Notwithstanding the foregoing, each Major
Holder may disclose such information, on a need to know basis, to its
employees, accountants or attorneys, or to the employees, accountants or
attorneys of its general partner or investment manager (so long as each such
person to whom confidential information is disclosed agrees to keep such
information confidential), in compliance with a court order or when otherwise
necessary to enforce any of the Major Holder's rights hereunder. Such
information may also be disclosed to a Major Holder's constituent partners,
members or shareholders (so long as each such person to whom confidential
information is disclosed agrees to keep such information confidential). Each
Major Holder further acknowledges and understands that any information will not
be utilized by such Major Holder in connection with purchases and/or sales of
the Company's securities except in compliance with applicable state and federal
antifraud statutes.
18.3 Assignment of Rights to Financial Information. The
rights and obligations pursuant to Sections 18.1 and 18.2 may be assigned or
otherwise conveyed by any Major Holder, or by any subsequent transferee of any
such rights to a transferee, upon prior written notice to the Company, upon the
transfer by such Major Holder of at least 50,000 shares of Registrable
Securities to any transferee other than a competitor or customer of the Company
(including any of its direct or indirect subsidiaries); provided, however, that
the Company shall not be obligated under Section 18.1 to provide to any
transferee other than a person or entity affiliated with the transferor any
information which the Company deems in good faith to be a trade secret or
similar confidential information.
19. VOTING AGREEMENT.
(a) For so long as the Purchasers or their Affiliates
hold not less than an aggregate of 180,000 shares of Series A Preferred or
Common Stock issued on conversion thereof (as appropriately adjusted for all
stock splits, dividends, combinations, reclassifications and the like), each of
the Existing Stockholders, Management Holders and Purchasers (and their
Affiliates) agrees to vote all of the shares of Common Stock Series A Preferred
or other securities of the Company entitled to vote in the election of
directors, to elect two (2) persons designated by the Purchasers to serve as
members of the Company's Board of Directors; provided, however, that if the
size of the Board of Directors shall be increased or decreased, each of the
Existing Stockholders, Management Holders and Purchasers (and their Affiliates)
agrees to vote all of the shares of Common Stock Series A Preferred or other
securities of the Company entitled to vote in an election of directors, to
elect a number of persons designated by the Purchasers to serve as members of
the Company's Board of Directors such that the number of persons designated by
the Purchasers shall constitute at least 20% of the Board of Directors. The
Purchasers have designated Donald Dixon and Rockwell Schnabel to serve as
directors effective as of the date hereof The Company shall reimburse the
reasonable expenses of Board meeting attendance by the representatives of the
Purchasers.
(b) In the event that any person designated to the Board
of Directors in accordance with Section 19(a) above resigns or otherwise ceases
to be a director, a replacement director shall be
-17-
<PAGE> 18
designated by the Purchasers and the terms of this Section 19 shall apply to
any such replacement director for so long as it would otherwise apply to the
initial director.
(c) Each of the Purchasers, Management Holders and
Existing Stockholders agrees to be present, in person or by proxy, at all
meetings of shareholders of the Company so that all shares of voting securities
held by such Purchaser, Management Holder or Existing Stockholder may be voted
for the election of the directors as set forth in this Section 19.
(d) So long as the provisions of this Section 19 are in
effect, each certificate evidencing shares of voting securities held by the
Purchasers, Management Holders and the Existing Stockholders shall bear a
legend in substantially the following form:
"THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON VOTING AS SET
FORTH IN A RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER OF SUCH SHARES. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS AND ITS REGISTERED OFFICE."
(e) The provisions of this Section 19 shall terminate
upon the closing of the Company's initial public offering of Common Stock
pursuant to a registration statement declared effective by the Commission.
20. COMPANY RIGHT OF FIRST REFUSAL ON CERTAIN SALES OF SERIES A
PREFERRED STOCK AND CONVERSION STOCK
20.1 General. In the event that a Holder proposes to make
any sale or transfer of Series A Preferred and Conversion Stock (or proposed
sale or transfer) otherwise permitted pursuant to this Agreement, to any
proposed transferee which is not solely a financial investor and which proposes
to acquire the shares for strategic business purposes and not solely as an
investment, then prior to effecting such sale or transfer the Holder shall give
the Company the opportunity to purchase such shares in the following manner:
(i) Such Holder shall give notice (the "TRANSFER
NOTICE") to the Company in writing of such intention, specifying the securities
proposed to be sold or transferred, the proposed price per share therefor (the
"TRANSFER PRICE"), the name of the proposed transferee or transferees and the
other material terms upon which such disposition is proposed to be made,
including such other terms and information as the Company may reasonably
request in order to confirm the bona fide nature of the proposed transaction.
(ii) The Company shall have the right, exercisable
by written notice given by the Company to such Holder within ten (10) days
after receipt of such Transfer Notice to purchase all (but not less than all)
of the securities specified in such Transfer Notice. The Company may during
such ten (10) day period advise such Holder of the Company's desire to exercise
its right of first refusal set forth herein subject to the ability of the
Company to secure financing. In such event, the Company shall
-18-
<PAGE> 19
have an additional thirty (30) days following the initial ten (10) day period
in which to secure financing. At the end of the thirty (30) period, the Company
shall advise such Holder as to whether the Company has successfully secured the
financing. If not, the Company's exercise of its right of first refusal shall
be deemed void and such Holder shall be entitled to consummate the proposed
transaction with the third party or parties.
(iii) If the Company exercises its right of first
refusal hereunder, the closing of the purchase of the securities with respect
to which such right has been exercised shall take place within thirty (30) days
after the Company gives notice of such exercise, which period of time shall be
extended if necessary to comply with applicable securities laws and
regulations. Upon exercise of its right of first refusal, the Company and such
Holder shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(iv) If the Company does not exercise its right of
first refusal hereunder within the ten (10) day period specified for such
exercise (or, in the event that the right has been exercised subject to
securing financing, within the additional thirty (30) day period specified
above), such Holder shall be free, during the period of ninety (90) days
following the expiration of such time for exercise to enter into an agreement
to sell the securities specified in such Transfer Notice, to the specified
proposed transferee or another investor which is solely a financial investor
acquiring for investment purposes, on terms no less favorable to such Holder
than the terms specified in such Transfer Notice, provided that the closing of
the purchase and sale of such securities shall take place within sixty (60)
days after such Holder enters into such agreement.
20.2 No Assignment of Rights of First Refusal The Company
may not assign its rights of first refusal under this Section 20.
20.2 Termination The Company's right of first refusal set
forth herein shall terminate upon the first to occur of (i) the closing of an
initial public offering of the Common Stock of the Company to the general
public which is effected pursuant to a registration statement filed with, and
declared effective by, the Commission under the Securities Act, and (ii) such
date as the Company shall be subject to the reporting requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.
21. MISCELLANEOUS.
21.1 Aggregation of Shares. For purposes of any provision
of this Agreement requiring a person or entity to hold a minimum number of
shares of Series A Preferred or Registrable Securities in order to gain the
benefit of such provision, all shares beneficially owned by Affiliated entities
or persons (including partners and constituent members and former partners and
former constituent members) shall be aggregated together for the purposes of
determining such Holder's status or rights under such provision. For purposes
of this Section 21.1 the Company may rely on such person whom a group of
related persons shall designate from time to time (which person shall initially
be the Chief
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<PAGE> 20
Financial Officer of Trident Capital, L.P., for Information Associates, L.P.
and Information Associates, C.V. and related persons) for information relating
to the affiliations of entities or persons.
21.2 Governing Law. This Agreement in all respects shall
be governed by and construed and enforced in accordance with the corporate laws
of the State of Delaware and (with respect to matters other than matters of
corporate law) the laws of the State of Texas as such laws apply to contracts
entered into and wholly to be performed within such state. In any litigation
relating to this Agreement or the transactions contemplated hereby, the
prevailing party shall be entitled to recover its costs and reasonable
attorneys' fees.
21.3 Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by any
Purchaser and the closing of the transactions contemplated hereby.
21.4 Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
21.5 Entire Agreement; Amendment. This Agreement and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof; and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided, however, that any provision of this Agreement may be amended,
waived or modified with the written consent of (i) the Company, (ii) Holders of
at least 50% of the outstanding shares of Registrable Securities, and (iii)
Holders other than Existing Stockholders and Management Holders who hold at
least a majority of the outstanding shares of Registrable Securities held by
all holders other than Existing Stockholders and Management Holders.
21.6 Effect of Amendment or Waiver, Each Purchaser
acknowledges that by the operation of Section 21.5 hereof the Holders of more
than 50% of the outstanding shares of Registrable Securities shall have the
right and power to diminish or eliminate all rights of such Holders under this
Agreement.
21.7 Notices. All notices and other communications
required or permitted hereunder shall be in writing, shall be effective when
given, and shall in any event be deemed to be given upon receipt or, if
earlier, (a) five (5) days after deposit with the U.S. Postal Service or other
applicable postal service, if delivered by first class mail, postage prepaid,
(b) upon delivery, if delivered by hand, (c) one business day after the
business day of deposit with Federal Express or similar overnight courier,
freight
-20-
<PAGE> 21
prepaid or (d) one business day after the business day of facsimile
transmission, if delivered by facsimile transmission with copy by first class
mail, postage prepaid, and shall be addressed (i) if to a Purchaser, at such
Purchaser's address as set forth in the Purchase Agreement, (ii) if to an
Existing Stockholder, at such Existing Stockholder's address according to the
Company's stock records, and (iii) if to the Company, at the address of its
principal corporate offices (attention: Secretary), or at such other address as
a party may designate by ten days' advance written notice to the other party
pursuant to the provisions above.
21.8 Delays or Omissions. Except as expressly provided
herein, no delay or omission to exercise any right, power or remedy accruing to
any Holder of any Registrable Securities, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement, or any
waiver on the part of any Holder of any provisions or conditions of this
agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
21.9 Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be executed by less than all of the
Purchasers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
21.10 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
21.11 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
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<PAGE> 22
EXHIBIT 4.3
[Signature Page to Rights Agreement]
The foregoing agreement is hereby executed as of the date
first above written.
"COMPANY"
PEGASUS Systems, INC.
a Delaware corporation
By: /s/ JOHN F. DAVIS III
--------------------------------
Title: PRESIDENT
-----------------------------
"PURCHASERS"
INFORMATION ASSOCIATES, L.P.
By: Trident Capital Management,L.L.C.
Its: General Partner
By: /s/ ROCKWELL SCHNABEL
--------------------------------
INFORMATION ASSOCIATES, C.V
By: Trident Capital Management, L.L.C.
Its: Investment General Partner
By: /s/ ROCKWELL SCHNABEL
--------------------------------
"EXISTING STOCKHOLDERS"
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS III
--------------------------------
Its: President
-------------------------------
CHOICE HOTELS
By: /s/ JAMES R. YOAKUM
--------------------------------
Its: SA. Vice President
-------------------------------
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<PAGE> 23
[Signature Page to Rights Agreement]
ANASAZI, INC.
By: /s/ TOM CASTLEBERRY
--------------------------------
Its: CEO
-------------------------------
BEST WESTERN INTERNATIONAL
By: /s/ WILLIAM WATSON
--------------------------------
Its: Board Representative for BWI
-------------------------------
REED TRAVEL GROUP,
A Division of Reed Elsevier Inc.
By: /s/ MAC HIGHET
--------------------------------
Its: EVP Finance & Operations
-------------------------------
HYATT HOTELS CORPORATION
By: /s/ JOHN BIGGS 6-25-96
--------------------------------
Its: Executive-Vice President
-------------------------------
INTER-CONTINENTAL HOTELS CORPORATION
By: /s/ PAUL J. TRAVERS
--------------------------------
Its: Senior Vice President-Property
Management
-------------------------------
FORTE HOTELS
By: /s/ GAVIN W. CHITTICK
--------------------------------
Its: EXECUTIVE DIRECTOR HOTELS
-------------------------------
June 25th 1996
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<PAGE> 24
[Signature Page to Rights Agreement]
ITT SHERATON CORPORATION
By: /s/ RICHARD L. NAUMANN
--------------------------------
Its: S.V.P. - CIO
-------------------------------
LA QUINTA INNS, INC.
By: /s/ W.C. HAMMETT, JR.
--------------------------------
Its: Sr. Vice President - Acct &
Admin
-------------------------------
MARRIOTT INTERNATIONAL, INC.
By: /s/ BRUCE WOLFF
--------------------------------
Its: Vice President, Distribution
Sales
-------------------------------
PROMUS HOTELS, INC.
By: /s/ DONALD M. KOLODZ 6/25/96
--------------------------------
Its:
-------------------------------
UTELL INTERNATIONAL LTD.
By: /s/ HENRY HORBACZEWSKI
--------------------------------
Its: Authorized Representative
-------------------------------
CHOICE HOTELS INTERNATIONAL
By: /s/ JAMES R. YOAKUM
--------------------------------
Its:
-------------------------------
HFS, INC.
By: /s/ MICHAEL KISTNER
--------------------------------
Its: VP MIS
-------------------------------
TRUSTHOUSE FORTE CALIFORNIA, INC.
By: /s/ ALEX SMITH
--------------------------------
Its:
-------------------------------
HILTON HOTELS CORPORATION
By: /s/ BRUCE ROSENBERG
--------------------------------
Its: V.P. Marketing Distribution
-------------------------------
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<PAGE> 25
[SIGNATURE PAGE TO RIGHTS AGREEMENT]
LODGING NETWORK, INC. WESTIN HOTELS & RESORTS
By: /s/ SCOTT A. SHEFIELD By: /s/ TIMOTHY M. COLEMAN
------------------------------- -------------------------------
Its: Vice-President Timothy M. Coleman
-------------------------------
Its: Vice President-Distribution
--------------------------------
/s/ JOHN F. DAVIS, III
-------------------------------
John F. Davis, III
"MANAGEMENT HOLDERS"
/s/ JOHN F. DAVIS, III
-------------------------------
John F. Davis, III
/s/ BILL NICHOLSON
-------------------------------
Bill Nicholson
/s/ NICK JENT
-------------------------------
Nick Jent
/s/ LARRY WEARDEN
-------------------------------
Larry Wearden
/s/ PHIL HART
-------------------------------
Phil Hart
/s/ BRYAN DONOWHO
-------------------------------
Bryan Donowho
/s/ STEVE REYNOLDS
-------------------------------
Steve Reynolds
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<PAGE> 26
[SIGNATURE PAGE TO RIGHTS AGREEMENT]
/s/ RIC FLOYD
-------------------------------
Ric Floyd
/s/ DENNIS CARPENTER
-------------------------------
Dennis Carpenter
/s/ NANCY CONKLIN
-------------------------------
Nancy Conklin
/s/ CAROLYN LANE
-------------------------------
Carolyn Lane
-26-
<PAGE> 27
SCHEDULE I
Purchasers:
Information Associates, L.P.
Information Associates, C.V.
<PAGE> 28
SCHEDULE II
Existing Stockholders:
Anasazi Service Corporation
Best Western International
Choice Hotels International
Trusthouse Forte California, Inc.
Hilton Hotels Corporation
Hospitality Franchise Systems, Inc.
Reed Travel Group
Hyatt Hotels Corporation
Inter-Continental Hotels Corporation
ITT Sheraton Corporation
La Quinta Corporation Inns, Inc.
Marriott International, Inc.
Promus Hotels, Inc.
Utell International, Ltd.
Westin Hotels and Resorts
John F. Davis, III
<PAGE> 29
SCHEDULE III
Management Holders:
John F. Davis, III
Joseph W. Nicholson
Nick Jent
Larry Wearden
Phil Hart
Bryan Donowho
Steve Reynolds
Ric L. Floyd
Dennis Carpenter
Nancy Conklin
Carolyn Lane
<PAGE> 1
EXHIBIT G
No.1 PEGASUS SYSTEMS, INC.
For the purchase of
259,292 Shares
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that HOLIDAY HOSPITALITY CORPORATION
(hereinafter called the "Holder") is entitled to purchase from PEGASUS SYSTEMS,
INC., a Delaware corporation (hereinafter called the "Company"), upon the
surrender of this Warrant to the Company at the principal office in Dallas,
Texas, at any time on and after May 13, 1997 (the "Detachment Date"), and
before the close of business on May 12, 1999 (the"Termination Date"), the
number of fully paid and nonassessable shares of Common Stock, par value $.01
per share ("Common Stock"), set forth above, evidenced by a certificate
therefor, upon payment of the lesser of $9.60 per share or 85% of the initial
public offering price per share of the Company's Common Stock (the "Warrant
Price") for the number of shares set forth herein above; provided, however,
that under certain conditions set forth hereinafter, the number of shares of
Common Stock purchasable upon the exercise of this Warrant may be increased or
reduced and the Warrant Price may be adjusted. The Warrant Price shall be
payable in cash, or by certified or official bank check, in United States
dollars, to the order of the Company. No adjustment shall be made for any cash
dividends on any shares of stock issuable upon exercise of this Warrant. The
right of purchase represented by this Warrant is exercisable by Holder, its
parent, subsidiary, affiliate or any other successor to all or substantially all
of its business by sale of stock, sale of assets, merger or otherwise only, in
its entirety only and only in respect of all of such shares. In the event this
Warrant has not been exercised as required herein before the close of business
on the Termination Date, it shall automatically terminate and be of no force
and effect.
Subject to the provisions hereof, Holder shall have the right
to purchase from the Company (and the Company shall issue and sell to Holder)
the number of fully paid and nonassessable shares of Common Stock specified in
this Warrant, upon surrender of this Warrant to the Company at its office in
Dallas, Texas and upon payment to the Company of the Warrant Price for the
number of shares of Common Stock for which this Warrant is issued and any
applicable taxes. Upon surrender of this Warrant, and payment of the Warrant
Price as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to Holder a certificate for the number of full shares of
Common Stock so purchased upon the exercise of this Warrant. Such certificate
shall be deemed to have been issued and Holder shall be deemed to have become a
holder of record of such shares as of the date of the surrender of this Warrant
and payment of the Warrant Price as aforesaid. The rights of purchase
represented by this Warrant shall be exercisable, at the election of Holder,
once only for all and not less than all of the shares specified herein and, in
the event this Warrant is exercised in respect of less than all of the shares
specified therein such exercise shall be invalid and of no force or effect.
There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and issued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by this Warrant, and the transfer Agent for the Common Stock and
every subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid are
hereby irrevocably
-1-
<PAGE> 2
authorized and directed at all times to reserve such number of authorized and
unissued shares as shall be requisite for such purpose.
The Warrant Price and number of shares subject to this Warrant shall
be subject to adjustment from time to time as follows:
a. In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the Warrant
Price in effect immediately prior to such subdivision shall be proportionately
reduced and, in case the outstanding shares of the Common Stock of the Company
shall be combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased.
b. Upon each adjustment of the Warrant Price pursuant to
the provisions hereof, the number of shares issuable upon the exercise of this
Warrant shall be adjusted by multiplying the Warrant Price in effect prior to
the adjustment by the number of shares of Common Stock covered by the Warrant
and dividing the product so obtained by the adjusted Warrant Price.
c. Except upon consolidation or reclassification of the shares of
Common Stock of the Company as provided for in subsections (a) or (f) hereof,
the Warrant Price in effect at any time may not be adjusted upward or increased
in any manner whatsoever.
d. Irrespective of any adjustment or change in the Warrant Price
or the number of shares of Common Stock actually purchasable under this
Warrant, this Warrant shall continue to express the Warrant Price per share and
the number of shares purchasable hereunder as the Warrant Price per share and
the number of shares purchasable were expressed in this Warrant when initially
issued with the adjustment or change reflected as set forth in subsection (g)
hereof.
e. If any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company with
another corporation or the sale of all or substantially all of its assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby Holder shall have the right to
purchase and receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by each such Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of shares
of such Common Stock purchasable upon the exercise of the rights represented by
this Warrant had such reorganization, reclassification, consolidation, merger
or sale not taken place, and in any such case appropriate provisions shall be
made with respect the rights and interests of Holder to the end that the
provisions hereof (including without limitation provisions for adjustment of
the Warrant Price and of the number of shares purchasable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may be in relation
to the shares of stock thereafter deliverable upon the exercise of this
Warrant.
-2-
<PAGE> 3
f. No adjustment of the Warrant Price shall be made in connection
with the issuance or sale of Common Stock issuable pursuant to any stock option
plan or incentive compensation arrangements now or hereafter granted to
employees of the Company or any of its subsidiaries in connection with their
employment or the issuance or sale of shares of Preferred Stock.
g. Whenever the Warrant Price is adjusted as herein provided,
the Company shall provide a written statement to Holder showing in detail the
facts requiring such adjustment and the Warrant Price and the number of shares
of Common Stock purchasable upon exercise of this Warrant after such
adjustment.
h. The Company may retain a firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) selected by the Board of
Directors of the Company or the Executive Committee of said Board to make any
computation required hereunder and a certificate signed by such firm shall be
conclusive evidence of the correctness of any such computation. If Holder does
not agree as to the correctness of such computation. Holder at their own
expense may retain a firm of independent certified public accountants of
recognized standings to develop a second computation. Such accounting firms
shall attempt to resolve any differences of opinion with respect to such
computations, but in the absence of such resolution, the matter shall be
submitted to binding arbitration in Dallas, Texas in accordance with the then
applicable rules of the American Arbitration Association.
Notwithstanding any other provision hereof, to the extent permitted
by applicable law, the Company shall provide written notice to Holder at least
ten (10) days prior to the record date or other effective date for any of the
following actions: dividends, mergers, liquidations, consolidations,
reclassifications of stock, sale of substantially all of the assets or any
other action for which stockholder approval is required by Delaware law.
The Company shall issue a new warrant to be issued in place of this
Warrant in the event this Warrant has been lost, stolen, defaced, worn-out,
or destroyed, upon the making of an affidavit of that fact by Holder. When
issuing a new warrant, the Company may, as a condition precedent thereto, (a)
require the Holder of a defaced or worn out warrant to deliver such warrant to
the Company and order the cancellation of the same, and (b) require the Holder
of any lost, stolen or destroyed warrant or its legal representative, to
advertise the same in such manner as the Company shall require and to give the
Company a bond in such sum as it may direct as indemnity against any claim that
may be made against the Company with respect to the warrant alleged to have
been lost, stolen or destroyed. Thereupon, the Company may cause to be issued to
Holder a new warrant in replacement for the warrant alleged to have been lost,
stolen, defaced, worn out or destroyed. Upon the new warrant so issued shall be
noted the fact of such issue and the number, date, and name of the registered
Holder of the lost, stolen, defaced, worn out, or destroyed warrant in lieu of
which the new warrant is issued. Every warrant issued hereunder shall be issued
without payment to the Company for such warrant, provided that, there shall be
paid to the Company a sum equal to any exceptional expenses incurred by the
Company in providing for or obtaining any such indemnity and security as is
referred to herein.
-3-
<PAGE> 4
Notwithstanding any other provision hereof, in the event this
Warrant is exercised in connection with an initial public offering of the
Company's stock or the sale of the Company, such exercise may be conditioned
upon and subject to the consummation of such initial public offering or sale.
The Company shall not be required to issue fractions of shares
of Common Stock on the exercise or conversion of this Warrant. If any fraction
of a share of Common Stock would, except for the provisions of this paragraph,
be issuable on the exercise or conversion of this Warrant, the Company shall
purchase such fraction for an amount in cash equal to the current fair market
value of such fraction.
The right to exercise this Warrant and purchase the stock as
provided herein is expressly contingent upon and conditioned upon Holder being
in material compliance with all of the material terms of that certain
Distribution Services Agreement for Holiday Inn Worldwide between the Company
and Holder and further provided that Holder has not terminated any of the
Services (as defined therein), unless as a result of a breach of the Agreement
by the Company, as of the exercise of this Warrant.
Except as otherwise provided herein, nothing contained in this
Warrant shall be construed as conferring upon Holder the right to vote or to
consent or to receive notice as a stockholder in respect of the meetings of
stockholders for the election of directors of the Company or any other matters,
or any rights whatsoever as a stockholder of the Company.
Any notice pursuant to this Warrant to be given or made by Holder or
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, or by next day delivery service for personal delivery,
addressed (until another address is provided in writing by the Company or
Holder) as follows with a copy to the Company's or Holder's legal departments:
President Senior Vice President, Worldwide Reservations
Pegasus Systems, Inc. Holiday Hospitality Corporation
3811 Turtle Creek Boulevard Three Ravinia Drive
Suite 1100 Suite 2900
Dallas, Texas 75219 Atlanta, Georgia 30346
All the covenants and provisions of this Warrant by or for the benefit
of the Company or Holder shall bind and inure to the benefit of their respect
successors and assigns hereunder.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and for all purposes shall be construed in accordance with
the laws of said State.
Nothing herein shall be construed to give to any person or
corporation other than the Company and Holder any legal or equitable right,
remedy or claim hereunder, but the terms of this Warrant shall be for the sole
and exclusive benefit of Holder and the Company.
Except as otherwise provided herein, this Warrant is not transferable.
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<PAGE> 5
In connection with the exercise of this Warrant, Holder agrees to
execute the Investment Representative Statement (or a substantially similar
document) attached hereto as Exhibit A.
IN WITNESS WHEREOF, this Warrant is hereby executed by the President
and Secretary of Pegasus Systems, Inc. as the act of the Company.
Date: May 27, 1997
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III
----------------------------------
John F. Davis, III, President
ATTEST:
By: /s/ RIC L. FLOYD
----------------------------------
Ric L. Floyd, Secretary
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<PAGE> 6
INVESTMENT REPRESENTATION STATEMENT
In connection with the exercise of Warrant Number 1 of Pegasus
Systems, Inc. and the purchase of the Securities described therein, the
undersigned Holder represents to the Company the following:
(a) Holder is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Holder is acquiring these Securities for investment for Holder's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Holder acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Holder's investment intent as expressed herein. Holder further
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Holder further acknowledges and understands that the
Company is under no obligation to register the Securities. Holder understands
that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or
such registration is not required in the opinion of counsel satisfactory to the
Company and any other legend required under then applicable state or federal
securities laws.
(c) Holder is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the issuance of the Warrant to the
Holder, the exercise will be exempt from registration under the Securities Act.
In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the Securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in
an unsolicited "brokers transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act); and, in the case of an
affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
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<PAGE> 7
EXHIBIT "A"
TO
COMMON STOCK PURCHASE WARRANT
In the event that the Company does not qualify under Rule 701
at the time of issuance of the Warrant, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one year after the later of the date
the Securities were sold by the Company or the date the Securities were sold by
an affiliate of the Company, within the meaning of Rule 144; and, in the case
of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Holder further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A under the Securities Act
or some other registration exemption will be required; and that, notwithstanding
the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities
and Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Holder understands
that no assurances can be given that any such other registration exemption will
be available in such event.
HOLIDAY HOSPITALITY CORPORATION, HOLDER
By:
-------------------------------------
Its:
-------------------------------
Date:
-------------------------
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<PAGE> 1
EXHIBIT 5.1
(214) 740-8523
August 1, 1997
Pegasus Systems, Inc.
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Re: Registration Statement on Form S-1 (No. 333-28595)
Dear Sirs:
We have acted as counsel for Pegasus Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of an aggregate of 3,416,995
shares of the Company's Common Stock, $.01 par value per share (the
"Securities"). We have examined such documents and questions of law as we have
deemed necessary to render the opinion expressed below.
Based upon the foregoing, we are of the opinion that the Securities,
when issued and sold as described in the above-referenced Registration
Statement, will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the prospectus under
the caption "Legal Matters." In giving this consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Sincerely,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ GUY KERR
-----------------------------
Guy Kerr
<PAGE> 1
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is being entered into
as of June 25, 1996 (the "Closing Date") by and between Pegasus Systems, Inc.,
a Delaware corporation (the "Company"), and John F. Davis, III ("Executive").
RECITALS
A. Executive has served as Chief Executive Officer of the Company
since July 1995.
B. Pursuant to a Series A Preferred Stock Purchase Agreement,
dated as of the Closing Date, by and among the Company, and the entities listed
on Exhibit A thereto (the "Purchasers"), the Purchasers are purchasing certain
shares of Series A Preferred Stock, par value $0.01 per share, of the Company
(the "Purchase").
C. The Purchasers have required, as a condition to consummating
the Purchase, that Executive execute and deliver this Agreement.
AGREEMENT
In order to induce the Purchasers to consummate the Purchase, and in
further consideration of the mutual covenants and agreements contained herein,
the parties agree as follows:
1. EMPLOYMENT
1.1 TERM; DUTIES.
(a) TERM. Subject to Section 1.6 below, Executive agrees to
serve as an employee of the Company during the period commencing on the Closing
Date and ending on the date four (4) years from the Closing Date, subject to
automatic one year annual renewals if neither party has provided the other with
a written notice expressing an intent to terminate the Executive's employment
with the Company 60 days prior to the beginning of such renewal period (the
"Employment Term").
(b) DUTIES. During the Employment Term,Executive shall
serve as the Chief Executive Officer of the Company and in such capacity shall
have such responsibilities and perform such duties as the Company's Board of
Directors may specify from time to time consistent with such position. Executive
agrees to serve the Company faithfully and to the best of his ability, and to
devote substantially all of his working time, attention and efforts during the
Employment Term to the business and affairs of the Company. Executive shall not
serve as a director, employee, consultant or advisor to any other corporation
(other than the Company's affiliates) or other business enterprise without the
prior written consent of the Company; provided, however, that Executive may
serve in any capacity with any civic, educational or charitable organization or
any trade association without the approval of the Board, so long
<PAGE> 2
as such activities do not interfere with his duties and obligations under this
Agreement. Executive represents and warrants to the Company that he is under no
contractual commitments inconsistent with his obligations set forth in this
Agreement.
1.2 COMPENSATION. In consideration for all services to be performed
under this Agreement, Executive shall receive the following compensation:
(a) SALARY. Executive shall be paid a base salary at a rate
of not less than $22,916.67 per month, subject to increase annually at the
discretion of the Compensation Committee of the Board of Directors and payable
at such times as other executives of the Company receive their regular salary
payments (the "Base Salary").
(b) SIGNING BONUS. The Company shall pay to Executive on or
before June 30, 1996 a signing bonus in the amount of $200,000.
(c) BONUS PROGRAM. The Executive will be eligible to
receive annual bonus payments in addition to the Base Salary. Such annual bonus
shall be determined by the Compensation Committee in its discretion based on
achievement of performance objectives established by the Compensation Committee
of the Board of Directors from time to time.
(d) OPTION. The Company shall grant to Executive an option
(the "Option") (or, at Executive's election, a stock purchase right to purchase
shares of Common Stock of the Company (the "Common Stock") for a total of
225,000 shares of Common Stock) at an exercise price of $2.68 per share.
Subject to Section 1.6(b)(ii) below, such Option will vest 1/4 on the first
anniversary of the Closing Date and 1/48 after each subsequent month of
employment, so that such Option would be fully vested four (4) years after the
Closing Date based on continued employment.
(e) AUTOMOBILE ALLOWANCE. The Company agrees to pay
Executive an automobile allowance of up to $911 per month.
(f) LIFE INSURANCE. To the extent commercially practicable,
the Company shall maintain life insurance with respect to Executive, in the
amount of $2,000,000 with the Company as beneficiary and $1,000,000 with
Executive's estate as beneficiary.
The Company shall be entitled to withhold from the compensation
payments otherwise required to be made to Executive such amounts as may be
required under applicable tax laws and other applicable legal requirements.
1.3 OTHER BENEFITS. The Company shall provide to Executive, during
the Employment Term such other benefits (including vacation) as the Company
makes generally available to its other employees and makes generally available
to its executives during the Employment Term, subject to Executive's
satisfaction of the respective requirements for such benefits.
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<PAGE> 3
The Hotel Industry Switch Company, The Hotel Clearing Corporation, the Hotel
Clearing Corporation (U.K.) and TravelWeb, Inc., any salary, bonus or other
compensation or benefit of any nature (whether relating to any period prior to
the Closing Date or relating to any period after the Closing Date) except as
expressly provided in Sections 1.2 and 1.3 above. Executive represents and
warrants to the Company that he is not aware of any claims or rights against
the Company arising directly or indirectly from his past employment with the
Company, and Executive hereby releases and discharges the Company and its
affiliates from all claims, rights, causes of action, demands and obligations
arising directly or indirectly from his past employment with the Company.
1.5 EXPENSES. Executive shall be entitled to reimbursement from the
Company for reasonable out-of-pocket business expenses reasonably incurred by
Executive during the Employment Term in the performance of Executive's duties
under this Agreement, in accordance with the Company policies in effect from
time to time; provided however, that the Company shall not be required to
reimburse Executive for any such expenses unless: (a) Executive presents
vouchers and receipts indicating in reasonable detail the amount and business
purpose of each of such expenses; and (b) Executive otherwise complies with
the Company's reimbursement policies established from time to time and in
effect during the Employment Term.
1.6 TERMINATION.
(a) Executive and the Company acknowledge and agree that
either the Company or Executive shall have the right to terminate Executive's
employment, at any time during the Employment Term, with or without Cause (as
defined in Section 1.7), by delivering written notice of termination to the
other thirty (30) days prior to the date of termination. Upon any such
termination of this Agreement, Executive's employment with the Company shall
terminate and, except as provided in Section 1.6(b) or 1.6(c) below, as
applicable, the Company shall have no further monetary obligation or other
obligation of any nature to Executive under this Agreement or with respect to
his employment or the termination of his employment (except as expressly
required by applicable law).
(b) If (i) the Company terminates this Agreement without
Cause (as defined in Section 1.7 below) during the Employment Term, (ii)
Executive satisfies all of his obligations relating to the termination of his
employment under this Agreement as specified in Sections 2, 3 and 4.1 hereof),
and (iii) Executive executes and delivers to the Company a general release of
liability (satisfactory in form and substance to the Company) in favor of the
Company, then so long as Executive does not breach Section 2, 3 or 4.1 hereof:
(A) The Company shall pay to Executive the Base
Salary referred to in Section 1.2(a) above for a period of twelve (12)
months following the date of termination, payable over such
twelve-month period at such times as executives of the Company receive
their regular salary payments;
(B) Vesting of the Option shall accelerate so that
(i) if termination of employment occurs prior to the date being three
(3) years and one (1) month after the Closing Date, Executive's Option
shall vest for an additional 56,250 shares of Common Stock (in addition
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<PAGE> 4
to shares vested as of the date of termination) or (ii) if termination
of employment occurs on or after the date being three (3) years and one
(1) month after the Closing Date, Executive's Option shall fully vest;
and
(C) The Company shall pay to Executive all accrued
salary, any benefits under any plans of the Company in which Executive
is a participant to the full extent of Executive's rights under such
plans and any appropriate out-of-pocket business expense
reimbursements.
(c) If this Agreement is terminated other than pursuant to
Section 1.6(b), including voluntary termination or termination by the Company
with Cause, or by reason of death or disability, then so long as Executive does
not breach Section 2, 3 or 4.1 hereof, Executive shall be entitled to payment of
all accrued salary, vesting of the Option through the date of termination only,
any further benefits under any plans of the Company in which Executive is a
participant to the full extent of Executive's rights under such plans through
the date of termination only, and any appropriate out-of-pocket business expense
reimbursements.
(d) The termination of this Agreement pursuant to this
Section 1.6 or otherwise shall not limit or otherwise affect any of Executive's
obligations under Sections 2, 3 and 4.1 hereof, which obligations shall survive
any such termination.
(e) Executive shall be entitled to no benefits,
compensation or other payments or rights upon termination of employment except
as expressly set forth under Section 1.6(b), 1.6(c) or 1.6(d), as applicable;
provided, only, that to the extent the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") shall be applicable to the Company,
Executive may be eligible following termination of employment to continue to
receive group health plan benefits pursuant to COBRA by making the appropriate
election and payments.
1.7 DEFINITION OF "CAUSE." Executive's employment with the Company
shall be deemed to have been terminated for "Cause" if such employment is
terminated due to:
(a) habitual failure to report to work, which is not cured
within sixty (60) days after written notice from the Board of Directors;
(b) habitual substance abuse, which is not cured within
sixty (60) days after written notice from the Board of Directors;
(c) material breach of Executive's fiduciary duty to the
Company or its affiliates, including without limitation, misappropriation of
corporate assets, self dealing and violation of any noncompetition agreement or
any confidential information and assignment agreement;
(d) any intentional misconduct, fraud or bad faith on the
part of Executive in the performance of his duties as an employee of the
Company;
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<PAGE> 5
(e) the conviction of Executive of, or the entry by
Executive of a plea of guilty or no contest to, any felony, any activity
constituting unlawful harassment, or any other malfeasance that could
materially impair the reputation of the Company or Executive; and
(f) the breach by Executive of any material provision in
this Agreement, which is not cured within sixty (60) days after written notice
from the Board of Directors.
1.8 DISABILITY. If, during the term of this Agreement, Executive,
in the reasonable judgment of the Board of Directors, has failed to perform his
duties under this Agreement on account of illness or physical or mental
incapacity, and such illness or incapacity continues for a period of six (6)
months, the Company shall have the right to terminate Executive's employment
hereunder by written notification to Executive.
1.9 DEATH. In the event of Executive's death during the term of
this Agreement, the date of termination shall be deemed to have occurred as of
the last day of the month during which his death occurs.
2. CONFIDENTIAL INFORMATION.
The Confidential Information and Invention Assignment Agreement entered
into by the Executive as of the date hereof and attached hereto as Exhibit A is
hereby incorporated by reference.
3. NON-COMPETITION AND NON-SOLICITATION
3.1 NON-COMPETITION. During the period commencing on the Closing
Date and continuing until the date twelve (12) months after the termination of
the Executive's employment with the Company (the "Noncompete Period"),
Executive shall not, directly or indirectly, provide any service (as an
employee, consultant or otherwise), support, product, or technology to any
person or entity, residing or located in the states or provinces of North
America and the countries of Europe, if such service, support, product or
technology involves or relates to, in any material respect, the business of the
Company as conducted during the term of Executive's employment (each a
"Restricted Business"). The Company and the Executive agree that these
limitations as to time, geographical area, and scope of activity to be
restrained are reasonable and the limitations are necessary to protect the
goodwill or other business interests of the Company.
3.2 NON-SOLICITATION. Executive further agrees that during the
Noncompete Period, he will not:
(a) directly or indirectly, personally or through others,
encourage, induce, attempt to induce, solicit or attempt to solicit (on
Executive's own behalf or on behalf of any other person or entity) the
employment of (i) any employee of the Company or any of the Company's affiliates
or (ii) any person who was within the previous twelve (12) months an employee
of the Company or any of the Company's affiliates;
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<PAGE> 6
(b) directly or indirectly, personally or through others,
approach, contact, solicit, advise or do (or attempt to do) business with, or
otherwise interfere with the relationship of the Company or any of the
Company's affiliates with, any person or entity who is, was or is reasonably
anticipated to become a customer or client of the Company or any of the
Company's affiliates with respect to any Restricted Business.
3.3 SEPARATE COVENANTS. The covenants contained in Section 3.2(a)
and (b) above shall be each construed as a series of separate covenants, one
for each county, city, state and country of any geographic area where any
business is presently carried on by the Company. Except for geographic
coverage, each such separate covenant shall be identical in terms to the
covenant contained in Section 3.2(a). If, in any judicial proceeding, a court
refuses to enforce any of such separate covenants (or any part thereof), then
such unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate covenants
(or portions thereof) to be enforced. In the event that the provisions of this
Section 3 are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, geographic or scope limitations, as the case may be, permitted by
applicable laws.
4. MISCELLANEOUS PROVISIONS.
4.1 SURRENDER OF REWARDS AND PROPERTY. At such time as Executive no
longer serves as an Executive of the Company, Executive shall deliver promptly
to the Company (a) all records, manuals, books, blank forms, documents,
letters, memoranda, notes, notebooks, reports, data, tables, calculations or
copies thereof in his possession or under his control which are the property of
the Company or which relate in any way to the business, products, practices or
techniques of the Company, and (b) all other property and Confidential
Information of the Company in his possession or under his control, including
all documents which contain any Confidential Information of the Company.
4.2 INDEPENDENCE OF OBLIGATIONS. The covenants of Executive set
forth in this Agreement shall be construed as independent of any other
agreement between Executive, on the one hand, and the Company, on the other.
The existence of any claim or cause of action by Executive against the Company
shall not constitute a defense to the enforcement of such covenants against
Executive.
4.3 SPECIFIC PERFORMANCE. Executive agrees that in the event of
any breach or threatened breach by Executive of any covenant, obligation or
other provision contained in this Agreement, the Company shall be entitled (in
addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) injunction
restraining such breach or threatened breach.
4.4 NON-EXCLUSIVITY. The rights and remedies of the Company
hereunder are not exclusive of or limited by any other rights or remedies which
the Company may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of the Company hereunder,
and the obligations and liabilities of Executive hereunder, are in addition to
their respective rights, remedies, obligations and liabilities under the law of
unfair competition, misappropriation of trade secrets and the like.
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<PAGE> 7
4.5 INDEMNIFICATION. Without in any way limiting any of the rights
or remedies otherwise available to the Company, Executive shall hold harmless
and indemnify the Company from and against, and shall compensate and reimburse
the Company from, any loss, damage, injury, decline in value, lost opportunity,
liability, exposure, claim, demand, settlement, judgment, award, fine, penalty,
tax, fee (including reasonable attorneys' fees) charge, cost (including costs
of investigation) or expense of any nature (collectively, the "Damages") which
are directly or indirectly suffered or incurred at any time by the Company, or
to which the Company otherwise becomes subject (regardless of whether or not
such Damages relate to a third-party claim) and that arise from or are directly
or indirectly connected with, any breach of any covenant or obligation of
Executive contained herein.
4.6 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and
shall be addressed (i) if to Executive at his address as set forth herein, and
(ii) if to the Company, at the address of its principal corporate offices
(attention: Secretary), or at such other address as a party may designate by
ten (10) days' advance written notice to the other party pursuant to the
provisions above.
4.7 SEVERABILITY. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under any other circumstances and in such
jurisdiction shall not affect the validity or enforceability of such provision
or part thereof under any other circumstances or in any other jurisdiction and
(c) such invalidity of enforceability of such provision or part thereof shall
not affect the validity or enforceability of the remainder of such provision or
the validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
4.8 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all by, the laws of the State of Texas (without giving
effect to principles of conflicts of laws).
4.9 WAIVER. No failure on the part of either party to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of either party in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. Neither party shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is
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<PAGE> 8
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
4.10 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
4.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
4.12 FURTHER ASSURANCES. Each party hereto shall execute and/or
cause to be delivered to the other party hereto such instruments and other
documents and shall take such other actions as such other party may reasonably
request to effectuate the intent and purposes of this Agreement.
4.13 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof and thereof
and supersedes all prior agreements and understandings between the parties
(including any prior agreements or understandings between Executive and any
subsidiary of the Company) relating to the subject matter hereof and thereof,
including without limitation the right to employment, employment compensation,
severance and other compensation upon termination of employment and rights to
acquire securities of the Company or any subsidiary which Executive may have to
acquire securities of the Company, provided only that this Agreement shall not
affect the Company's rights under the Amended and Restated Stockholders
Agreement of the Company dated June 25, 1996, which shall continue in full
force and effect.
4.14 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of the Company and Executive.
4.15 ASSIGNMENT. This Agreement and all rights and obligations of
Executive hereunder are personal to Executive and may not be transferred or
assigned by Executive at any time. The Company may, assign its rights under
this Agreement to any entity that assumes the Company's obligations hereunder
in connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
4.16 BINDING NATURE. Subject to Section 4.15, this Agreement will be
binding upon and inure to the benefit of the Company and its successors and
assigns and Executive and his representatives, executors, administrators,
estate, heirs, successors and assigns.
4.17 ARBITRATION. Any disputes under this Agreement between the
parties hereto shall be settled by arbitration in Dallas, Texas under the
auspices of, and in accordance with the rules of, the American Arbitration
Association, by an arbitrator who is mutually agreeable to the parties hereto,
or, if the Company and Executive cannot agree on the selection of the
arbitrator, then before three arbitrators, one of which shall be appointed by
Executive, one of which shall be appointed by the Company, and the third of
which shall be chosen by the American Arbitration Association (such arbitrator
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<PAGE> 9
or arbitrators hereinafter referred to as the "Arbitrator"). The decision in
such arbitration shall be final and conclusive on the parties and judgment upon
such decision may be entered in any court having jurisdiction thereof. The
parties hereby agree that the Arbitrator shall be empowered to enter an
equitable decree mandating specific enforcement of the terms of this Agreement.
The Company and Executive shall share equally all expenses of the Arbitrator
incurred in any arbitration hereunder; provided, however, that the Company or
Executive, as the case may be, shall bear all expenses of the Arbitrator and
all of the legal fees and out-of-pocket expenses of the other party if the
Arbitrator determines that the claim or position of such party was without
reasonable foundation. Executive hereby consents to personal jurisdiction of
the state and federal courts located in the State of Texas for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
4.18 SURVIVAL. The provisions of Sections 2, 3 and 4 hereof shall
survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PEGASUS SYSTEMS, INC.
By: JOHN W. BIGGS
-----------------------------
Name: John W. Biggs
---------------------------
Title: Chairman
--------------------------
EXECUTIVE
JOHN F. DAVIS, III
---------------------------------
John F. Davis, III
Address: 6043 Park Ln.
------------------------
Dallas, Tx 75225
---------------------------------
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<PAGE> 1
EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is being entered into
as of June 25, 1996 (the "Closing Date") by and between Pegasus Systems, Inc.,
a Delaware corporation (the "Company"), and Joseph W. Nicholson ("Executive").
RECITALS
A. Executive has served as Chief Information Officer of the
Company since July 1995.
B. Pursuant to a Series A Preferred Stock Purchase Agreement,
dated as of the Closing Date, by and among the Company, and the entities listed
on Exhibit A thereto (the "Purchasers"), the Purchasers are purchasing certain
shares of Series A Preferred Stock, par value $0.01 per share, of the Company
(the "Purchase").
C. The Purchasers have required, as a condition to consummating
the Purchase, that Executive execute and deliver this Agreement.
AGREEMENT
In order to induce the Purchasers to consummate the Purchase, and in
further consideration of the mutual covenants and agreements contained herein,
the parties agree as follows:
1. EMPLOYMENT
1.1 TERM; DUTIES.
(a) TERM. Subject to Section 1.6 below, Executive agrees to serve
as an employee of the Company during the period commencing on the Closing Date
and ending on the date four (4) years from the Closing Date, subject to
automatic one year annual renewals if neither party has provided the other with
a written notice expressing an intent to terminate the Executive's employment
with the Company 60 days prior to the beginning of such renewal period (the
"Employment Term").
(b) DUTIES. During the Employment Term, Executive shall serve as
the Chief Information Officer of the Company and in such capacity shall have
such responsibilities and perform such duties as the Chief Executive Officer or
the Company's Board of Directors may specify from time to time consistent with
such position. Executive agrees to serve the Company faithfully and to the best
of his ability, and to devote substantially all of his working time, attention
and efforts during the Employment Term to the business and affairs of the
Company. Executive shall not serve as a
<PAGE> 2
director, employee, consultant or advisor to any other corporation (other than
the Company's affiliates) or other business enterprise without the prior written
consent of the Company; provided, however, that Executive may serve in any
capacity with any civic, educational or charitable organization or any trade
association without the approval of the Board, so long as such activities do
not interfere with his duties and obligations under this Agreement. Executive
represents and warrants to the Company that he is under no contractual
commitments inconsistent with his obligations set forth in this Agreement.
1.2 COMPENSATION. In consideration for all services to be
performed under this Agreement, Executive shall receive the following
compensation:
(a) SALARY. Executive shall be paid a base salary at a rate
of not less than $14,583 per month, subject to increase annually at the
discretion of the Compensation Committee of the Board of Directors and payable
at such times as other executives of the Company receive their regular salary
payments (the "Base Salary").
(b) BONUS PROGRAM. The Executive will be eligible to
receive annual bonus payments in addition to the Base Salary. Such annual bonus
shall be determined by the Compensation Committee in its discretion based on
achievement of performance objectives established by the Compensation Committee
of the Board of Directors from time to time.
(c) OPTION. The Company shall grant to Executive an option
(the "Option") (or, at Executive's election, a stock purchase right to purchase
shares of Common Stock of the Company (the "Common Stock") for a total of
112,500 shares of Common Stock) at an exercise price of $2.68 per share.
Subject to Section 1.6(b)(ii) below, such Option will vest 1/4 on the first
anniversary of the Closing Date and 1/48 after each subsequent month of
employment, so that such Option would be fully vested four (4) years after the
Closing Date based on continued employment.
(d) AUTOMOBILE ALLOWANCE. The Company agrees to pay
Executive an automobile allowance of up to $500 per month.
(e) LIFE INSURANCE. To the extent commercially
practicable, the Company shall maintain life insurance with respect to
Executive, in the amount of $1,333,000 with the Company as beneficiary and
$667,000 with Executive's estate as beneficiary.
The Company shall be entitled to withhold from the compensation
payments otherwise required to be made to Executive such amounts as may be
required under applicable tax laws and other applicable legal requirements.
1.3 OTHER BENEFITS. The Company shall provide to Executive, during
the Employment Term, such other benefits (including vacation) as the Company
makes generally available to its other employees and makes generally available
to its executives during the Employment Term, subject to Executive's
satisfaction of the respective eligibility requirements for such benefits.
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<PAGE> 3
1.4 NO OTHER COMPENSATION. Executive acknowledges and agrees that
he shall not be entitled to receive from the Company or any other affiliate of
the Company, including but not limited to, The Hotel Industry Switch Company,
The Hotel Clearing Corporation, the Hotel Clearing Corporation (U.K.) and
TravelWeb, Inc. any salary, bonus or other compensation or benefit of any
nature (whether relating to any period prior to the Closing Date or relating to
any period after the Closing Date) except as expressly provided in Sections 1.2
and 1.3 above. Executive represents and warrants to the Company that he is not
aware of any claims or rights against the Company arising directly or
indirectly from his past employment with the Company, and Executive hereby
releases and discharges the Company and its affiliates from all claims, rights,
causes of action, demands and obligations arising directly or indirectly from
his past employment with the Company.
1.5 EXPENSES. Executive shall be entitled to reimbursement from the
Company for reasonable out-of-pocket business expenses reasonably incurred by
Executive during the Employment Term in the performance of Executive's duties
under this Agreement, in accordance with the Company policies in effect from
time to time; provided, however, that the Company shall not be required to
reimburse Executive for any such expenses unless: (a) Executive presents
vouchers and receipts indicating in reasonable detail the amount and business
purpose of each of such expenses; and (b) Executive otherwise complies with the
Company's reimbursement policies established from time to time and in effect
during the Employment Term.
1.6 TERMINATION.
(a) Executive and the Company acknowledge and agree that either the
Company or Executive shall have the right to terminate Executive's employment
at any time during the Employment Term with or without Cause (as defined in
Section 1.7), by delivering written notice of termination to the other thirty
(30) days prior to the date of termination. Upon any such termination of this
Agreement, Executive's employment with the Company shall terminate and, except
as provided in Section 1.6(b) or 1.6(c) below, as applicable, the Company shall
have no further monetary obligation or other obligation of any nature to
Executive under this Agreement or with respect to his employment or the
termination of his employment (except as expressly required by applicable law).
(b) If (i) the Company terminates this Agreement without Cause (as
defined in Section 1.7 below) during the Employment Term, (ii) Executive
satisfies all of his obligations relating to the termination of his employment
under this Agreement as specified in Sections 2, 3 and 4.1 hereof), and (iii)
Executive executes and delivers to the Company a general release of liability
(satisfactory in form and substance to the Company) in favor of the Company,
then so long as Executive does not breach Section 2, 3 or 4.1 hereof.
(A) The Company shall pay to Executive the Base Salary
referred to in Section 1.2(a) above for a period of twelve (12) months
following the date of termination, payable over such twelve-month period
at such times as executives of the Company receive their regular salary
payments;
-3-
<PAGE> 4
(B) Vesting of the Option shall accelerate so that (i) if
termination of employment occurs prior to the date being three (3) years
and one (1) month after the Closing Date, Executive's Option shall vest
for an additional 28,125 shares of Common Stock (in addition to shares
vested as of the date of termination) or (ii) if termination of
employment occurs on or after the date being three (3) years and one (1)
month after the Closing Date, Executive's Option shall fully vest; and
(C) The Company shall pay to Executive all accrued salary, any
benefits under any plans of the Company in which Executive is a
participant to the full extent of Executive's rights under such plans
and any appropriate out-of-pocket business expense reimbursements.
(c) If this Agreement is terminated other than pursuant to Section
1.6(b), including voluntary termination, termination by the Company with Cause,
or by reason of death or disability, then so long as Executive does not breach
Section 2, 3 or 4.1 hereof, Executive shall be entitled to payment of all
accrued salary, vesting of the Option through the date of determination only,
any further benefits under any plans of the Company in which Executive is a
participant to the full extent of Executive's rights under such plans through
the date of termination only and any appropriate out-of-pocket business expense
reimbursements.
(d) The termination of this Agreement pursuant to this Section 1.6
or otherwise shall not limit or otherwise affect any of Executive's obligations
under Sections 2, 3, and 4.1 hereof, which obligations shall survive any such
termination.
(e) Executive shall be entitled to no benefits, compensation or
other payments or rights upon termination of employment except as expressly set
forth under Section 1.6(b), 1.6(c) or 1.6(d), as applicable; provided, only,
that to the extent the Consolidated Omnibus Budget Reconciliation Act of 1985
(""COBRA'') shall be applicable to the Company, Executive may be eligible
following termination of employment to continue to receive group health plan
benefits pursuant to COBRA by making the appropriate election and payments.
1.7 DEFINITION OF "CAUSE." Executive's employment with the Company
shall be deemed to have been terminated for "Cause" if such employment is
terminated due to:
(a) habitual failure to report to work, which is not cured within
sixty (60) days after written notice from the Board of Directors;
(b) habitual substance abuse, which is not cured within sixty (60)
days after written notice from the Board of Directors;
(c) material breach of Executive's fiduciary duty to the Company or
its affiliates, including without limitation, misappropriation of corporate
assets, self dealing and violation of any noncompetition agreement or any
confidential information and assignment agreement;
-4-
<PAGE> 5
(d) any intentional misconduct, fraud or bad faith on the part of
Executive in the performance of his duties as an employee of the Company;
(e) the conviction of Executive of, or the entry by Executive of a
plea of guilty or no contest to, any felony, any activity constituting unlawful
harassment, or any other malfeasance that could materially impair the
reputation of the Company or Executive; and
(f) the breach by Executive of any material provision in this
Agreement, which is not cured within sixty (60) days after written notice from
the Board of Directors.
1.8 DISABILITY. If, during the term of this Agreement, Executive,
in the reasonable judgment of the Board of Directors, has failed to perform his
duties under this Agreement on account of illness or physical or mental
incapacity, and such illness or incapacity continues for a period of six (6)
months, the Company shall have the right to terminate Executive's employment
hereunder by written notification to Executive.
1.9 DEATH. In the event of Executive's death during the term of
this Agreement, the date of termination shall be deemed to have occurred as of
the last day of the month during which his death occurs.
2. CONFIDENTIAL INFORMATION
The Confidential Information and Invention Assignment Agreement entered
into by the Executive as of the date hereof and attached hereto as Exhibit A is
hereby incorporated by reference.
3. NON-COMPETITION AND NON-SOLICITATION
3.1 NON-COMPETITION. During the period commencing on the Closing
Date and continuing until the date twelve (12) months after the termination of
the Executive's employment with the Company (the "Noncompete Period"), Executive
shall not, directly or indirectly, provide any service (as an employee,
consultant or otherwise), support, product, or technology to any person or
entity residing or located in the states or provinces of North America and the
countries of Europe, if such service, support, product or technology involves or
relates to, in any material respect, the business of the Company as conducted
during the term of Executive's employment (each, a "Restricted Business"). The
Company and Executive agree that these limitations as to time, geographical
area, and scope of activity to be restrained are reasonable and the limitations
are necessary to protect the goodwill or other business interests of the
Company.
3.2 NON-SOLICITATION. Executive further agrees that during the
Noncompete Period, he will not:
(a) directly or indirectly, personally or through others,
encourage, induced, attempt to induce, solicit or attempt to solicit (on
Executive's own behalf or on behalf of any other person or entity) the
employment of (i) any employee of the Company or any of the Company's
affiliates or
-5-
<PAGE> 6
(ii) any person who was within the previous twelve (12) months an employee of
the Company or any of the Company's affiliates;
(b) directly or indirectly, personally or through others, approach,
contact, solicit, advise or do (or attempt to do) business with, or otherwise
interfere with the relationship of the Company or any of the Company's
affiliates with, any person or entity who is, was or is reasonably anticipated
to become a customer or client of the Company or any of Company's affiliates
with respect to any Restricted Business.
3.3 SEPARATE COVENANTS. The covenants contained in Section 3.2(a)
and (b) above shall be each construed as a series of separate covenants, one
for each country, city, state and country of any geographic area where any
business is presently carried on by the Company. Except for geographic
coverage, each such separate covenant shall be identical in terms to the
covenant contained in Section 3.2(a). If, in any judicial proceeding, a court
refuses to enforce any of such separate covenants (or any part thereof), then
such unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate covenants
(or portions thereof) to be enforced. In the event that the provisions of this
Section 3 are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, geographic or scope limitations, as the case may be, permitted by
applicable laws.
4. MISCELLANEOUS PROVISIONS.
4.1 SURRENDER OF REWARDS AND PROPERTY. At such time as Executive
no longer serves as an Executive of the Company, Executive shall deliver
promptly to the Company(a) all records, manuals, books, blank forms, documents,
letters, memoranda, notes, notebooks, reports, data, tables, calculations or
copies thereof in his possession or under his control which are the property of
the Company, and (b) all other property and Confidential Information of the
Company in his possession or under his control, including all documents which
contain any Confidential Information of the Company.
4.2 INDEPENDENCE OF OBLIGATIONS. The covenants of Executive set
forth in this Agreement shall be construed as independent of any other
agreement or arrangement between Executive, on the one hand, and the Company,
on the other. The existence of any claim or cause of action by Executive
against the Company shall not constitute a defense to the enforcement of such
covenants against Executive.
4.3 SPECIFIC PERFORMANCE. Executive agrees that in the event of
any breach or threatened breach by Executive of any covenant, obligation or
other provision contained in this Agreement, the Company shall be entitled (in
addition to any other remedy that may be available to it) to (a) a decree or
order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b)
injunction restraining such breach or threatened breach.
-6-
<PAGE> 7
4.4 NON-EXCLUSIVITY. The rights and remedies of the Company
hereunder are not exclusive of or limited by any other rights or remedies which
the Company may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of the Company hereunder,
and the obligations and liabilities of Executive hereunder, are in addition to
their respective rights, remedies, obligations and liabilities under the law of
unfair competition, misappropriation of trade secrets and the like.
4.5 INDEMNIFICATION. Without in any way limiting any of the rights
or remedies otherwise available to the Company, Executive shall hold harmless
and indemnify the Company from and against, and shall compensate and reimburse
the Company from any loss, damage, injury, decline in value, lost opportunity,
liability, exposure, claim, demand, settlement, judgment, award, fine, penalty,
tax, fee (including reasonable attorneys' fees) charge, cost (including costs
of investigation) or expense of any nature (collectively, the "Damages") which
are directly or indirectly suffered or incurred at any time by the Company, or
to which the Company otherwise becomes subject (regardless of whether or not
such Damages relate to a third-party claim) and that arise from or are directly
or indirectly connected with, any breach of any covenant or obligation of
Executive contained herein.
4.6 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt of, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and
shall be addressed (i) if to Executive at his address as set forth herein, and
(ii) if to the Company, at the address of its principal corporate offices
(attention: Secretary), or at such other address as a party may designate by
ten (10) days' advance written notice to the other party pursuant to the
provisions above.
4.7 SEVERABILITY. If any provision of this Agreement or any part
of any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall be affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction and (c) such
invalidity of enforceability of such provision or part thereof shall not affect
the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
-7-
<PAGE> 8
4.8 GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed in all by, the laws of the State of Texas (without giving
effect to principles of conflicts of laws).
4.9 WAIVER. No failure on the part of either party to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the
part of either party in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. Neither party shall be deemed to have waived
any claim arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such party; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it
is given.
4.10 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
4.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
4.12 FURTHER ASSURANCES. Each party hereto shall execute and/or
cause to be delivered to the other party hereto such instruments and other
documents and shall take such other actions as such other party may reasonably
request to effectuate the intent and purposes of this Agreement.
4.13 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof and thereof
and supersedes all prior agreements and understandings between the parties
(including any prior agreements or understandings between Executive and any
subsidiary of the Company) relating to the subject matter hereof and thereof,
including without limitation the right to employment, employment compensation,
severance and other compensation upon termination of employment and rights to
acquire securities of the Company or any subsidiary which Executive may have to
acquire securities of the Company, provided only that this Agreement shall not
affect the Company's rights under the Amended and Restated Stockholders
Agreement of the Company dated June 25, 1996, which shall constitute in full
force and effect.
4.14 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of the Company and Executive.
-8-
<PAGE> 9
4.15 ASSIGNMENT. This Agreement and all rights and obligations of
Executive hereunder are personal to Executive and may not be transferred or
assigned by Executive at any time. The Company may, assign its rights under
this Agreement to any entity that assumes the Company's obligations hereunder
in connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
4.16 BINDING NATURE. Subject to Section 4.15, this Agreement will
be binding upon and inure to the benefit of the Company and its successors and
assigns and Executive and his representatives, executors, administrators,
estate, heirs, successors and assigns.
4.17 ARBITRATION. Any disputes under this Agreement between the
parties hereto shall be settled by arbitration in Dallas, Texas under the
auspices of, and in accordance with the rules of, the American Arbitration
Association, by an arbitrator who is mutually agreeable to the parties hereto,
or, if the Company and Executive cannot agree on the selection of the
arbitrator, then before three arbitrators, one of which shall be appointed by
Executive, one of which shall be appointed by the Company, and the third of
which shall be chosen by the American Arbitration Association (such arbitrator
or arbitrators hereinafter referred to as the "Arbitrator"). The decision in
such arbitration shall be final and conclusive on the parties and judgement
upon such decision may be entered in any court having jurisdiction thereof.
The parties hereby agree that the Arbitrator shall be empowered to enter an
equitable decree mandating specific enforcement of the terms of this Agreement.
The Company and Executive shall share equally all expenses of the Arbitrator
incurred in any arbitration hereunder; provided, however, that the Company or
Executive, as the case may be, shall bear all expenses of the Arbitrator and
all of the legal fees and out-of-pocket expenses of the other party if the
Arbitrator determines that the claim or position of such party was without
reasonable foundation. Executive hereby consents to personal jurisdiction of
the state and federal courts located in the State of Texas for any action or
proceeding arising from or relating to this Agreement or relating to any
arbitration in which the parties are participants.
4.18 SURVIVAL. The provisions of Sections 2, 3 and 4 hereof shall
survive termination of this Agreement.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III
-----------------------------
Name: John F. Davis, III
----------------------------
Title: President
---------------------------
/s/ JOSEPH W. NICHOLSON
---------------------------------
Name: Joseph W. Nicholson
Address:
-------------------------
---------------------------------
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<PAGE> 1
EXHIBIT 10.3
[PEGASUS SYSTEMS INC. LETTERHEAD]
August 29, 1996
Mr. Jerome L. Galant
4444 Gloster Road
Dallas, TX 75220
Dear Jerry,
I am pleased to extend to you an offer of employment as Chief Financial Officer
of Pegasus Systems, Inc. The terms of your employment are as follows:
Effective: No later than October 1, 1996
Salary: $12,083.33 per month
Bonus potential up to 30%
Stock: 40,000 shares of the employee stock option plan at a
strike price of $2.68 per share
Vacation: Two weeks accrued on start date
Comprehensive insurance and benefit program
If you are in agreement with the above, please sign below and return this letter
to me.
We look forward to having you on board!
Best regards,
/s/ JOHN F. DAVIS, III
John F. Davis, III
CEO
- ---------------------- -------------------------
Jerome L. Galant Date
Please note that Pegasus Systems, Inc. is an employment at-will organization
and the above does not constitute an employment contract.
<PAGE> 1
[PEGASUS LETTERHEAD]
April 18, 1997
Michael R. Donahue
2110 Walters
Northbrook, Ill. 60062
Dear Mike,
I am pleased to extend to you an offer of employment as Chief Marketing Officer
of Pegasus Systems, Inc. The terms of your employment are as follows:
Base Salary: $13,750 per month
Bonus: Up to 40% of annual base salary on the following basis:
- 15% if company meets forecast
- 10% based on mutually agreed goals
- three quarters of one percent for each 1% company exceeds
forecast up to 15% of your base salary
Equity: 40,000 shares at $7.00 per share, vesting over four years.
The shares vest at 25% after the first twelve months, and
2,500 shares per quarter thereafter.
- Participation in future employee stock option plans as
approved by the Compensation Committee
Severance: Through the first 12 months of employment, the equivalent of
6 months salary; the second 12 months the equivalent of
9 months salary, and a full year after three years of
service.
Benefits: - Full medical and dental coverage paid by Pegasus; 50%
family coverage paid by Pegasus.
- 3 weeks vacation
- participation in the Pegasus 401(k) plan, Pegasus matching
up to 5% of base salary up to the maximum allowed by law.
- Country club membership, up to $250.00 per month.
Participation in a corporate sponsored membership, if
Pegasus chooses to purchase a corporate membership.
- Automobile allowance of $600. per month.
<PAGE> 2
Michael Donahue
April 18, 1997
Page Two
Relocation: - 90 days temporary housing
- One months salary as "settling in" allowance
- $30,000 to cover closing and other costs
- transportation and actual costs of the move
- two house hunting trips for spouse
Effective date: No later than May 15, 1997
If you are in agreement with the above, please sign below and return the letter
to me.
I look forward to having you on board!
Sincerely,
/s/ JOHN F. DAVIS, III
John F. Davis, III
Chief Executive Officer
- ---------------------------------
Michael Donahue
cc: Paul Travers
Jerry Galant
Chuck Ollinger
<PAGE> 1
EXHIBIT 10.5
PEGASUS SYSTEMS, INC.
AMENDED 1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and any Parent or Subsidiary and to promote the success of the
Company's business. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at
the time of grant of an option and subject to the applicable provisions of
Section 422 of the Code and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or the Compensation Committee
appointed by the Board.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee appointed by the Board of
Directors.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Pegasus Systems, Inc.
(g) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless
<PAGE> 2
reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Optioned Stock" means the Common Stock subject to an Option.
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(q) "Optionee" means an Employee or Consultant who receives an Option.
(r) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(s) "Permitted Transferee" means a member of a holder's immediate family,
trusts for the benefit of such immediate family members, and partnerships in
which the holder and such immediate family members are the only partners,
provided that no consideration is provided for the transfer.
(t) "Plan" means this Amended 1996 Stock Option Plan.
(u) "Section 16(b)" means Section 16(b) of the Securities Exchange Act of
1934, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 975,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program
authorized by the Administrator, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the Plan (unless
the Plan has terminated); provided, however, that Shares that have actually
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution under the Plan, except that if
unvested Shares are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or the Compensation Committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the Company becomes
Subject to the Exchange Act. With respect to Option grants made to Employees or
Consultants, the Plan shall be administered by (A) the Board or (B) the
Compensation Committee designated by the Board, which committee shall be
constituted to satisfy the legal requirements, if any, relating to the
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administration of incentive stock option plans of state corporate and
securities laws, of the Code, and of any stock exchange or national market
system upon which the Common Stock is then listed or traded (the "Applicable
Laws"). Once appointed, such Committee shall serve in its designated capacity
until otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the Plan and
approval of any relevant authorities, including the approval, if required, of
any stock exchange or national market system upon which the Common Stock is
then listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options may from
time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder. Such terms and conditions
may include, but are not limited to, the exercise price, the time or times when
Options may be exercised, any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or the
Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(e) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the purchase of
unvested Shares, subject to such terms and conditions as the Administrator may
determine; and
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(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to
such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect to
the continuation of the Optionee's employment or consulting relationship with
the Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the Optionee's employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders
of the Company, as described in Section 18 of the Plan. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 14
of the Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
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8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per share
exercise price shall be determined by the Administrator but shall, in no event,
be less than fifty percent (50%) of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
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An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three (3) months following the Optionee's termination. In the
case of an Incentive Stock Option, such period of time for exercise shall not
exceed three (3) months from the date of termination. If, on the date of
termination, the Optionee is not entitled to exercise the Optionee's entire
Option, the Shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his
or her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in status
from Consultant to Employee or Employee to Consultant, an Optionee's Continuous
Status as an Employee or Consultant shall not automatically terminate solely as
a result of such change in status. However, in such event, an Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option
three months and one day following such change of status.
(c) Disability of Optionee. In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his or her
Disability, the Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of his or her Option as set forth in the Option Agreement), exercise the Option
to the extent the Optionee was otherwise entitled to exercise it on the date of
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such termination. To the extent that the Optionee is not entitled to exercise
the Option on the date of termination, or if the Optionee does not exercise the
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who has acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to exercise
the Option at the date of death. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquires the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to
the Optionee at the time that such offer is made.
(f) Rule 16b-3. Options granted to persons subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 10. When an Optionee incurs tax liability in
connection with an Option which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
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(c) all elections shall be subject to the consent or disapproval of the
Administrator.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
11. Transferability of Options and Rights. Incentive Stock Options granted
under the Plan shall not be transferable otherwise than by will or the laws of
descent and distribution, or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder. Incentive Stock Options shall
be exercisable during the lifetime of the Employee only by the Employee or by
the Employee's guardian or legal representative (unless such exercise would
disqualify it as an Incentive Stock Option). Unless the Committee otherwise
provides in an agreement regarding the award of non-qualified stock options or
rights (not granted in connection with an Incentive Stock Option),
non-qualified stock options or rights (not granted in connection with Incentive
Stock Options) may be transferred by the holder to Permitted Transferees,
provided that there cannot be any consideration for the transfer.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide
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for an Optionee to have the right to exercise his or her Option until ten (10)
days prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Acquisition Events
(1) Consequences of Acquisition Events. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Options: (i)
provide that outstanding Options shall be assumed or equivalent Options shall
be substituted by the acquiring or succeeding entity (or an affiliate thereof),
provided that any such Options substituted for Incentive Stock Options shall
satisfy, in the determination of the Board, the requirements of Section 424(a)
of the Code; (ii) upon written notice to the Optionees, provide that all then
unexercised Options will become exercisable in full as of a specified date (the
"Acceleration Date") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Optionees between the Acceleration Date and the
consummation of the Acquisition Event or (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price") provide that all
outstanding Options shall terminate upon consummation of such Acquisition Event
and each Optionee shall receive, in exchange therefor, a cash payment equal to
the amount (if any) by which (A) the Acquisition Price multiplied by the number
of shares of Common Stock subject to such outstanding Options (whether or not
then exercisable), exceeds (B) the aggregate exercise price of such Options.
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less
than 60% of the combined voting power of the voting securities of the Company
or such surviving or acquiring entity outstanding immediately after such merger
or consolidation; (b) any sale of all or substantially all of the assets of the
Company; (c) the complete liquidation of the Company; or (d) the acquisition of
"beneficial ownership" (as defined in Rule 13d- 3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
"person", as such term is used in Sections 13 (d) and 14 (d) of the Exchange
Act other than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company.
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(2) Assumption of Options Upon Certain Events. The Board may grant
options under the Plan in substitution for stock and stock-based awards held by
employees of another entity who become Employees as a result of a merger or
consolidation of the employing entity with the Company or the acquisition by
the Company of property or stock of the employing entity. The substitute
options shall be granted on such terms and conditions as the Board considers
appropriate in the circumstances.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any stock exchange or national market system upon
which the Common Stock is then listed), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted, and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or national market
system upon which the Common Stock is then listed or traded, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
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16. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
18. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and
the rules of any stock exchange or national market system upon which the Common
Stock is then listed or traded.
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EXHIBIT 10.6
PEGASUS SYSTEMS, INC.
1997 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and any Parent or Subsidiary and to promote the
success of the Company's business. Options granted under the Plan may be
Incentive Stock Options or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code and the regulations promulgated
thereunder.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or the Compensation
Committee appointed by the Board.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Compensation Committee
appointed by the Board of Directors.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Pegasus Systems, Inc.
(g) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting or advisory services
and is compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company
registers any class of any equity security pursuant to the Exchange Act, the
term Consultant shall thereafter not include directors who are not compensated
for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship with the Company, any
Parent or Subsidiary is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of (i)
any leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave. For purposes of Incentive
Stock Options, no such leave may exceed 90 days, unless
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reemployment upon expiration of such leave is guaranteed by statute or
contract, including Company policies. If reemployment upon expiration of a
leave of absence approved by the Company is not so guaranteed, on the 181st day
of such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option.
(i) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(j) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(l) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for
the Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by
the Administrator.
(m) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the
Plan.
(p) "Optioned Stock" means the Common Stock subject to an
Option.
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(q) "Optionee" means an Employee or Consultant who
receives an Option.
(r) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Permitted Transferee" means a member of a holder's
immediate family, trusts for the benefit of such immediate family members, and
partnerships in which the holder and such immediate family members are the only
partners, provided that no consideration is provided for the transfer.
(t) "Plan" means this 1997 Stock Option Plan.
(u) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(v) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 375,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an option exchange
program authorized by the Administrator, the unpurchased Shares which were
subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated); provided, however, that Shares that have
actually been issued under the Plan shall not be returned to the Plan and shall
not become available for future distribution under the Plan, except that if
unvested Shares are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any,
upon which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or the Compensation Committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the
Company becomes Subject to the Exchange Act. With respect to Option grants
made to Employees or Consultants, the Plan shall be administered by (A) the
Board or (B) the Compensation Committee designated by the Board, which
committee shall be constituted to satisfy the legal requirements, if any,
relating to the
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<PAGE> 4
administration of incentive stock option plans of state corporate and
securities laws, of the Code, and of any stock exchange or national market
system upon which the Common Stock is then listed or traded (the "Applicable
Laws"). Once appointed, such Committee shall serve in its designated capacity
until otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions
of the Plan and approval of any relevant authorities, including the approval,
if required, of any stock exchange or national market system upon which the
Common Stock is then listed, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to
whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions may include, but are not limited to, the exercise price,
the time or times when Options may be exercised, any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or limitation regarding
any Option or the Shares relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under Section 9(e) instead of
Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options
for the purchase of unvested Shares, subject to such terms and conditions as
the Administrator may determine; and
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<PAGE> 5
(x) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right
with respect to the continuation of the Optionee's employment or consulting
relationship with the Company, nor shall it interfere in any way with the
Optionee's right or the Company's right to terminate the Optionee's employment
or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the stockholders of the Company, as described in Section 18 of the Plan. It
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that the term shall be no
more than ten (10) years from the date of grant thereof. However, in the case
of an Incentive Stock Option granted to an Optionee who, at the time the Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
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<PAGE> 6
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than
an Employee described in the preceding paragraph, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option,
the per share exercise price shall be determined by the Administrator but
shall, in no event, be less than fifty percent (50%) of the Fair Market Value
per Share on the date of grant.
(b) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option have been owned by the Optionee for
more than six months on the date of surrender and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option
and delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
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<PAGE> 7
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship.
Upon termination of an Optionee's Continuous Status as an Employee or
Consultant, other than upon the Optionee's death or Disability, the Optionee
may exercise his or her Option, but only within such period of time as is
specified in the Notice of Grant, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the absence of a specified time in the Notice of Grant, the Option shall
remain exercisable for three (3) months following the Optionee's termination.
In the case of an Incentive Stock Option, such period of time for exercise
shall not exceed three (3) months from the date of termination. If, on the
date of termination, the Optionee is not entitled to exercise the Optionee's
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
Notwithstanding the above, in the event of an Optionee's
change in status from Consultant to Employee or Employee to Consultant, an
Optionee's Continuous Status as an Employee or Consultant shall not
automatically terminate solely as a result of such change in status. However,
in such event, an Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option three months and one day following such change of
status.
(c) Disability of Optionee. In the event of termination
of an Optionee's Continuous Status as an Employee or Consultant as a result of
his or her Disability, the Optionee may, but only within twelve (12) months
from the date of such termination (and in no event later than the expiration
date of the term of his or her Option as set forth in the Option Agreement),
exercise the Option to the extent the Optionee was otherwise entitled to
exercise it on the date of
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<PAGE> 8
such termination. To the extent that the Optionee is not entitled to exercise
the Option on the date of termination, or if the Optionee does not exercise the
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who has acquired the right to exercise the Option by
bequest or inheritance, but only to the extent that the Optionee was entitled
to exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquires the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
(f) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At
the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this Section 10. When an Optionee incurs tax
liability in connection with an Option which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option that
number of Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the
applicable Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option as to which the election is made;
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<PAGE> 9
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but
such Optionee shall be unconditionally obligated to tender back to the Company
the proper number of Shares on the Tax Date.
11. Transferability of Options and Rights. Incentive Stock
Options granted under the Plan shall not be transferable otherwise than by will
or the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. Incentive
Stock Options shall be exercisable during the lifetime of the Employee only by
the Employee or by the Employee's guardian or legal representative (unless such
exercise would disqualify it as an Incentive Stock Option). Unless the
Committee otherwise provides in an agreement regarding the award of
non-qualified stock options or rights (not granted in connection with an
Incentive Stock Option), non-qualified stock options or rights (not granted in
connection with Incentive Stock Options) may be transferred by the holder to
Permitted Transferees, provided that there cannot be any consideration for the
transfer.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide
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<PAGE> 10
for an Optionee to have the right to exercise his or her Option until ten (10)
days prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option shall lapse as to
all such Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option will terminate immediately prior to the
consummation of such proposed action.
(c) Acquisition Events
(1) Consequences of Acquisition Events. Upon the
occurrence of an Acquisition Event (as defined below), or the execution by the
Company of any agreement with respect to an Acquisition Event, the Board shall
take any one or more of the following actions with respect to then outstanding
Options: (i) provide that outstanding Options shall be assumed or equivalent
Options shall be substituted by the acquiring or succeeding entity (or an
affiliate thereof), provided that any such Options substituted for Incentive
Stock Options shall satisfy, in the determination of the Board, the
requirements of Section 424(a) of the Code; (ii) upon written notice to the
Optionees, provide that all then unexercised Options will become exercisable in
full as of a specified date (the "Acceleration Date") prior to the Acquisition
Event and will terminate immediately prior to the consummation of such
Acquisition Event, except to the extent exercised by the Optionees between the
Acceleration Date and the consummation of the Acquisition Event or (iii) in the
event of an Acquisition Event under the terms of which holders of Common Stock
will receive upon consummation thereof a cash payment for each share of Common
Stock surrendered pursuant to such Acquisition Event (the "Acquisition Price")
provide that all outstanding Options shall terminate upon consummation of such
Acquisition Event and each Optionee shall receive, in exchange therefor, a cash
payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options.
An "Acquisition Event" shall mean: (a) any merger or consolidation
which results in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or acquiring entity)
less than 60% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after
such merger or consolidation; (b) any sale of all or substantially all of the
assets of the Company; (c) the complete liquidation of the Company; or (d) the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities (other than
through a merger or consolidation or an acquisition of securities directly from
the Company) by any "person", as such term is used in Sections 13 (d) and 14
(d) of the Exchange Act other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any entity
owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company.
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(2) Assumption of Options Upon Certain Events. The Board
may grant options under the Plan in substitution for stock and stock-based
awards held by employees of another entity who become Employees as a result of
a merger or consolidation of the employing entity with the Company or the
acquisition by the Company of property or stock of the employing entity. The
substitute options shall be granted on such terms and conditions as the Board
considers appropriate in the circumstances.
13. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law
or regulation, including the requirements of any stock exchange or national
market system upon which the Common Stock is then listed), the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such
a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted,
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or national
market system upon which the Common Stock is then listed or traded, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such
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<PAGE> 12
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
17. Agreements. Options shall be evidenced by written agreements
in such form as the Administrator shall approve from time to time.
18. Stockholder Approval. Continuance of the Plan shall be
subject to approval by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted. Such stockholder approval
shall be obtained in the degree and manner required under applicable state and
federal law and the rules of any stock exchange or national market system upon
which the Common Stock is then listed or traded.
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<PAGE> 13
PEGASUS SYSTEMS, INC.
1997 STOCK OPTION PLAN
NOTICE OF GRANT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Notice of Grant.
[Optionee's Name and Address]
- -----------------
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Stock Option
Agreement, as follows:
Grant Number
---------------------------
Date of Grant
---------------------------
Vesting Commencement Date
---------------------------
Exercise Price per Share $
---------------------------
Total Number of Shares Granted
---------------------------
Total Exercise Price $
---------------------------
Type of Option: Incentive Stock Option
----
Nonstatutory Stock Option
----
Term/Expiration Date:
---------------------------
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
-------------------------------
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<PAGE> 14
Termination Period:
This Option may be exercised for three (3) months after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or Disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.
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<PAGE> 15
PEGASUS SYSTEMS, INC.
1997 STOCK OPTION PLAN
OPTION AGREEMENT
1. Grant of Option. Pegasus Systems, Inc. (the "Company"),
hereby grants to the Optionee (the "Optionee") named in the Notice of Grant, an
option (the "Option") to purchase the total number of shares of Common Stock
(the "Shares") set forth in the Notice of Grant, at the exercise price per
share set forth in the Notice of Grant (the "Exercise Price") subject to the
terms, definitions and provisions of the 1997 Stock Option Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. However, if this Option is intended to
be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
2. Exercise of Option. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a
fraction of a Share.
(b) In the event of Optionee's death, disability
or other termination of the Optionee's Continuous Status as an Employee or
Consultant, the exercisability of the Option is governed by Sections 6, 7 and 8
below, subject to the limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in the
Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the Exercise Price. This Option shall be deemed
to be exercised upon receipt by the Company of such written notice accompanied
by the Exercise Price.
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<PAGE> 16
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange or national market
system upon which the Common Stock is then listed. Assuming such compliance,
for income tax purposes the Shares shall be considered transferred to the
Optionee on the date on which the Option is exercised with respect to such
Shares.
3. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
4. Lock-Up Period. Optionee hereby agrees that if so requested
by the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the
180-day period (or such longer period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act; provided, however, that such
restriction shall apply only to the first registration statement of the
Company to become effective under the Securities Act that includes securities
to be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such Market Standoff Period.
5. Method of Payment. Payment of the Exercise Price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the
Company which (A) in the case of Shares acquired pursuant to the exercise of a
Company option, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the Exercise Price of the Shares as to which the Option is
being exercised; or
(iv) to the extent authorized by the Company, delivery of
a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the Exercise Price.
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<PAGE> 17
6. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by
the Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
7. Termination of Relationship. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, or if Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.
8. Disability of Optionee. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of his or her Disability, Optionee
may, but only within twelve (12) months from the date of such termination (and
in no event later than the expiration date of the term of such Option as set
forth in the Notice of Grant) exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination. To the extent that
Optionee is not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
9. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option
at the date of death.
10. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
11. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) stockholders shall
apply to this Option.
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<PAGE> 18
12. Tax Consequences. Set forth below is a brief summary as of
the date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(i) Exercise of an ISO. If this Option qualifies as an
ISO, there will be no regular federal income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price will be treated as an
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to the alternative minimum tax in the year of exercise.
(ii) Exercise of an NSO. There may be a regular federal
income tax liability upon the exercise of an NSO. The Optionee will be treated
as having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price. If Optionee is an Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if
Shares are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal income tax purposes.
If Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to
the extent of the difference between the Exercise Price and the lesser of (1)
the Fair Market Value of the Shares on the date of exercise, or (2) the sale
price of the Shares.
(iv) Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may
be subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
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<PAGE> 19
Pegasus Systems, Inc.
By:
---------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1997 STOCK OPTION
PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY
RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY,
NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:
---------------------------- ----------------------------------
Optionee
Residence Address:
----------------------------------
----------------------------------
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<PAGE> 20
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration
of the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to
be irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
-------------------------------
Spouse of Optionee
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<PAGE> 21
EXHIBIT A
PEGASUS SYSTEMS, INC.
1997 STOCK OPTION PLAN
EXERCISE NOTICE
Pegasus Systems, Inc.
3811 Turtle Creek Boulevard
Suite 1100
Dallas, Texas 75219
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of Pegasus
Systems, Inc. (the "Company") under and pursuant to the 1997 Stock Option Plan,
as amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option
Agreement dated ________, 19___ (the "Stock Option Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Stock Option
Agreement and agrees to abide by and be bound by their terms and conditions.
3. Rights as Stockholder. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a stockholder until such time
as Optionee disposes of the Shares or the Company and/or its assignee(s)
exercises the Right of First Refusal hereunder. Upon such exercise, Optionee
shall have no further rights as a holder of the Shares so purchased except the
right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
4. Company's Right of First Refusal. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
<PAGE> 22
(a) Notice of Proposed Transfer. The Holder of the
Shares shall deliver to the Company a written notice (the "Notice") stating:
(i) the Holder's bona fide intention to sell or otherwise transfer such Shares;
(ii) the name of each proposed purchaser or other transferee (the "Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "Offered Price"), and the
Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time
within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price (the "Purchase
Price") for the Shares purchased by the Company or its assignee(s) under this
Section shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Administrator in good faith.
(d) Payment. Payment of the Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash, by check, by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale
or other transfer is consummated within 120 days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to
the contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death by
will or intestacy to the Optionee's immediate family or a trust for the benefit
of the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the
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<PAGE> 23
Shares so transferred subject to the provisions of this Section, and there
shall be no further transfer of such Shares except in accordance with the terms
of this Section.
(g) Termination of Right of First Refusal. The Right of
First Refusal shall terminate upon the closing of the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by state or
federal securities laws at the time of the issuance of the Shares:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR THE
ISSUER OF THE SHARES (THE "ISSUER") HAS RECEIVED AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE WITH THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THE SHARES
REPRESENTED HEREBY.
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<PAGE> 24
(b) Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
7. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
8. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to
the Administrator of the Plan, which shall review such dispute at its next
regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.
11. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the
Company the full Exercise Price for the Shares.
13. Lock-Up Period. Optionee hereby agrees that if so requested
by the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the
180-day period (or such
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<PAGE> 25
longer period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period.
14. Entire Agreement. The Plan, the Notice of Grant, and the
Stock Option Agreement are incorporated herein by reference. This Agreement,
the Plan, the Notice of Grant, the Stock Option Agreement and the Investment
Representation Statement (if applicable) constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements
of the Company and Optionee with respect to the subject matter hereof.
Submitted by: Accepted by:
OPTIONEE: Pegasus Systems, Inc.
By:
------------------------------
Its:
- --------------------------- -----------------------------
(Signature)
Address:
- ---------------------------
- ---------------------------
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<PAGE> 26
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY :
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. Optionee is acquiring these Securities for investment for
Optionee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under then applicable state or federal securities laws.
(c) Optionee is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject
<PAGE> 27
to the satisfaction of certain conditions. Rule 701 provides that if the
issuer qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the Securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Exchange Act); and, in the case
of an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A under the Securities
Act, or some other registration exemption will be required; and that,
notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of
the Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rules 144 or 701 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk. Optionee understands that no assurances can be given that any such other
registration exemption will be available in such event.
Signature of Optionee:
---------------------------------
Date: , 19
--------------------- ---
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<PAGE> 1
EXHIBIT 10.7
AMENDMENT TO
WORLD TRAVEL PAYMENT
TRAVEL AGENCY COMMISSION SETTLEMENT PROGRAM
CLIENT SERVICE AGREEMENT
This Amendment to the World Travel Payment Travel Agency Commission
Settlement Program Client Service Agreement dated as of June 19, 1993
("Amendment") between THE HOTEL CLEARING CORPORATION ("Client") and CITIBANK,
N.A. (NEW YORK) ("Citibank").
WITNESSETH:
WHEREAS, Citibank and Client entered into a WORLD TRAVEL PAYMENT
TRAVEL AGENCY COMMISSION SETTLEMENT PROGRAM CLIENT SERVICE AGREEMENT dated
December 9, 1991 (the "Service Agreement"); and
WHEREAS, certain hotel organizations that comprise the stockholders of
Client (collectively, the "Members") provide information to Client regarding
commission payments owed by the Members to travel industry suppliers outside of
the United States ("Non-domestic Payments") under the Members' individual
agreements with Client; and
WHEREAS, Client in turn transmits Member-provided information to
Citibank for processing through its Travel Agency Commission Settlement Program
(the "Program"); and
WHEREAS, Client and Citibank desire to expand the scope of
transactions governed by the terms of the Service Agreement and make certain
other changes to the Service Agreement; and
WHEREAS, in exchange for such changes to the Service Agreement,
Citibank is willing to make certain financial accommodations to Client,
provided that the Members enter into agreements with Citibank requiring minimum
levels of processing activity with respect to commission payments to travel
suppliers located within the United States ("Domestic Payments") to be supplied
by the Members ("Member Minimum Volume") to Citibank through Client
(collectively, the "Member Volume Agreements").
NOW, THEREFORE, in exchange for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties agree that
the Service Agreement is amended as follows:
1. Definitions. For purposes of this Amendment, the following
definitions shall apply:
(a) "HCC Minimum Volume" shall mean the minimum annual
volume of domestic Chargeable Transactions required to be
transmitted by Client to Citibank for processing pursuant to
the Service Agreement and this Amendment as provided in
Schedule A.
(b) "HCC Deficit" shall mean the negative difference, if
any, between the HCC Minimum Volume and the actual number of
domestic Chargeable Transactions transmitted by Client to
Citibank for processing pursuant to the Service Agreement and
this Amendment.
(c) "Member Deficit" shall mean the negative difference,
if any, between the Member Minimum Volume and the actual
number of domestic Chargeable Transactions transmitted by any
Member through Client for processing pursuant to the Service
Agreement and this Amendment.
1
<PAGE> 2
(d) "HCC Deficit Payment" shall mean the amount to be paid or
paid by Client to Citibank, in the event of an HCC Deficit, being
equal to the HCC Deficit multiplied by US sixteen cents (US $.16).
(e) "Member Deficit Payment" shall mean the amount to be paid or
paid by Member to Citibank, in the event of a Member Deficit, being
equal to the Member Deficit multiplied by US sixteen cents (US $.16).
(f) "Other Service Programs" shall mean those agreements
existing now or in the future between a Member and Citibank to process
Domestic Payments.
2. Commitment Period. The Commitment Period under the Service Agreement
is extended to December 31, 1998. Thereafter, the Commitment Period may be
renewed as provided in Section 15(h) of the Service Agreement. During such
Commitment Period and any renewal thereof, Client shall use Citibank as its
exclusive vendor for the processing of Commission Payments to travel agents
under contract with HCC, including both Domestic Payments and Non-domestic
Payments.
3. Remittance. The Exhibit "A" attached hereto shall supersede the
heretofore existing Exhibit "A" to the Service Agreement as of the date of this
Amendment. As of the date of this Amendment, Client shall pay Citibank
according to the terms of the attached Exhibit "A" for Domestic Payments and
Non-domestic Payments for which information is transmitted on or after the date
of this Amendment. Client shall pay Citibank according to the terms of Exhibit
"A" in effect prior to the date of this Amendment for Non-domestic Payments for
which information is transmitted prior to the date of this Amendment.
4. Special Services. Client may request, in writing, that Citibank
perform special programming, system changes, enhancements, developments,
customizations or special processing, provided, however, that Client shall be
responsible for all developmental and processing costs associated with any such
work. Client and Citibank shall negotiate in good faith and agree in writing
upon the price, schedule, payment and other terms for such work, provided,
however, that Citibank shall not be obligated to perform work that Citibank
deems to be impracticable or not in the best interests of the Program.
5. Minimum Volume.
(a) The start date for purposes of determining the number of
Chargeable Transactions to be processed by Citibank on behalf of
Client and its Members shall be the earlier of the first day Citibank
processes a Domestic Payment or November 1, 1993. Client agrees to
meet the HCC Minimum Volume set forth on Exhibit "A" hereto. Citibank
and HCC hereby agree to dedicate the personnel and time necessary to
perform their respective obligations for timely implementation of the
system to begin live processing of Domestic Payments no later than
November 1, 1993. In the event of an HCC Deficit, Citibank shall give
written notice to Client of the amount and itemization (including each
Member Deficit and excess information) and shall permit Client thirty
(30) days within which to make an HCC Deficit Payment. In the event
Client shall fail to make the HCC Deficit Payment within thirty (30)
days of Client's receipt of Citibank's notice of the HCC Deficit
Payment due and accompanying information as provided herein, Citibank
may proceed to exercise its rights pursuant to the Member Volume
Agreements to obtain Member Deficit Payments. Client shall receive a
credit against any HCC Deficit for fees received by Citibank from
Members for Other Service Programs.
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<PAGE> 3
(b) If Citibank collects Member Deficit Payments for any annual
period that in the aggregate exceed the HCC Deficit, Citibank shall
refund to HCC the excess amount. HCC's right to such refund shall not
be transferable or assignable and shall terminate in the event of the
corporate dissolution of HCC or HCC ceases doing business for any
reason including, but not limited to, bankruptcy or insolvency, or a
receiver or trustee is appointed to manage HCC's affairs, and such
receiver or trustee is not discharged within sixty (60) days of
appointment.
6. Form of Commission Payments. The existing text in Paragraph 5 of the
Service Agreement is hereby designated as Paragraph 5(a) and the following is
added as Paragraph 5(b) and Paragraph 5(c) respectively:
(b) Notwithstanding the foregoing, all Domestic Payments and
Non-domestic Payments in U.S. dollars, not sent by Electronic
Transfer, will be sent by a corporate draft drawn on Citibank (for
purposes of such U.S. dollar payments, the terms "Bank Check" or
"Bank Checks" shall be deemed to refer to such corporate drafts, and
the term "Drawee" shall be deemed to refer to Citibank).
(c) In the event Client requests payment to be made by Electronic
Transfer, such payments shall be made according to those Procedures
(as defined in Paragraph 15(a) of this Agreement) detailing the
processes, methods and practices designed to help ensure that
transmissions, information, instructions, orders and requests for
Electronic Transfers sent in the name of Client ("Electronic Transfer
Instructions") are the authorized, unaltered and accurate Electronic
Transfer Instructions of Client. The parties acknowledge certain
inherent risks associated with transmitting Electronic Transfer
Instructions. Client has reviewed the Procedures as they apply to
Electronic Transfer Instructions and accepts them as appropriate.
Provided Citibank has satisfied its obligations under the Procedures,
Citibank may rely on such Electronic Transfer Instructions and shall
not be responsible for the authorization, verification or accuracy of
the information contained in an Electronic Transfer Instruction. In
the event such Electronic Transfer Instruction contains errors or
inaccuracies or requires changes to the extent not due to the
negligence or willful misconduct of Citibank, Citibank shall have
those remedies available to it as described in Paragraph 2 of this
Agreement for Communications. For purposes of this Paragraph 5(c), the
term "Citibank" shall include any of Citibank, N.A., its parent,
subsidiaries, affiliates or branches providing services in connection
with the Program.
7. Client Incentive. As an incentive to Client to reach the HCC Minimum
Volume, Citibank shall make incentive payments to Client based on Domestic
Payment processing volume according to the schedule attached hereto as Exhibit
"B".
8. Citibank Incentive. As additional consideration for the benefits
afforded HCC by this Amendment and the Service Agreement and Citibank's
continued performance thereof, client shall pay to Citibank during the
Commitment Period an amount equal to (i) 4.99% of the aggregate total of any
dividend paid by Client to any Member or other stockholder of Client on or
after the date of this Amendment and (ii) 4.99% of the aggregate total of any
Participant Commissions (as defined in Client's unamended Participant Agreement
with each of Client's common stockholders) paid on or after the date of this
Amendment by Client to any Member or other stockholder. Client shall make this
payment to Citibank prior to making any of the above-described payments to
Members or stockholders.
9. Board Meetings. Citibank shall be entitled, but not obligated, to
attend all meetings of Client's board of directors, and Client shall provide
Citibank with complete copies of all board meeting minutes, commencing with the
first board meeting after the execution of this Amendment. Client shall notify
Citibank of all board
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<PAGE> 4
meetings in the same manner as Client notifies Client's directors. Citibank's
presence shall not be required for a quorum or other similar purposes.
10. Financial Accommodation. In exchange for the obligations and
undertakings of Client under this Amendment, Citibank shall pay to Client the
sum of Two Million U.S. Dollars (U.S.$2,000,000.00) not later than seven (7)
business days after the execution of this Amendment by Client and the execution
of Member Volume Agreements by all Members existing as of the date of this
Amendment. In the event Citibank fails to make such payment, this Amendment
shall be terminated and of no force or effect.
12. Miscellaneous. The terms used herein shaH have the same meaning as in
the Service Agreement unless the context of this Amendment specifically
requires otherwise. The Service Agreement is hereby revised to be consistent
with this Amendment. Except as specifically amended hereby, the Service
Agreement shall continue in full force and effect unchanged.
THE HOTEL CLEARING CORPORATION CITIBANK, N.A. (NEW YORK)
By:/s/ JOHN F. DAVIS, III By:
--------------------------- ---------------------------
Printed Name Printed Name
and Title: John F. Davis, III and Title:
-------------------- --------------------
President
-------------------- --------------------
<PAGE> 5
EXHIBIT "A"
This Exhibit contains certain specifications of the World Travel Payment Travel
Agency Commission Settlement Program ("Program") which Citibank, N.A. (New
York) ("Citibank") will provide to The Hotel Clearing Corporation ("Client").
1. Remitting Currency: U.S. Dollars
2. Payment Cycle:
On or before the 13th business day after the end of the prior month's
billing period, Client (or, in lieu of Client, any Member) shall remit
via wire transfer to Citibank funds in the amount equal to the total
monthly commission amount to be paid and Citibank shall at the option
of each payee (where possible), initiate automated clearinghouse
transactions, electronic funds transfers, or issuance of checks (in
the form of checks written on a Citibank account and prepared by
Citibank) on or before the 15th business day after the end of the
prior month's billing period to each travel agent for the commission
amount set forth in the statement. Also on or before such 15th
business day Citibank shall remit via wire transfer to Client all fees
due to Client as set forth on commission statements. This procedure
and schedule shall be followed or as set forth in agreed-upon
operating specifications.
3. Fee Schedule - Non-domestic Payments:
Client shall pay Citibank a Transaction Fee for each Chargeable
Transaction processed by Citibank pursuant to this Agreement. Such
Transaction Fee shall be the greater of (i) US $0.30 for each
Chargeable Transaction or (ii) US $3.00 for each statement sent to a
travel agency detailing the items to which the Commission Payment
applies in accordance with the Procedures ("Settlement Statement").
For purposes of this calculation, a "Chargeable Transaction" shall
refer to a hotel reservation for which a Commission Payment is due to
a travel agency and which is reported on a Settlement Statement sent
by Citibank to the travel agency pursuant to this Agreement, including
any adjustments which result in a change in the amount of the
Commission Payment. "Chargeable Transactions" shall not include No
Shows, Cancellations or Non-Commissionable Stays, as such terms are
defined in the Procedures. Client shall pay Transaction Fees with its
remittance for the corresponding Commission Payments.
4. Fee Schedule - Domestic Payments:
Client shall pay Citibank fees for Domestic Payments per the following
schedule:
<TABLE>
<S> <C>
o Payment Preparation Fee
(includes statement, forms, envelopes,
check stock and check preparation) $.50/Payment
o Chargeable Transaction Charge $.15/Transaction
For purposes of this calculation, a "Chargeable Transaction" shall refer to a hotel reservation for
which a Commission Payment is due to a travel agency and which is reported on a Settlement Statement
sent by Citibank to the travel agency pursuant to this Agreement, including any adjustments which
result in a change in the amount of the Commission Payment. "Chargeable Transactions" shall not include
No Shows, Cancellations or Non-Commissionable Stays, as such terms are defined in the Procedures.
Client shall pay Transaction Fees with its remittance for the corresponding Commission Payments.
o Non-Chargeable Transaction Charge
(Non-Chargeable Transaction Ratio to
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
Total Transactions less than 50%) No Charge
o Non-Chargeable Transaction Charge
(Non-Chargeable Transaction Ratio to
Total Transactions equal to or greater
than 50%) $.075/Transaction
o Mail Expenses At Cost
o EFT (ACH) Payments (with Payment Advice) $.25/Payment
o EFT (ACH) Payments (without Payment Advice) $.15/Payment
o Diskette Production $10.00/Diskette
o Mail Inserts $4.00/Thousand Inserts
o Special Reports/Special Processing Runs
o Test Market Module
- Programming & Development $25,000
- Processing Runs (each cycle) $ 1,000
o Electronic Media Module
- Programming & Development $18,000
o Fee Billing Module
- Programming & Development $30,000
o VAT Tax Module
- Programming & Development $15,000
o Customer Service System Input Module
- Programming & Development $17,000
5. Method of Payment: ACH Debit to Client's Account
6. Client Minimum Volumes: 11/1/93 to 10/31/94 3,500,000 Chargeable Transactions
11/1/94 to 10/31/95 4,500,000 Chargeable Transactions
11/1/95 to 10/31/96 5,500,000 Chargeable Transactions
11/1/96 to 10/31/97 6,000,000 Chargeable Transactions
11/1/97 to 10/31/98 6,000,000 Chargeable Transactions
</TABLE>
Client's Initials Citibank's initials
------------------------- -------------------------
<PAGE> 7
EXHIBIT "B"
INCENTIVE PAYMENTS:
(a) Client shall pay to Citibank such fees and remittances as
required by Exhibit "A."
(b) Until this Agreement is terminated Citibank shall pay Client
an incentive once per calendar quarter based upon Domestic
Payments issued calculated as follows:
(i) Multiply Client's average daily ending balance
during the prior calendar quarter, net of any
applicable reserve requirements, processing fees
and debits for Commission Payments presented for
payment, of the funds paid by Client as detailed
in the Agreement for such type of payment, times
(ii) 50%, times
(iii) the average (calculated by counting actual elapsed
days) of the daily quoted three month U.S.
Treasury Bill (Secondary Market) Rate during such
quarter; provided, however, if such calculation
results in a negative number, Client shall pay
Citibank an amount equal to such number multiplied
by -1, which amount shall be payable by way of
set-off against subsequent incentive payments
Citibank may owe Client under this Agreement, and
if this Agreement is subsequently terminated or
Client is no longer entitled to incentive payments
under this Agreement before such amount can be
fully paid, then the portion of such amount not
then satisfied shall be payable by direct payment
from Client promptly upon Citibank's invoice
therefor. Should, on any particular day, Client's
ending balance of funds paid by Client as detailed
in the Agreement, net of any reserve requirements,
handling fees and debits for Commission Payments,
be a negative number, then Client shall pay
Citibank, in addition to any amounts owed pursuant
to the preceding sentence, an amount equal to such
number multiplied by -1, divided by 365 and then
multiplied by the base rate on corporate loans at
large U.S. money center commercial banks, adjusted
to a per-diem basis, as reported in the Wall
Street Journal (or, if no longer provided therein,
such financial publication that Citibank shall
designate) on the day such payment was due and
payable. Such amount shall be payable by direct
payment from Client promptly upon Citibank's
invoice therefor.
(c) To qualify for an incentive payment, Client must maintain a
minimum annualized volume of Domestic Payments of $40 million.
Client Initials Citibank initials
------------------------- -------------------------
<PAGE> 8
WORLD TRAVEL PAYMENT(SM)
TRAVEL AGENCY COMMISSION SETTLEMENT PROGRAM
CLIENT SERVICE AGREEMENT
This is an agreement dated December 9, 1991 ("Agreement") by and
between THE HOTEL CLEARING CORPORATION ("Client"), a Corporation organized
under the laws of Delaware with its central office at Suite 1910, 3811 Turtle
Creek Boulevard, Dallas Texas 75219, and CITIBANK N.A. (NEW YORK) ("Citibank"),
a national banking association with its central office at 399 Park Avenue, New
York, New York 10043, U.S.A.
1. Introduction. Citibank has developed a Travel Agency
Commission Settlement Program (the "Program") under which Citibank has
commission payments sent on behalf of travel suppliers (such payments are
referred to collectively as the "Commission Payments") in amounts and made
payable to such travel agencies located outside of the United States and its
territories as the Program participant may elect. Client desires to participate
in the Program and Citibank is willing to make such Program available to Client
upon the terms and conditions set forth below. Therefore, for valuable
consideration received, the parties agree as set forth in this Agreement.
2. Communications. Citibank, Citicorp and its subsidiaries will
rely upon the worksheets, information, communications, instructions, orders and
requests (individually referred to as a "Communication") they receive from
Client. Consequently, Client will be presumed conclusively to have properly
authorized all such Communications and the persons supplying such
Communications. Client agrees that Citibank will not be responsible for the
verification and accuracy of the information contained in a Communication.
Citibank, Citicorp or any of its subsidiaries may charge to Client and Client
will pay upon demand, any cost incurred by any of them in good faith arising
out of its reliance upon a Communication should such Communication contain
errors or inaccuracies or require changes to the extent not due to the
negligence or willful misconduct of Citibank, Citicorp or any of its
subsidiaries. This charge will be in addition to any other rights or remedies
Citibank, Citicorp or any of its subsidiaries may have under this Agreement, at
law or in equity. Citibank, Citicorp and its subsidiaries' books and records
will be prima facie evidence (subject to any party's right to rebut such
evidence) of such Communication, unless one of them receives the Communication
in sufficient time to act on it via tested telex or in a writing with the
original signature of one of Client's officers in which case such telex or
writing will be the evidence of the Communication.
3. Remittance.
(a) Client will pay Citibank for each Commission Payment
Client instructs Citibank to send hereunder, plus the Transaction Fees
associated with such Commission Payment as listed in the Client
Profile (the "Profile") attached to this Agreement as Exhibit "A".
Client will do this by (i) remitting to Citibank the total amount of
such Commission Payment and Transaction Fees, (ii) making this payment
in the Remitting Currency listed in the Profile, and (iii) having this
payment sent to such accounts as Citibank may designate from
time-to-time. Unless otherwise agreed in writing by Citibank, Client
shall make each payment hereunder by an electronic wire transfer that
provides Citibank with final settlement of good funds on the day
Citibank receives the transfer. If, in Client's instructions to
Citibank regarding such Commission Payment, Client has described the
total amount of such Commission Payment in currencies other than the
Remitting Currency, Client shall make its payment for such Commission
Payment in the Remitting Currency equivalent at the exchange rates
Citibank shall then determine for such payment. Commencing after the
Adjustment Date set forth in the Profile, once each calendar year
Citibank may adjust the Transaction Fees described in the Profile,
which adjustment will become effective no sooner than ninety (90) days
after Client's receipt of written notice of such adjustment.
Increases in the
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<PAGE> 9
Transaction Fees shall be limited as follows: (i) In the event of
increases in bank charges, taxes, postage, telecommunication fees or
other costs or expenses incurred by Citibank or assessed to Citibank
by third parties in the course of performing services hereunder, the
Transaction Fees shall be increased correspondingly, such increases to
be in good faith and subject to verification by Client; (ii) increases
in the Transaction Fees for any reason under the reasonable control of
Citibank shall be limited to the percentage increase in the Consumer
Price Index ("CPI") in the year of the Transaction Fee increase over
the CPI for the prior year. For purposes of this Agreement, the
applicable CPI shall be the Consumer Price Index, Chicago, Illinois
/NY Indiana, all items, 1982-84=100, all urban consumers, as published
by the Bureau of Labor Statistics of the United States government, or,
if such CPI is no longer published, a substantially similar index for
all metropolitan areas in the U.S. for the period in question.
(b) Client will reimburse Citibank for any bank charges,
fees and taxes (excluding those taxes based on Citibank's net income
and those charges and fees incurred as a result of Citibank, Citicorp
or its subsidiaries' negligence or misconduct) imposed on Citibank,
Citicorp or any of its subsidiaries in the course of its proper
execution of the services to be provided hereunder for (i) any
Commission Payment sent, stopped or recalled hereunder, or (ii) any
remittance sent by Client, in the event such charges are enacted or
initially imposed after the date of this Agreement (collectively, the
"New Charges"). Citibank shall promptly notify Client of such New
Charges and Client shall have thirty (30) days after the date of such
notice to notify Citibank that it will not be responsible for the New
Charges. Client's failure to so notify Citibank of its rejection of
the New Charges shall be deemed Client's agreement to reimburse
Citibank for New Charges incurred after Citibank's notice to Client.
Citibank shall be responsible for any New Charges incurred prior to
its notice to Client, provided, however, that Citibank may suspend the
performance of any services that would result in imposition of the New
Charges until the earlier of Client's notification of acceptance or
the expiration of such thirty (30) day period. All amounts due to
Citibank hereunder shall be payable to Citibank immediately upon
Citibank's demand for payment.
(c) In the event the Client fails to make any payment as
required in this Agreement, Citibank may, at its option and in
addition to any other rights or remedies it may have, (i) stop payment
on or recall any Commission Payment for which Client owes such payment
or (ii) elect not to send or have sent out any further Commission
Payments unless and until Client makes such payment. Citibank shall
promptly notify Client should Citibank exercise any of its rights
under this Paragraph 3(c).
4. Commission Payment Currency. Citibank will have Commission
Payments sent under this Agreement in the currency which Client has requested
if it is then available under the Program or, if not then available, in a
currency which is then available and which Citibank believes in good faith
would be preferable to the Commission Payment's beneficiary. For each
Commission Payment being sent in a currency other than the Remitting Currency,
Citibank will determine the non-Remitting Currency equivalent of the amount of
such Commission Payment by using exchange rates Citibank determines in good
faith for such Commission Payment that day.
5. Form of Commission Payments. The Commission Payments will be sent
by bank check (individually referred to as a "Bank Check") drawn on Citibank
branches, affiliates or correspondents (the branch or entity on which a Bank
Check is drawn being a "Drawee"). However, at Client's option, Commission
Payments will be sent by electronic transfer (individually referred to as an
"Electronic Transfer") sent to a designated account at a depository financial
institution (the "Receiving Bank"), but only to the extent Citibank has made
Electronic Transfers available to Client under the Program. Citibank will
determine, at its sole discretion using its professional skill and judgment,
the form and format of each Bank Check and Electronic Transfer and will select
the Citicorp subsidiary which will use its customary procedures to send each
Bank Check and Electronic
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<PAGE> 10
Transfer in accordance with this Agreement. As of the date of this Agreement,
the only form of Electronic Transfers available to the Client under the Program
is ACH credit transfers.
6. Sending Commission Payments. Citibank will cause the
Commission Payments referred to in Paragraph 4 above to be sent in accordance
with the Procedures and as Client has then instructed, provided: (a) such
instruction, in the form of Commission Settlement Worksheets or as otherwise
permitted by such Procedures, complies with all requirements of such
Procedures, and (b) Citibank could confirm its receipt of payment for such
Commission Payments in immediately available funds as required under this
Agreement; but provided further that Citibank may elect to have any such
Commission Payment sent even if part or all of the foregoing have not been
satisfied. For purposes of this Agreement, a Commission Payment will be deemed
sent when the applicable Citicorp subsidiary has completed, signed and mailed
or otherwise sent out the applicable Bank check, or, in the case of an
Electronic Transfer, when the applicable Citicorp subsidiary has transmitted
instructions to a third party financial institution for the transfer or credit
of funds, which, if properly executed, would electronically transfer such funds
to the third parry financial institution.
7. Cancellations and Stop Payments.
(a) Client may cancel its instructions to Citibank to
send a Commission Payment provided Citibank or its designated
affiliate receives from Client notice of such cancellation in
sufficient time for Citibank and its designated affiliate to act
thereon prior to sending such Commission Payment. Citibank will then
refund to Client any amounts (excluding those fees, charges and taxes
payable by Client under Paragraph 3(b) above) Client paid to Citibank
for such canceled Commission Payment, or apply such amounts towards
payment of other Commission Payments as Client may direct.
(b) Should Client desire to cancel its instructions to
send any Commission Payment by Electronic Transfer but Citibank or its
designated affiliate fails to receive notice of such cancellation in
sufficient time for it and its designated affiliate to act thereon
prior to such Commission Payment being sent, Citibank shall refund
Client's payment for such Commission Payment at Citibank's option only
and then only when Citibank is in possession of the funds transferred
or to be transferred by such Electronic Transfer and has received
satisfactory confirmation of effective recall or cancellation of the
Electronic Transfer.
(c) Citibank shall comply with Client's request or
instruction to stop payment on any Commission Payment sent by Bank
Check but only if (i) Citibank receives such request or instructions
in sufficient time before such Bank Check is settled or presented for
payment for Citibank, its designated affiliate and any applicable
Drawee to act upon such request or instructions, (ii) such request
including its from and format complies with the procedures and
requirements set out in the Procedures referenced in Paragraph 15(a)
below, (iii) such stop payment can be made in accordance with
applicable laws and regulations, such Procedures, and the applicable
Drawee's policies, procedures and requirements which are subject to
change without notice from time-to-time, and (iv) Client provides
Citibank, its designated affiliate and the applicable Drawee with such
security as any of them may reasonably require.
(d) Citibank, Drawees and their affiliates shall treat
each of Client's cancellation, recall or stop payment requests or
instructions as continuing in effect unless and until Citibank
receives Client's notice to rescind such request or instruction in
sufficient time for Citibank and any applicable Drawee to act thereon.
All notices to rescind, including its form and format, must comply
with Citibank and the applicable Drawee or Receiving Bank's then
current policies, procedures and requirements.
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<PAGE> 11
(e) All refunds for cancellations, recalls and stop
payments shall be made at such exchange rate as Citibank shall then
determine, less costs, charges and expenses payable by Client
pursuant to Paragraph 3(b) above, and are subject to foreign currency
regulations. Client shall repay to Citibank any credit Client may
receive from Citibank in connection with any Commission Payment for
which Client has requested a cancellation, recall or stop payment but
which Citibank was unable to cancel, recall or stop payment on due to
Client's misdescription of such Commission Payment.
8. Laws and Regulations. The rights and obligations of the
Client, Citibank, Citicorp and its subsidiaries under this Agreement are
subject to and limited by all applicable local laws and regulations. Because
these laws and regulations are subject to change without notice, Citibank,
Citicorp and its subsidiaries do not make any representations with respect to
such laws and regulations and Citibank cannot be liable to Client for any
violation of such laws or regulations other than those violations which
Citibank knowingly commits not in connection with a stop payment on a Bank
Check effected pursuant to this Agreement. Notwithstanding the terms of
Paragraph 6 above, neither Citibank nor the applicable Citicorp subsidiary will
be required to send a Commission Payment or perform any actions that would be
necessary to send such Commission Payment (a) if it would be impossible or
impracticable to do so due to circumstances beyond it's control which could not
have been reasonably or practicably prevented in the exercise of due care, or
(b) if it would cause a violation of any applicable law or regulation. Citibank
will notify Client immediately if Citibank or the applicable Citicorp
subsidiary will be unable to send such Commission Payment or perform any such
action in a timely manner.
9. Indemnity. Client will indemnify Citibank, Citicorp and its
subsidiaries against and hold them harmless from any loss, liability or expense
(including reasonable attorneys' fees) arising from (i) Citibank's request to
stop payment on or recall a Commission Payment in connection with exercising
its rights under Paragraph 3(c)(i) above, (ii) any action taken by any of them
in good faith compliance with or reliance upon Client's instructions,
applications, information or requests, or (iii) any claim which directly or
indirectly arose out of any representation by Client to any third party which
is inconsistent with the services to be provided by Citibank as set forth
herein. Citibank will indemnify Client, its subsidiaries and affiliates against
and hold them harmless from any loss, liability or expense (including
reasonable attorneys' fees) arising from any claim which directly or indirectly
arose out of any representation by Citibank to any third party which is
inconsistent with the services to be provided by Citibank as set forth herein.
However, in no event will either party hereto be liable to the other party for
loss of good will or for special, indirect, incidental or consequential
damages, regardless of whether any party has been advised of the possibility of
such damages.
10. Liability. Citibank, at its expense, will quickly and
expeditiously correct any errors in the performance of its obligations
hereunder to the extent due to its negligence or misconduct. Client will
promptly notify Citibank of the error as soon as the error first comes to
Client's attention. If Client makes the notification orally, Client must send a
written confirmation to Citibank within five (5) days. If Client fails to
provide notification as and when aforesaid, Citibank will correct such error as
provided above but only to such extent as would have been necessary had Client
properly provided such notification. However, neither Citibank nor any Citicorp
subsidiary, will be responsible for any errors, delays, mutilations,
interruption, loss or non-performance due to events beyond its direct control
which could not have been reasonably or practicably prevented in the exercise
of due care, or due to any compliance with local banking practices or the laws,
rules and regulations of any industry association, convention, clearing house,
jurisdiction or governmental authority.
11. Trademarks; Advertising. Citibank will not use Client or any of
its affiliates' names, trademarks or service marks without Client's prior
written approval. Client will neither use the name, trademarks and service
marks of Citicorp or any subsidiary of Citicorp nor advertise or promote the
Program without Citibank's prior written approval. However, either party or
any of their affiliates may use either party's name and address in any
directory, listing, advertisement or promotional
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<PAGE> 12
material to indicate in an accurate and non-misleading manner that Client has
subscribed to the Program and is sending Commission Payments thereunder.
12. Termination.
(a) Upon completion of the Commitment Period described in
Paragraph 15(h) below, Client may terminate this Agreement at any time
for any reason upon ninety (90) days prior written notice to Citibank.
Citibank may terminate this Agreement at any time for any reason upon
ninety (90) days prior written notice to Client. In addition, Citibank
may by notice immediately terminate this Agreement without further
formality or judicial interference being required upon the occurrence
of any of the following events: (1) any default by Client in any of
its agreements with any of its lenders, (2) the Client becoming unable
to pay its debts as and when they become due or (3) the commencement
of any assignment for the benefit of creditors or any bankruptcy,
liquidation, winding-up, reorganization or similar proceedings
involving the Client. Either party may by notice to the other
immediately terminate this Agreement without further formality or
judicial interference being required should the other party
substantially breach any one of its material obligations under this
Agreement.
(b) Upon any termination of this Agreement, all sums due
under this Agreement will be immediately due and payable without
further notice or demand.
(c) Notwithstanding any such termination, the terms and
conditions of Paragraphs 2, 3, 7-11, 12, 13 and 15(c)-(f) of this
Agreement will survive such termination.
13. Choice of Law and Jurisdiction. This Agreement and all
documents, agreements and instruments related to this Agreement will be
governed by and interpreted according to the laws of the State of New York,
United States of America. Client, by this Agreement, submits to the
non-exclusive jurisdiction of all courts within the State of New York. United
States of America, waiving any objection which it then may have to the laying
of venue of any action relating to this Agreement or any related document or
instrument brought in such court. To the extent that the Client is located
outside the United States of America and may have or acquire any sovereign
immunity from the jurisdiction of any court or from any legal process, with
respect to itself or its property, Client by this Agreement waives such
immunity in respect of its obligations under this Agreement and all documents,
agreements and instruments related thereto.
14. Assignment. This Agreement will be binding upon and inure to
the benefit of Client and Citibank, their respective successors and assigns.
However, neither party may assign or transfer any of its rights or obligations
under this Agreement without the other party's prior written consent, which
consent will not be unreasonably withheld, except that Citibank may, at its
sole discretion, at any time assign or transfer any or all of its rights,
duties or obligations under this Agreement to its parent, an affiliate or
subsidiary. In the event Citibank assigns and transfers any of its rights and
obligations under this Agreement to its parent, an affiliate or subsidiary,
then Client shall retain recourse to Citibank, and Citibank shall remain
responsible to Client, for the exercise and performance of such rights and
obligations so assigned and transferred as though such assignment and transfer
had not occurred, unless and until Client gives its written consent to such
assignment and transfer, which consent shall not be unreasonably withheld.
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<PAGE> 13
15. Miscellaneous Terms.
(a) Upon entering into this Agreement the parties hereto shall
work together expeditiously and in good faith to prepare three
mutually agreeable documents containing specifications, requirements,
forms and other details which the parties deem necessary to facilitate
the efficient day-to-day operation of the Program and communications
between the parties respecting the Program. These documents are the
HCC Cash Functional Specifications, the HCC Cash-Citicorp Interface
Specifications and the World Travel Payment/HCC Procedures, and the
final agreed-upon versions of these documents, as revised from time to
time pursuant to the provisions of this Paragraph 15(a), are referred
to in this Agreement collectively as the "Procedures". The parties
will be bound by the provisions set forth in the Procedures. However,
upon ninety (90) days prior written notice thereof to Client, Citibank
may amend or modify the Procedures as it may deem in good faith to be
reasonably necessary (i) in order to improve or enhance the services
provided under the Program or (ii) to comply with all applicable local
banking practices or the laws, rules and regulations of any banking
industry association, convention, clearing house or of any
jurisdiction of governmental authority. Any amendment or modification
under (i) above shall be subject to Client's consent, which consent
shall not unreasonably be withheld, provided, however, that Client
shall have first made a determination, reasonably and in good faith,
that such change will result in an increase in Client's costs for, or
reduction in Client's benefits derived from, availing itself of the
Program. Notwithstanding the foregoing, if the terms and conditions of
this Agreement are inconsistent with those of the Procedures, those of
this Agreement will control and the Procedures will be deemed modified
to be consistent with this Agreement.
(b) Each party represents and warrants that (i) its exercise
or performance of its rights or obligations under or by virtue of this
Agreement will not violate any applicable law or regulation or any
agreement to which it may now or hereafter be bound, and (ii) this
Agreement represents valid obligations of such party and is fully
enforceable against it according to its terms. Client acknowledges
that it will use the Program only in connection with the payment of
bona fide travel agency commissions.
(c) This Agreement and the Procedures embody the entire and
only understanding of the parties with respect to the subject matter
hereof, and any and all other proposals, agreements or other writings
are superseded by this Agreement. If any provision of this Agreement
or the Procedures are declared to be invalid or unenforceable by a
court of competent jurisdiction, the remaining provisions of this
Agreement and the Procedures will remain in full force and effect
despite such declaration. This Agreement may not be amended except by
a written amendment signed by the parties hereto. The section headings
are for convenience and are not part of this Agreement.
(d) The failure or delay of either party to insist upon the
performance of any term, covenant or condition of this Agreement or to
exercise any right, remedy or privilege therein conferred, will not
impair or be construed as waiving any of such terms, covenants,
conditions, rights, remedies or privileges.
(e) Each party shall hold all non-public information it
obtains in connection with the Program from the other party to this
Agreement regarding such other party, whether obtained now or later,
strictly confidential and shall not disclose such information to any
third party without the other party's prior written consent, except as
follows:
(i) Disclosures required by court order, court
procedure, law or regulation, or any governmental
department or agency.
-6-
<PAGE> 14
(ii) Disclosures to Citibank's parent, or any of its
affiliates, subsidiaries, correspondents,
auditors, consultants, accountants or attorneys,
provided such party agrees to hold such disclosed
information on a strictly confidential basis and
provided such disclosure is necessary in order for
Citibank to comply with its obligations under this
Agreement; or
(iii) Disclosures to a third party with respect to any
individual Bank Check or Electronic Transfer,
provided such third party already knows the serial
number or other identifying number of such Bank
Check or Electronic Transfer and such disclosure
is necessary for Citibank to comply with its
obligations under this Agreement.
The sending of a Commission Statement in accordance with this
Agreement shall not be deemed a violation of the provisions of this
Paragraph 15(e).
(f) Any and all information provided by Client to
Citibank relating to a Reservation Transaction (as hereinafter
defined), derived therefrom, or any information in any manner used,
created or arising out of a Reservation Transaction, including but not
limited to, the name, address (all or part thereof), telephone number
or other identifying code, of any travel agent, hotel or hotel
reservation service, the name, address (all or part thereof),
telephone number or other identifying code identifying or relating to
any customer, person or entity for whom or by whom a reservation is
made, room rates, commissions, destinations, length of stay, dates of
stay, departure or arrival points and intermediate stops, volumes of
reservations by hotel, travel agent, in the aggregate or otherwise, is
and shall be the sole and exclusive property of Client and shall not
be disclosed to any third party or used by Citibank, its employees,
agents or representatives, or any of its affiliates, subsidiaries or
parent without the express written consent of Client, except as
required in connection with the performance of this Agreement, or as
required by court order, court procedure, law or regulation or any
governmental department or agency. A "Reservation Transaction" is an
individual reservation at a hotel property. However, in no event shall
any of the following be deemed to be information relating to a
Reservation Transaction, derived therefrom, or any information in any
manner used, created or arising out of a Reservation Transaction:
(i) Information which becomes publicly available
through no fault of Citibank, or information
derived or developed therefrom, or
(ii) Information Citibank lawfully obtains from any
third party, or information derived or developed
therefrom, or
(iii) Information already in the possession of Citibank,
its parent or any of its subsidiaries or
affiliates, or any information derived or
developed therefrom, or
(iv) Any and all client lists, potential client lists
and accounts not derived in whole or in part from
or specifically included in any Reservation
Transactions or not covered by sub-paragraphs
(i), (ii) or (iii) above, computer programs,
software modules, programming capabilities,
algorithms, processes, trade secrets, promotional
techniques, books and records, financial and
operating information, patents, trade marks,
service marks, copyrights, inventions,
improvements, ideas, discoveries, works of
authorship, business practices and techniques and
any other information, instruments and documents
of any kind or nature whatsoever which is not
derived in whole or in part from or specifically
included in any Reservation Transaction or not
covered by sub-paragraphs (i), (ii) or (iii)
above, and which Citibank or its affiliates have
developed or may
-7-
<PAGE> 15
develop in good faith for the purpose of providing
the Program or any other World Travel Payment
product or service whether provided to Client or
to any other Citibank Client.
Notwithstanding anything in this Agreement to the contrary, Citibank
shall not be prevented from using the number of transactions or the amount of
Transaction Fees for the purposes of analyzing or reporting the total volume of
transactions, payments or their monetary value processed by Citibank under its
commission settlement programs and services.
(g) All notices which this Agreement specifically
requires to be given in writing, but excluding those notices
specifically required under the Procedures, shall be sent to the
parties at the following addresses:
If to Client: The Hotel Clearing Corporation
----------------------------------
3811 Turtle Creek Blvd Suite 1910
----------------------------------
Dallas, TX 75219
----------------------------------
Attention: John F. Davis
-----------------------
If to Citibank: Citibank, N.A. (New York)
c/o Citicorp Global Cash Management Services
8430 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attention: World Travel Payment Product
Director
Either party may elect to change their address listed above by sending
written notice of the new address to the other party. All notices sent
pursuant to this paragraph shall be effective upon receipt by their
addressee except that notices sent via courier shall be deemed
received and effective the first business day following dispatch and
notices sent via registered mail shall be deemed received and
effective on the third business day following dispatch.
(h) Commencing upon live usage of the Program by
Client. Client shall instruct Citibank to have Commission Payments
sent (excluding those Commission Payments which are subsequently
canceled or stopped pursuant to this Agreement) for which Citibank
shall have been properly paid, and which relate to the payment of
travel agency commissions for a period of three (3) years. The period
of time from the commencement of live usage of the Program until
Client's satisfaction of the foregoing obligation shall be referred to
in this Agreement as the "Commitment Period". During the Commitment
Period, Client shall not use any third party to send Commission
Payments to any travel agency located outside of the United States or
its territories. The Commitment Period shall automatically renew for
additional one (1) year periods. unless either parry advises the other
of its intent not to renew at least ninety (90) days prior to the
expiration of the initial Commitment Period or any subsequent
Commitment Period.
-8-
<PAGE> 16
16. Effective Date. This Agreement will become effective and
binding upon the parties on the date Citibank accepts this Agreement. Citibank
shall use its best efforts to commence providing the Program to Client as soon
as possible provided however Citibank shall have no obligation to commence
providing the Program sooner than six (6) months after the Procedures are
finally agreed upon pursuant to Paragraph 15(a) above.
THE HOTEL CLEARING Accepted this 12 day of
CORPORATION December, 1991.
By: /s/ JOHN F. DAVIS, III CITIBANK, N.A. (NEW YORK)
------------------------------
[Authorized Signature]
By: /s/ MARK MACKENZIE
-----------------------------
Print Name [Authorized Signature]
and Title: John F. Davis, III
-------------------------
President Printed Name:
and Title: Mark Mackenzie
----------------------
Vice President
Citibank, N. A.
CITIBANKS SALES AND MARKETING REPRESENTATIVES DO NOT HAVE AUTHORITY
TO BIND CITIBANK.
-9-
<PAGE> 17
EXHIBIT "A"
Client Profile
This document sets forth certain specifications of the World Travel
Payment Travel Agency Commission Settlement Program ("Program") which Citibank,
N.A. (New York) ("Citibank") will provide for THE HOTEL CLEARING CORPORATION
("Client").
1. Remitting Currency: U.S. Dollars
2. Payment Cycle: Monthly
3. Cut-off Day:
--------------------------------------------------
4. Client shall pay Citibank a Transaction Fee for each Chargeable
Transaction processed by Citibank pursuant to this Agreement. Such
Transaction Fee shall be the greater of (i) US $0.30 for each
Chargeable Transaction or (ii) US $3.00 for each statement sent to a
travel agency detailing the items to which the Commission Payment
applies in accordance with the Procedures ("Settlement Statement").
For purposes of this calculation, a "Chargeable Transaction" shall
refer to a hotel reservation for which a Commission Payment is due to
a travel agency and which is reported on a Settlement Statement sent
by Citibank to the travel agency pursuant to this Agreement, including
any adjustments which result in a change in the amount of the
Commission Payment. "Chargeable Transactions" shall not include No
Shows, Cancellations or Non-Commissionable Stays, as such terms are
defined in the Procedures. Client shall pay Transaction Fees with its
remittance for the corresponding Commission Payments.
5. Payment Fee: N/A
Check (X) one of these boxes to show how Citibank will collect this
Fee:
[X] Client will pay separately each month upon
invoice.
[ ] Citibank will charge the beneficiary.
[ ] Citibank will charge Client's Owner/Operator/
Franchisor/Licensor.
6. Method of Payment: Wire (If ACH Debit, Client must provide proper ACH
Debit Authorizations)
7. Adjustment Date: December 31, 1992
Client's Initials Citibank's initials
[ILLEGIBLE] [ILLEGIBLE]
------------------------- -------------------------
<PAGE> 1
EXHIBIT 10.8
FACILITIES MANAGEMENT AGREEMENT
THIS FACILITIES MANAGEMENT AGREEMENT ("Agreement") is made and entered
into as of January 1, 1996 (the "Effective Date"), by and between Pegasus
Systems Inc. ("Pegasus"), a Delaware corporation, and Anasazi Inc. ("Anasazi"),
a Delaware corporation. For purposes of this Agreement, Pegasus shall include
its subsidiaries, The Hotel Industry Switch Company, The Hotel Clearing
Corporation, and TravelWeb Inc.
WHEREAS, Pegasus owns an automated reservation inquiry switching network which
includes bulk data transfer capabilities and internet connectivity, which
enables travel agents and other users to book, modify and cancel reservations
at participating hotels through airline and other reservation systems, and also
owns a commission consolidation system (these systems are collectively known as
the "Switch");
WHEREAS, Anasazi currently houses the Switch at its principal place of business
in Phoenix, Arizona, and has heretofore managed and operated the Switch
pursuant to those certain Switch Management and Operation Agreements, dated
January 4, 1991 and April 1, 1994 between THISCO and Anasazi, and that certain
Network Operation, Customer Support and System Administration Proposal dated
October 3, 1991 between HCC and Anasazi (the "Original Agreements");
WHEREAS, the parties have determined to terminate the Original Agreements and
enter into a new facilities management agreement; and
WHEREAS, Pegasus and Anasazi have determined that it would be mutually
beneficial for Anasazi to continue to manage and operate the Switch under the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the mutual covenants herein
contained, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, except as provided otherwise herein,
the capitalized terms used herein shall have the following meanings:
"Affiliate" shall mean, with respect to any specified Person, any
other Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with, such specified
Person.
"Anasazi Commercial Software" shall mean the Anasazi Commercial
Software described on Exhibit A.
"Automated Lodging Reservation Inquiry Switching Network" shall mean a
centralized system of hardware and software which provides data communication
linkages between certain
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<PAGE> 2
reservation distribution systems and computerized reservation systems operated
by lodging, cruise, tour, bus or restaurant entities who subscribe to one or
more such distribution systems and which system allows travel agents or other
persons or entities transmitting reservation-related data who subscribe to the
distribution systems to query and/or make, modify and cancel lodging, cruise,
tour, bus or restaurant reservations and receive confirmations of such
transactions.
"Bulk Data Transfer" (also, "BDT") shall mean the set of hardware and
software components implemented by Pegasus which enables file transfers between
HRSs and the Switch as well as file transfers between GDSs and the Switch.
"Central Reservation System" shall mean a centralized or decentralized
system of hardware and software which provides data communication linkages
between databases of entities and a central database and which effects
reservations and other reservations-related transactions on a centralized
basis.
"Central Reservation System Services" shall mean reservation and
reservation-related services provided to entities using a Central Reservation
System.
"Charges" shall mean the fees, expenses and costs for which Pegasus is
billed pursuant to Article VI of this Agreement
"Emergency" shall mean a problem resulting in either a total loss of
access to or operation of the Switch or a loss of a critical function with
respect to the Switch or the Participant's interface including but not limited
to loss of Type A, Type B, Phase I Logging, or significant performance
degradation.
"Equipment" shall mean the Hardware, the Network Components and the
Support Equipment.
"Event of Default" shall mean an event specified in Section 10.1
hereof.
"Hardware" shall mean collectively the Hardware listed on Exhibits and
all other computer hardware owned, leased or licensed by Pegasus and housed by,
and with the approval of Anasazi, at the Switch Facility from time to time,
together with any and all modifications, improvements, or enhancements thereof,
additions thereto, and/or replacements therefor.
"HCC" shall mean the hardware and software components implemented by
Pegasus which enable the transfer of travel agent commission information
between HRSs and financial institutions.
"HRS" shall mean an automated reservations system operated primarily
for the benefit of one or more companies.
"Intellectual Property", or "Intellectual Property Rights", shall mean
all trade secrets, copyrights, inventions (whether or not patentable), patents,
trademarks, trade names and any other proprietary information and knowledge
relating to, associated with, or used in connection with, the development, use
and maintenance of the Switch and for the performance of the functions the
Switch was designed to perform, including, but not limited to, any and all
modifications thereto or enhancements thereof and all rights concerning source
codes, object codes, execution programs and other information relating to the
Switch whether now owned or hereafter acquired; provided, however, that with
respect to the Anasazi Commercial Software, "Intellectual Property" and
"Intellectual Property Rights" shall refer only to such of the foregoing
information and rights as are expressly conveyed to Pegasus under license.
"Losses" shall mean all losses, liabilities, damages, actions, claims,
costs and expenses
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<PAGE> 3
(including, without limitation, reasonable attorneys' fees and disbursements)
and costs of investigation, litigation, settlement, judgments, interest and
penalties.
"Monthly Fee" shall mean the Monthly Facilities Management Base Fee
described in Article VI and Schedule VI.
"Network Components" shall mean, collectively, the Network Components
listed on Exhibit A and all other similar equipment and materials owned, leased
or licensed by Pegasus and housed by, and with the approval of Anasazi, at the
Switch Facility from time to time, together with any and all modifications,
improvements or enhancements thereof, additions thereto, and/or replacements
therefor.
"Operations Manual" shall mean that certain UltraSwitch Operations
Manual (Revision 3.0) dated March 3, 1996, as amended from time to time jointly
by Pegasus and Anasazi.
"Participant" shall mean an entity whose automated reservation system
is connected to the Switch for the purpose of originating, communicating, or
responding to requests for bookings or other transaction supporting those
functions.
"Participant Connection" shall mean any Participant's use of a Type A,
Type B or HCC interface to the Switch. Each communication line requiring a
unique data service unit (DSU), whether stand-alone or rack mounted, shall
constitute one (1) connection regardless of whether the communication line is
split by a multiplexor or similar device.
"Person" shall mean a corporation, association, partnership, joint
venture, organization, business, trust or any other entity or organization of
any kind or character, including a government or any subdivision or agency
thereof.
"Phase I" shall mean "UltraConnect" which is the functionality of the
Switch relating to the booking, modifying and canceling of reservations.
"Phase II" shall mean "UltraSelect" which is the functionality of the
Switch relating to property and room type availability, rate information,
property descriptions and property policies and amenities.
"Services" shall mean one or more services described in, or provided
by Anasazi pursuant to, this Agreement
"Software" shall mean collectively the software listed on Exhibit A
and all other computer software owned, leased or licensed by Pegasus and, with
the approval of Anasazi, used in connection with the operation of the Switch
from time to time, together with any and all modifications, updates,
improvements or enhancements thereof, additions thereto, and/or replacements
therefor, and including all associated Intellectual Property Rights and all
manuals, selling materials or other documentation prepared by the licenser or
developer of such software describing the software and its performance
characteristics and capabilities.
"Support Equipment" shall mean collectively the Support Equipment
listed on Exhibit A and all other similar equipment, including testing and
diagnostic equipment owned, leased or licensed by Pegasus and housed by, and
with the approval of Anasazi, at the Switch Facility from time to time,
together with any and all modifications, improvements or enhancements thereof,
additions thereto, and/or replacements therefor.
"TravelWeb" is the service mark and trade name of Pegasus for its
Internet site and includes the set of hardware and software components
implemented by Pegasus which enables users of the
3
<PAGE> 4
Internet to search for hotel properties, check property availability, book and
cancel hotel reservations, and obtain access to other travel-related services.
"UltraSwitch" shall mean the automated reservation inquiry switching
network owned by Pegasus and used by Pegasus to provide services to
Participants consisting of the Hardware, the Network Components, the Support
Equipment and the Software, together with all related documentation, procedures
and associated Intellectual Property Rights. "UltraSwitch" shall include Phase
I, Phase II and Bulk Data Transfer functionalities.
"Switch Facility" shall mean the location housing the Switch,
currently being Anasazi's principal place of business at 7500 North Dreamy Draw
Drive, Suite 120, Phoenix, Arizona 85020, or any substitute location provided
by Anasazi pursuant to this Agreement. Anasazi may move the physical location
of the Switch Facility to a comparable facility within North America at its
sole expense; provided that the new facility provides functionality and
performance comparable to the then existing facility.
"Switch Production Environment" shall mean the Equipment and Software
which is used to provide access to the Switch by Participants for the sending
and receiving of production (non-test) transactions.
"Switch Test Environment" shall mean the Equipment and Software which
is used to facilitate Pegasus' development and testing of the Switch.
"UltraSwitch Software" shall mean the UltraSwitch Software described
on Exhibit A.
ARTICLE II
TERM
2.1 Initial Term. Subject to Article XI, the term of this Agreement
will begin on the date hereof and shall extend for five (5) twelve month
periods (each, a "Service Year") (the "Initial Term"), unless earlier
terminated or extended in accordance with this Agreement
2.2 Renewal. Subject to Article XI, after the Initial Term, this
Agreement shall automatically be renewed for consecutive periods of one (1)
Service Year (each, a "Renewal Term") unless either party gives the other party
written notice at least six (6) months prior to the termination date of the
Initial Term or then current Renewal Term that the Agreement will not be
renewed. Anasazi agrees to provide written notice of this provision to Pegasus
at least nine (9) months prior to the expiration date of the Initial Term or
then current Renewal Term; at Pegasus' option, any delay in such notice by
Anasazi will extend the aforementioned six (6) month period to the extent of
the delay.
ARTICLE III
ANASAZI SERVICES
3.1 Computer and Network Operations. Anasazi will provide Services
with respect to the computer and network operations of the Switch as follows:
(a) Operate the Switch using all due diligence and in a
commercially reasonable manner in accordance with the Operations
Manual, 24 hours per day, 7 days per week, including all holidays;
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<PAGE> 5
(b) Operate the Switch Test Environment from 8am through 5pm
(local Dallas, Texas time) Monday through Friday exclusive of Anasazi
holidays, and such additional times as are required to support
development and testing to resolve Emergency problems. Anasazi will
give its "best efforts" to operate the Switch Test Environment at
other times as requested by Pegasus;
(c) Provide facilities and utilities required to house and operate
the Switch;
(d) Provide uninterruptable power supply and emergency electrical
generating equipment sufficient to provide continuous power to the
Switch such that the Switch can be operated at full capacity for an
indefinite period of time during power failures;
(e) Have the right of reasonable approval of all Equipment
provided by Pegasus, such approval to be based upon the space
requirement, electrical power and cooling requirement, aesthetics, and
operability of the Equipment proposed;
(f) Act on Pegasus' behalf to initiate, and track to resolution,
requests for repairs to Equipment and Software housed by Anasazi from
Pegasus' vendors of maintenance contracts and other repair
arrangements. (Anasazi will not be liable for "no trouble found" or
other charges incurred by Pegasus as a result of Anasazi having
initiated a service call so long as Anasazi used commercially
reasonable procedures in determining that such a service call was
appropriate.);
(g) Purchase, on behalf of Pegasus as provided herein, certain
Hardware and Software Components as requested and directed by Pegasus.
Whenever appropriate, Anasazi shall purchase all such items in
Pegasus' name and shall have the purchase order issued directly to
Pegasus, to the attention of its chief financial officer. Any
purchases made in Anasazi's name (e.g. to take advantage of an Anasazi
discount) will be billed back to Pegasus at total cost plus a Fifteen
(15) percent processing fee;
(h) Maintain, pursuant to Section 3.5(a), a log of the events
associated with the unavailability of the Switch to one or more of its
respective Participants and provide Pegasus with copies of the log
each month;
(i) Provide Pegasus with reasonable access to the Switch and the
Switch Facility housing the Switch Production Environment and the
Switch Test Environment. In the event of an audit, Pegasus must
provide a minimum of forty-eight hours notice to Anasazi prior to
commencing the audit;
(j) Provide the same level of security as commercially reasonable,
for the Switch Test Environment and Switch Production Environment as
Anasazi provides for its own equipment and operations;
(k) Maintain the Switch and the Switch Facility in a commercially
reasonable and professional manner and at least at the same level of
efficiency as it maintains its own system operations;
(l) Configure modems and DSUs as per Pegasus' directions and
specifications for Participant connections to the Switch;
(m) Anasazi will commit the following levels of resources to
fulfilling the obligations set forth in this Agreement:
5
<PAGE> 6
<TABLE>
<CAPTION>
Job Type Allocation
--------- ----------
<S> <C>
Account Manager 20%
Network Operator Manager 25%
Network Operator Supervisor 75%
Network Operator Lead 100%
Network Operator Lead 100%
Network Operator Lead 100%
Network Operator Jr. 100%
Network Operator Jr. 100%
</TABLE>
3.2 Technical Support Services. Anasazi will provide Pegasus with
technical support services in accordance with the following:
(a) Anasazi will make available to Pegasus technical resources to
assist Pegasus in the analysis and resolution of i) system and
software-related problems, ii) database-related problems, iii)
telecommunication problems, and iv) telecommunication configurations.
(b) Technical resources will be available 24 hours per day, 7 days
per week, 365 days per year to assist Pegasus in dealing with
Emergency problems. Anasazi shall begin execution of Pegasus' request
for Emergency services no later than four hours following the request.
(c) Schedulable technical resources requested by Pegasus will be
billed on a time and materials basis at Anasazi's then prevailing
rates.
(d) Emergency technical resources requested by Pegasus will be
billed at twice the then current hourly rate.
(e) Anasazi will make its best effort to fulfill Pegasus' requests
for technical support in a timely manner.
3.3 Software and Hardware Maintenance. Anasazi shall provide certain
Software and Hardware maintenance services as follows:
(a) Anasazi will perform routine and corrective maintenance to
support and maintain the Anasazi Commercial Software as is reasonable
and necessary for the operation of the Switch. This maintenance will
be limited to correcting bugs within the Anasazi-written software.
Protocol and gateway problems traced to Participants or to Pegasus-
modified code, are covered under Section 3.2 (technical support
services). In the event new releases of the Anasazi Commercial
software are developed by Anasazi, such new releases will be made
available to Pegasus as follows: in the event the new release has been
developed through the mutual efforts of Pegasus or such development
has been paid for, in whole or in part, by Pegasus, such new release
shall be made available to Pegasus at no charge or in exchange for
Pegasus' portion of the development costs, whichever is applicable. In
the event Pegasus personnel have not been involved in the development
of such new release nor has Pegasus paid for all or part of the
development of such new release, then if the release is made generally
available to Anasazi's customers, the new release shall be made
available to Pegasus for a fee comparable to the fee generally charged
to Anasazi's other customers. Anasazi will consider changes to the
Anasazi Commercial Software as recommended or requested by Pegasus for
the purposes of enhancing performance and expanding the functionality
of the Anasazi Commercial Software.
(b) Anasazi will administer third party maintenance contracts
pursuant to Section 3.1(f).
(c) Anasazi's technical support staff will use both the Switch
Test Environment and certain
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<PAGE> 7
equipment provided by Anasazi for its computing needs pursuant to this
Agreement only. Pegasus-provided telecommunications facilities will be
used as required by this Agreement. The Switch Test Environment and
communication equipment will be used solely to perform this Agreement
and primarily for any development and testing of the Switch.
3.4 Physical Space and Utilities. Anasazi shall, at no additional cost
to Pegasus, provide space and utilities at the Switch Facility for the Switch
and its operations, including any expansions thereof or additions thereto
mutually agreed upon by Pegasus and Anasazi, as follows:
(a) Switch. Anasazi shall provide adequate space for the Switch.
The space allocated to each component of the Switch shall meet or
exceed those environmental requirements of the manufacturer of such
component.
(b) Supplies. Anasazi shall provide paper, printer ribbons and
toner required for the provision of Services, and shall provide
adequate storage space for all necessary Switch-related supplies,
including, but not limited to, magnetic tapes, stock paper, custom
forms and other computer and network supplies. Pegasus shall provide
all magnetic media pursuant to Section 4.1(g).
(c) Pegasus Personnel. Anasazi shall provide a furnished office
equipped with a telephone and network connection for use by Pegasus
personnel during visits to the Switch Facility.
(d) Training and Meeting Space. Upon reasonable notice, Anasazi
shall provide appropriately equipped facilities for all required
training and meeting activities.
(e) Utilities. Anasazi shall at all times provide or cause to be
provided at the Switch Facility all of the utilities, including, but
not limited to, electricity, gas, water and voice telephone service,
necessary for the operation and performance of the Switch as
contemplated in this Agreement.
(f) Storage and Pick-Up. Anasazi shall provide, or cause to be
provided, storage, pick-up and delivery services for off-site storage
of magnetic and paper media on at least a weekly basis.
3.5 Monthly Status Report. Anasazi shall provide Pegasus with a
monthly status report containing the following information: (a) a log of each
occurrence of a System outage occurring during the month, and the number of
minutes duration of each and the number of minutes each communications line and
Participant was reported as down, and the diagnosed cause of the problem (the
event list); (b) an analysis of communication line failures occurring during
the month; (c) a log of all Hardware and Equipment maintenance and repair
services performed during the month, which log shall include a description of
all Equipment maintenance work performed, including the date, time, and
duration of the maintenance work performed and a description of the cause for
the work, either by describing the defect, real function or non-conforming
performance giving rise to the maintenance work or by describing such work as
regular, routine maintenance; (d) a list of items which in Anasazi's opinion
requires the attention of Pegasus management, if any; (e) the UltraSwitch
availability report for such month and, if the average UltraSwitch downtime for
such month exceeds 0.25%, an analysis of the cause(s) and an action plan for
addressing the cause(s) of such UltraSwitch downtime; (f) a report detailing
hours billed to Pegasus for technical support services as provided in
accordance with Section 3.2; (g) a report of dial back-up test results
including all successes and failures; (h) a report of router fallback test
results including all successes and failures; and (i) a report of BDT transfer
successes and failures.
3.6 Electronic Communications. Anasazi shall maintain the Switch,
facilities permitting Pegasus to access the Switch directly from Pegasus' home
office and to communicate
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with Anasazi via electronic mall, all at Pegasus' expense.
3.7 Marketing Materials. Anasazi shall promptly review and advise
Pegasus with respect to the accuracy of all marketing materials prepared by or
for Pegasus insofar as they describe the technical capabilities of the Switch
and the services it provides.
3.8 Switch Test Environment Utilization. Anasazi shall, upon request,
permit qualified employees, agents and representatives of Pegasus, the
Participants and Anasazi to utilize the Switch Test Environment for
maintenance, development, testing and other Switch related purposes. The use of
the Switch Test Environment as a back-up to the Switch Production Environment
has priority over all other uses of the Switch Test Environment and such usage
shall be at the sole discretion of Anasazi.
3.9 Security Features and Fire Prevention. Anasazi will provide the
same level of security, fire prevention and fire protection for all other
Pegasus equipment and supplies as it provides for its own equivalent materials,
but in any event it shall not be less than exists at the execution of this
Agreement.
3.10 Participation in Dispute Resolution. As part of its duties
hereunder, the Anasazi account manager assigned to Pegasus will, upon request,
provide assistance to Pegasus in connection with resolution of disputes between
Pegasus and the Participants as to the nature or quality of Switch services
and/or the costs thereof. Assistance sought by Pegasus from Anasazi's technical
support staff will be subject to the provisions of Section 3.2.
3.11 Operating Procedures. The Operations Manual establishes operating
procedures for various activities, including, without limitation, routine
maintenance of equipment, conversion to certain communications equipment,
periodic testing of equipment, back-up routines, disaster recovery and
escalation procedures for seeking appropriate assistance of Anasazi or Pegasus
management and/or the vendor which has been contracted to provide equipment
maintenance services in the event of system outages which cannot be quickly
resolved, response to equipment and software failures, record keeping,
preserving confidentiality for Participant information received through the
Switch, computer operations, network management and liaison with communications
vendors. In order to insure that these and the other mandated operating
procedures are observed and properly implemented, Anasazi shall, among other
things: (a) provide its employees with appropriate training, (b) provide its
employees with working copies of such portions of the Operations Manual as are
relevant to their respective responsibilities, (c) ensure that all Anasazi
employees working on the Switch or given access to Confidential Information are
subject to confidentiality agreements with Anasazi covering the Confidential
Information, (d) enforce compliance with procedures specified in the Operations
Manual and (e) create and appropriately distribute revisions of portions of the
Operations Manual describing any agreed modified operating procedures.
3.12 Costs and Expenses.
(a) Except as expressly hereinafter provided, Anasazi shall bear
all of the costs and expenses arising from the performance of
Anasazi's obligations under this Agreement, including but not limited
to: (i) all costs associated with renting (or otherwise acquiring),
finishing out, furnishing and providing security for the Switch
Facility; (ii) all utility costs, including, without limitation, the
costs of electricity, gas, water and voice telephone service; (iii)
all employee related costs and expenses for Anasazi's employees,
including salary expenses, overtime, bonuses, benefits, taxes, other
compensation and the costs of training; and (iv) the maintenance costs
specified in Section 3.3(a). Notwithstanding the foregoing, and
without limiting Pegasus' other obligations or responsibilities under
this Agreement, Pegasus shall bear: (i) the cost of installing at the
Switch Facility any additional or replacement Switch-related equipment
purchased by it or on its behalf with its approval; (ii) all costs
associated
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with the data communication lines used to operate the Switch,
including installation costs and usage charges; (iii) the cost of
magnetic media used in connection with the operation of the Switch as
specified in Section 4.1(g); and (iv) the costs arising from Pegasus
obligations described in Section 3.1(g).
(b) With respect to any other costs for which neither Anasazi nor
Pegasus is expressly obligated in the Agreement to cover or incur, the
parties will promptly use best efforts to reach mutual agreement
within thirty (30) days of such notice of such cost on the manner in
which such cost will be allocated. Until resolution is reached, the
parties will each bear 50% of such costs as they become due.
ARTICLE IV
CUSTOMER AND JOINT RESPONSIBILITIES
4.1 Pegasus Responsibilities. Pegasus will be solely responsible for
performing and incurring all costs for the following obligations as a condition
of Anasazi's Services under this Agreement:
(a) Provide Equipment and Software required for the Switch,
including all manuals and documentation provided by the manufacturers
and distributors of such Equipment and software which art required for
their efficient operation;
(b) Provide Test Equipment for use in diagnosing
telecommunications facilities used in the Switch Production
Environment and Switch Test Environment;
(c) Update Operations Manual as the Switch is enhanced and
modified over time and as equipment and telecommunications facilities
are upgraded and modified over time;
(d) Provide and pay for all costs and expenses rising from
maintenance contracts or other repair arrangements for all Equipment
housed at the Switch Facility and provide notice of authorization to
third party vendors enabling Anasazi to act on Pegasus' behalf to
facilitate maintenance services;
(e) Assume full responsibility for Participant maintenance
requests and service;
(f) Provide at Pegasus' sole discretion, maintenance contracts or
direct maintenance of all Software and Equipment utilized in the
operation of the Switch, including, but not limited to Informix and
Interactive UNIX;
(g) Provide all magnetic media required for operation of both the
Switch Production Environment and Switch Test Environment;
(h) As mutually agreed, provide enhancements to Software to
implement interfaces with future system monitoring tools. These
monitoring tools will be designed and implemented by Anasazi and will
enhance the ability of system operators to monitor the functionality
of the Switch;
(i) Provide Anasazi with an "on-call" contact list to be used in
the event of a problem with the Switch whose remedy is beyond she
scope of the procedures set forth in the Operations Manual provided by
Pegasus and which cannot be remedied by the primary on-call contact
provided by Anasazi;
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(j) Provide customer support services to Participants.
4.2 Anasazi Implemented Interfaces. Upon mutual agreement on terms
between Pegasus and Anasazi, Anasazi may design, develop, document and
implement new Participant interfaces to the Switch. These interfaces, following
a brief post-implementation acceptance period, will be maintained by Pegasus
pursuant to Section 4.1(e).
ARTICLE V
WARRANTIES AND DISCLAIMERS
5.1 Warranties.
(a) Anasazi warrants that the "Average Switch Downtime", as
described in Exhibit B, will not exceed 0.25% (twenty-five percent of
one percent) of total scheduled UltraSwitch operating time each
calendar month, provided that Anasazi will be released from such
warranty if its failure resulted from a cause beyond its reasonable
control, including, but not limited to, force majeure events, any act
or omission of Pegasus or a Participant, or failure of a vendor to
timely respond to service requests. For purposes of this Agreement,
the "Average Switch Downtime" shall be calculated according to Exhibit
B.
(b) Should the "Average Switch Downtime" for any calendar month be
exceeded, then Pegasus will be due a credit against the Switch
Operating Fee for that month according to the following schedule:
A total credit of $5,000 if unavailability is greater than
0.25% and less than or equal to 0.75%
A total credit of $10,000 if unavailability is greater than
0.75% and less than or equal to 1.25%
A total credit of $15,000 if unavailability is less than 1.25%
The maximum credit in respect of calendar month is $15,000.
(c) Anasazi will employ or otherwise retain individuals with the
required skills and training sufficient to carry out its obligations
under this Agreement.
(d) The Switch Facility is reasonable and appropriate for purposes
of housing and operating the Switch, assuming that there are no
material changes to the configuration of the Switch.
(e) If Anasazi breaches this warranty in a manner to lose or
destroy billing data prior to Pegasus' billings to participants which
contemplated such data, then Pegasus' sole remedy in respect of such
reach will be (i) Anasazi's obligation to diligently assist Pegasus in
the data re-creation and estimation process so as to provide Pegasus
with reasonable billing data (which may include, but not be limIted
to, reasonable estimates based on methodologies and categories of data
used by the parties in prior similar circumstances) for the period
effected by such breach no later than the tenth business day after the
beginning of the month in which Participants are billed in respect of
such data, and (ii) if the parties are unable to accomplish the
foregoing by such date, then subject to the following sentence,
Anasazi shall credit to Pegasus' billing account, a credit of up to
$5,000 in liquidated damages per incident. Such credit will be
applicable to incidents or breaches affecting in excess of 500 net
bookings, shall be measured by amounts billed and uncollected due to
Anasazi's breach (not to exceed $5,000), and shall be conditioned upon
reasonable substantiation by Pegasus of its best efforts to mitigate
its losses, including, but not limited to, good faith collection
efforts on, estimated bills and obtaining contractual agreements with
affected Participants (contracted with after the Effective Date) to
pay estimated bills.
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5.2 Disclaimer and Exclusion of Warranties.
(a) While Anasazi may provide from time to time certain hardware,
software or other items to Pegasus, Anasazi is primarily providing
Services under this Agreement, and the provision of such other items
is an incidental part of the Services and not the sale of goods within
the meaning of the Uniform Commercial Code or other statute.
(b) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS ARTICLE V (BUT
WITHOUT LIMITING ANASAZI'S EXPRESS CONTRACT OBLIGATIONS CONTAINED
ELSEWHERE IN THIS AGREEMENT), ANASAZI MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, TO PEGASUS OR TO ANY OTHER PERSON,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING THE
MERCHANTABILITY, SUITABILITY, ORIGINALITY, FITNESS FOR A PARTICULAR
PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY PREVIOUS COURSE OF DEALINGS
BETWEEN THE PARTIES OR CUSTOM OR USAGE OF TRADE), OR RESULTS TO BE
DERIVED FROM THE USE, OF ANY SOFTWARE, SERVICES, HARDWARE OR OTHER
MATERIALS PROVIDED UNDER THIS AGREEMENT.
(c) This Article V sets forth Anasazi's total liability for a
breach of any warranty contained in this Article V, without limiting
Pegasus' remedies with respect to Anasazi's obligations contained
elsewhere in this Agreement.
ARTICLE VI
CHARGES; PAYMENT
6.1 Charges. The Charges for the Services are set forth on Schedule VI
to this Agreement.
(a) The Monthly Facilities Management Base Fee for facilities
management ("Monthly Fee") and the floor space fees described below
will be subject to annual increases (beginning January 1, 1997) by a
factor equal to the percentage change in the Consumer Price Index for
the U.S. City Average for Other Goods and Services for All Urban
Consumers as published by the U.S. Department of Commerce based on the
1982-1984 standard reference base area ("CPI"). The Monthly Fee will
also be subject to the following annual adjustment:
(i) The Monthly Fee will be increased or decreased at the
end of each applicable month for each additional square foot
of floor space required, or freed up, by Pegasus according to
the following rates:
- Computer Room Space: $5 per square foot per
month.
- Computer Lab Space: $3 per square foot per
month.
These adjustments will be applicable provided they do not
reduce the Monthly Fee below its original value as set forth
on Schedule VI. These adjustments will not be applicable to
any non-operational Pegasus hardware which Anasazi may
currently be storing within either of its computer rooms (e.g.
USP1 and USP2).
(b) The cost of services not otherwise described in this Agreement
which Pegasus may request Anasazi to perform in the future, shall be
based on Anasazi's then current time and materials rates. The current
rates are set forth on Schedule VI and are subject to change in the
event Anasazi shall change its then current prevailing standard hourly
rates (as set forth on Schedule VI) generally applicable to its
customers, and then, no more than once per Service
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Year effective upon thirty (30) days prior written notice to Pegasus,
provided that (i) in no one Service Year can the increase exceed a
percentage equal to the percentage change in the CPI over the CPI for
the prior twelve month period, plus 2% and (ii) Pegasus shall receive
the same percentage discount (set forth on Schedule VI attached
hereto) on the new then current prevailing standard hourly rates,
provided that Pegasus is current on its payment obligations. Each
request for service outside the scope of this Agreement made by
Pegasus will be evaluated by Anasazi. After completing its evaluation,
Anasazi will either decline to provide such service (e.g. based on
unavailability of resources or scheduling conflicts) or shall submit
to Pegasus its price and time estimate to provide the requested
additional service, which will also advise Pegasus of any recurring
costs of providing the requested additional service and costs of any
additional hardware, software or other resources associated with the
requested additional service. The parties will evidence any agreement
on such additional services in a mutually executed writing.
(c) Anasazi shall make operational training available to Pegasus,
the Participants, prospective Participants and other users of the
Switch pursuant to the Charges in Schedule VI. All training
preparation and materials will be included in the hourly fees. Upon
request, training will be provided at a Participant's or other
non-Anasazi location at the same rates.
(d) If Anasazi personnel travel with Pegasus' prior written
approval to perform Agreement related services during the term of this
Agreement, whether to provide training or for other purposes, Pegasus
shall reimburse Anasazi for coach class air fare and other reasonable
out-of-pocket expenses incurred during any month set forth on a
separate billing statement.
(e) The Monthly Fee shall be invoiced and billed on the first day
of every month following the month to which the Monthly Fee applies.
All fees and expenses set forth in this Agreement, including the
Monthly Fee, are due within thirty (30) days following the date of the
invoice. Notwithstanding anything to the contrary, unless directed by
an arbitrator, the Monthly Fee is not subject to any set-off with
respect to disputes and is deemed not to be divisible or allocable
with respect to any claims or disputes of Pegasus. Any disputes on any
other invoice must be communicated in writing to Anasazi, prior to the
due date of the invoice, specifying the claimed discrepancy. Pegasus
shall pay when due all undisputed amounts, and if the parties have
failed to resolve the dispute within thirty (30) days after the
applicable due date, then within five business days after such date,
Pegasus must either pay by the due date the disputed amount and seek a
credit pending dispute resolution or place such amount in an escrowed
bank account designated for Anasazi's benefit (with interest allocated
as the disputed amount is so allocated), pending resolution of the
dispute. Any unresolved disputes will be subject to Article XII.
(f) Any amounts payable which are not received by Anasazi by the
due date shall bear interest of 1.5% per month provided that such rate
shall be reduced by the percentage it exceeds the highest rate
permitted by applicable law.
(g) Pegasus will be responsible for any sales, use, excise or
value-added taxes or duties payable by Anasazi on the Services as a
whole or on a particular good or Service received by Pegasus or a
Participant from Anasazi where the tax is imposed on Pegasus' or the
Participant's acquisition or use of such Services or goods from
Anasazi, and not by Anasazi's income or property. Pass-through items
will be billed to Pegasus inclusive of any taxes billed to Anasazi.
Anasazi represents that, to its knowledge, as of the execution date of
this Agreement, there are no sales, use, excise or value added taxes
or duties payable on the Services as a whole or on a particular good
or Service received by Pegasus or a Participant from Anasazi where the
tax is imposed on Pegasus' or the Participant's acquisition or use of
such Services or goods from Anasazi, nor, to the knowledge of Anasazi,
is any such tax or duty contemplated. The parties will reasonably
cooperate with one another to enable each to
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more accurately determine its tax liability and to minimize such
liability to the extent legally permissible.
(h) Any fees, costs or expenses arising from this Agreement which
are not expressly set forth or allocated in this Agreement will be
resolved pursuant to the procedures in Section 3.12(b).
ARTICLE VII
CONFIDENTIALITY
7.1 Confidential Information. Each of Anasazi and Pegasus acknowledges
that the other possesses and will continue to possess information that has been
developed or received by it, has commercial value in its business and is not in
the public domain. Anasazi further acknowledges that it will receive
information from Pegasus and Participants which has been created or received by
Participants which has commercial value in its business and is not in the
public domain. For purposes of this Agreement, "Confidential Information" shall
mean (a) the terms of this Agreement; (b) all information of a party (including
information received from Participants) marked "confidential," "restricted,"
"proprietary" or with a similar designation; (c) in the case of Pegasus,
information in addition to the items specified in (b) above, including the
source and object codes for the UltraSwitch Software, all plans, designs,
drawings and specifications for the Switch, all Switch-related documentation
and manuals, including the Operations Manual and the Switch functional
specifications, and all information concerning the business, customers and
finances of Pegasus and the Participants, all data or information received from
Participants or Pegasus and processed or generated by the Switch and all trade
secrets, confidential knowledge, know-how, technical information relating to
the components of the Switch in which Pegasus has a proprietary interest
(including, without limitation, all software programs, computer processing
systems and techniques employed or used by Pegasus or a Participant and any
related items such as specifications, layouts, flow charts, manuals,
instruction books and programmer, technical and user documentation, any and all
upgrades, enhancements, improvements or modifications to the foregoing),
business information regarding business planning and operations of Pegasus and
any Participant and all information and data received, processed or generated
by the Switch pursuant to this Agreement or otherwise; and (d) in the case of
Anasazi, information and, in addition to the items specified in (b) above,
trade secrets, confidential knowledge, know-how, technical information, data or
other proprietary information relating to Anasazi Commercial Software or other
intellectual property used in the provision of Services (or to which Pegasus
otherwise has access) and in which Anasazi or its Affiliate has a proprietary
interest (including, without limitation, all source codes, object codes,
software programs, computer processing systems and techniques employed or used
by Anasazi or its Affiliates and any related items such as specifications,
layouts, flow charts, manuals, instruction books and programmer, technical and
user documentation, and any and all upgrades, enhancements, improvements or
modifications to the foregoing), business information regarding business
planning and operations of Anasazi and its Affiliates, and all information
regarding Anasazi's provision of Services hereunder. Access by Anasazi
personnel or any third party to Pegasus or Participant Confidential Information
shall be limited solely and exclusively to the performance of this Agreement
and such access shall be solely and exclusively by those persons reasonably
necessary to perform or enforce this Agreement. Each party shall take all
reasonable and necessary steps and precautions, consistent with the steps and
precautions taken to protect its own confidential and proprietary information
and materials, to assure that all Confidential Information of the other party
or a Participant is not used or disseminated, directly or indirectly, in whole
or in part, to any person or entity except as expressly permitted herein.
7.2 Obligations. Each party will use at least the same degree of care
to prevent disclosing to other Persons the Confidential Information of the
other party as it employs to avoid unauthorized disclosure, publication or
dissemination of its own information of a similar nature; provided,
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however, subject to Section 7.1, that each party may disclose such information
to its employees, agents, subcontractors and vendors who have a need to know
such information and who have been advised by the disclosing party of the
obligation to preserve such information's confidentiality. Furthermore, neither
Anasazi nor Pegasus will: (a) utilize, sell, assign, lease, otherwise dispose
of or commercially exploit the Confidential Information of the other party
except as expressly contemplated by this Agreement; (b) acquire any right in or
assert any lien against the Confidential Information of the other party; or (c)
refuse for any reason (including a default or material breach of this Agreement
by the other party) to promptly return the other party's Confidential
Information to it if requested to do so. Upon expiration or termination of this
Agreement for any reason, each party shall return promptly to the other party
all Confidential Information in such party's possession and certify in writing
to the other party its compliance with this sentence.
7.3 Exclusions. Notwithstanding the foregoing, this Article VII will
not apply to any particular information of a party that the other party can
demonstrate: (a) was, at the time of disclosure to it, in the public domain;
(b) after disclosure to it, becomes part of the public domain through no fault
of the receiving party; (c) was in the possession of the receiving party at the
time of disclosure to it without being subject to another confidentiality
agreement; (d) was received after disclosure to it from a third party who had a
lawful right to disclose such information to it; or (e) was independently
developed by the receiving party without reference to Confidential Information
of the furnishing party. In addition, a party shall not be considered to have
breached its obligations under this Article VII for disclosing Confidential
Information of the other party: (a) as required pursuant to an arbitration
proceeding conducted in accordance with Article XI, provided that such
disclosure is made in accordance with the approval or at the direction of the
Arbitration Panel; or (b) if in the opinion of such party's counsel, such
disclosure is required by legal process or pursuant to any applicable statute,
rule or regulation provided that, except with respect to securities laws
disclosure obligations, such party advises the other party prior to making such
disclosure in order that the other party may object to such disclosure, take
action to assure confidential handling of the Confidential Information, or take
such other appropriate action to protect the Confidential Information.
7.4 Loss of Confidential Information. In the event of any disclosure
or loss of, or inability to account for, any Confidential Information of the
furnishing party, the receiving party will promptly notify the furnishing
party.
7.5 No Implied Rights. Nothing contained in this Article VII shall be
construed as obligating a party to disclose any particular Confidential
Information to the other party, or as granting to or conferring on a party,
expressly or implied, any rights or license to the Confidential Information of
the other party, except as otherwise provided herein.
7.6 Publicity. Neither party will, without the other party's prior
written consent, use the name, service marks or trademarks of the other party
or any of its Affiliates.
7.7 Limited Use of Certain Information. Notwithstanding the foregoing,
the parties may disclose to other Persons the existence and general nature of
this Agreement.
7.8 Equitable Remedies. Each party acknowledges that if it breaches
(or attempts or threatens to breach) its obligations under this Article VII, the
other party will be irreparably harmed. Accordingly, if a court of competent
jurisdiction should find that a party has breached (or attempted or threatened
to breach) any such obligations, such party will not oppose the entry of an
appropriate order compelling performance by such party and restraining it from
any further breaches (or attempted or threatened breaches).
7.9 No Solicitation. During the term of this Agreement and for one
year after its termination or expiration, neither party shall solicit for
employment or retention as a contractor, retain, hire or employ any employee of
the other party, or contractor primarily engaged in the provision of services
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to or on behalf of the other party except whereas mutually agreed upon by the
Presidents of both Anasazi and Pegasus.
7.10 Survival. The rights and obligations of the parties under this
Article VII (excluding Section 7.9 hereof) shall survive the termination of
this Agreement for ten (10) years.
ARTICLE VIII
INTELLECTUAL PROPERTY
8.1 Ownership. Anasazi acknowledges that, except for its ownership of
the Anasazi Commercial Software, it has neither an ownership interest in, nor a
license to use, nor a lien against, the Switch or any of the components
thereof, and that: (a) Pegasus has all right, title and interest in and to
UltraSwitch, HCC and BDT; (b) Anasazi has granted to Pegasus a non-exclusive,
non-transferable license to use the Anasazi Commercial Software pursuant to a
license dated December 31, 1990; and (c) Pegasus has granted to Anasazi a
non-exclusive, nontransferable license to use the UltraSwitch, HCC and BDT
Software in the Switch Facility during the term of this Agreement and only
pursuant to the terms of this Agreement. Anasazi shall permit the components of
the Switch to bear such signage or other notices and shall execute such UCC
statements and other documents as Pegasus reasonably requests to record
ownership interests in the components of the Switch of Pegasus, its lender(s),
its lessor(s) or other persons with a protectable interest in the Switch.
Anasazi shall not remove any tags, labels or other notices of ownership
interests in the components of the Switch which Pegasus causes to be affixed to
the components of the Switch.
ARTICLE IX
LIABILITY LIMITATIONS: INDEMNIFICATION
9.1 Limitation of Liability.
(a) If Anasazi shall, during the Initial Term or any Renewal Term,
be liable to one or more of Customer and the Participants as a result
of any disputes, controversies or claims of any kind or nature arising
under or in connection with this Agreement or the relationship created
hereby (whether any such breaches, disputes, controversies or claims
are based upon contract, tort (including negligence) or any other
legal theory), all Losses from all such breaches, disputes,
controversies or claims are limited to actual and provable damages
which are reasonably incurred by Pegasus. The cumulative amount of all
such Losses (including, but not limited to, liquidated damages or
penalties) recoverable against Anasazi for all such breaches,
disputes, controversies and claims during the entire Term and any
Renewal Term(s), will not exceed, in the aggregate, an amount equal to
the total amount of Anasazi's Charges under this Agreement for the six
months immediately preceding the Arbitration Panel's (as defined in
Schedule 12.1) then current final determination of the amount of
damages recoverable against Anasazi.
(b) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE
CONTRARY (EXCEPT FOR THE CATEGORY OF DAMAGES PROVIDED FOR IN SECTION
5.1 HEREOF), IN NO EVENT SHALL ANASAZI, ANY OF ITS AFFILIATES OR ANY
OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
SUBCONTRACTORS BE LIABLE FOR ANY DAMAGES OF PEGASUS, ANY PARTICIPANT
OR ANY OTHER PERSON WHICH: (i) WERE NOT REASONABLY FORESEEABLE BY A
PERSON OR ENTITY IN ANASAZI'S POSITION; (ii) ARE SPECULATIVE IN
NATURE; (iii) ARE NOT READILY OR REASONABLY
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DETERMINABLE AND PROVABLE IN DOLLAR TERMS; (iv) CONSTITUTE PUNITIVE
DAMAGES, LOSS OF GOODWILL OR OTHER SIMILAR INTANGIBLE; OR (v) COULD
HAVE BEEN AVOIDED, USING REASONABLE DILIGENCE, BY PEGASUS, SUCH
PARTICIPANT OR SUCH OTHER PERSON.
(c) Exceptions. Notwithstanding the foregoing provisions of
Section 9.1(a), the liability limitations contained in such subsection
shall not apply with respect to proven damages caused solely and
directly by Anasazi's intentional misconduct constituting a violation
of applicable civil or criminal law, or other acts for which a
limitation is unenforceable as construed by applicable law. However,
the foregoing exception shall not apply if such damages were directly
caused by Anasazi's employee or agent and (i) Anasazi had exercised
reasonable care in supervising such employee or agent or (ii) such
employee or agent was acting materially outside the scope of his or
her employment or agency without Anasazi's knowledge.
(d) Exculpation. Unless resulting from Anasazi's negligence or
breach of this Agreement, in the event of any alleged defect or
failure in the Required Equipment or any other Equipment or any other
Software utilized by Pegasus or any Participant, such Person shall
look solely to its rights and remedies under its agreements with the
Equipment or Software providers and will bring no claims against
Anasazi or any of its Affiliates as a result of such alleged defect or
failure including claims of non-performance or breach of Anasazi's
obligations under this Agreement.
(e) Limitations on Actions. Pegasus may not assert any cause of
action against Anasazi under this Agreement that occurred more than
two years prior to the filing of the suit or the commencement of
arbitration proceedings alleging such cause of action.
(f) Duty to Mitigate. Each party shall have a duty to mitigate
damages for which the other party is responsible.
(g) Acknowledgment. Pegasus and Anasazi expressly acknowledge that
the limitations contained in this Section 9.1 represent the express
agreement of the parties with respect to the allocation of risks
between the parties, including the level of risk to be associated with
the provision of the Services as related to the amount of the payments
to be made to Anasazi for such Services, and each party fully
understands and irrevocably accepts such limitations.
(h) Force Majeure. No party shall be liable for any default or
delay in the performance of its obligations under this Agreement if
and to the extent such default or delay is caused, directly or
indirectly, by; (i) fire, flood, elements of nature or other acts of
God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country; (iii) any act or omission of the other
party or any governmental authority; (iv) any labor disputes (whether
or not the employees' demands are reasonable or within the party's
power to satisfy), except that Pegasus shall have the right, if not in
contravention of applicable law or a labor agreement to which Anasazi
is bound, to replace any absent employees (and shall in such case,
supervise them), solely for purposes of minimizing any disruption to
Switch operations; or (v) nonperformance by a third party (despite
using all reasonable, necessary, diligent and expedient efforts by a
party to cause such performance or to prevent or cure such events)
excluding, however, in the case of Pegasus, the nonpayment of any
Participant of any charges owed to Pegasus, or any other similar cause
beyond the reasonable control of such party including, without
limitation, failures or fluctuations in telecommunications equipment
or lines or other equipment beyond the reasonable control of such
party. Force majeure events shall not, on their face, excuse, reduce
or delay Anasazi's obligations to provide back-up power pursuant to
Section 3.1(d), air conditioning or to promptly access backup
communication lines unless such event renders such alternate power
supply, air conditioning
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or backup communication lines unavailable. In any such event, the non-
performing party will be excused from any further performance or
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially
reasonable efforts to recommence performance or observance as soon as
practicable.
9.2 Indemnities.
(a) Indemnity by Anasazi. Anasazi agrees to defend and indemnify
Pegasus and hold Pegasus, its stockholders, directors, officers,
employees, consultants, representatives and agents harmless from,
against, for and in respect of any and all damages, losses,
obligations, liabilities, costs and expenses, including reasonable
attorneys' fees and other costs and expenses incident to any suit,
action, investigation, claim or proceeding suffered, sustained,
incurred or required to be paid by Pegasus by reason of: (i) the gross
negligence or willful misconduct of Anasazi, its directors, officers,
employees, consultants, representatives or agents; or (ii) any actual
or alleged infringement or violation of any third party copyright,
patent, trademark, trade name, trade secret or other proprietary right
arising from Anasazi's use of the Anasazi Commercial Software in its
provision of Services pursuant to this Agreement; provided, however,
that Anasazi's obligation to indemnify and hold Pegasus harmless shall
not apply to any modification or enhancement of the Anasazi Commercial
Software during the term of this Agreement which was performed by or
on behalf of Pegasus without Anasazi's consent. The limitations in
Section 9.1 hereof are applicable to Anasazi's indemnification
obligations herein.
(b) Indemnity by Pegasus. Pegasus agrees to defend and indemnify
Anasazi and hold Anasazi, its stockholders, directors, officers,
employees, consultants, representatives and agents harmless from,
against, for and in respect of any and all damages, losses,
obligations, liabilities, costs and expenses, including reasonable
attorneys' fees and other costs and expenses incident to any suit,
action, investigation, claim or proceeding suffered, sustained,
incurred or required to be paid by Anasazi by reason of: (i) any
claim, demand, charge, action, cause of action or other proceeding
asserted by any Participant or other third party (e.g. Pegasus' third
party vendors covered by this Agreement) against Anasazi or any of its
Affiliates which arises in connection with, or relates to (or is
claimed to relate to), any of the Services provided to Pegasus or to
any Participant under this Agreement, including, without limitation,
any such claim, demand, charge, action, cause of action or other
proceeding resulting from the breach or alleged breach by Anasazi or
Pegasus of any of its respective obligations under this Agreement or
from, in whole or part, the negligence or alleged negligence of
Anasazi in providing the Services hereunder; (ii) the gross negligence
or willful misconduct of Pegasus, its stockholders, directors,
officers, employees, consultants, representatives or agents; and (iii)
any action or alleged infringement or violation of any copyright,
patent, trademark, trade name, trade secret or other proprietary right
of any other person resulting from any development, modification or
enhancement of the Switch Software and the Anasazi Commercial Software
during the term of this Agreement which was performed by an employee,
agent, consultant or representative of Pegasus.
(c) Infringement Claims. In the event: (i) a claim or action is
brought alleging infringement or violation of any copyright, patent,
trademark, trade name, trade secret or other proprietary, right of
another person; or (ii) the UltraSwitch Software and/or the Anasazi
Commercial Software is held to constitute an infringing use, then the
indemnifying party may, at its sole expense and with the prior consent
of the indemnified party, which consent will not be unreasonably
withheld, settle such claim, action or judgment by either: (a)
obtaining an exclusive, worldwide, royalty-free license from the third
party to enable the indemnified party to continue to use the Switch
Software and/or a non-exclusive, worldwide, royalty-free license from
the third party to enable the indemnified party to continue to use the
Anasazi Commercial Software; (b) modify the Switch Software and/or the
Anasazi Commercial
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Software so that its continued use becomes non-infringing; or (c)
replace the Switch Software and/or the Anasazi Commercial Software
with equally suitable, functionally equivalent, non-infringing
software.
(d) Indemnification for Third-Party Claims. Notwithstanding
anything else contained in this Agreement, no obligation to indemnify
which is set forth in this Article IX shall apply unless the party
claiming indemnification notifies the other party as soon as
practicable (within sixty (60) days after the notice, or such shorter
period as is required to avoid any prejudice in the claim, suit or
proceeding) of any matters in respect of which the indemnity may apply
and of which the notifying party has knowledge and gives the other
party the opportunity to control the response thereto and the defense
thereof; provided, however, that the party claiming indemnification
shall have the right to participate in any legal proceedings to
contest and defend a claim for indemnification involving a third party
and to be represented by its own attorneys, all at such party's cost
and expense; provided further, however, that no settlement or
compromise of an asserted third party claim other than the payment of
money may be made without the prior written consent of the party
claiming indemnification.
(e) Claims Period. Any claim for indemnification under this
agreement must be made prior to the earlier of: (a) one year after the
party claiming indemnification becomes aware of the event for which
indemnification is claimed; or (b) one year after the earlier of the
termination of this Agreement or the expiration of the Term of this
Agreement.
ARTICLE X
EVENTS OF DEFAULT
10.1 Nature of Event. The term "Event of Default" means the occurrence
of any one or more of the following events:
(a) The failure of Anasazi or Pegasus to perform, observe or
comply with any covenant, term or agreement contained in the
Agreement; or
(b) Pegasus or Anasazi shall have:
(i) applied for or consented to the appointment of a
conservator, receiver, trustee, liquidate or custodian or the
like of itself or of its property;
(ii) admitted in writing its inability to pay its debts
generally as they become due;
(iii) made a general assignment for the benefit of
creditors;
(iv) become or been adjudicated as bankrupt or insolvent;
(v) filed a voluntary petition of bankruptcy under the
federal bankruptcy laws of the United States or filed a
voluntary petition or answer seeking reorganization, an
arrangement with creditors or an order for relief or seeking
to take advantage under any bankruptcy, insolvency or other
similar law;
(vi) filed an answer admitting the material allegations
of, or consented to, or defaulted in, a petition filed against
it in any proceeding under any bankruptcy, insolvency or other
similar law;
(vii) consented to the entry of an order for relief in an
involuntary case under any
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bankruptcy, insolvency or other similar law;
(viii) had a proceeding instituted against it in any court
of competent jurisdiction under any bankruptcy, insolvency or
other similar law seeking an order for relief or an
adjudication in bankruptcy, reorganization, dissolution,
winding up, liquidation, composition or arrangement with
creditors, a readjustment of debts, the appointment of a
conservator, receiver, trustee, liquidator or custodian or the
like of itself for of its property, or other like relief under
any bankruptcy, insolvency or other similar law, and such
court shall have entered an order of decree which remains
unstayed and in effect for a period of sixty (60) consecutive
days.
10.2 Notice and Opportunity to Cure. Upon the occurrence of an Event
of Default, the non-defaulting party shall notify the defaulting party in
writing of such default and shall allow the defaulting party fifteen (15) days
following the defaulting party's receipt of such notice within which to cure
such default, during which 15 day period the non-defaulting party shall not
exercise any of the remedies available to it under Section 10.3; provided,
however, (i) that if the default is non-payment by Pegasus of any Charge (other
than the Monthly Charge which if not paid by the due date shall have a cure
period of five (5) business days) which was not disputed pursuant to the
procedures in Section 6.1(f), then the cure period shall be ten (10) business
days after receipt of notice, and (ii) notwithstanding the foregoing, if the
occurrence of an Event of Default causes either a total loss of operation of
the Switch or a loss of one or more of the critical functions of the Switch
such that the Switch cannot be restored to full operation within 24 hours of
the occurrence of such Event of Default, then the non-defaulting party may
notify the defaulting party of such default and immediately exercise one or
more of the remedies available to it under Section 10.3.
10.3 Remedies. Upon the occurrence of an Event of Default and the
expiration of the applicable cure period as provided in Section 10.2, the non-
defaulting party shall have the right to:
(a) Terminate this Agreement in accordance with the provisions of
Articles X and XI;
(b) Exercise any and all rights or remedies against the defaulting
party afforded by the laws of the applicable jurisdiction, including
but not limited to, those afforded by this Agreement and those
available at law or in equity; provided, however, that: (i) no party
shall have a right of set-off except as directed by an arbitrator;
(ii) Pegasus shall not be entitled to seek or obtain injunctive relief
in response to a termination notice from Anasazi (to suspend Services
or terminate the Agreement) for a non-payment Event of Default unless
and until it has commenced arbitration pursuant to Article XII, has
escrowed in an account for Anasazi's benefit all Charges in default
and prepays prior to each month during which arbitration is pending or
conducted, at minimum, the Monthly Fee plus an amount equal to the
average of all monthly invoiced amounts during the prior three months;
and (iii) the amount of monetary damages Anasazi shall be required to
pay Pegasus under this Section 10.3(b), together with the amounts
Anasazi shall be required to pay Pegasus under Section 9.2(a), shall
in no event exceed the limitation(s) described in Section 9.1.
10.4 Remedies Not Exclusive. Except to the extent monetary damages are
limited pursuant to the provisions of Sections 9.1 and 9.2, no remedy herein
conferred upon or reserved to the parties under this Article XI or under any
other provision of this Agreement is intended to be exclusive, but rather each
such remedy shall be cumulative of and in addition to all other rights and
remedies granted to the parties at law or in equity, whether given hereunder or
thereafter existing, and whether or not the parties shall have instituted any
suit or any other action in connection therewith.
10.5 Fees and Expenses. Should an Event of Default occur and the non-
defaulting party employ attorneys or incur other expenses for the enforcement or
performance of any covenant, term or agreement of the defaulting party
hereunder, if the arbitrator so determines, the defaulting party
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shall on demand pay to the non-defaulting party the reasonable fees of such
attorneys and such other reasonable expenses so incurred.
10.6 Waivers. The acceptance by either part at any time and from time
to time of performance by the other party shall not be deemed to be a waiver of
any default or Event of Default then existing. No waiver by either party of any
particular default or Event of Default shall be deemed to be a waiver of any
default or Event of Default other than the particular default or Event of
Default waived. No delay or omission by either party in exercising any right or
remedy hereunder shall impair such right or remedy or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise
of any such right or remedy preclude other or further exercise thereof, or the
exercise of any other right or remedy hereunder or otherwise.
ARTICLE XI
TERMINATION
11.1 Termination. This Agreement may be terminated and abandoned
without further notice at any time upon the occurrence of the following events:
(a) Pegasus and Anasazi may mutually terminate this Agreement in
writing at any time;
(b) Upon the occurrence of an Event of Default and the expiration
of the applicable cure period, if any, the non-defaulting party may
terminate this Agreement pursuant to Section 10.3, or Anasazi, at its
option, may terminate or suspend all or a portion of the Services
until a non-payment Event of Default has been cured;
(c) Pegasus may terminate this Agreement in the event a fire,
flood, or other disaster occurs which results in either a total loss
of operation of the Switch or a loss of one or more critical functions
of the Switch such that the Switch cannot be restored to full
operation within 96 hours of the occurrence of such event;
(d) Pegasus or Anasazi may terminate this Agreement if any court
or governmental agency restrains, enjoins, prohibits, invalidates, or
sets aside the consummation of any of the transactions contemplated
hereby;
(e) Pegasus may terminate this Agreement at any time following the
acquisition by one or more of the Participants of 50% or more of
Anasazi's assets or 50% or more of Anasazi's outstanding voting
securities;
(f) Pegasus may terminate this Agreement at any time upon its
election to withdraw from the hotel reservation switching business for
a period of at least two (2) years; provided, however, Pegasus shall
give Anasazi six (6) months prior written notice of its intent to
terminate this Agreement pursuant to this subsection (f); and
(g) Pegasus may terminate this Agreement within twelve months
following the acquisition of 50% or more of Anasazi's assets or 50% or
more of Anasazi's voting securities provided that such notice shall
not provide an effective termination date beyond the 12 month period
and shall be provided to the acquiring party or successor no later
than six (6) months after the acquisition date.
(h) Notwithstanding any other provision herein, Pegasus may
terminate this agreement upon providing at least six months notice of
termination to Anasazi.
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11.2 Effect of Termination. Upon the termination of this Agreement
pursuant to the provisions of Section 11.1:
(a) Within ten (10) days after effective date of termination,
Anasazi shall submit to Pegasus a final billing statement for all
unpaid fees owed to it by Pegasus for services performed by Anasazi
prior to the date of termination. The billing statement shall be
prepared by Anasazi and paid by Pegasus in accordance with the terms
of Article VI; provided, however, if this Agreement shall be
terminated by Pegasus for any reason other than upon the occurrence of
an Event of Default by Anasazi under Section 11.1(b) hereof, such
payments shall be made upon delivery by Anasazi of those items set
forth in subsections 11.2(b) through (d) hereof;
(b) In the event this Agreement is terminated by Pegasus pursuant
to Sections 11.1(b)-(e), within ten (10) business days after the
termination of this Agreement, Anasazi shall deliver to Pegasus all
notebooks, data, information and other material acquired, compiled or
generated by Anasazi with respect to the Switch.
(c) Within ten (10) business days after the termination of this
Agreement, Anasazi and Pegasus shall deliver to each other all
Confidential Information furnished to either of them by the other,
together with all copies of the same.
(d) In the event this Agreement is terminated by Pegasus pursuant
to Sections 11.1(b)-(e), immediately upon termination of this
Agreement or at such earlier date as Pegasus reasonably requests,
Anasazi shall deliver to Pegasus or Pegasus' designee, for the cost of
the media upon which it is provided, a copy of each Switch data tape
then in Anasazi's possession, a copy of the source and object codes in
their then current forms for the Anasazi Commercial Software and
copies of such Switch records as Pegasus reasonably requests, and make
the Hardware, the Network Components, the Support Equipment and the
Software available for packing and pick-up by Pegasus and/or its
designees, at Pegasus' expense.
(e) In the event this Agreement is terminated pursuant to Section
11.1(a), or terminated by Pegasus pursuant to Section 11.1(b)-(d), to
facilitate transition to operation of the Switch by a party other than
Anasazi, and subject to Pegasus' payment to Anasazi of all outstanding
amounts due under invoices rendered, Anasazi shall make personnel
knowledgeable in Switch operations, the Hardware, the Network
Components, the Support Equipment and the Software available to train
and consult with Pegasus and/or Pegasus' designees as reasonably
requested during the two-month period following termination, provided,
however, that Anasazi shall not be required to provide such resources
in excess of the hours and periods otherwise provided for under
Article III hereof, and provided that such non-Pegasus designees shall
enter into a confidentiality agreements with Anasazi with terms at
least as stringent as those in Article VII hereof. Pegasus shall pay
for such services at Anasazi's then prevailing hourly rate(s) for the
level(s) of personnel rendering such services, and shall reimburse the
traveling expenses of such personnel, if any, in accordance with
Section 6.1(d).
11.3 Survival of Certain Covenants. In the event this Agreement is
terminated in accordance with this Article XI, this Agreement shall be of no
further force or effect, except for Articles VII, VIII, XI, XII and XIII which
shall not be affected by the termination of this Agreement but shall survive
the termination hereof pursuant to their terms.
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ARTICLE XII
DISPUTE RESOLUTION
12.1 Dispute Resolution Procedures. Schedule XII attached hereto sets
forth the procedures governing any and all disputes arising between the parties
hereunder or in connection herewith.
ARTICLE XIII
GENERAL
13.1 Relationship of Parties.
(a) In furnishing the Services to Pegasus, Anasazi is acting only
as an independent contractor. This Agreement is not intended to create
a joint employer, shared employee or leased employee relationship with
respect to any employees of either party. Except as otherwise
expressly provided in this Agreement, Anasazi has the sole right to
supervise, manage, contract, direct, procure, provide or cause to be
provided, all Services to be provided pursuant to this Agreement.
Except as otherwise expressly provided in this Agreement, Anasazi does
not undertake by this Agreement or otherwise to perform any obligation
of Pegasus, whether regulatory or contractual, or to assume any
responsibility for the business or operations of Pegasus. Under no
circumstances shall Anasazi be considered or deemed under this
Agreement to be a joint venture or partner of Pegasus or in any
relationship with Pegasus under this Agreement carrying with it
fiduciary or trust responsibilities, and no other similar relationship
is intended or created between the parties pursuant to this Agreement
(b) Except for Anasazi's current business relationship with Avis
Rent A Car System, Inc. and except as otherwise permitted by Pegasus
in writing, Anasazi covenants and agrees that it will not, at any time
during the term of this Agreement, directly or indirectly: (i) own or
control more than 50% of the equity or assets of any business which
engages in the creation, development, installation, maintenance or
operation of an Automated Lodging Reservation Inquiry Switching
Network; (ii) manage or operate any business which, directly or
indirectly, engages in the creation, development, installation,
maintenance or operation of an Automated Lodging Reservation Inquiry
Switching Network; or (iii) serve as a consultant, contractor,
advisor, programmer or supervisor in the creation, development,
installation, maintenance or operation of any Automated Lodging
Reservation Inquiry Switching Network. The remedy at law for any
breach or attempted breach by Anasazi of the provisions of this
Section 13.1(b) will be inadequate and Pegasus shall be entitled to
temporary or permanent injunctive relief against any breach or
attempted breach of such provision without the necessity of posting
bond or proving actual damages. It is the express intention of the
parties hereto to comply with all laws which may be applicable to this
Section 13.1(b). Should any restriction contained in this Section
13.1(b) be found to exceed in duration or scope the restriction
permitted by law, it is expressly agreed that the covenant not to
compete contained in this Section 13.1(b) may be reformed or modified
by the final judgement of a court of competent jurisdiction to reflect
a lawful and enforceable duration or scope. If any one or more of the
provisions contained in this Section 13. 1(b) shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
(c) Except as otherwise permitted by Anasazi in writing, Pegasus
covenants and agrees that it will not, at any time during the term of
this Agreement, directly or indirectly (i) own or control at least 50%
of the equity or assets of any U.S.-based business which engages in
the creation, development, installation, licensing, maintenance or
operation of any Central Reservation System marketed in competition
with Anasazi or contemplated to be marketed in
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competition with Anasazi or which engages in the business of providing
Central Reservation System Services which is in competition with
Anasazi or which contemplates being in competition with Anasazi; (ii)
manage or operate any business which, directly or indirectly, engages
in the creation, development, installation, maintenance or operation
of a Central Reservation System marketed in competition with Anasazi
or contemplated to be marketed in competition with Anasazi or which
engages in the business of providing Central Reservation System
Services which is in competition with Anasazi or which contemplates
being in competition with Anasazi; or (iii) serve as a consultant,
contractor, advisor, programmer or supervisor in the creation,
development, installation, maintenance or operation of a Central
Reservation System or in the provision of Central Reservation System
Services, which business is in competition with Anasazi or
contemplates being in competition with Anasazi, provided that nothing
herein is intended to prohibit Pegasus from engaging in general
consulting activities which are in its normal and ordinary course of
business activities pertaining to the exploitation of the Switch and
further provided that nothing herein shall prohibit Pegasus from
entering into agreements with central reservation system providers to
include in the central reservation system provider's system any one or
more of the products or services offered by Pegasus. The remedy at law
for any breach or attempted breach by Pegasus of the provisions of
this Section 13.1(c) will be inadequate and Anasazi shall be entitled
to temporary or permanent injunctive relief against any breach or
attempted breach of such provision without the necessity of posting
bond or proving actual damages. It is the express intention of the
parties hereto to comply with all laws which may be applicable to this
Section 13.1(c). Should any restriction contained in this Section
13.1(c) be found to exceed in duration or scope the restriction
permitted by law, it is expressly agreed that the covenant not to
compete contained in this Section 13.1(c) may be reformed or modified
by the final judgment of a court of competent jurisdiction to reflect
a lawful and enforceable duration or scope. If any one or more of the
provisions contained in this Section 13.1(c) shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
(d) Notwithstanding the foregoing, either party shall have the
right to terminate this Agreement without liability upon six months
prior written notice if: (i) 50% of more of the assets or equity of
Anasazi are proposed to be sold to an entity or person owning,
operating, controlling or participating, directly or indirectly, in at
least 50% or more of a business engaged in the operation or commercial
exploitation of an Automated Lodging Reservation Switching Network; or
(ii) 50% of more of the assets or equity of Pegasus are proposed to be
sold to an entity or person owning, operating, controlling or
participating, directly or indirectly, in at least 50% or more of a
business engaged in the operation or commercial exploitation of a
Central Reservation System or Central Reservation System Services.
13.2 Consents and Approvals. If either party requires the consent or
approval of the other party for the taking of, or omitting to take, any action
under this Agreement, such consent or approval shall not be unreasonably
withheld or delayed.
13.3 Notices. Except as otherwise expressly provided in this Agreement
and except for routine operational communications, any notice or other
communication under this Agreement to either party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally (or by courier) or sent by telex, telecopy, other facsimile
transmission (with confirmation), or certified or registered mail, postage
prepaid as follows:
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If to Anasazi, to:
Anasazi Inc.
7500 N. Dreamy Draw Drive
Suite 120
Phoenix, AZ 85020
Facsimile transmission: (602) 861-7687
Attention: Joe Atteridge
If to Pegasus, to:
Pegasus Systems Inc.
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Facsimile transmission: (214) 528-5675
Attention: John F. Davis
With a copy (which shall not constitute
effective notice) to:
Ric Floyd, Counsel
A party may from time to time change its address or designee for
notification purposes by giving the other party prior notice in the
manner specified above of the new address or the new designee and the
subsequent date upon which the change will be effective.
13.4 Account Manager. Anasazi and Pegasus shall each designate one
person, and shall notify each other immediately in writing of the person so
designated, who shall serve as the Account Manager for all communication
regarding the performance of their respective duties and obligations under this
Agreement. The person designated as the Account Manager by Anasazi and Pegasus
shall be fully authorized and empowered by Anasazi and Pegasus, respectfully to
act, in his or her sole discretion, for and on behalf of Anasazi and Pegasus,
respectfully in response to any communication regarding performance under this
Agreement.
13.5 Assignment. Anasazi's rights and duties under this Agreement are
personal and not assignable without the prior written consent of Pegasus,
except Anasazi may, without the consent of Pegasus, assign its rights and
duties under this Agreement to an Affiliate, provided that such assignee agrees
in writing to be bound by this Agreement. Anasazi may subcontract with third
parties to provide required services, but will retain ultimate responsibility
for ensuring that such services are properly rendered. Pegasus' rights and
duties may be assigned without Anasazi's consent to any entity which Pegasus
controls or which purchases either (a) more than 50% of the assets of the
business in which the Switch is used or (b) a controlling interest in Pegasus,
provided the assignee agrees in writing to be bound by this Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted assigns and successors.
13.6 Legal Compliance. Pegasus shall ensure that; (a) the services
offered by Pegasus ("Pegasus Services") to Participants and others through the
provision of Services by Anasazi; (b) the materials provided to Anasazi for use
in connection with the Services; (c) the methods used by Pegasus to offer, sell
and deliver Pegasus' Services to Pegasus; and (d) the contents of all
advertising, marketing and promotional communications, comply with all
applicable laws and regulations. Pegasus will possess all authorizations,
consents, registrations, exemptions and licenses necessary to offer, sell and
deliver, and to engage Anasazi to offer, sell and deliver, Pegasus' Services to
Pegasus' customers in all jurisdictions where such offers, sales and deliveries
are to be made. Anasazi shall ensure that it complies with all applicable laws
and regulations with respect to the provision of Services under this Agreement.
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13.7 No Third-Party Beneficiaries. Nothing contained in this Agreement
is intended to confer upon any Person (other than the parties hereto) any
rights, benefits or remedies of any kind or character whatsoever, and no Person
(including, without limitation, the Participants) shall be deemed a third-party
beneficiary under or by reason of this Agreement.
13.8 Amendment and Modification: No Waiver. This Agreement may be
amended or modified only by a written instrument duly executed by the parties
hereto. The failure of either party at any time or times to require performance
of any provision of this Agreement shall not affect the right of a party at a
later time (not to exceed 12 months after the non-performance) to enforce such
provision.
13.9 Severability. If any provision or portion of a provision of this
Agreement or the application of any such provision or portion of a provision to
any Person or circumstance, shall be declared judicially or by the Arbitration
Panel (as defined in Schedule XII) to be invalid, unenforceable or void, such
decision shall not have the effect of invalidating or voiding the remainder of
this Agreement (or the remainder of the provision), it being the intent and
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision or portion thereof to the extent necessary to render
it valid, legal and enforceable while preserving its intent or, if such
modification is not possible, by substituting therefor another provision or
portion thereof that is valid, legal and enforceable and that achieves the same
objective.
13.10 Entire Agreement. This Agreement (including the Schedules
hereto) and the documents and instruments executed and delivered in connection
herewith constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous
agreements and understandings, whether written or oral, between the parties
with respect to the subject matter hereof, and there are no representations,
understandings or agreements relating to the subject matter hereof that are not
fully expressed in this Agreement and the documents and instruments executed
and delivered in connection herewith. All Schedules attached to this Agreement
are expressly made a part of, and incorporated by reference into, this
Agreement. This Agreement, as of the Effective Date, shall have the effect of
terminating and nullifying the Original Agreements (including all addenda and
amendments thereto) and the parties' rights and obligations thereunder, except
for liabilities incurred prior the Effective Date. Notwithstanding anything to
the contrary in this Agreement or the Original Agreements, Pegasus hereby
terminates its rights and Anasazi's obligations of the Original Agreements, and
Anasazi, as of the Effective Date, shall not be bound thereby, but shall be
bound by the provisions of Section 13.1 thereof.
13.11 Governing Law. This Agreement shall be construed in accordance
with, and the rights of the parties shall be governed by, the substantive laws
of the State of Arizona without giving effect to any choice-of-law rules that
may require the application of the laws of another jurisdiction.
13.12 Certain Construction Rules. The description of any Services
contained in the Schedules is qualified in its entirety by reference to the
information set forth in the provisions of this Agreement. To the extent that
the provisions of this Agreement and of the Schedules are in any respect
inconsistent, the provisions of this Agreement shall govern and control. To the
extent that one or more provisions in the Operations Manual is inconsistent
with or in contravention of this Agreement (including the Schedules), this
Agreement shall govern, and unless the Agreement is mutually amended by the
parties to address the inconsistency, the Operations Manual will be amended or
implemented by the parties to conform to the Agreement. The Article and Section
headings and the table of contents contained in this Agreement are for
convenience of reference only and shall in no way define, limit, extend or
describe the scope or intent of any provisions of this Agreement. In addition,
as used in this Agreement, unless otherwise provided to the contrary, (a) all
references to days, months, quarters or years shall be deemed references to
calendar days, months, quarters or years, and b) any reference to a "Section,"
"Article," or "Schedule" shall be deemed to refer to a Section or Article of
this Agreement or a Schedule attached to this Agreement.
25
<PAGE> 26
13.13 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart.
26
<PAGE> 27
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first above written.
ANASAZI INC.
By:/s/ J. ATTERIDGE
----------------------------
Name: J. ATTERIDGE
--------------------------
Title: PRESIDENT & COO
-------------------------
PEGASUS SYSTEMS, INC.
By: /s/ B. NICHOLSON
----------------------------
Name: B. NICHOLSON
--------------------------
Title: PRESIDENT
-------------------------
27
<PAGE> 28
SCHEDULE VI
ANASAZI CHARGES
Subject to the provisions of Article VI, the Monthly Facilities
Management Fee will initially be $39,530 per calendar month.
HOURLY RATES
(as of January 1, 1996)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Standard Hourly Rate Pegasus Rate
- --------------------------------------------------------------------------------
<S> <C> <C>
VP Dir, Sr. Management $225 $175
Sr. Consultant $175 $150
Project Manager $150 $135
Sr. System Administrator $150 $135
System Administrator $100 $ 90
Sr. System Engineer $135 $115
System Engineer $100 $ 90
Jr. System Engineer $ 75 $ 65
System Analyst $100 $ 90
Sr. Database Analyst $125 $100
Database Analyst $ 75 $ 65
Sr. QA Analyst $ 95 $ 85
Tester $ 50 $ 45
Tech Writer $ 55 $ 45
Support Analyst $ 55 $ 45
Application Trainer $ 55 $ 45
</TABLE>
Anasazi reserves the right to apply the Standard Hourly Rate during
any period in which Pegasus is overdue on the payment of any charge
o Travel time to/from Customer is charged portal to
portal.
o Reasonable travel, lodging and incidental expenses
are additional.
<PAGE> 29
SCHEDULE XII
ARBITRATION PROCEDURES
DISPUTE RESOLUTION
1. Arbitration. If the parties are unable to resolve any dispute,
controversy or claim between the parties of any kind or nature arising under or
in connection with the Agreement or the relationship of the parties under the
Agreement (a "Dispute") informally or in accordance with the procedures, if
any, set forth in the Agreement relating to such Dispute, then such Dispute
shall be submitted to mandatory and binding arbitration at the election of
either party (the "Disputing Party"). The procedures set forth in this Schedule
12.1 shall be governed by The Federal Arbitration Act, 9 U.S.C. Section 1, et
seq. Except as otherwise provided in this Section 1, the arbitration shall be
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA").
a. Initiation of Arbitration; Selection of Arbitration
Panel. To initiate the arbitration, the Disputing Party shall notify the other
party in writing (the "Dispute Notice"), which shall (i) describe in reasonable
detail the nature of the Dispute, (b) state the amount of the claim, (iii)
specify the requested relief, and (iv) name an arbitrator who (A) has been
licensed to practice law in the United States for at least ten years, (B) is
not then an employee of either party or of an Affiliate of either party, and
(C) has not been retained or employed by or rendered professional services to
either party or an Affiliate of either party for a five-year period prior
thereto (the "Basic Qualifications"). Within 15 days after the other party's
receipt of the Dispute Notice, such other party shall file, and serve on the
Disputing Party, a written statement (i) answering the claims set forth in the
Dispute Notice and including any affirmative defenses of such party; (ii)
asserting any counterclaim, which shall (A) describe in detail the nature of
the Dispute relating to the counterclaim, (B) state the amount of the
counterclaim, and (C) specify the requested relief; and (iii) naming a second
arbitrator satisfying the Basic Qualifications. Promptly, but in any event
within 15 days thereafter, the two arbitrators so named shall select a third
neutral arbitrator from a list provided by the AAA of potential arbitrators who
satisfy the Basic Qualifications and who have no past or present relationships
with the parties or their counsel, except as otherwise disclosed in writing to
and approved by the parties. The arbitration shall be heard by a panel of the
three arbitrators so chosen (the "Arbitration Panel"), with the third
arbitrator so chosen serving as the chairperson of the Arbitration Panel.
b. Conduct of Arbitration. The arbitration hearing shall
be held in such neutral location as the parties may mutually agree. The
Arbitration Panel is specifically authorized to render partial or full summary
judgment as provided for in the Federal Rules of Civil Procedure. The Federal
Rules of Evidence shall apply to the arbitration hearing. The party bringing a
particular claim or asserting an affirmative defense shall have the burden of
proof with respect thereto. The arbitration proceedings and all testimony,
filings, documents and information relating to or presented during the
arbitration proceedings shall be deemed to be Confidential Information subject
to Article VII of the Agreement. The Arbitration Panel shall have no power or
authority, under the Commercial Arbitration Rules of the AAA or otherwise, to
relieve the parties from their agreement hereunder to arbitrate or otherwise to
amend or disregard any provision of the Agreement or the Schedules thereto,
including this Schedule 12.1, including without limitation the provisions of
this Section 1.
c. Findings and Conclusions. Within 15 days after the
closing of the arbitration hearing, the Arbitration Panel shall prepare and
distribute to the parties a writing setting forth the Arbitration Panel's
findings of fact and conclusions of law relating to the Dispute, including the
reasons for the giving or denial of any award. The findings and conclusions and
the award, if any, shall be deemed to be Confidential Information subject to
Article VII of the Agreement.
d. Expeditious Proceedings. The Arbitration Panel is
instructed to schedule promptly all discovery and other procedural steps and
otherwise to assume case management initiative and control to effect an
efficient and expeditious resolution of the Dispute. The Arbitration Panel is
authorized to issue monetary sanctions against either party if, upon a showing
of good cause, such party is unreasonably delaying the proceeding.
e. Award. Any award rendered by the Arbitration Panel
shall be final, conclusive and binding upon the parties and any judgment
thereon may be entered and enforced in any court of competent jurisdiction.
f. Expenses of Proceeding. Each party shall bear 50% of
all fees, costs and expenses of the arbitrators, and notwithstanding any law to
the contrary, each party shall bear all the fees, costs and expenses of its
own attorneys, experts and witnesses; provided, however, that in connection
with any judicial proceeding to compel arbitration pursuant to this Agreement
or to enforce any award rendered by the Arbitration Panel, the prevailing party
in such a proceeding shall be entitled to recover reasonable attorneys' fees
and expenses incurred in connection with such proceeding, in addition to
any other relief to which it may be entitled.
1
<PAGE> 30
2. Effect of Contract Rights During Arbitration. Nothing in this
Schedule 12.1 shall be construed to prevent a party from exercising or enforcing
its rights and remedies or to excuse a party from performing an obligation
(including, but not limited to, making payments when due) set forth in, and
pursuant to, the terms of the Agreement, notwithstanding the initiation and
pendency of an arbitration proceeding. The provisions of Section 10.3(b) of the
Agreement are incorporated herein as part of the arbitration procedures.
2
<PAGE> 31
EXHIBIT A
COMPONENTS OF THE SWITCH
Hardware
1. Those certain transaction processing engines (TPEs) provided
by Pegasus.
2. Those certain communication engines (CEs) provided by Pegasus.
3. That certain communication equipment provided by Pegasus for
the purpose of establishing and maintaining electronic data
communication links amongst UltraSwitch, HCC, BDT and
Participants.
4. Those certain communication interface boards used in the CEs.
5. Those certain items of hardware comprising part of the Switch
Test Environment for the Switch.
6. Those certain items of hardware comprising the Lanyon Terminal
interface System.
7. Those certain items of hardware comprising the Bulk Data
Transfer System.
8. Those certain items of hardware comprising the TravelWeb
System.
Network Components
1. An Ethernet network, which includes sub-networks.
2. A network management system.
Software
1. DC/OSx operating system software (including the C programming
language) obtained under license from Pyramid Technology
Corporation pursuant to a Software Binaries Sublicense
Agreement for use in connection with the operation of the
TPEs.
2. Interactive UNIX operating system software obtained under
license from the vendor pursuant to self-executing
"shrink-wrap" or "box-top" license for use in connection with
the operation of the CEs.
3. Informix data base software obtained under license from the
vendor thereof pursuant to a self-executing "shrink-wrap" or
"box-top" license for use in conjunction with the UNIX
operating system in connection with the operation of the TPEs.
4. Anasazi Commercial Software (KivaNet) which includes a subset
of "primitives" (macro language) for lodging systems and other
common-use modules (algorithms and techniques with general
applicability to many types of data processing applications)
and protocol gateways, either currently in existence or
created in conjunction with the performance of this Agreement,
all as obtained under license from Anasazi dated December 31,
1990 for use in connection with the Switch.
<PAGE> 32
5. UltraSwitch software developed by Anasazi and Pegasus
exclusively for use in connection with the Switch and acquired
by Pegasus pursuant to the Development, License and Funding
Agreement dated November 14, 1988, as amended, including all
Participant interface processes and all software developed by
Anasazi and Pegasus pursuant to the Software Development
Agreement dated January 6, 1992, as amended, and additional
functionality as developed from time to time.
6. Those certain items of software comprising the Lanyon Terminal
interface System.
7. SCO UNIX operating system software obtained under license from
the vendor pursuant to self-executing "shrink-wrap" or
"box-top" license for use in connection with the operation of
BDT.
8. BSDI UNIX operating system software obtained under license
from the vendor pursuant to self-executing "shrink-wrap" or
"box-top" license for use in connection with the operation of
TravelWeb.
9. Just Logic data base software obtained under license from the
vendor thereof pursuant to a self-executing "shrink-wrap" or
"box-top" license for use in conjunction with the UNIX
operating system in connection with the operation of
TravelWeb.
10. Netscape Netsite Commerce Server web server software obtained
under license from the vendor pursuant to self-executing
"shrink-wrap" or "box-top" license for use in connection with
the operation of TravelWeb.
11. All manuals, selling materials or other documentation prepared
by the licenser or developer of any of the foregoing software
describing the software and its performance characteristics
and capabilities.
<PAGE> 33
Average Switch Downtime
The following System/Component Recovery Table shall be used to
determine the Average Switch Downtime each month referred to in
Section 5.1 of the Agreement. This Table may be amended from time to
time by mutual agreement of THISCO and Anasazi.
Only the amount of time in excess of the Maximum Time Allocated for
the Events included in this table shall be used to calculate the
Average Switch Downtime.
SYSTEM/COMPONENT RECOVERY TABLE
<TABLE>
<CAPTION>
Maximum Time
Failure Events Requiring Recovery by Anasazi Allocated
====================================================================================================================================
<S> <C> <C>
General UltraSwitch
o TPE Hardware Fallback, Spring Forward or Reboot 45 Min.
o Comm Engine Fallback, Spring Forward or Reboot 20 Min.
o Comm Engine or TPE Software Install or Problem
Requiring Cycle of All Software 15 Min.
o Comm Engine or TPE Software Install or Problem
Requiring Cycle of Subset of All Software 5 Min.
Communications
o DSU or Modem Fallback 15 Min.
</TABLE>
<TABLE>
<CAPTION>
Maximum Time
Commercial Software and Operator Error Allocated
====================================================================================================================================
<S> <C> <C>
o Anasazi Commercial Software Recovery 0 Min.
o Anasazi Computer Operator Error Recovery 0 Min.
</TABLE>
<TABLE>
<CAPTION>
Maximum Time
Failure Events Requiring Notification by Anasazi Allocated
====================================================================================================================================
<S> <C> <C>
General UltraSwitch
o TPE or Comm Engine Hardware Recovery Successful.
Vendor to be Notified 60 Min.
o TPE or Comm Engine Hardware Recovery Failed.
Vendor to be Notified 15 Min.
o TPE or Comm Engine Recover Software Recoverable on
Running System or During Unsuccessful Software Install.
THISCO to be Notified 60 Min.
o TPE or Comm Engine Unrecoverable Software Problem on
Running System or during an Unsuccessful Software Install.
THISCO to be Notified 15 Min.
Communications
o DSU, Modem, or T-1 Rack (and its global components) Recovery Successful
Vendor to be Notified 60 Min.
o DSU, Modem, or T-1 (and its global components) Recovery Failed
Vendor to be Notified 15 Min.
o Comm Lane Dial Back Up Successful
Vendor to be Notified 15 Min.
o Comm Lane Dial Back Up Unsuccessful
Vendor to be Notified 15 Min.
</TABLE>
<PAGE> 34
AMENDMENT TO
SOFTWARE LICENSE AGREEMENT
This Amendment dated as of April 1, 1994 (the "Amendment") to the
Software License Agreement dated December 31, 1994 by and between Anasazi Inc.,
a Delaware corporation ("Anasazi") and The Hotel Industry Switch Company, a
Delaware corporation ("THISCO") ("License Agreement").
The parties hereby amend the License Agreement only to the extent as
follows:
1. The parties have mutually terminated the Operations Agreement dated
January 4, 1991 in order to enter into a successor Facilities
Management Agreement dated the date hereof ("Facilities Management
Agreement").
2. The parties hereby update and amend the License Agreement to redefine
"Operations Agreement" (the defined term in the License Agreement) to
be "that certain Facilities Management Agreement dated as of April 1,
1994 between the parties or any successor agreement which generally
provides for operational and other support services provided
exclusively by Anasazi to THISCO in respect of the Switch."
3. Except for the foregoing, the meanings of the defined terms in this
Amendment are the same as those meanings in the License Agreement, and
the License Agreement remains the same.
ANASAZI INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Title: PRESIDENT
--------------------------
THE HOTEL INDUSTRY SWITCH COMPANY
By: /s/ [ILLEGIBLE]
-----------------------------
Title: PRESIDENT
--------------------------
<PAGE> 1
EXHIBIT 10.9
[COMDISCO LOGO] BUSINESS CONTINUITY
SERVICES MASTER AGREEMENT
This Master Agreement is dated December 13, 1996 by and between COMDISCO
DISASTER RECOVERY SERVICES, A DIVISION OF COMDISCO, INC. ("COMDISCO" or "CDRS")
with offices at 6111 North River Road, Rosemont, Illinois 60018 and Pegasus
Systems, Inc. ("Customer") with offices at 3811 Turtle Creek Blvd., Suite 1100,
Dallas, TX 75219. Each party acknowledges that it has read this Master
Agreement, understands it, and agrees to be bound by its terms and conditions.
MASTER AGREEMENT AND SCHEDULES
Comdisco will provide business continuity Services under the terms and
conditions of this Master Agreement and its Schedules. The parties can enter
into a Schedule for the following types of Services:
1. Backup Capability
2. Continuous Availability Services ("CAS")
3. Telecommunication Services
4. Professional Services
Each Schedule contains the specific terms and conditions for the business
continuity Services provided by Comdisco. If there is a conflict between any
Schedule and this Master Agreement, the terms of the Schedule will govern. THIS
AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITH REGARD TO ITS
CONFLICT OF LAW PROVISIONS. Certain capitalized terms used in this Master
Agreement are defined in Section 11.
COMDISCO DISASTER RECOVERY PEGASUS SYSTEMS, INC.
SERVICES, a division of ---------------------------------------
Comdisco, Inc. Customer
---------------------------------------
---------------------------------------
By: /s/ VICTOR J. FRICAS By: [ILLEGIBLE]
-------------------------------- -----------------------------------
Victor J. Fricas
Title: Senior Vice President Title: Chief Information Officer
----------------------------- --------------------------------
<PAGE> 2
TERMS AND CONDITIONS
SECTION 1. BUSINESS CONTINUITY SERVICES
If designated in a signed Schedule between the parties, Comdisco will provide
the following Services to assist Customer in preparing for and recovering from
a Disaster at the Customer Facility.
1.1. Backup Capability. During a Disaster at the Customer Facility, Comdisco
will provide Customer with access to the Backup Capability and Recovery Center.
Customer will notify Comdisco via the Comdisco Disaster Notification Hot Line
if a Disaster occurs at the Customer Facility. Comdisco will ask Customer's
personnel to provide Customer's assigned authorization code. Immediately after
receipt of the Disaster notification and authorization code, Comdisco will
begin preparation of the Backup Capability for account by Customer.
1.2 Continuous Availability Services. Comdisco provides the following CAS
Services for Customers: 1) Transaction Protection Services (Electronic
Vaulting, Remote Journaling, Data Shadowing); 2) Standby Services (Standby
Processing, Standby Data); and 3) Facility Management Services. Comdisco will
provide Customer with the CAS Services described in the Schedule with the
equipment and software and at the CAS Facility listed in the Schedule. If
Customer declares a Disaster, in accordance with Section 1.1, Comdisco will
provide Customer with prompt access to Customer's data and equipment, if any,
stored at the CAS Facility.
1.3 Telecommunication Services. Comdisco will provide Customer with the
networking capability and telecommunications equipment described in a Schedule
to connect the Backup Capability or CAS Service to Customer's designated
site(s).
1.4 Test Time. During each contract year, Customer will have the number of
hours of Test Time listed in each Schedule. Comdisco may reschedule Test time
due to the receipt of a Disaster notification from another Subscription Holder.
1.5 Comdisco-Owned Equipment at Customer Location. Upon Disaster declaration,
Comdisco will ship the equipment designated as "Shipped Equipment" or "Mobile
Cluster Equipment" in a Schedule to a location within the United States
designated by Customer within the time frame designated in the Schedule, or if
not designated, then within a commercially reasonable time frame. Customer will
pay all costs associated with shipping the equipment to and from the Customer
location and assumes all risk of loss for the equipment. Customer will pay the
daily Usage Fee indicated in the Schedule, or if none is indicated, a mutually
agreed-upon daily Usage Fee, for the equipment while at the Customer location.
Customer will de-install and return the equipment to Comdisco's designated
location when its use is completed.
1.6 Customer-Owned Equipment at Comdisco Location. Comdisco will store the
Customer-Owned Equipment indicated in a Schedule at the Recovery Center or CAS
Facility, as applicable. Customer will pay the storage fee set forth in the
Schedule and all costs associated with shipping the Customer-Owned Equipment to
and from the Comdisco location. Also, Customer retains responsibility for all
maintenance costs and risk of loss for the Customer-Owned Equipment.
1.7 Professional Services. Comdisco will provide the Professional Services and
deliverables as described in a Schedule.
SECTION 2. FEES
2.1 Service Fees. Beginning on the Commencement Date, Customer will pay the
monthly Service Fees sated in the Schedule on the first of each month of the
Term as specified in the invoice for the Service. Customer will pay the
Professional Service Fees as specified in the Schedule.
2.2 Disaster Notification Fee. Customer will pay the Disaster Notification Fee
stated in a Schedule, if possible, within twenty-four (24) hours, but no later
than seven (7) days, after Disaster notification.
2.3 Usage Fees. Customer agrees to pay Comdisco the Usage Fees stated in a
Schedule for use of the Backup Capability during a Disaster.
2.4 Expenses. Customer will reimburse Comdisco within thirty (30) days from the
receipt of invoice for the cost of any additional goods or services provided to
Customer during its use of the Backup Capability. For Professional Services,
Customer will reimburse Comdisco for expenses, including travel, maintenance,
report production and administrative support.
2.5 Fee Increase. Any increase in a Service Fee will be limited by Comdisco to
a maximum of six percent (6%) per year per Schedule. Increases are effective on
the annual anniversary of the Commencement Date of each Schedule.
2.6 Late Fee. Whenever any payment is not made when due, Customer will pay
interest at the lesser of prime rate of interest as reported by the Wall Street
Journal on the date payment is due plus five percent (5%) or the maximum amount
permitted by law.
2.7 Taxes. Customer will pay or reimburse Comdisco for any taxes, fees or other
charges imposed by state, local or federal authority resulting from this
Agreement, or from any activities hereunder, except for taxes based on
Comdisco's net income.
SECTION 3. MULTIPLE DISASTERS
3.1 Upon declaration of a Disaster, Customer will have priority access to the
Backup Capability during the Priority Access Period over 1) Comdisco
Subscription Holders who declare a Disaster after Comdisco's receipt of
Customer's Disaster notification; and 2) Subscription Holders who are scheduled
to Test or who are testing. During the Priority Access Period, Customer will
not be required by Comdisco to share the Backup Capability with any other
Subscription Holder. After the Priority Access Period, any other Comdisco
Subscription Holder who declares a Disaster will be entitled to priority use of
the Backup Capability. If a Multiple Disaster occurs, Comdisco will log the
Disaster notifications in the order in which they are received.
3.2 If during a Multiple Disaster, the Backup Capability is unavailable for
Customer's use,Comdisco will assist customer in relocating to the alternate
Comdisco Backup Capability most capable of accommodating Customer's processing
needs. However, because Multiple Disasters could occur, Customer acknowledges
that Customer may not have access to and use of a backup Capability.
<PAGE> 3
SECTION 4. CUSTOMER RESPONSIBILITIES
4.1 Customer will follow the procedures and policies in the Comdisco Recovery
Support Manual. While using a Backup Capability, Customer represents and
warrants that it will: 1) supply and license all necessary programs and data
for Test Time and Disaster recovery; 2) furnish all required supplies,
materials, and storage media not provided with the Backup Capability; 3) remove
all data and Customer provided programs from the Backup Capability equipment
after a Test or Disaster; and 4) provide all necessary personnel for a Test or
a Disaster recovery. Customer is responsible for the adequacy and accuracy of
all data, programs, and procedures that Customer furnishes. CAS Customers agree
to comply with all "Customer Responsibilities" specified in a CAS Schedule.
4.2 Customer is responsible for establishing any audit controls, back-up
files, back-up programs, security procedures and check points in connection
with Customer's use of the Services.
4.3 Customer may not, without the consent of Comdisco, hire any person who is,
or was at any time within the year preceding the offer of employment, an
employee of Comdisco.
GENERAL PROVISIONS
SECTION 5. TERM.
The term of this Master Agreement begins upon signature by both parties and
continues as long as any Schedule is in effect. A Schedule begins on the
Commencement Date and continues through the Initial Term or, if no Initial Term
is indicated, until the Services are completed. The Initial Term of each
Schedule will be automatically extended for successive twelve (12) month
periods unless terminated pursuant to Section 9, "Termination".
SECTION 6. WARRANTIES AND LIABILITY.
6.1 WARRANTIES. Comdisco warrants to Customer that neither the Professional
Services nor the deliverables will infringe any copyright, patent, or trade
secret of any third party. Comdisco will defend at its expense any action
brought against Customer which claims the Professional Services or deliverables
infringe a patent, copyright or trade secret of any third party. Comdisco will
indemnify Customer and pay any costs and damages incurred by Customer due to
the claim if Customer notifies Comdisco promptly in writing of the claim and
Comdisco fully participates in the defense or settlement of the claim. Comdisco
will not be liable for any claim of infringement based on any software, data,
or materials not supplied by Comdisco. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, COMDISCO MAKES NO WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
6.2 LIABILITY. Comdisco's liability to Customer for direct damages from any
cause whatsoever arising out of any Schedule will not, in any event, exceed the
aggregate of the Service Fees paid by Customer for that Schedule during the
twelve (12) month period preceding the month in which Customer's loss or damage
is incurred. This limitation of liability will not apply to the indemnities set
forth in Section 6.1 or Section 7. UNDER NO CIRCUMSTANCES, WILL EITHER PARTY BE
LIABLE FOR INDIRECT, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES EVEN IF IT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
SECTION 7. MUTUAL INDEMNIFICATION.
A party will indemnify (the "Indemnifying Party") and hold the other party (the
"Indemnified Party") and any parent, subsidiaries and affiliates and the
employees and agents of it, harmless against any and all claims, liabilities,
losses, damages and causes of action relating to personal injury, death, or
property damage arising out of the intentional or negligent acts or omissions
of the Indemnifying Party due to its performance or non-performance of this
Agreement. However, the Indemnifying Party will not be responsible for injury
attributable to the negligent acts or omissions of the Indemnified Party and
any parent, subsidiaries, affiliates, agents and employees of it.
SECTION 8. CONFIDENTIALITY AND COPYRIGHTS.
8.1 CONFIDENTIALITY. Each party (including its employees, agents, and
contractors) will use the same standard of care to protect any proprietary or
confidential information of the other disclosed during negotiation or
performance of this Agreement that it used to protect its own proprietary or
confidential information. This Agreement, its Schedules, Comdisco's security
system, access control system, recovery support manuals, support documentation,
and any deliverables are confidential information of Comdisco for Customer's
internal use only.
8.2 COPYRIGHTS. The deliverables contain copyrighted material of Comdisco.
Comdisco grants Customer the right to duplicate the deliverables as necessary
for its internal use only. Comdisco reserves all other copyrights in the
deliverables.
SECTION 9. TERMINATION.
At the end of the Term, either party may terminate a Schedule by giving the
other party at least ninety (90) days prior written notice of termination. A
party may, by written notice, terminate a Schedule for cause without further
obligation if the other party to the Schedule fails to cure a material default
under that Schedule. Any material default(s) must be specifically identified in
the notice of termination. The notified party will have thirty (30) days to
remedy the default(s). Failure to remedy the specified material default(s)
within thirty (30) days will give cause for immediate termination. If a
termination is due to Customer's material default, Customer will immediately
pay to Comdisco the amounts then owing and the present value (discounted at the
prime rate of interest as published in the Wall Street Journal on the date of
default) of the Fees due for all of the remaining Term of the Schedule that was
terminated plus reasonable attorney's fees as liquidated damages and not as a
penalty.
SECTION 10. MISCELLANEOUS.
10.1 Comdisco will maintain a proper operating environment for the equipment
which supplies the Services and will adhere to vendor recommended policies and
procedures for proper maintenance.
10.2 Customer may not assign this Agreement or any of its rights or
obligations (except to its successor pursuant to a merger, consolidation or
sale of all or substantially all of its assets) without obtaining the prior
written consent of Comdisco.
10.3 The waiver by either party of a breach of any provision in this Agreement
will not be construed as a waiver of any subsequent breach.
<PAGE> 4
10.4 This Agreement is the entire agreement between the parties and
supersedes all other oral or written agreements or understandings between the
parties concerning the Services. This Agreement may not be modified unless in
writing and signed by the party against whom enforcement of the modification
is sought.
10.5 Except for Disaster notifications, all notices must be in writing and
will be deemed received three (3) days after mailing if sent by certified mail,
postage prepaid, return receipt requested, to the address set forth above.
10.6 No third party is intended to be, or will be construed to be, a
beneficiary of any provision of this Agreement nor have any right to enforce
any of its provisions or to pursue any remedy for its breach.
10.7 If any provision of this Agreement is held invalid, illegal or
unenforceable, the remaining provisions will remain unimpaired and that
provision will be replaced by a mutually acceptable valid, legal and
enforceable provision that is closest to the original intent of the parties.
10.8 Any provision of this Agreement which by its nature would continue
beyond a termination of this Agreement will survive any termination.
10.9 Schedules may be entered into by Customer or any of its subsidiaries,
divisions or affiliates and such entity will be deemed "Customer" for that
Schedule. However, the Customer set forth above is jointly and severally liable
for the performance of the obligations under all Schedules.
10.10 Comdisco will not be considered in default under this Agreement due to
any failure in its performance due to causes beyond its control.
SECTION 11. DEFINITIONS
AGREEMENT -- means this Master Agreement and any Schedule which incorporates it
by reference.
BACKUP CAPABILITY -- means the equipment (or compatible and functionally
equivalent equipment) and Services described in a Schedule.
COMMENCEMENT DATE -- means the date set forth in each Schedule.
CUSTOMER FACILITY -- means Customer's facility at the address designated in the
Schedule.
CAS FACILITY -- means the Comdisco data center where the Continuous
Availability Services are provided.
CUSTOMER-OWNED EQUIPMENT -- means equipment, as designated in a Schedule, owned
by Customer that the parties agree will be stored at the Comdisco Recovery
Center or CAS Facility listed in the Schedule.
DATA CENTER SUPPORT AREA -- means space provided with a raised-floor Backup
Capability to accommodate Customer's system/application programmers and
operators who manage the raised-floor equipment. Data Center Support Area may
only be used in conjunction with a raised-floor Backup Capability Disaster
notification, and by up to twenty (20) concurrent Customer data center support
personnel.
DISASTER -- means an unplanned interruption in business operations at the
Customer Facility due to causes beyond Customer's control.
DISASTER NOTIFICATION FEE -- means the fee stated in a Schedule assessed upon
the occurrence of each separate Disaster which causes Customer to request
access to the Backup Capability or data stored at the CAS Facility.
INITIAL TERM -- means the number of full months listed on the Schedule.
MULTIPLE DISASTER -- means Disaster notifications from more than one
Subscription Holder entitled to access a Backup Capability for the same or
overlapping periods.
PRIORITY ACCESS PERIOD -- means six (6) weeks for all Backup Capabilities
except a Shell. The Priority Access Period for a Shell is twelve (12) months.
RECOVERY CENTER -- means the Comdisco facility where the Backup Capability is
provided.
SCHEDULE -- means a Schedule or Statement of Work which incorporates the terms
and conditions of this Master Agreement.
SERVICES -- means any or all services provided under this Agreement.
SHELL -- means a raised floor and air-conditioned space suitable for a fully
operational computer equipment environment. The Shell is for the duplication of
the raised-floor Backup Capability in a Schedule for long term Disaster
recovery and, unless indicated in a Schedule, may not be used concurrently with
the raised-floor Backup Capability, except during a reasonable transition
period to the Shell.
SUBSCRIPTION FEE -- means the monthly Service Fee for a Backup Capability.
SUBSCRIPTION HOLDER -- means another Comdisco customer who has a disaster
recovery subscription with Comdisco.
TERM -- means the Initial Term plus any renewal term.
TEST TIME -- means use of the Backup Capability by Customer to test its
Disaster recovery procedures and verify the operation of its critical
applications on the Backup Capability.
USAGE FEE -- means the fee assessed for the period during which the Backup
Capability is used. For purposes of determining the Usage Fee, the term "daily"
mean search period of twenty-four (24) consecutive hours starting at the hour
when Customer accesses the Backup Capability or twenty-four (24) hours after
Comdisco's receipt of a Disaster notification, whichever occurs first.
3/15/95
<PAGE> 5
ADDENDUM TO THE BUSINESS CONTINUITY
SERVICES MASTER AGREEMENT DATED DECEMBER 13, 1996
BETWEEN COMDISCO, INC. AND PEGASUS SYSTEMS, INC.
The terms and conditions of the above Master Agreement are hereby
amended and modified as follows:
1. Section 1.5 Comdisco owned Equipment at Customer Location. To the end
of the first sentence add the following:
"taking into account the immediacy of the circumstances."
2. Section 1.6. Customer Owned Equipment at Comdisco Location. To the end
of this Section add the following sentence:
"Notwithstanding anything to the contrary contained in this Section
Comdisco will indemnify Customer for the loss of any Equipment lost at a
Comdisco Location in the event that the loss or damage is due to the
negligence or willful misconduct of Comdisco or its agents or
employees."
3. Section 2.4 Expenses. To the end of this Section add the following:
"Comdisco shall only be entitled to reimbursement for expenses that were
reasonably and necessarily incurred or specifically requested."
4. Section 3.1 To the end of this Section add the following:
"Upon request Comdisco will supply Customer with the number of other
Subscription Holders who are subscribing to the same equipment
configuration as Customer along with the approximate geographic
locations of said Subscription Holders."
5. Section 5 Term. To the end of this Section add the following:
"Comdisco shall give Customer 180 days written notice prior to the end
of the Term of a Schedule and in the event Comdisco fails to give such
notice then Customer shall have the right to terminate the effected
Schedule upon 30 days notice. No such notice shall be effective prior to
the end of the current Term of the Schedule."
6. Section 7 Mutual Indemnification. In line 6 delete the word
"intentional" and replace with the words "willful misconduct." In line
10, before the word "negligent" insert the words "willful misconduct
or."
<PAGE> 6
7. Section 9 Termination. To the end of this Section add the following:
"Notwithstanding anything to the contrary contained in this Section
Customer shall have the right to terminate a Schedule immediately if the
Comdisco default occurs during a Disaster and such default would
materially prevent Customer from recovering."
8. Section 10.10 To the end of this Section add the words "which could not
reasonably be foreseen and prevented."
9. Section 11 Definitions. In the definition for Disaster delete the words
"due to causes beyond Customer's control" and replace with the words
"which could not reasonably be foreseen and prevented."
COMDISCO, INC. PEGASUS SYSTEMS, INC.
BY: /s/ VICTOR J. FRICAS BY: [ILLLEGIBLE]
------------------------- -----------------------------
Victor J. Fricas
TITLE: Senior Vice President TITLE: Chief Information Officer
---------------------- --------------------------
DATE: January 10, 1997 DATE: December 31, 1996
----------------------- ---------------------------
<PAGE> 7
SCHEDULE A-1 DATED DECEMBER 13, 1996
TO THE MASTER AGREEMENT DATED DECEMBER 13, 1995
BETWEEN COMDISCO DISASTER RECOVERY SERVICES,
A DIVISION OF COMDISCO, INC. ("CDRS")
AND PEGASUS SYSTEMS, INC. ("CUSTOMERS")
1. CUSTOMER FACILITY
Pegasus Systems, Inc.
c/o Anasazi, Inc.
7500 N. Dreamy Draw Dr., Ste. 120
Phoenix, AZ 85020
2. CDRS BACKUP CAPABILITY:
COMPUTER RECOVERY CENTER and CUSTOMER CONTROL CENTER - Carlstadt, NJ
QUANTITY MACHINE TYPE SERVER OPTIONS
-------- ------------ --------------
1 NILE 150 Corporate Business Server
w/6 CPU
w/512 MB Memory
Requires: DC/OSX 79 IMU 7
DISK OPTIONS
------------
24GB SCSI Disk HAAS-3 SCSI Drives - 2.14 GB
REMOVABLE MEDIA OPTIONS
-----------------------
1 8mm 8mm Cartridge Library-Quad Drive-40 Tapes
(J2447-944)
TERMINAL/PRINTER OPTIONS
------------------------
1 Console 19" Color X-Display
DATA COMMUNICATIONS INTERFACE OPTIONS
-------------------------------------
1 Ethernet Dual Ethernet Adapters (J2076)
1 Asynch 16-Port Terminal Server
3. CUSTOM OPTIONS:
A. COMPUTER RECOVERY AND CUSTOMER CONTROL CENTER OPTIONS - Carlstadt, NJ
None
<PAGE> 8
Pegasus Systems, Inc.
Nile Schedule
Dated December 13, 1996
Page 2
4. INITIAL TERM:
Forty-eight (48) Months, commencing January 1, 1997
5. TEST TIME:
Thirty-Two (32) Hours/Year
6. FEES:
A. MONTHLY SUBSCRIPTION
BASIC EQUIPMENT CONFIGURATION........................Includes
Schedules A-2, A-3, & Consulting Statement of Work dated
December 13, 1996
MONTHLY TOTAL - Year 1...........................$10,000
MONTHLY TOTAL - Year 2...........................$12,000
MONTHLY TOTAL - Year 3............................$8,167
MONTHLY TOTAL - Year 4............................$8,167
B. DISASTER NOTIFICATION (Per Occurrence)...............$11,000
C. DAILY USAGE
BACKUP CAPABILITY (Access Six (6) Weeks)..............$5,500
7. SPECIAL TERMS:
A. The equipment described in this Schedule may be substituted by CDRS
with comparable and fully compatible systems.
B. Monthly Subscription Fees do not include Customer's costs for items
such as remote or dedicated telephone lines and common carrier
(long distance or telephone company) services incurred during Test
Time or Disaster.
C. ADDITIONAL EQUIPMENT AT TIME OF DISASTER (NOT ON FLOOR)
2 CPU's
w/256 MB Memory
In the event of a Disaster, CDRS agrees to acquire the equipment
indicated as "ATOD" above (the "ATOD Equipment") within a
commercially reasonable time frame and install it at the Backup
Capability taking into account the immediacy of the circumstances.
Customer agrees to pay the fair market daily rental rate for the
use of the ATOD Equipment during a Disaster. The daily rental for
this ATOD Equipment will commence on the date of installation and
continue through the date of
<PAGE> 9
Pegasus Systems, Inc.
Nile Schedule
Dated December 13, 1996
Page 3
de-installation. Customer agrees to pay all in-transit insurance,
transportation, installation and de-installation costs associated
with the ATOD Equipment. The fair market daily rental rate is the
amount obtainable in an arm's-length transaction between an
informed and willing buyer/user and an informed and willing seller
under no compulsion to sell.
D. MODIFICATION TO MASTER AGREEMENT
1. Section 9, Termination
To the end of Section 9. Termination, add the following sentence:
"Notwithstanding anything to the contrary contained in this
Agreement Customer shall have the option to terminate this Schedule
in the event that Comdisco fails to have, or properly maintain as
per the terms of this Agreement, the Equipment listed on this
Schedule and fails to cure such deficiency within 30 days of
written notice from Customer."
E. All Fees set forth in this Schedule are firm if accepted by
Customer before December 31, 1996. CDRS reserves the right to adjust
the Fees in this Schedule if it is not executed by Customer by
December 31, 1996.
F. EARLY TERMINATION OPTION
Customer may terminate this Schedule upon the expiration of the
24th month of the Term of this Schedule or on an annual contract
year basis thereafter (the "Termination Date"). On the first of the
month prior to the Termination Date, Customer will be obligated to
pay CDRS all fees and charges due through the Termination Date.
This option can only be exercised (i) if Customer is not in
default and upon at least 120 days prior written notice to CDRS,
and (ii) if the Early Termination Option under Schedules A-1, A-2,
and A-3 have been simultaneously exercised.
This Schedule is issued pursuant to the Master Agreement identified above. All
of the terms, conditions, representations and warranties of the Master
Agreement are incorporated herein and made a part hereof. This Schedule
constitutes a separate Agreement with respect to the Backup Capability
subscribed to hereunder.
ACCEPTED:
PEGASUS SYSTEMS, INC. COMDISCO DISASTER RECOVERY SERVICES.
A DIVISION OF COMDISCO, INC.
By: /s/ BILL NICHOLSON By: /s/ VICTOR J. FRICAS
-------------------------------- -----------------------------------
Victor J. Fricas
Title: Chief Information Officer Title: Senior Vice President
----------------------------- --------------------------------
Date: December 31, 1996 Date: January 9, 1997
------------------------------ ---------------------------------
<PAGE> 10
SCHEDULE A-2 DATED DECEMBER 13, 1996
TO THE MASTER AGREEMENT DATED DECEMBER 13, 1995
BETWEEN COMDISCO DISASTER RECOVERY SERVICES,
A DIVISION OF COMDISCO, INC. ("CDRS")
AND PEGASUS SYSTEMS, INC. ("CUSTOMER")
1. CUSTOMER FACILITY:
Pegasus Systems, Inc.
c/o Anasazi, Inc.
7500 N. Dreamy Draw Dr., Ste. 120
Phoenix, AZ 85020
2. CDRS BACKUP CAPABILITY:
COMPUTER RECOVERY CENTER and CUSTOMER CONTROL CENTER - Carlstadt, NJ
<TABLE>
<CAPTION>
QUANTITY MACHINE TYPE SERVER OPTIONS
-------- ------------ --------------
<S> <C> <C>
1 S1000E SPARCserver 1000E Compatible Server
w/4 CPU - 60 MHZ SuperSPARC
w/1 GB Main Memory
Requires: Solaris 2.5.1 or Greater
DISK OPTIONS
------------
4.1 GB SCSI Disk SCSI Disk (Internal)
16.0 GB SCSI Array EMC Symmetrix Disk Array
REMOVABLE MEDIA OPTIONS
-----------------------
1 CD-ROM SmCD - 644 MB
1 8mm 8mm Cartridge Drive - 7/14 GB
TERMINAL/PRINTER OPTIONS
------------------------
1 Console Color Monitor - 17"
DATA COMMUNICATIONS INTERFACE OPTIONS
-------------------------------------
1 Ethernet Ethernet Adapter (FSBE/S)
2 Async Asynchronous Ports
1 NCC Network Control Center
w/24 Dial Tone Lines for Data Circuit
Recovery
w/Diagnostic and Test Equipment
</TABLE>
<PAGE> 11
Pegasus Systems, Inc.
SUN Schedule A-2
Dated December 13, 1996
Page 2
1 LANBRIDGING CDRS LAN Bridging Service
1 CDRS LAN Bridge
w/ 1 Ethernet Port(s)
w/ 1 V.35 Port(s)
Connecting Recovery Centers:
Carlstadt, NJ
Grand Prairie, TX
3. CUSTOM OPTIONS:
A. COMPUTER RECOVERY AND CUSTOMER CONTROL CENTER OPTIONS -
Carlstadt, NJ
None
4. INITIAL TERM:
Forty-Eight (48) Months, commencing January 1, 1997
5. TEST TIME:
Thirty-Two (32) Hours/Year
6. FEES:
A. MONTHLY SUBSCRIPTION
BASIC EQUIPMENT CONFIGURATION......... $ Included in Schedule A-1
Dated December 13, 1996
MONTHLY TOTAL................... $ Included in Schedule A-1
Dated December 13, 1996
B. DISASTER NOTIFICATION (Per Occurrence).................... $4,000
C. DAILY USAGE
BACKUP CAPABILITY (Access Six (6) Weeks).................. $2,000
7. SPECIAL TERMS:
A. The equipment described in this Schedule may be substituted by CDRS
with comparable and compatible systems.
B. Monthly Subscription Fees do not include Customer's costs for items
such as remote or dedicated telephone lines and common carrier
(long distance or telephone company) services incurred during Test
Time or Disaster.
<PAGE> 12
Pegasus Systems, Inc.
SUN Schedule A-2
Dated December 13, 1996
Page 3
C. MODIFICATION TO MASTER AGREEMENT
1. Section 9, Termination
To the end of Section 9. Termination, add the following sentence:
"Notwithstanding anything to the contrary contained in this Agreement Customer
shall have the option to terminate this Schedule in the event that Comdisco
fails to have, or properly maintain as per the terms of this Agreement, the
Equipment listed on this Schedule and fails to cure such deficiency within 30
days of written notice from Customer."
D. All Fees set forth in this Schedule are firm if accepted by Customer
before December 31, 1996. CDRS reserves the right to adjust the Fees in this
Schedule if it is not executed by Customer by December 31, 1996.
F. EARLY TERMINATION OPTION
Customer may terminate this Schedule upon the expiration of the 24th month of
the Term of this Schedule or on an annual contract year basis thereafter (the
"Termination Date"). On the first of the month prior to the Termination Date,
Customer will be obligated to pay CDRS all fees and charges due through the
Termination Date. This option can only be exercised (i) if Customer is not in
default and upon at least 120 days prior written notice to CDRS, and (ii) if the
Early Termination Option under Schedules A-1, A-2, and A-3 have been
simultaneously exercised.
This Schedule is issued pursuant to the Master Agreement identified above. All
of the terms, conditions, representations and warranties of the Master
Agreement are incorporated herein and made a part hereof. This Schedule
constitutes a separate Agreement with respect to the Backup Capability
subscribed to hereunder.
ACCEPTED:
PEGASUS SYSTEMS, INC. COMDISCO DISASTER RECOVERY SERVICES,
A DIVISION OF COMDISCO, INC.
By: /s/ BILL NICHOLSON By: /s/ VICTOR J. FRICAS
------------------------------ --------------------------------
Victor J. Fricas
Title: Chief Information Officer Title: Senior Vice President
--------------------------- ------------------------------
Date: December 31, 1996 Date: 1/9/97
---------------------------- -------------------------------
<PAGE> 13
WORKAREA SCHEDULE A-3 DATED DECEMBER 13, 1996
TO THE MASTER AGREEMENT DATED DECEMBER 13, 1996
BETWEEN COMDISCO DISASTER RECOVERY SERVICES,
A DIVISION OF COMDISCO, INC. ("CDRS")
AND PEGASUS SYSTEMS, INC. ("CUSTOMER")
1. CUSTOMER FACILITY:
Pegasus Systems, Inc.
3811 Turtle Creek Blvd., Suite 1100
Dallas, TX 75219
2. CDRS BACKUP CAPABILITY:
EMERGENCY RESPONSE BACKUP CAPABILITY
RECOVERY FACILITY: SOUTHWESTERN COMPUTER RECOVERY FACILITY
Grand Prairie, TX
<TABLE>
<CAPTION>
QUANTITY TYPE DESCRIPTION
-------- ---- -----------
<S> <C> <C>
Workarea(s): (Customer Personnel Maximum = 25)
25 Stations Pre-wired Workspace for (25) Stations
25 Phonesets Digital Phonesets w/Basic Phone Service
1 Facsimile Device CCITT Group III Fax Machine
1 Copier 12 copies/minute Copier
PC/LAN Stations:
22 PC/LAN Stations 486,66 MHz Processor or Above w/16MB Memory
and each with:
(1) Fixed Disk Drive 240 MB Hard Drive
(1) Diskette Drive 3.5" (1.44 MB) Disk Drive
(1) Monitor VGA Color Monitor
(1) Ethernet Ethernet Adapter
Mobile Cluster PC/486 Stations: (Shipped Next Business Day to Recovery Facility)
10 PC/LAN Station 486,33 MHz Processor w/8MB Memory and with:
(1) Fixed Disk Drive 120 MB Hard Drive
(1) Diskette Drive 3.5" (1.44 MB) Disk Drive
(1) Monitor VGA Color Monitor
(1) Mouse Microsoft Compatible Mouse
(1) Ethernet Ethernet Adapter
LAN Server(s):
1 PC/Server Pentium, 60 MHz Processor w/32MB Memory with:
(1) Fixed Disk Drive 4 GB Hard Drive
</TABLE>
<PAGE> 14
Pegasus Systems, Inc.
Workarea Schedule A-3
Dated December 13, 1996
Page 2
<TABLE>
<S> <C> <C>
(1) Diskette Drive 3.5" (1.44 MB) Disk Drive
(1) Monitor VGA Color Monitor
(1) Ethernet Ethernet Adapter
1 4mm Tape Drive 4mm DAT DDS-2 Compatible Tape Drive w/ Adaptec
SCSI Interface
LAN Connectivity:
1 LAN Hub Ethernet Hub Equipment
30 Ethernet Ethernet 10Base-T Ports
1 Ethernet Maximum Physical Ethernet 10Base-T Segments
LAN Printer(s):
1 Laser Printer Hewlett Packard LaserJet 4 w/ 6 MB Memory and
HP JetDirect Ethernet Card
1 LAN BRIDGING CDRS LAN Bridging Service
1 CDRS LAN Bridge
w/ 1 Ethernet Port(s)
w/ 1 V.35 Port(s)
Connecting Recovery Centers:
Carlstadt, NJ
Grand Prairie, TX
</TABLE>
3. INITIAL TERM:
Forty-Eight (48) Months commencing January 1, 1997
4. TEST TIME:
Twenty four (24) hours per contract year in eight (8) hour increments.
5. FEES:
A. MONTHLY SUBSCRIPTION FEE FOR EMERGENCY RESPONSE BACKUP CAPABILITY
<TABLE>
<S> <C>
WORKAREA w/ (25) STATIONS
PC/LAN STATIONS (22)
MOBILE CLUSTER PC'S (8)
PC/SERVER (1)
MONTHLY TOTAL........................$ Included in Schedule A-1
Dated December 13, 1996
</TABLE>
<PAGE> 15
Pegasus Systems, Inc.
Workarea Schedule A-3
Dated December 13, 1996
Page 3
B. DISASTER NOTIFICATION FEE (Per Occurrence) . . . . . . . $2,500
C. DAILY USAGE FEE (Per Station/Day Access Up to
Six (6) Weeks) . . . . . . . . . . . . . . . . . . . . $ 50
6. SPECIAL TERMS:
A. Monthly Subscription Fees do not include Customer's costs for
items such as remote or dedicated telephone lines and common
carrier (long distance or telephone company) services incurred
during Test Time or Disaster.
B. The equipment described in this Schedule may be substituted by
CDRS with comparable or equivalent units.
C. CDRS provided PC/LAN Stations and PC/Server will be equipped
with DOS 5.0 or higher version level software. Customer will
provide station/server application software and network
operating system software.
Customer represents and warrants that it has taken all
reasonable precautions to protect the Customer supplied
software and computer systems from infection by any computer
virus. CDRS represents and warrants that it has taken all
reasonable precautions to protect the CDRS supplied software
and computer systems from infection by any computer virus.
D. During the first scheduled test, CDRS and Customer will conduct
testing for compatibility of Customer's Home Tape System media
and software on the Tape Drive and SCSI interface referenced
above in the Backup Capability. If not compatible, Customer can
elect to provide their own Tape Drive System for testing and
disaster support or CDRS can provide the compatible Tape Drive
Unit and/or interface as needed, for an additional monthly fee.
E. In the event of a Disaster, and at the customers request, CDRS
agrees to ship the equipment indicated as the "Mobile Cluster"
equipment above to the Backup Recovery Facility within the next
day after Disaster Notification, unless otherwise noted.
Customer will pay CDRS a daily rental rate equal to one percent
(1%) of the purchase price, including tax, of the equipment for
each day the Equipment is utilized by Customer. This daily
rental rate will commence on the date of installation and
continue through the date of de-installation. A minimum thirty
day rental rate will be assessed for each Disaster Notification
by Customer. The total of daily rental will not exceed one
hundred percent (100%) of the purchase price, including tax, of
the equipment. Customer agrees to reimburse CDRS or pay for all
in-transit insurance and transportation costs associated with
the Equipment. One hundred percent (100%) of the daily rental
rate may be applied towards the purchase of the equipment if the
Customer elects to purchase the equipment from CDRS. Customer is
responsible for all installation, deinstallation, return
transportation and site preparation at the Customer Facility.
F. MODIFICATION TO MASTER AGREEMENT
1. SECTION 9, TERMINATION
To the end of Section 9. Termination, add the following
sentence: "Notwithstanding anything to the contrary contained in
this Agreement Customer shall have the option to terminate this
Schedule in the event that Comdisco fails to have, or properly
maintain as per the terms of this Agreement, the Equipment
listed on this Schedule and fails to cure such deficiency within
30 days of written notice from Customer."
<PAGE> 16
Pegasus Systems, Inc.
Worlcarca Schedule A-3
Dated December 13, 1996
Page 4
G. All fees set forth in this Schedule are firm if accepted by
Customer before December 31, 1996. CDRS reserves the right to
adjust the Fees in this Schedule if it is not executed by
Customer by December 31, 1996.
H. EARLY TERMINATION OPTION
Customer may terminate this Schedule upon the expiration of the
24th month of the Term of this Schedule or on an annual contract
year basis thereafter (the "Termination Date"). On the first of
the month prior to the Termination Date, Customer will be
obligated to pay CDRS all fees and charges due through the
Termination Date. This option can only be exercised (i) if
Customer is not in default and upon at least 120 days prior
Pls. Initial written notice to CDRS, and (ii) if the Early Termination Option
/s/ VF under Schedules A-1, A-2, and A-3 have been simultaneously
- ------------ exercised.
This Schedule is issued pursuant to the Master Agreement identified above. All
of the terms, conditions, representations and warranties of the Master
Agreement are incorporated herein and made a part hereof. This Schedule
constitutes a separate Agreement with respect to the Backup Capability
subscribed to hereunder.
ACCEPTED:
PEGASUS SYSTEMS, INC. COMDISCO DISASTER RECOVERY SERVICES,
A DIVISION OF COMDISCO, INC.
By: /s/ BILL NICHOLSON By: /s/ VIC FRICAS
----------------------------- --------------------------------
Vic Fricas
Title: Chief Information Officer Title: Senior Vice President
-------------------------- -----------------------------
Date: December 31, 1996 Date: 1/9/97
-------------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.10
This MASTER SERVICE AGREEMENT between the below-named Client and Genuity Inc.
("Provider" or "GENUITY") (collectively referred to as the "Parties")
establishes the terms and conditions under which Provider will provide
communications services to the client.
- -------------------------------------------------------------------------------
Client TravelWeb, Inc.
State of Incorporation: Delaware
Principal Place of Business:
Address: 3811 Turtle Creek
Suite 110
Dallas, TX 75219
Address for notices:
Attn: Mr. Bill Nicholson
Provider:
Genuity Inc. Address for Notices:
State of Incorporation: Nevada Genuity Inc. Principal Place
of Business 4041 N. Central
4041 N. Central Phoenix, AZ 85012
Phoenix, AZ 85012
Attn: Contract Administration
- -------------------------------------------------------------------------------
1. The Parties anticipate that Client may, at Client's sole discretion, issue
one or more Data Service Orders ("Service Orders") describing certain services
which Client desires to purchase from Provider, and which set forth the prices,
minimum term of service and other service specific details. All Service Orders
shall be subject to the terms and conditions of this Master Service Agreement
for the duration of the Service Order. If a Service Order is accepted in writing
by an authorized representative of Provider, it shall supersede any and all
prior agreements or understandings with respect to the service described
therein, and shall, together with such terms and conditions, comprise the full
and final agreement of the Parties. No term or condition hereof shall be
modified except by written agreement of both Parties and any preprinted terms
and conditions which may appear on Client's order form are expressly rejected
and are void. As used in this document, the word "Term" shall mean the total
duration of a Service Order and the phrase "Initial Term" shall mean the minimum
term of service as specified in a Service Order. The word "Agreement" shall
apply to all promises, terms and conditions of the Parties contained in this
Master Service Agreement or a Service Order.
2. The Initial Term of this Agreement shall be as set forth in the Service
Order placed hereunder and shall extend thereafter until terminated by either
Party upon no less than ninety (90) days' prior written notice. However,
Provider may terminate this Agreement or suspend service hereunder at any time
upon: (a) any failure of Client to pay any undisputed amounts as provided in
this Agreement, which event shall permit Provider to terminate this Agreement
and suspend service immediately upon notice to Client; (b) any breach by Client
of any material provision of this Agreement continuing for thirty (30) days
after receipt of notice thereof; (c) any insolvency, bankruptcy, assignment for
the benefit of creditors, appointment of a trustee or receiver or similar event
with respect to Client; or (d) any governmental prohibition or required
alteration of services to be provided hereunder or any violation of an
applicable law, rule or regulation. Any termination shall not relieve Client of
its obligation to pay any charges incurred hereunder prior to such termination.
The Parties' rights and obligations which by their nature would extend beyond
the termination, cancellation or expiration of this Agreement shall survive such
termination, cancellation or expiration.
3. Client is responsible for all Recurring and Non-Recurring Charges from and
after the Date of Acceptance, except that installation and start-up fees may be
invoiced by Provider for payment by Client concurrently with signature of this
Agreement by Provider. For purposes of this Agreement, the Date of Acceptance is
the earlier of 1) the date Client signs a Client Acceptance Letter or 2) two (2)
business days after Provider establishes a connection in which the
Provider-furnished service is functioning properly. Recurring Charges will be
prorated for the first and last month of the Agreement if service is not
provided for a complete month. Proration of a monthly charge will be based on
the number of days connection was available divided by total days in the month.
Provider's targeted service installation intervals are thirty (30) days after
order acceptance for on-net services and forty-five (45) days for off-net
services. In the event Client requests Provider to attempt to accelerate the
order process to install services more quickly, Client shall pay an Order
Expedite charge of $500. Order Expedite charges will apply to each site ordered
for which expended installation is requested.
4. During the Term Client shall pay Provider for services at the rates set
forth in the Service Order. Normal service charges shall be invoiced monthly in
advance. All amounts owed by Client shall be paid within thirty (30) days after
the date of the invoice and Provider reserves the right to charge interest on
all delinquent payments at an annualized rate of 2 percentage points above the
prime rate as announced in the Wall Street Journal from time to time.
5. Provider's bill shall separately identify any excise, sales, use, or other
taxes applicable to Provider's provision of service or equipment to Client, and
all such taxes, however designated (excepting those based on Provider's net
income), shall be paid by Client in addition to any other amount owing. Provider
will not collect any otherwise applicable tax if Client first provides Provider
with a valid tax exemption certificate.
6. At Client's request, Provider will respond to Client's report of service
interruption and attempt to resolve all problems of connectivity. If it is
determined that all facilities, systems and equipment furnished by Provider are
functioning properly, and that the connectivity problem arose from some other
cause, Provider will recover labor and materials cost for services actually
performed at the following rates, which shall be the usual and customary rates
for similar services provided by Provider to all clients in the same locality.
Labor (4 hour Minimum Charge):
7 a.m. to 7 p.m. week days/$150 per hour per Technician
All other times: $225 per hour per Technician
Materials: Cost to Provider x 1.15
Provider reserves the right to modify the above rates upon ninety (90) days
advance written notice to Client. Provider shall also be entitled to recover
from Client reasonable travel and related expenses of technicians required to
travel in connection with such services.
7. Provider may substitute, change or rearrange any equipment, facility or
system used in providing services at any time and from time to time, but shall
not thereby alter the technical parameters of the services provided thereunder.
Provider may at its discretion limit the burstable capacity available to Client
to a maximum of three (3) times the number of megabits purchased by Client
hereunder.
8. Client shall not cause or allow any facility or equipment of Provider to be
rearranged, moved, removed, disconnected, altered, or repaired without
Provider's prior written consent, which consent shall not be unreasonably
withheld. Client shall not create or allow any liens or other encumbrances to be
placed on any Provider equipment, facility or system arising from any act,
transaction or circumstance relating to Client. If Client elects to relocate or
otherwise change the place of services after commencement of the installation of
facilities, Client shall pay any disconnection, early cancellation or
termination charges reasonably incurred by Provider for the original location
and installation charges for the new location.
9. Provider will grant a credit allowance for service interruption calculated
and credited in fifteen (15) minute increments. A
<PAGE> 2
service interruption will be deemed to have occurred only if service becomes
unusable to Client as a result of failure of Provider's facility, equipment, or
personnel used to provide the service in question, and only where the
interruption is not the result of: (i) the negligence or acts of Client or its
agents; (ii) the failure or malfunction of non-Provider equipment or systems
not provided by Provider; (iii) circumstances or causes beyond the control of
Provider; or (iv) a service interruption caused by scheduled service
maintenance, alteration, or implementation. Such credits will be granted only
if (a) Client affords Provider full and free access to Client's premises to
make appropriate repairs, maintenance, testing, etc.; and (b) Client does not
unreasonably continue to use the service on an impaired basis.
For purposes of canceling or terminating a service provided under this
Agreement for a Provider service interruption, such service interruption order
must equal either twenty four (24) hours of cumulative service outages during
any continuous twelve (12) month period or a single outage of eight (8) hours
or more.
The foregoing states Client's sole remedy for service interruption under the
Agreement, and in no event shall Provider be liable for harm to business, lost
revenues, lost savings, or lost profits suffered by Client, regardless of the
form of action, whether in contract, warranty, strict liability, or tort,
including without limitation negligence of any kind, whether active or passive.
10. Provider's entire liability for any claim, loss, damage or expense from
any cause whatsoever shall in no event exceed sums actually paid to Provider by
Client, during the three (3) months immediately preceding the month of such
occurrence, for the specific service giving rise to the claim. Notwithstanding
the foregoing, Provider shall not be liable for any indirect, incidental,
consequential, punitive or special damages. No action or proceeding against
Provider shall be commenced more than one (1) year after service is rendered.
11. There are no warranties, representations or agreements, express or implied
either in fact or by operation of law, statutory or otherwise, including
warranties of merchantability or fitness for a particular purpose or arising
from a particular course of dealing, except those expressly set forth herein.
Provider makes no representations as to results that will be obtained by the
use of the service hereunder. PROVIDER shall not be liable to Client for
damages or for alteration, theft, loss or destruction of data, programs or
systems from accident, fraud, third party intrusion or otherwise, for failure
of authentication or encryption, or for failure of firewall protection or other
security failures, unless the same shall have been caused by the intentional
act of Provider.
12. In the event that Client cancels or terminates service at any time during
the Initial Term of this Agreement or any renewal thereof for any reason
whatsoever other than a service interruption (as described in Paragraph 9
above), Client agrees to pay Provider as liquidated damages (which shall not be
deemed a penalty) the following sums which shall become due and owing as of the
effective date of cancellation or termination and be payable in accordance with
Paragraph 3 above: 1) all Non-Recurring charges specified in the Service Order
and reasonably expended by Provider to establish service to Client; plus 2) if
cancellation or termination results from a default by Client, any
disconnection, early cancellation or termination charges reasonably incurred by
Provider; plus 3) all Recurring Charges specified in the Service Order for the
balance of the then current Term of this Agreement.
13. Client shall allow Provider continuous access and right-of-way to Client's
premises to the extent reasonably determined by Provider to be appropriate to
the provision and maintenance of services, equipment, facilities, and systems
hereunder. Client shall furnish Provider, at no charge, such equipment space
and electrical power as is reasonably determined by Provider to be required and
suitable to render services hereunder.
14. Client shall be liable for any damage to Provider equipment, facility,
and system which is caused by: (a) negligent or willful acts or omissions of
Client or its agents, employees or suppliers; or (b) malfunction or failure of
any equipment or facility provided by Client or its agents, employees or
suppliers. Client is responsible for identifying, monitoring, removing and
disposing of any existing hazardous materials (e.g., friable asbestos) prior to
any construction or installation work being performed by Provider at Client's
premises and Client shall indemnify, defend, and hold Provider harmless from any
claim, suit, loss, cost, or expense, including fines, abatement charges, legal
fees and court costs incurred in connection with hazardous materials on Client's
premises.
15. Client is solely responsible for the content of any transmissions using
Provider's services, or any other use of Provider's services, by Client or by
any person or entity Client permits to access Provider's services (a "User").
Client agrees that it and any User will not use the services for illegal
purposes (including but not limited to infringement of copyright or trademark,
misappropriation of trade secrets, prohibited munitions export, wire fraud,
invasion of privacy, pornography, obscenity and libel), or to interfere with or
disrupt other network users, network services or network equipment. Disruptions
include, but are not limited to, distribution of unsolicited advertising or
chain letters, repeated harassment of other network users, wrongly
impersonating another such user, falsifying one's network identity for improper
or illegal purposes, posting unsolicited articles to large numbers of such
users or to inappropriate groups, sending unsolicited mass e-mailings,
propagation of computer worms and viruses, and using the network to make
unauthorized entry to any other machine accessible via the network. If Provider
has reasonable grounds to believe that Client is utilizing the services for any
such illegal or disruptive purpose, Provider may suspend or terminate its
services to Client hereunder immediately upon notice to Client. Client shall
defend, indemnify, and hold harmless Provider from and against all liabilities
and costs (including reasonable attorneys' fees) arising from any and all
claims by any person based upon the content of any transmissions by Client or
any User using Provider's services or any other use of Provider's services by
Client or any User.
16. If so requested, Provider may assign on a temporary basis a reasonable
number of Internet Protocol ("IP") addresses from the address space assigned to
Provider by the InterNIC. The Client acknowledges that these addresses are the
property of Provider, are assigned to Client as a service by Provider, and are
not portable as such term is used by InterNIC. Provider reserves the right to
change these address assignments at any time during the term of this Agreement
if the architecture of Provider's network so requires it however, Provider
shall use reasonable efforts to avoid any disruption to Client resulting from a
renumbering requirement. Provider will give Client as much notice as possible
of any requirement to renumber. Client agrees that the addresses provided by
Provider shall be returned to Provider on the effective date of termination of
this Agreement, and that any renumbering required of Client thereafter shall be
the sole responsibility of Client.
17. Provider warrants that all traffic originating from Client will be routed
to the destination address via Provider's network, provided that the IP
addresses in use by Client are part of Provider's assigned address space. If
Client has or acquires its own IP addresses, Client shall confirm that all
other networks will accept and route traffic from Client.
18. Neither Party may assign this Agreement without the written consent of the
other Party (which consent shall not be unreasonably withheld or unduly
delayed), except that Provider may assign its rights and obligations hereunder:
(a) to any subsidiary, parent company, or affiliate of Provider; (b) pursuant
to any sale or transfer of substantially all the business of Provider; or (c)
pursuant to any financing, merger, or reorganization of Provider, Client
represents that it is purchasing Provider's services for use in Client's
business and agrees that it will not assign, sell or make available all or any
part of such purchase or services to any competitor of Provider.
19. If any provision of this Agreement is held by a court to be invalid, void
or unenforceable, the remainder of this Agreement shall nevertheless remain
unimpaired and in effect.
20. No license, joint venture or partnership, express or implied, is granted
by Provider pursuant to this Agreement.
21. Each Party agrees to maintain in strict confidence for a period of five
(5) years from disclosure all plans, designs, drawings, trade secrets, and
other proprietary information of the other Party
This document is the confidential and proprietary property of Provider and
belongs exclusively to it.
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<PAGE> 3
which is disclosed in written or electronic form pursuant to this Agreement. No
obligation of confidentiality shall apply to disclosed information which the
recipient 1) already possessed without obligation of confidentiality; 2)
develops independently; or 3) rightfully receives without obligation of
confidentiality from a third party.
22. Except for payment of money, neither Party shall be liable for any delay or
failure in performance of any part of this Agreement to the extent such delay
or failure is caused by an event of Force Majeure, including but not limited
to, fire, flood, explosion, accident, war, strike, embargo, governmental
requirement, civil or military authority, Act of God, inability to secure
materials, labor or transportation, acts or omissions of common carrier or
warehouseman, failure of performance by third-party supplier, or any other
causes beyond its reasonable control. Any such delay or failure shall suspend
the Agreement until the Force Majeure condition ceases and the Term shall be
extended by the length of the suspension.
23. If this Agreement is entered into by more than one Client, each is jointly
and severally liable for all agreements, covenants and obligations herein.
24. Provider may use Client's name as a reference with third parties and as
part of Provider's general advertising materials.
25. This Agreement shall be governed by the laws of the State of Arizona
without regard to its choice of law provisions. The Parties agree that the
exclusive jurisdiction for all actions on claims hereunder or relating hereto
shall be the state and/or federal courts located in Phoenix, Arizona. In any
action between the Parties to enforce any material provision of this Agreement,
the prevailing Party shall be entitled to recover its legal fees and court
costs from the non-prevailing Party in addition to whatever other relief a
court may award.
26. Each person executing this Agreement on behalf of Providers or Client
represents and warrants that such person has been fully empowered to do so, and
that all necessary corporate actions (if any) required for the execution of
agreements have been taken.
27. This Agreement may be executed in one or more counterparts, each of which
shall be an original and all of which together shall be constitute one and the
same instrument.
28. The following are incorporated herein by reference and are agreed to by the
Parties:
Genuity Inc.: /s/ T.S. ZIMMERMAN
-----------------------
By: T.S. Zimmerman
-----------------------------
Title: Director of Finance
-----------------------------
Date: 1-17-97
-----------------------------
TravelWeb, Inc.: /s/ BILL NICHOLSON
-------------------
By: Bill Nicholson
-----------------------------
Title: President
-----------------------------
Date: 97/1/15
-----------------------------
This document is the confidential and proprietary property of
Provider and belongs exclusively to it. Page 3
<PAGE> 4
ADDENDUM
TO THE
MASTER SERVICE AGREEMENT
BETWEEN GENUITY AND TRAVELWEB, INC.
Notwithstanding the foregoing provisions of the Master Service Agreement, the
parties hereto agree as follows:
Section one is hereby amended to include the quote forms for current and future
services to be a part of this Master Service Agreement As long as any certain
specific requests TravelWeb, Inc. may have are spelled out in a Genuity order
form and signed by a Genuity representative, the order form shall be considered
a part of this Master Service Agreement.
Section Two is hereby amended to include "However, Genuity and/or Client may
terminate the Agreement or suspend service at any time in the event of a breach
or failure to pay, bankruptcy, or government prohibition.
Section Six is hereby amended to include a one hour response time after the
Client contacts Genuity regarding a service interruption. This is to say, after
a representative from the client has contacted a service representative from
Genuity by dialing 1 888 GENUITY, the Genuity service department will have one
hour to report back to the client as to the status of the Client's request. This
in no way implies Genuity guarantees that the problem can be corrected within
one hour.
The hourly rates posted in Section Six are hereby capped at what they are
listed at in this Master Service Agreement for the duration of this contract.
Furthermore, in the event the problems are as a result of some failure by
Genuity to provide the services contracted for by the Client, the Client does
not have to pay any of the hourly charges.
Section Nine is hereby amended to include "in the event of a service
interruption which is equal to 12 hours over a 12 month period or a single
outage of 4 hours or more, Client may cancel or terminate service."
Section Eleven is hereby amended to include "any negligent acts and/or failure
to act as required to provide the services set forth herein."
Section Twelve is hereby amended to include "In the event Client elects to
cancel or terminate the service due to a breach or failure on Genuity's part,
Client owes Genuity nothing. Furthermore, if Genuity cancels or terminates
service to Client, the maximum charge to Client will be 90 days of service
costs."
Section Eighteen is hereby amended to expand the right of assignment to the
Client of this agreement making the right to assign mutual.
<PAGE> 5
Section Twenty Two is hereby amended to include the deletion of Genuity's
failure to perform due to inability to secure materials, labor or
transportation, acts or omissions of common carrier or warehouseman.
Additionally, Acts of God are limited to those acts which are not reasonably
foreseen and which could not reasonably be protected against.
Section Twenty Four is hereby amended to include "permission for Genuity to use
Client's name in advertising will be permitted provided it is submitted in
writing and approved by Client first.
Genuity Inc. TravelWeb, Inc.
By: /s/ THOMAS S. ZIMMERMAN By: /s/ BILL NICHOLSON
------------------------------ -----------------------------
Name: T. S. Zimmerman Name: Bill Nicholson
Title: Director of Finance Title:
<PAGE> 1
EXHIBIT 10.12
TRAVELWEB(TM) PARTICIPANT AGREEMENT
FOR INTERNET PAGES, ON LINE AVAILABILITY AND RESERVATIONS
This Agreement is entered into by and between TravelWeb, Inc. as
successor in interest to The Hotel Industry Switch Company (hereinafter called
"TWI") and Hyatt Corporation (hereinafter called "Participant") to be effective
on the latest date of execution by both parties hereto on the terms and
conditions as set forth herein (the "Agreement").
I.
DEFINITIONS
The following definitions shall be applicable to this Agreement:
1.1 TravelWeb(TM). The trade name and trademark owned by TWI for
its service to provide access to information on hotels,
resorts, cruise lines and other travel and lodging subjects
and a limited access to TravelWeb(TM) Participant's
reservation system with the interactive capability to permit
an operator of a Client Computer (as hereinafter defined) to
make a reservation.
1.2 Internet. A worldwide network of computers with information
which is accessible by Client Computers.
1.3 TravelWeb(TM) Participant. A person or entity who enters into
an agreement with TWI to publish Internet Pages (as
hereinafter defined) and (at its option) to provide access to
the TravelWeb(TM) Participant's reservation system with the
capability to make a reservation.
1.4 TravelWeb(TM) Publication. One or more pages of Materials (as
hereinafter defined) to be developed into Internet Pages (as
hereinafter defined).
1.5 TravelWeb(TM) Order. A written order form, reasonably
acceptable to TWI and in the form prescribed by TWI, executed
by TWI and Participant setting forth the information necessary
for the publication of Internet Pages (as hereinafter defined)
from the Materials (as hereinafter defined) and the agreed
fees and costs to be paid for the order.
1.6 Change Order. A written change, on a form prescribed by TWI,
in the TravelWeb(TM) Order mutually agreed to and executed by
TWI and Participant.
1.7 Client Computer. A computer with access to information on the
Internet.
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1.8 TravelWeb Reservation. A TravelWeb Reservation is a
reservation made with a TravelWeb(TM) Participant via
TravelWeb(TM) by an operator of a Client Computer.
1.9 Net TravelWeb Reservation. Net TravelWeb Reservations within a
particular time period equals the number of reservations made
by an operator of a Client Computer via TravelWeb(TM) within
such time period, less the number of reservations made by an
operator of a Client Computer as to which notice of
cancellation is received via TravelWeb(TM) within such time
period.
1.10 Net Net TravelWeb Reservation. Net Net TravelWeb Reservations
within a particular time period equals the number of
reservations made by an operator of a Client Computer via
TravelWeb(TM) within such time period less cancellations,
chargebacks, rebookings of reservations, package bookings, and
any reservation for which a fee has already been paid.
1.11 Materials. All of the information, in documentary form or
otherwise, provided to TWI by Participant to be used by TWI to
create and publish the Internet Pages.
1.12 TravelWeb(TM) Activity Report. An on line report available
only to Participant and Cyber Publishing, Inc. via TravelWeb
providing information regarding the viewing of Participant's
Internet Pages by operators of Client Computers (to include,
without limitation, daily transaction statistics, hourly
transaction statistics, total transfers by client domain and
reversed subdomain, total transfers from each archive section
and previous full summary period) and all available data
prepared by TWI regarding TravelWeb Reservations with
Participant.
1.13 Internet Page. The finished informational product created and
published by TWI from the Materials pursuant to this Agreement
and a TravelWeb(TM) Order or a Change Order which appears on
an individual Client Computer screen and which is available on
and is accessible by Client Computers on the Internet.
1.14 Authorized Representative. An authorized representative is any
person or entity with the express right, authority and/or
obligation to perform the obligations of or act on behalf of
TWI or Participant with respect to this Agreement.
1.15 Certificate of Internet Page Acceptance. Written acceptance by
Participant of the Internet Pages and authorization to publish
them. The Certificate of Internet Page Acceptance will be in a
form prescribed by TWI.
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1.16 Interface. The connection created by TWI between TravelWeb(TM)
and Participant's Reservation System pursuant to the technical
and functional design specifications set forth in the
UltraSwitch UltraSelect HRS Interface Specifications (the
"Specifications") which shall be compatible with Participant's
reservation system as of the date of this Agreement.
1.17 Interactive Portion of TravelWeb(TM). The functional
capability provided by TWI via the Interface of on line Client
Computers' access via TravelWeb and the most recent version of
Netscape Navigator (or any other browser approved by TWI's
Technical Committee) to a Participant's Reservation system
with the capability to make and cancel a reservation.
II.
INTENT OF THIS AGREEMENT
2.1 Mutual Intent. It is mutually intended that this Agreement and
all documents made reference to herein, set forth, in its
entirety, all of the terms, conditions, rights and obligations
of TWI and Participant with respect to the publishing of
Internet Pages by TWI and the installation and operation of
the Interface by TWI as specifically set forth herein. This
Agreement is not exclusive and Participant may publish the
Internet Pages and accept Internet Reservations with any other
person or entity.
III.
CREATION AND PUBLICATION OF A TRAVELWEB(TM) BROCHURE;
DUTIES AND OBLIGATIONS OF TWI AND PARTICIPANT
3.1 TravelWeb(TM) Order. The TravelWeb(TM) Order shall be
completed in the form attached hereto (the "TravelWeb(TM)
Order Form") and shall contain all of the information
requested on the form for TWI to publish the Internet Pages
requested by Participant. The TravelWeb(TM) Order Form may be
amended or replaced by TWI at any time without notice prior to
any TravelWeb(TM) Order being executed. To be effective, any
TravelWeb(TM) Order Form must be executed by an Authorized
Representative of TWI and Participant. A new TravelWeb(TM)
Order Form shall be completed and agreed to with respect to
each TravelWeb(TM) Publication to be created and published by
TWI for the benefit of Participant pursuant to this Agreement.
3.2 Materials for Creation and Publication of the Internet Pages.
Participant shall be solely responsible for providing to TWI
all Materials reasonable and necessary for TWI to create and
publish the Internet Pages pursuant to the TravelWeb(TM)
Order. All Materials shall be in form, substance, condition
and format as required by TWI and shall meet or exceed all of
the requirements set forth in the TravelWeb(TM) Order Form and
in all other reasonable and
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<PAGE> 4
necessary requirements requested by TWI. TWI is hereby
authorized to utilize, consistent with the TravelWeb(TM) Order
and for no other purposes other than those expressly set forth
in this Agreement, all copyrights, trademarks, trade names,
service marks or other proprietary marks or symbols contained
within the Materials (collectively, "Participant's Marks").
3.3 Processing the Order Creation of the Internet Pages:
Approvals. TWI shall process the TravelWeb(TM) Order pursuant
to the schedule set forth therein. Upon creation of the
Internet Pages to be published pursuant to the TravelWeb(TM)
Order and this Agreement (but prior to such publication), TWI
shall deliver to Participant, for inspection and approval, the
completed Internet Pages. Participant shall, within fourteen
(14) days of such delivery, make any and all written
corrections or proposed amendments it may have to the Internet
Pages and shall provide TWI with written notice detailing such
corrections and/or proposed amendments. In the event the
Internet Pages are approved, Participant shall, within
fourteen (14) days of receipt of the Internet Pages, provide
TWI with a Certificate of Acceptance. Notwithstanding the
above and foregoing, in the event Participant does not provide
written notice to TWI of corrections or proposed amendments or
approving the Internet Pages within fourteen (14) days of
receipt of the Internet Pages, approval of the Internet Pages
shall be deemed not given by Participant to TWI and TWI shall
not be authorized to publish the Internet Pages on the
Internet; however, TWI may immediately invoice Participant for
all fees and costs associated with the TravelWeb Order or
Change Order and Participant shall be deemed to have waived
any dispute of such invoice.
3.4 Authority to Publish. Participant hereby authorizes and
directs TWI to publish on the Internet as part of
TravelWeb(TM) the approved Internet Pages.
3.5 TravelWeb Management. THISCO shall be responsible for all
costs associated with the connection of the TravelWeb server
to Internet and all hardware and software maintenance for such
server. THISCO shall insure that the server is monitored for
failures 24 hours per day, seven days per week and will use
commercially reasonable efforts to assure that the server is
operational and available on the Internet 98% of the time, 24
hours per day, seven days per week for each 90-day period.
IV.
THE INTERFACE: DUTIES AND OBLIGATIONS OF TWI AND PARTICIPANT
4.1 Duties of TWI. TWI shall be responsible for all costs
associated with the production, development, service and
maintenance of the Interface and the Interactive Portion of
TravelWeb including, but not limited to providing all
reasonable and necessary personnel, technical support,
hardware and
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software to produce the Interface between Client Computers and
Participant's reservation system meeting or exceeding the
Specifications. Subject to Section 9.2 hereof and acts of
third parties, the Interactive Portion of TravelWeb will be
operable at least 98% of the time measured 24 hours per day, 7
days per week for each rolling 90-day period after the
Interface has been completed. TWI will periodically review and
update, as is reasonable and necessary, all security
applications of the Interactive Portion of TravelWeb
including, without limitation, the current reservation limits.
4.2 Duties of Participant. Participant shall provide all
reasonable and necessary personnel and technical support,
reasonable and necessary programming and modification of its
reservation system and all other reasonable and necessary
accommodations to produce a dependable and operable Interface
with its reservation system and shall cooperate fully with TWI
personnel to produce the Interface. Through the Interface,
Participant will permit access to Participant's reservation
system by all Client Computers utilizing TravelWeb(TM) and the
most recent version of Netscape Navigator (or any other server
approved by TWI's Technical Committee) and will permit all
such Client Computers to reserve and cancel rooms available to
be reserved in Participant's reservation system and to make
credit card payments to Participant in connection with the
TravelWeb Reservation.
4.3 Implementation of the Interface. It is acknowledged by
Participant that the Interface has been created and is
operable.
4.4 Security Problems. Notwithstanding any other provision set
forth herein, in the event Participant experiences losses
resulting from security breaches in the usage of the
Interactive Portion of TravelWeb and/or the Interface, or the
Technical Committee of TWI determines that additional security
measures should be implemented, Participant shall immediately
provide notice to TWI of any such security breach and
otherwise may immediately terminate the Interactive Portion of
TravelWeb and/or the Interface and refuse to accept any
transaction until such time as the security problem has been
cured or additional security measures are implemented.
Participant's right to terminate the Interactive Portion of
TravelWeb and/or the Interface shall be Participant's sole and
exclusive remedy for any such security breach.
4.5 Enhancement or Modification of the Interactive Portion of
TravelWeb(TM). TWI may undertake to modify the operation or
enhance the capability of the Interactive Portion of
TravelWeb(TM). In such event, TWI shall provide notice to
Participant of such modification or enhancement at least 30
days prior to such modification or enhancement taking effect
and will make such adjustments and modifications to
TravelWeb(TM) at TWI's sole expense, as are reasonable and
necessary to maintain the Interface with Participant.
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Participant agrees to cooperate with TWI with regard to its
modification or enhancement of the Interactive Portion of
TravelWeb(TM).
4.6 Modification of Participant's Reservation System. In the event
Participant modifies its reservation system or modification of
its reservation system is required for Participant if it
continues to participate in the Interactive Portion of
TravelWeb(TM), Participant shall pay for such modification to
its reservation system. In the event Participant modifies its
reservation system and such modification requires TWI to
modify the Interface or the Interactive Portion of
TravelWeb(TM) to maintain the Interface and to comply with its
functional specifications with Participant, Participant shall
pay TWI its standard consulting rate and all reasonable
expenses incurred by TWI as a result of the modification.
V.
FEES AND COSTS
5.1 Creation and Publication Fees. For the creation and
development of the Internet Pages from the Materials provided
by Participant to TWI, Participant shall pay to TWI the fees
and costs set forth on each TravelWeb(TM) Order Form and/or
Change Order Form. Fees and costs charged in connection with
each TravelWeb(TM) Order are subject to change without notice
for all TravelWeb(TM) Orders which have not been executed.
5.2 Monthly Maintenance Fees. For maintaining the Internet Pages
on the Internet and the management, supervision and operation
of the software, hardware and facilities management associated
with the TravelWeb connection, Participant shall pay to TWI a
monthly maintenance fee as follows:
1 - 50 properties $3.00 per property
51 - 200 properties $2.75 per property
201 - 400 properties $2.50 per property
over 400 properties $1,000
The monthly maintenance fee is due for each month during which
Internet Pages have been published on the Internet pursuant to
this Agreement.
5.3 TravelWeb Reservation Fees. For each Net TravelWeb Reservation
during the first 12 months after the date hereof, Participant
shall pay to TWI a fee of $2.00 (the "TravelWeb Reservation
Fee"). Prior to the expiration of 12 months after the date
hereof and on or before each anniversary date hereof,
Participant and TWI shall diligently and in good faith attempt
to agree on a new TravelWeb Reservation Fee to be applicable
for each subsequent 12
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month period. In the event Participant and TWI do not agree on
a new TravelWeb Reservation Fee to be applicable for each 12
month period as provided herein, either party may terminate
the portions of this Agreement with respect to the Interactive
Portion of TravelWeb and the parties shall be relieved of
their responsibilities set forth herein with respect to the
Interactive Portion of TravelWeb. The TravelWeb Reservation
Fee is in addition to the fees to be paid by Participant for
transactions utilizing The Hotel Industry Switch Company's
UltraSwitch system. Notwithstanding the above and foregoing,
Participant shall have the option to renew for any period at a
mutually agreed Net TravelWeb Reservation fee.
5.4 Communication Line Costs. Participant shall pay all costs of
communication lines required for the Interface and operation
of the Interactive Portion of TravelWeb.
5.5 Payment of Fees and Costs. TWI shall provide to Participant a
monthly invoice itemizing all fees and costs and Participant
shall pay each invoice upon receipt and each invoice shall be
past due thirty (30) days thereafter.
VI.
TRAVELWEB(TM) REPORTS
6.1 TravelWeb(TM) Activity Reports. TWI shall provide to
Participant via TravelWeb(TM) current on line TravelWeb(TM)
Activity Reports.
VII.
TERM AND TERMINATION
7.1 Term. Unless terminated as provided herein, the term of this
Agreement shall begin on the date this Agreement is executed
by both parties and shall terminate on the date of its first
(1st) anniversary. This Agreement shall be automatically
renewed and extended for additional one (1) year terms unless,
at least sixty (60) days prior to the expiration of any one
(1) year term, either party hereto shall give notice of its
intent not to renew and extend this Agreement.
7.2 Termination. This Agreement may only be terminated prior to
the expiration of each one (1) year term or any extended term
(if applicable) in the event of a breach hereof and the
failure to cure within the applicable time period as provided
herein or in the event this Agreement is not performable as
the result of an event of force majeure as set forth in
Section 9.2 hereof.
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7.3 Effect of Termination. In the event this Agreement is
terminated as permitted herein or the term of this Agreement
expires without being renewed and extended, the publication of
all Internet Pages and access to Participant's reservation
system via TravelWeb shall cease and all duties and
obligations as set forth herein shall immediately cease and
terminate except for the provisions set forth in Article VIII,
Sections 9.7, 9.8, 10.1 and Articles 11 and 12 hereof and any
payments which may be due after the date of termination and
all Materials shall be returned to Participant.
VIII.
INTELLECTUAL PROPERTY AND DATA
8.1 Ownership of Materials. Participant represents and warrants
that it is the sole and exclusive owner, or has the authorized
right of use in connection herewith, of all Materials and
Participant's Marks to be used hereby, by virtue of common or
statutory law, used in connection therewith and that the
publication of same on the Internet Pages is and shall be, at
all times material hereto, legal and shall not, in any manner,
violate any applicable law or the rights of any third party.
8.2 Protection of Intellectual Property Rights. Participant shall
be solely and exclusively responsible for the protection of
any and all of its intellectual property including, but not
limited to the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing
notice of ownership or protection of Participant's Marks in
connection with the Materials, the Internet Pages and the
Interactive Portion of TravelWeb(TM).
8.3 Ownership of Internet Pages. The Internet Pages, shall, at all
times material to this Agreement, be and remain the property
of Participant. TWI may not use or publish the Internet Pages
in any manner other than pursuant to this Agreement without
the prior written consent of Participant.
8.4 TravelWeb Reservation Information. Subject to Participant's
right to receive information pursuant to Section 6.1 hereof,
TWI shall own all statistical data regarding a Client
Computer's access to TravelWeb and the name and address of the
user of each Client Computer accessing TravelWeb provided TWI
shall not use or distribute such data in any manner which is
specific to Participant or reasonably determinable as related
to Participant (except as required to perform this Agreement).
TWI may use all aggregate data generated from the Interactive
Portion of TravelWeb provided such data is not specific to
Participant or reasonably determinable as related to
Participant, and does not indicate that a customer is a
customer of Participant.
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IX.
DEFAULT
9.1 Events of Default. Subject to Section 9.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or any of its
participating affiliates or franchisees to satisfy
the obligations set forth in this Agreement;
(iii) The refusal or failure of either party (including
Participant's participating affiliates, or
subsidiaries) to perform diligently and in good faith
each and every material provision of this Agreement;
or
(iv) The commencement by either party of a voluntary case
under Chapter 11 or 7 of the United States Bankruptcy
Code, as from time to time in effect, the
commencement against either party of an involuntary
case under said Chapter 11 or 7, either party seeking
relief as a debtor under any applicable law, other
than said Chapter 11 or 7, of any jurisdiction
relating to the liquidation or reorganization of
debtors or the modification of the rights of
creditors, the entry of a court order adjudging the
party bankrupt or insolvent, ordering its liquidation
or reorganization or assuming custody or appointing a
receiver or other custodian of its property, or its
making an assignment for the benefit of, or entering
into a composition with, its creditors.
9.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 9.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or
other events beyond the control of the defaulting party.
However, if any such occurrence results in any of the events
described in Section 9.1, and the same continues for more than
thirty (30) consecutive days, either party may terminate this
Agreement by providing notice as required herein.
9.3 Notice of Default and Opportunity to Cure. Upon the occurrence
of an Event of Default, the non-defaulting party shall give
notice of such default to the defaulting party and, in the
event of a monetary default, the defaulting party shall have
ten (10) days from the date of such notice within which to
cure such default or, in the event of a non-monetary default,
the defaulting party shall have twenty (20) days within which
to cure such default. In the event
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such default is not cured within the time required herein,
this Agreement may then be terminated.
9.4 Effect of Default.
(i) By Participant. In the event of a default of this
Agreement by Participant and the failure of
Participant to cure such default after notice and
opportunity to cure as provided herein, TWI shall be
entitled (i) to terminate this Agreement and TWI's
obligations and duties set forth herein shall cease
(ii) to retain Materials, the Internet Pages and any
and all other Materials used by, developed, or
created by TWI in the performance of this Agreement,
and (iii) pursue any and all claims for fees and
costs agreed to be paid pursuant to this Agreement
without any offset for mitigation resulting from
TWI's terminated obligation to continue to develop
and create Internet Pages as required by the
TravelWeb(TM). Order. It is acknowledged and agreed by
Participant that the damages to TWI for a default on
this Agreement by Participant would be difficult, if
not impossible, to measure and that the balance
unpaid on any Travelweb(TM) Order in addition to any
unpaid TravelWeb Reservation Fees or other fees is a
fair and reasonable estimate of TWI's damages in the
event of such default and shall be the total amount
due TWI in such event.
(ii) By TWI. In the event of a default of this Agreement
by TWI and the failure of TWI to cure such default
after notice and opportunity to cure as provided
herein, Participant may terminate this Agreement and
TWI shall deliver to Participant all Materials and
all other materials used, developed and/or created by
TWI in the development and creation of the Internet
Pages and TWI shall refund to Participant all amounts
paid pursuant to the TravelWeb(TM) Order less a
reasonable amount (no greater than the price set
forth on the applicable TravelWeb Order) for such
portion of the development and creation of the
Internet Pages accomplished by TWI as represented by
the Materials delivered to Participant.
9.5 Risk of Internet Usage. Each party acknowledges and agrees
that the Internet is a communication medium over which the
parties have no control and that its continued utilization in
its present form at current costs is uncertain. Therefore, if
at any time during the term of this Agreement the cost of
access to the Internet increases or there is imposed a fee or
cost for use of the Internet communication lines, or there is
imposed any law, governmental ruling, or regulation the result
of which increases the cost of access to or usage of the
Internet or otherwise makes it impractical, in either party's
sole discretion, to continue to perform this Agreement, either
party may, upon notice to the other party, immediately
terminate the Interactive Portion of TravelWeb, the interface,
and/or this Agreement without such action constituting an
event of default.
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9.6 Errors on Internet Pages. Not withstanding any other provision
hereof, in the event an Internet Page published pursuant to
this Agreement contains an error caused by TWI, its employees,
agents or subcontractors, other than an error arising from
TWI's gross negligence or willful misconduct, Participant's
sole and exclusive remedy for such error shall be TWI's
obligation to remove such Internet Page from TravelWeb within
twenty four (24) hours of becoming aware or notified of such
error and shall then cure such error by correcting the
information contained on the Internet Page and restoring the
corrected and approved Internet Page as promptly as reasonably
possible but in no event later than seven (7) days of date of
notice from Participant of such error, each at TWI's sole cost
and expense.
9.7 Waiver of Consequential Damages. Neither party shall be liable
to the other for any consequential damages proximately caused
or resulting from any default of this Agreement or arising out
of the performance of this Agreement, and each party hereby
expressly waives such damages.
9.8 Disclaimer and Limitation of Liabilities. TWI WILL NOT BE
RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN THE MATERIAL OR THE INTERNET PAGES; (ii) NOR
WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH
RESPECT TO THE INTERNET PAGES UNLESS EXPRESSLY SET FORTH
HEREIN, OR (iii) ANY CLAIM, DAMAGE OR LIABILITY OF ANY NATURE
ARISING OUT OF A CLIENT COMPUTER'S ACCESS TO PARTICIPANT'S
RESERVATION SYSTEM AND/OR ANY TRANSACTION OR THE USE OF A
CREDIT CARD OR OTHER DEBIT DEVISE IN CONNECTION THEREWITH,
EXCEPT TO THE EXTENT RESULTING FROM THE FAILURE OF THE
INTERACTIVE PORTION OF TRAVELWEB TO PERFORM PURSUANT TO THE
SPECIFICATIONS (PROVIDED HOWEVER, TWI SHALL NOT BE LIABLE FOR
ANY FAILURE OR DEFECT RESULTING FROM ANY THIRD PARTY SOFTWARE
APPLICATION SET FORTH AS PART OF THE SPECIFICATIONS) OR FROM
TWI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES,
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR
OTHERWISE, ARE DISCLAIMED BY TWI AND WAIVED BY PARTICIPANT.
X.
INDEMNIFICATION
10.1 Indemnification in the Event of Certain Losses. Subject to the
other provisions hereof, Participant agrees to indemnify,
defend and hold harmless TWI and TWI's partners successors,
assigns, subsidiaries, affiliates, and each such entities
directors, officers, employees and stockholders, from and
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against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) ("TWI's Losses")
occurring on account of Participant's fault except to the
extent dye to the fault of TWI. Subject to the other
provisions hereof, TWI agrees to indemnify, defend and hold
harmless Participant, and Participant's partners, successors,
assigns, subsidiaries, affiliates, and each such entities
directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) ("Participant's
Losses") occurring on account of TWI's fault except to the
extent due to the fault of Participant. Promptly after receipt
by an indemnified party of notice of the commencement of any
action or the presentation or other assertion of any claim
which could result in any indemnification claim pursuant to
this Section 10.1, such indemnified party shall give prompt
notice thereof to the indemnifying party and the indemnifying
party shall be entitled to participate therein or, to the
extent that it shall wish, assume the defense thereof with its
own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party
shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation
and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. Whether or not an
indemnifying party elects to assume the defense of any action
or claim, the indemnifying party shall not compromise or
settle any such action or claim without the indemnified
party's written consent (which consent shall not be
unreasonably withheld). The parties agree to cooperate to the
fullest extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
XI.
CONFIDENTIALITY
11.1 Confidential Information. During the term of this Agreement,
it is acknowledged by Participant and TWI that each may
receive or have access to confidential and proprietary
information of the other party including, but not limited to,
the UltraSwitch UltraSelect HRS Interface Specifications,
Participant's reservation system specification, marketing
information, business plans, financial information and other
proprietary information or trade secrets ("Confidential
Information"). Each party acknowledges that it shall not
acquire any ownership or other rights in or to Confidential
Information of the other, and shall use the Confidential
Information only for the purposes of the performance of this
Agreement, and shall keep confidential and not disclose the
Confidential Information to any other person, firm or
corporation without the prior written consent of the other
party. Any Confidential Information transmitted in writing or
by other tangible media shall remain the property of the owner
and shall be returned to the
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owner at its request, together with all copies made thereof,
at the conclusion of this Agreement. The parties agree that
the provisions of this Section 11 shall extend, without
limitation, beyond the date of the expiration or other
conclusion of this Agreement. Each party agrees to take all
reasonably avoidable measures, at their own expense, to ensure
that the other party's Confidential Information is not
accessible to other persons and to upgrade such measures as
often as necessary and practicable.
11.2 Use of Marks. Participant acknowledges that "TravelWeb(TM)" is
a trade name and servicemark of TWI and that it shall not use
such mark without the prior written approval of TWI. Except as
otherwise permitted herein, TWI agrees that it shall not use
any of Participant's Marks or any portion thereof or elements
contained therein without Participant's prior written consent.
XII.
MISCELLANEOUS
12.1 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its
conflict of laws principles. Any action brought relating to or
arising out of this Agreement must be brought in the state or
federal courts situated in the county and state of the
residence or principal place of business of the party against
whom the action is brought (or any of them, if more than one).
12.2 Notice. All notices and other communications contemplated
hereby must be in writing (except in the case of
electronically transmitted data) and (a) personally delivered,
(b) deposited in the United States mail, first-class,
registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for
next business day delivery), shipping prepaid, (d) sent by
telecopy with confirmation of receipt of telecopy to the
number indicated, or (e) transmitted directly to the recipient
by electronic data transmission pursuant to arrangements made
between the parties. Such notices and other communications
(except in the case of electronically transmitted data) shall
be addressed as follows:
IF TO TWI: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Hyatt Corporation
Suite 1100 200 W. Madison
Dallas, Tx 75219 Chicago, IL 60606
Attention: John F. Davis, III Attention: John Lavin
(if by telecopy: (214) 528-5675) (if by telecopy: (312) 920-2409)
With a copy to General Counsel
[at same address]
(if by telecopy to: (312 750-8581)
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or such persons or addresses as any party may request by
notice duly given hereunder. Except as otherwise specified
herein, notices will be deemed given and received when
received.
12.3 Binding Effect. This Agreement will be binding upon and will
inure to the benefit of the legal representatives, successors
and duly authorized assigns of each party whether resulting
from merger, acquisition, reorganization or assignment
pursuant to the terms hereof.
12.4 Assignment; Authorized Agents. This Agreement is not
assignable by either party without the prior written consent
of the other and such consent shall not be unreasonably
withheld or delayed; provided, however, it is acknowledged and
agreed that the obligations of TWI as set forth in paragraphs
3.2 and 3.3 herein may be performed by Cyber Publishing, Inc.
or such other Authorized Representative. Notwithstanding any
restrictions herein on assignment or transfer, either party
shall have the right at its option to assign and transfer all
of its rights and interests hereunder to any entity or
entities which may be spun-off from either party, to the
extent such rights and interests relate to properties which
will be owned, leased, licensed or managed by, or services to
be performed by, such entity or entities. Following the date
of such spin-off, such entity or entities shall be solely
responsible for the performance of any and all covenants,
agreements, indemnities and other obligations of any kind
hereunder as they relate to such properties or services and
the assigning party, its subsidiaries, affiliates, licensees
and successors, and each of such entities and their officers,
directors, employees and agents shall be released from any and
all such covenants, agreements, indemnities and other
obligations of any kind hereunder, without however, in any way
increasing the Net Reservation fee or any other fees or
charges payable by Participant hereunder.
12.5 Entire Agreement. This Agreement, the Exhibits hereto, and the
documents made reference to herein (and any replacements
and/or amendments thereto) shall constitute the entire, sole
and exclusive agreement between TWI and Participant with
respect to the subject matter set forth herein and shall
supersede and cause the mutual termination of any and all
other agreements, oral or written with respect to TravelWeb
including, but not limited to, that certain TravelWeb
Participant Agreement between The Hotel Industry Switch
Company and Participant with an effective date of July 15,
1995. Each party hereto acknowledges that it has not relied
upon any representation or promise not set forth herein.
12.6 Parties Independence. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto
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are separate and distinct entities independently contracting
with each other at arms length.
TRAVELWEB, INC.
BY: /s/ JOHN F. DAVIS, III
----------------------------------
John F. Davis
President
DATE: January 17, 1996
--------------------------------
PARTICIPANT:
HYATT CORPORATION
BY: /s/ MARY CATHERINE SEXTON
----------------------------------
---------------------------------
ITS: Associate General Counsel
---------------------------------
DATE: January 12, 1996
--------------------------------
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EXHIBIT 10.13
TRAVELWEB PARTICIPANT AGREEMENT
This Agreement is executed on the dates indicated but to be effective July
15, 1995 and is hereby entered into by and between The Hotel Industry Switch
Company (hereinafter called "THISCO") and INTER-CONTINENTAL HOTELS CORPORATION
(hereinafter called "Participant") on the terms and conditions as set forth
herein (the "Agreement").
I.
DEFINITIONS
The following definitions shall be applicable to this Agreement:
1.1 TravelWeb. A tradename owned by THISCO for its service to provide a
catalog of information on hotels, resorts, cruise lines and other
travel and lodging subjects which is accessible by a Client Computer
(as hereinafter defined) on the Internet.
1.2 Internet. A worldwide network of computers with information which is
accessible by Client Computers (as hereinafter defined).
1.3 TravelWeb Participant. A person or entity who enters into an
agreement with THISCO for the creation and publishing of Internet
Pages (as hereinafter defined).
1.4 TravelWeb Publication. One or more pages of Materials (as hereinafter
defined) to be developed into Internet Pages (as hereinafter
defined).
1.5 TravelWeb Order. A written order form, acceptable to THISCO and in
the form prescribed by THISCO, executed by THISCO and Participant
setting forth the information necessary for the publication of
Internet Pages (as hereinafter defined) from Participant's Materials
(as hereinafter defined) and the agreed fees and costs to be paid for
the order. A copy of the current TravelWeb Order Form (with
additional required documents attached thereto) is attached hereto
and marked Exhibit A.
1.6 Change Order. A written change, on a form prescribed by THISCO, in
the TravelWeb Order mutually agreed to and executed by THISCO and
Participant.
1.7 Client Computer. A computer with access to information on the
Internet.
1.8 Materials. All of the information, in documentary form or otherwise,
provided to THISCO by Participant to be used by THISCO to publish the
Internet Pages.
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1.9 TravelWeb Access Information. Information regarding TravelWeb access
by Client Computers as is gathered by THISCO and made available to
Participant which shall include daily transaction statistics, hourly
transaction statistics, total transfers by client domain, total
transfers by reversed sub domain, total transfers from each archive
section and previous full summary period.
1.10 Internet Page. The finished informational product created and
published by THISCO from the Materials pursuant to this Agreement and
a TravelWeb Order or a Change Order which appears on an individual
Client Computer screen and which is available on and is accessible by
Client Computers on the Internet.
1.11 Authorized Representative. An authorized representative is any person
or entity with the express right, authority and/or obligation to
perform the obligations of or act on behalf of THISCO or Participant
with respect this Agreement.
1.12 Certificate of Acceptance. Written acceptance by Participant of the
Internet Pages and authorization to publish them. The Certificate of
Acceptance will be in a form prescribed by THISCO.
II.
INTENT OF THIS AGREEMENT
2.1 Mutual Intent. It is intended by both parties to this Agreement that
this Agreement, all exhibits hereto, and all other documents made
reference herein, sets forth, in its entirety, all of the terms,
conditions, rights and obligations of THISCO and Participant with
respect to the publishing of Internet Pages by THISCO for the benefit
of Participant as more specifically set forth herein.
III.
CREATION AND PUBLICATION OF A TRAVELWEB BROCHURE;
DUTIES AND OBLIGATIONS OF THISCO AND PARTICIPANT
3.1 TravelWeb Order. The TravelWeb Order shall be completed and shall be
in the form attached hereto and marked Exhibit A (the "TravelWeb
Order Form") and shall contain all of the information necessary for
THISCO to publish the Internet Pages requested by Participant. The
TravelWeb Order Form may be amended or replaced by THISCO at any time
without notice prior to any TravelWeb Order being executed and such
new or amended form need not be attached hereto as a replacement for
Exhibit A to be effective and to supersede Exhibit A. To be
effective, any TravelWeb Order Form must be executed by an Authorized
Representative of THISCO and Participant. A new TravelWeb Order Form
shall be completed and
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agreed to with respect to each TravelWeb Publication to be created
and published by THISCO for the benefit of Participant pursuant to
this Agreement.
3.2 Materials for Creation and Publication of the Internet Pages.
Participant shall be solely responsible for providing to THISCO all
Materials reasonable and necessary for THISCO to create and publish
the Internet Pages pursuant to the TravelWeb Order. All Materials
shall be in form, substance, condition and format as required by
THISCO and shall meet or exceed all of the requirements set forth on
Exhibit A hereto and all other reasonable and necessary requirements
requested by THISCO. Exhibit A (or any other similar document setting
forth the requirements for the Materials) may be amended by THISCO at
any time. Subject to the terms of this Agreement, THISCO is hereby
authorized to utilize, consistent with the TravelWeb Order and for no
other purposes other than those expressly set forth in this
Agreement, all copyrights, trademarks, trade names, service marks or
other proprietary marks or symbols contained within the Materials.
3.3 Processing the Order; Creation of the Internet Pages; Approvals.
THISCO shall process the TravelWeb Order pursuant to the schedule set
forth therein. Upon creation of the Internet Pages to be published
pursuant to the TravelWeb Order and this Agreement (but prior to such
publication), THISCO shall deliver to Participant, for inspection and
approval, the completed Internet Pages. Participant shall, within
fourteen (14) days of such delivery, make any and all written
corrections or proposed amendments it may have to the Internet Pages
and shall provide THISCO with written notice detailing such
corrections and/or proposed amendments. In the event the Internet
Pages are approved, Participant shall, within fourteen (14) days of
receipt of the Internet Pages, provide THISCO with a Certificate of
Acceptance. Notwithstanding the above and foregoing, in the event
Participant does not provide written notice to THISCO of corrections
or proposed amendments or approving the Internet Pages within
fourteen (14) days of receipt of the Internet Pages, approval of the
Internet Page shall be deemed not given by Participant to THISCO and
THISCO shall not be authorized to publish the Internet Pages on the
Internet; however, THISCO may immediately invoice Participant for all
fees and costs associated with the TravelWeb Order and/or Change
Order and Participant shall be deemed to have waived any dispute of
such invoice. THISCO may not modify or amend the approved Internet
Pages without Participant's prior written consent.
3.4 Authority to Publish. Participant hereby authorizes and directs
THISCO to publish on the Internet as part of TravelWeb the approved
Internet Pages.
3.5 TravelWeb Management. THISCO shall be responsible for all costs
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associated with the connection of the TravelWeb server to Internet
and all hardware and software maintenance for such server. THISCO
shall insure that the server is monitored for failures 24 hours per
day, seven days per week and will use commercially reasonable efforts
to assure that the server is operational and available on the
Internet 24 hours per day, seven days per week.
IV.
FEES AND COSTS
4.1 Creation and Publication Fees. For the creation and development of
the Internet Pages from the Materials provided by Participant to
THISCO, Participant shall pay to THISCO the fees and costs set forth
on each TravelWeb Brochure Order and/or Change Order. Fees and costs
charged in connection with each TravelWeb Brochure Order are subject
to change without notice for all TravelWeb Brochure Orders which have
not been executed.
4.2 Monthly Maintenance Fees. For maintaining the Internet Pages on the
Internet and the management and operation of the TravelWeb,
Participant shall pay to THISCO a monthly maintenance fee as
follows:
1 - 50 properties $3.00 per property
51 - 200 properties $2.75 per property
201 - 400 properties $2.50 per property
over 400 properties $1000
The monthly maintenance fee is for each property for which an
Internet Page appears for all or any portion of a month and shall be
due on or before the thirtieth (30th) day after the date of the
invoice.
4.3 Additional Hypertext Connections. For all hypertext connections to
Internet sites not on TravelWeb, Participant shall pay to THISCO Five
Dollars ($5.00) per additional site.
4.4 Payment of Fees and Costs. THISCO shall invoice Participant for all
fees and costs and Participant shall pay each invoice within thirty
(30) days of the date of such invoice. In the event any amount is not
paid as required, all unpaid amounts shall incur interest at one and
one-quarter percent (1 1/4%) per month (15% per annum) until paid in
addition to the other remedies provided herein.
V.
TERM AND TERMINATION
5.1 Term. Unless terminated as provided herein, the initial term of this
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Agreement shall be from the date hereof through the first anniversary
date hereof provided, however, this Agreement shall be automatically
renewed and extended for additional one (1) year terms unless, at
least sixty (60) days prior to the expiration of the initial or any
extended term, either party shall terminate this Agreement by
providing written notice to the other party of such termination.
5.2 Effect of Termination. Upon termination of this Agreement, the
publication of all Internet Pages by THISCO shall cease and all
duties and obligations as set forth herein shall immediately cease
and terminate except for the those provisions that expressly state
otherwise and the provisions set forth in Article 6, Sections 7.6,
7.7, 9.1 and Articles 10 and 11 hereof and any payments which may
be due after the date of termination and all Materials shall be
returned to Participant.
VI.
INTELLECTUAL PROPERTY AND MATERIALS
6.1 Ownership of Materials. Participant represents and warrants that it
is the sole and exclusive owner, or has the unlimited authorized
right of use in connection herewith, of all Materials, copyrights,
trademarks, trade names, service marks and any and all other
intellectual property rights, by virtue of common law or statutory,
used in connection therewith and that the publication of same on the
Internet Pages is and shall be, at all times material hereto, legal
and shall not, in any manner, infringe upon or violate any applicable
law or rights of any third party.
6.2 Protection of Intellectual Property Rights. Participant shall be
solely and exclusively responsible for the protection of any and all
of its intellectual property including, but not limited to the
inclusion of any and all statutory or other notices customarily used
or required for purposes of providing notice of ownership or
protection of such intellectual property in connection with the
Materials and the Internet Pages.
6.3 Ownership of Internet Pages. The Internet Pages, shall, at all times
be and remain the property of Participant. THISCO may not use or
publish the Internet Pages in any manner other than pursuant to this
Agreement without the prior written consent of Participant.
Participant may use and republish the Internet Pages upon payment to
THISCO of all costs associated with providing the Internet Pages to
Participant.
VII.
DEFAULT
7.1 Events of Default. Subject to Section 7.2 below, any one of the
following will be considered an Event of Default:
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(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The failure of either party (including Participant's
participating affiliates and franchisees) to satisfy the
obligations set forth in this Agreement;
(iii) The material breach by either party of this Agreement; or
(iv) If either THISCO or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party") may
immediately terminate this Agreement upon written notice to the
other party unless the Defaulting Party immediately gives the
Insecure Party adequate assurance of the future performance of
this Agreement. If bankruptcy proceedings are commenced with
respect to the Defaulting Party, and if this Agreement has not
otherwise terminated, then the Insecure Party may suspend all
further performance of this Agreement until the Defaulting
Party assumes or rejects this Agreement pursuant to Section 365
of the Bankruptcy Code or any similar or successor provision.
Any such suspension of further performance by the Insecure
Party pending the Defaulting Party's assumption or rejection
will not be a breach of this Agreement.
7.2 Force Majeure. It will not constitute an Event of Default if such
event listed in Section 7.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures,
mechanical defects, or other events beyond the control of the
defaulting party. However, if any such occurrence results in any of
the events described in Section 6.1, and the same continues for more
than thirty (30) consecutive days, either party may terminate this
Agreement by providing notice as required herein.
7.3 Notice of Default and Opportunity to Cure. Upon the occurrence of an
Event of Default, the non-defaulting party shall give notice of such
default to the defaulting party and, in the event of a monetary
default, the defaulting party shall have ten (10) days from the date
of such notice within which to cure such default or, in the event of
a non-monetary default, the defaulting party shall have twenty (20)
days within which to cure such default. In the event such default is
not cured within the time required herein, this Agreement may then be
terminated.
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7.4 Effect of Default.
(i) By Participant. In the event of a default of this Agreement by
Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided herein, THISCO
shall be entitled (i) terminate this Agreement and THISCO's
obligations and duties set forth herein shall cease (ii) to
retain all materials, the Internet Pages and any and all other
Materials used by, developed or created by THISCO in the
performance of this Agreement, and (iii) pursue any and all
claims for fees and costs agreed to be paid pursuant to this
Agreement without any offset for mitigation resulting from
THISCO's terminated obligation to continue to develop and create
Internet Pages as required by the TravelWeb Brochure Order. It
is acknowledged and agreed by Participant that the damages to
THISCO for a default on this Agreement by Participant would be
difficult, if not impossible, to measure and that the balance
unpaid on any TravelWeb Brochure Order would represent a fair
and reasonable estimate of THISCO's damages in the event of such
default.
(ii) By THISCO. In the event of a default of this Agreement by THISCO
and the failure of THISCO to cure such default after notice and
opportunity to cure as provided herein, Participant may
terminate this Agreement and THISCO shall deliver to Participant
all Materials and all other materials used, developed and/or
created by THISCO in the development and creation of the
Internet Pages and THISCO shall refund to Participant all
amounts paid pursuant to the TravelWeb Brochure Order less a
reasonable amount for such parties of the development and
creation of the Internet Pages accomplished by THISCO as
represented by the Materials delivered to Participant.
7.5 Errors on Internet Pages. Notwithstanding any other provision hereof,
but except as provided in Section 9.1, in the event an Internet Page
published pursuant to this Agreement contains an error caused by
THISCO, Participant's sole and exclusive remedy for such error shall
be THISCO's obligation to cure such error by correcting the
information contained on the Internet Page within ten (10) days of
receipt of notice of such error.
7.6 Waiver of Consequential Damages. Except as provided in Section 9.1,
neither party shall be liable to the other for any consequential
damages proximately caused or resulting from any default of this
Agreement or arising out of the performance of this Agreement, and
each party hereby expressly waives such damages.
7.7 Disclaimer and Limitation of Liabilities. EXCEPT AS PROVIDED IN
SECTION 9.1, THISCO WILL NOT BE RESPONSIBLE OR LIABLE TO PARTICIPANT
FOR ANY FALSIFICATIONS OR INACCURACIES IN THE
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MATERIAL OR THE INTERNET PAGES NOR WILL IT HAVE ANY LIABILITY TO
PARTICIPANT FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE
INTERNET PAGES UNLESS EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE
EXTENT RESULTING FROM THISCO'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT
OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY THISCO AND WAIVED BY
PARTICIPANT.
VIII.
TRAVELWEB ACCESS INFORMATION
8.1 Access Reports. Periodically, THISCO shall provide to Participant a
report containing TravelWeb Access Information.
IX.
INDEMNIFICATION
9.1 Indemnification in the Event of Certain Losses. Participant agrees to
indemnify and hold harmless THISCO and THISCO's affiliates,
directors, officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees), arising out of the performance of this
Agreement ("THISCO's Losses") occurring on account of Participant's
fault and through no fault of THISCO. THISCO agrees to indemnify and
hold harmless Participant, and Participant's affiliates, directors,
officers, employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable
attorney's fees) arising out of the performance of this Agreement
("Participant's Losses") occurring on account of THISCO's fault and
through no fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in
any indemnification claim pursuant to this Section 9.1, such
indemnified party shall give prompt notice thereof to the
indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the
defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party for
any fees of other counsel or other expenses, in each case
subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation
and preparation, unless representation OF both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them. Whether or not an indemnifying party elects
to assume the defense of any action or claim,
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the indemnifying party shall not compromise or settle any such action
or claim without the indemnified party's written consent (which
consent shall not be unreasonably withheld). The parties agree to
cooperate to the fullest extent possible in connection with any claim
for which indemnification is or may be sought under this Agreement.
X.
CONFIDENTIALITY
10.1 Confidential Information. During the term of this Agreement, it is
acknowledged by Participant and THISCO that each may receive or have
access to confidential and proprietary information of the other party
including, but not limited to, marketing information, business plans,
financial information, and trade secrets ("Confidential Information").
Each party acknowledges that it shall not acquire any ownership or
other rights in or to Confidential Information of the other, and shall
use the Confidential Information only for the purposes of the
performance of this Agreement, and shall keep confidential and not
disclose the Confidential Information to any other person, firm or
corporation without the prior written consent of the other party. Any
Confidential Information transmitted in writing or by other tangible
media shall remain the property of the owner and shall be returned to
the owner at its request, together with all copies made thereof, at the
conclusion of this Agreement. The parties agree that the provisions of
this Section 10 shall be in perpetuity. However, this provision shall
not in any way restrict the rights of either party to disclose
information that: (i) is required by the other party to be disclosed in
the performance of the services specified herein; (ii) is specifically
requested by the other party to be disclosed; (iii) is specifically
requested by authorized staff of either party to be disclosed; (iv) is
or becomes generally available to the public other than by breach of
this Agreement; or (v) either party is required by law to disclose;
provided, however, that prior to such disclosure the disclosing party
shall immediately notify the other party in writing if it believes that
there will be a legal requirement to disclose, so that the
non-disclosing party can determine the most appropriate means of
disclosure and so that the non-disclosing party is provided the
opportunity to contest the disclosure requirement through legal means.
10.2 Use of Marks. Participant acknowledges that "TravelWeb" is a service
mark of THISCO and that it shall not use such mark without the prior
written approval of THISCO. Except as otherwise permitted herein,
THISCO agrees that it shall not use any copyright Materials, service
mark, trademark or trade name of Participant without Participant's
prior written consent. Notwithstanding the preceding provisions of
this Section 10.2, either party to this Agreement may, for purposes
consistent with the use of the name and/or logo of other hotel
companys participating in TravelWeb, utilize the proper trade names,
service marks, trademarks and logos of the other party.
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XI.
MISCELLANEOUS
11.1 Controlling Law. This Agreement will be interpreted pursuant to the
laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the
jurisdiction and venue provisions set forth in Section 10.1 hereof,
any action brought relating to or arising out of this Agreement must
be brought in the state or federal courts situated in the county and
state of the residence or principal place of business of the party
against whom the action is brought (or any of them, if more than
one).
11.2 Notice. All notices and other communications contemplated hereby must
be in writing (except in the case of electronically transmitted data)
and (a) personally delivered, (b) deposited in the United States
mail, first-class, registered or certified mail, return receipt
requested, with postage prepaid, (c) sent by overnight courier
service (for next business day delivery), shipping prepaid, (d) sent
by telecopy with confirmation of receipt of telecopy to the number
indicated, or (e) transmitted directly to the recipient by electronic
data transmission pursuant to arrangements made between the parties.
Such notices and other communications (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO THISCO:
3811 Turtle Creek Blvd. Suite 1100
Dallas, TX 75219
Attention: John F. Davis, III
(if by telecopy to:
(214) 528-5675)
IF TO PARTICIPANT:
Inter-Continental Hotels Corporation
1120 Avenue of the Americas
New York, NY 10036
Attention: General Counsel
(if by telecopy to:
(212) 852-6414)
with a copy to:
Inter-Continental Hotels Group Ltd.
Devonshire House, Mayfair Place
London, England WlX 5FX
Attention: Sr. Vice President Marketing
& Sales
(if by telecopy to: 44 171 355 6504)
or such persons or addresses as any party may request by notice duly
given hereunder. Except as otherwise specified herein, notices will
be deemed given and received when received.
11.3 Binding Effect. This Agreement will be binding upon and will inure to
the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger,
acquisition, reorganization or assignment pursuant to the terms
hereof.
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11.4 Assignment; Authorized Agents. This Agreement is not assignable by
Participant without the prior written consent of THISCO and such
consent shall not be unreasonably withheld or delayed. Any of the
duties and obligations of THISCO may be assigned by THISCO or
performed by any Authorized Representative of THISCO.
11.5 Entire Agreement. This Agreement and the Exhibits hereto (and any
replacements and/or amendments thereto) shall constitute the entire,
sole and exclusive agreement between THISCO and Participant with
respect to the subject matter set forth herein and shall supersede
any and all other agreements, oral or written. Each party hereto
acknowledges that it has not relied upon any representation or
promise not set forth herein.
11.6 Parties Independence. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto
are separate and distinct entities independently contracting with
each other at arms length.
THE HOTEL INDUSTRY SWITCH COMPANY
BY: /s/ JOHN F. DAVIS, III
---------------------------------
John F. Davis, III
President
DATE: 6/29/95
---------------------------------
PARTICIPANT:
INTER-CONTINENTAL HOTELS CORPORATION
BY: /s/ ALBERT J. PUCCIARELLI
---------------------------------
ITS: Executive Vice President
---------------------------------
DATE: 23 June 1995
---------------------------------
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EXHIBIT 10.14
TRAVELWEB PARTICIPANT AGREEMENT
This Agreement is entered into by and between The Hotel Industry Switch
Company, a Delaware corporation (hereinafter called "THISCO") and HILTON
HOTELS CORPORATION, a Delaware corporation (hereinafter called "Participant")
to be effective on the latest date of execution by the parties hereto on the
terms and conditions as set forth herein (the "Agreement").
I.
DEFINITIONS
The following definitions shall be applicable to this Agreement:
1.1 TravelWeb. A tradename owned by THISCO for its service to
provide a catalog of information on hotels, resorts, cruise
lines and other travel and lodging subjects which is accessible
by a Client Computer (as hereinafter defined) on the Internet.
1.2 Internet. A worldwide network of computers with information
which is accessible by Client Computers (as hereinafter
defined).
1.3 TravelWeb Participant. A person or entity who enters into an
agreement with THISCO for the creation and publishing of
Internet Pages (as hereinafter defined).
1.4 TravelWeb Publication. One or more pages of Materials (as
hereinafter defined) to be developed into Internet Pages (as
hereinafter defined).
1.5 TravelWeb Order. A written order form, reasonably acceptable to
THISCO and in the form prescribed by THISCO, executed by THISCO
and Participant setting forth the information necessary for the
publication of Internet Pages (as hereinafter defined) from the
Materials (as hereinafter defined) and the agreed fees and costs
to be paid for the order. A copy of the current TravelWeb Order
Form (with additional required documents attached thereto) is
attached hereto and marked Exhibit A.
1.6 Change Order. A written change, on a form prescribed by THISCO,
in the TravelWeb Order mutually agreed to and executed by THISCO
and Participant.
1.7 Client Computer. A computer with access to information on the
Internet.
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The monthly maintenance fee is for each property with an Internet
Page published for all or any portion of a month and is due upon
receipt and shall be past due thirty (30) days thereafter for
each month during which an Internet Page has been published on
TravelWeb pursuant to this Agreement.
2. This First Amendment shall be and hereby is incorporated into
the Agreement for all intents and purposes and all terms,
provisions and definitions of the Agreement shall apply.
3. Except where inconsistent with the terms of this First
Amendment, the Agreement is hereby ratified and affirmed in all
respects.
This First Amendment shall be effective upon the date set forth above upon
execution by both parties.
TRAVELWEB, INC.
By: /s/ JOHN F. DAVIS, III
-------------------------------------
John F. Davis, III
President
Date: 4/27/95
-----------------------------------
HILTON HOTELS CORPORATION
By: /s/ ROBERT DIRKS
-------------------------------------
-------------------------------------
Its:
-----------------------------------
Date: 4/20/95
-----------------------------------
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1.8 Materials. All of the information, in documentary form or
otherwise, provided to THISCO by Participant to be used by
THISCO to publish the Internet Pages.
1.9 Trave]Web Access Information. Information regarding TravelWeb
access by Client Computers as is gathered by THISCO and made
available to Participant which shall include daily transaction
statistics, hourly transaction statistics, total transfers by
client domain, total transfers by reversed sub domain, total
transfers from each archive section and previous full summary
period, which shall include the date, time, page number and
originating domain for all accesses to Participant's TravelWeb
Pages.
1.10 Internet Page. The finished informational product created and
published by THISCO from the Materials pursuant to this
Agreement and a TravelWeb Order or a Change Order which appears
on an individual Client Computer screen and which is available
on and is accessible by Client Computers on the Internet.
1.11 Authorized Representative. An authorized representative is any
person or entity with the express written right, authority
and/or obligation to perform the obligations of or act on behalf
of THISCO or Participant with respect to this Agreement.
1.12 Certificate of Acceptance. Written acceptance by Participant of
the Internet Pages and authorization to publish them. The
Certificate of Acceptance will be in a form prescribed by
THISCO.
II.
INTENT OF THIS AGREEMENT
2.1 Mutual Intent. It is intended by both parties to this Agreement
that this Agreement and all exhibits hereto set forth, in its
entirety, all of the terms, conditions, rights and obligations
of THISCO and Participant with respect to the publishing of
Internet Pages by THISCO for the benefit of Participant as more
specifically set forth herein. THISCO agrees to enter into
separate agreements on the same terms and conditions with each
of Participant's franchisees which may, from time to time,
notify THISCO of their intent to enter into such an agreement.
Ill.
CREATION AND PUBLICATION OF A TRAVELWEB BROCHURE;
DUTIES AND OBLIGATIONS OF THISCO AND PARTICIPANT
3.1 TravelWeb Order. The TravelWeb Order shall be completed in the
form attached hereto and marked Exhibit A (the "TravelWeb Order
Form") and shall contain all of the information requested on the
form for THISCO to
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publish the Internet Pages requested by Participant. The
TravelWeb Order Form may be amended or replaced by THISCO at any
time without notice prior to any TravelWeb Order being executed
and such new or amended form need not be attached hereto as a
replacement for Exhibit A to be effective and to supersede
Exhibit A. To be effective, any TravelWeb Order Form must be
executed by an Authorized Representative of THISCO and
Participant. A new TravelWeb Order Form shall be completed and
agreed to with respect to each TravelWeb Publication to be
created and published by THISCO for the benefit of Participant
pursuant to this Agreement.
3.2 Materials for Creation and Publication of the Internet Pages.
Participant shall be solely responsible for providing to THISCO
all Materials reasonable and necessary for THISCO to create and
publish the Internet Pages pursuant to the TravelWeb Order. All
Materials shall be in form, substance, condition and format as
mutually agreed and shall meet or exceed all of the requirements
set forth on Exhibit A hereto and all other reasonable and
necessary requirements requested by THISCO and mutually agreed
with Participant. Exhibit A may be amended by THISCO at any
time. THISCO is hereby authorized to utilize, consistent with
the TravelWeb Order, all copyrights, trademarks, trade names,
service marks or other proprietary marks or symbols contained
within the Materials (collectively, "Participant's Marks"),
provided that THISCO hereby acknowledges and agrees that it does
not have and shall not gain any usage or other rights or
interests of any kind in and to any Materials or Participant's
Marks at any time.
3.3 Processing the Order; Creation of the Internet Pages; Approvals.
THISCO shall process the TravelWeb Order pursuant to the
schedule set forth therein but no later than fourteen (14)
business days from the date of receipt thereof. Upon creation of
the Internet Pages to be published pursuant to the TravelWeb
Order and this Agreement (but prior to such publication), THISCO
shall (i) deliver to Participant a printed black and white copy
of the completed Internet Pages and (ii) notify Participant of
and permit Participant access to the TravelWeb server via its
Client Computer to view the completed Internet Pages.
Participant shall, within seven (7) business days of such
delivery and notification, make any and all written corrections
or proposed amendments it may have to the Internet Pages and
shall provide THISCO with written notice detailing such
corrections and/or proposed amendments. In the event the
Internet Pages are approved, Participant shall, within seven (7)
business days of receipt of the Internet Pages, provide THISCO
with a Certificate of Acceptance. In the event Participant does
not provide written notice to THISCO of corrections or proposed
amendments or approving the Internet Pages within seven (7)
business days of receipt of the Internet Pages, the Internet
Page shall be
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deemed disapproved by Participant and THISCO shall not publish
the Internet Pages on the Internet.
3.4 Authority to Publish. Participant hereby authorizes and directs
THISCO to publish on the Internet as part of TravelWeb the
approved Internet Pages. No Internet Page may be changed or
revised without Participant's express written permission.
IV.
FEES AND COSTS
4.1 Creation and Publication Fees. For the creation and development
of the Internet Pages from the Materials provided by Participant
to THISCO, Participant shall pay to THISCO the fees and costs
set forth on each TravelWeb Brochure Order and/or Change Order
provided however the price for page construction shall not
exceed Seventy Five Dollars ($75.00) per page, the price for
picture processing shall not exceed Forty Five ($45.00) per
picture and the price for data entry shall not exceed Twenty
Dollars ($20.00) per page. Fees and costs charged in connection
with each TravelWeb Brochure Order are subject to change only by
mutual agreement.
4.2 Monthly Maintenance Fees. For maintaining the Internet Pages on
the Internet and the management and operation of the TravelWeb,
Participant shall pay to THISCO a monthly maintenance fee as
follows:
1 - 10 properties $25
11 - 30 properties $50
31 - 50 properties $100
51 - 100 properties $250
101 - 500 properties $500
over 500 properties $1000
Franchises $2.50 per property
The monthly maintenance fee is for each property with an
Internet Page published for all or any portion of a month and is
due upon receipt and shall be past due thirty (30) days
thereafter for each month during which an Internet Page has been
published on TravelWeb pursuant to this Agreement.
4.3 Additional Hypertext Connections. For all hypertext connections
to Internet sites not on TravelWeb, Participant shall pay to
THISCO Five Dollars ($5.00) per additional site.
4.4 Payment of Fees and Costs. THISCO shall invoice Participant for
all fees and costs and Participant shall pay each invoice upon
receipt and each invoice shall be past due thirty (30) days
thereafter.
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V.
TERM AND TERMINATION
5.1 Term. Unless terminated as provided herein, the term of this
Agreement shall begin on the date this Agreement is executed by
both parties and shall terminate on the date of its first (lst)
anniversary hereof. This Agreement shall be automatically
renewed and extended on the same terms and conditions for
additional one (1) year terms thereafter unless, at least sixty
(60) days prior to the expiration of the initial one (1) year
term or the expiration of any additional one (1) year term,
either party hereto shall give notice of its intent not to renew
and extend this Agreement.
5.2 Termination. This Agreement may only be terminated prior to the
expiration of the initial one (1) year term or any extended term
(if applicable) in the event of a breach hereof and the failure
to cure within the applicable time period as provided herein or
in the event this Agreement is not performable as the result of
an event of force majeure as set forth in Section 7.2 hereof.
5.3 Effect of Termination. In the event this Agreement is terminated
as permitted herein or the term of this Agreement expires
without being renewed and extended, the publication of all
Internet Pages shall immediately cease and all duties and
obligations as set forth herein shall immediately cease and
terminate except for the provisions set forth in Article 6,
Sections 7.6, 7.7, 9.1 and Articles 10 and 11 hereof and any
payments which may be due after the date of termination and all
Materials shall be returned to Participant.
VI.
INTELLECTUAL PROPERTY AND MATERIALS
6.1 Ownership of Materials. Participant represents and warrants that
it is the sole and exclusive owner, or has the authorized right
of use in connection herewith, of all Materials, and
Participant's Marks to be used hereby, by virtue of common or
statutory law, used in connection therewith and that the
publication of same on the Internet Pages is and shall be, at
all times material hereto, legal and shall not, in any manner,
violate any applicable law or the rights of any third party.
6.2 Protection of Intellectual Property Rights. Participant shall be
solely and exclusively responsible for the protection of any and
all of its intellectual property including, but not limited to
the inclusion of any and all statutory or other notices
customarily used or required for purposes of providing notice of
ownership or protection of Participant's Marks in connection
with the Materials and the Internet Pages.
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6.3 Ownership of Internet Pages. Subject to Section 3.2 hereof, the
Internet Pages, shall, at all times material to this Agreement,
be and remain the property of Participant and may be used by
Participant to be available for receiving on the Internet via a
server other than TravelWeb. THISCO may not use or publish the
Internet Pages or any portion thereof or elements contained
therein in any manner other than pursuant to this Agreement
without the prior written consent of Participant.
VII.
DEFAULT
7.1 Events of Default. Subject to Section 7.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The refusal or failure of either party (including
Participant's participating affiliates or subsidiaries) to
perform diligently and in good faith each and every
material provision of this Agreement; or
(iii) The commencement by either party of a voluntary case under
Chapters 11 or 7 of the United States Bankruptcy Code, as
from time to time in effect, the commencement against
either party of an involuntary case under said Chapters 11
or 7, either party seeking relief as a debtor under any
applicable law, other than said Chapters 11 or 7, of any
jurisdiction relating to the liquidation or reorganization
of debtors or the modification of the rights of creditors,
the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or
assuming custody or appointing a receiver or other
custodian of its property, or its making an assignment for
the benefit of, or entering into a composition with, its
creditors.
7.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 7.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages
or delays. utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section
6.1, and the same continues for more than thirty (30)
consecutive days, either party may terminate this Agreement by
providing notice as required herein.
7.3 Notice of Default and Opportunity to Cure. Upon the occurrence
of an Event of Default, the non-defaulting party shall give
notice of such default to the defaulting party and, in the event
of a monetary default, the
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defaulting party shall have ten (10) business days from the date
of such notice within which to cure such default or, in the
event of a non-monetary default, the defaulting party shall have
twenty (20) business days within which to cure such default. In
the event such default is not cured within the time required
herein, this Agreement may then be terminated.
7.4 Effect of Default.
(i) By Participant. In the event of a default of this
Agreement by Participant and the failure of Participant to
cure such default after notice and opportunity to cure as
provided herein, THISCO shall be entitled (i) to terminate
this Agreement and THISCO's obligations and duties set
forth herein shall cease (ii) to cease use of all
Materials, the Internet Pages and any and all other
Materials used by, developed, or created by THISCO in the
performance of this Agreement, and (iii) pursue any and
all claims for fees and costs agreed to be paid pursuant
to this Agreement with offset for mitigation resulting
from THISCO's terminated obligation to continue to develop
and create Internet Pages as required by the TravelWeb
Order Form. It is acknowledged and agreed by Participant
that the damages to THISCO for a default on this Agreement
by Participant would be difficult, if not impossible, to
measure and that the balance unpaid on any TravelWeb Order
Form is a fair and reasonable estimate of THISCO's damages
in the event of such default and shall be the total amount
due THISCO in such event.
(ii) By THISCO. In the event of a default of this Agreement by
THISCO and the failure of THISCO to cure such default
after notice and opportunity to cure as provided herein,
Participant may terminate this Agreement and THISCO shall
deliver to Participant all Materials and all other
materials used, developed and/or created by THISCO in the
development and creation of the Internet Pages and THISCO
shall refund to Participant all amounts paid pursuant to
the TravelWeb Brochure Order less a reasonable amount no
greater than the price set forth on the applicable
TravelWeb Order Form for such parts of the development and
creation of the Internet Pages accomplished by THISCO as
represented by the Materials delivered to Participant.
7.5 Errors on Internet Pages. Notwithstanding any other provision
hereof, in the event an Internet Page published pursuant to this
Agreement contains an error caused by THISCO, other than an
error arising from THISCO's gross negligence or willful
misconduct, Participant's sole and exclusive remedy for such
error shall be THISCO's obligation to remove such Internet Page
from the Travel Web within twenty four (24) hours of becoming
aware, or notified of, such error, and shall then cure such
error by correcting the information contained on the Internet
Page and restoring the corrected and approved Internet Page to
the TravelWeb as promptly
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as possible but in no event later than seven (7) days of the
date of notice from Participant of such error, each at THISCO's
sole cost and expense.
7.6 Waiver of Consequential Damages. Neither party shall be liable
to the other for any consequential damages proximately caused or
resulting from any default of this Agreement or arising out of
the performance of this Agreement, and each party hereby
expressly waives such damages.
7.7 Disclaimer and Limitation of Liabilities. THISCO WILL NOT BE
RESPONSIBLE OR LIABLE FOR ANY FALSIFICATIONS OR INACCURACIES IN
THE MATERIAL OR THE INTERNET PAGES NOR WILL IT HAVE ANY
LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE
INTERNET PAGES UNLESS EXPRESSLY SET FORTH HEREIN, OR EXCEPT TO
THE EXTENT RESULTING FROM THISCO'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND
WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY
THISCO AND WAIVED BY PARTICIPANT.
VIII.
TRAVELWEB ACCESS INFORMATION
8.1 TravelWeb Access Information. There shall be available to
Participant via TravelWeb current on line reports containing
TravelWeb Access Information.
IX.
INDEMNIFICATION
9.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify, defend and hold harmless THISCO and
THISCO's partners, successors, assigns, subsidiaries,
affiliates, and each such entity's directors, officers,
employees and stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable
attorney's fees) ("THISCO's Losses") occurring on account of
Participant's fault except to the extent due to the fault of
THISCO. THISCO agrees to indemnify, defend and hold harmless
Participant, and Participant's partners, successors, assigns,
subsidiaries, affiliates, and each such entities' directors,
officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring
on account of THISCO's fault except to the extent due to the
fault of Participant. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result
in any indemnification claim pursuant to this Section 9.1, such
indemnified party shall give prompt notice thereof to the
indemnifying party and the
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indemnifying party shall be entitled to participate therein or,
to the extent that it shall wish, assume the defense thereof
with its own counsel. If the indemnifying party elects to assume
the defense of any such action or claim, the indemnifying party
shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation
and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. Whether or not an indemnifying
party elects to assume the defense of any action or claim, the
indemnifying party shall not compromise or settle any such
action or claim without the indemnified party's written consent
(which consent shall not be unreasonably withheld). The parties
agree to cooperate to the fullest extent possible in connection
with any claim for which indemnification is or may be sought
under this Agreement.
X.
CONFIDENTIALITY
10.1 Confidential Information. During the term of this Agreement, it
is acknowledged by Participant and THISCO that each may receive
or have access to confidential and proprietary information of
the other party including, but not limited to, marketing
information, business plans, financial information, and trade
secrets ("Confidential Information"). Each party acknowledges
that it shall not acquire any ownership or other rights in or to
Confidential Information of the other, and shall use the
Confidential Information only for the purposes of the
performance of this Agreement, and shall keep confidential and
not disclose the Confidential Information to any other person,
firm or corporation without the prior written consent of the
other party. Any Confidential Information transmitted in writing
or by other tangible media shall remain the property of the
owner and shall be returned to the owner at its request,
together with all copies made thereof, at the conclusion of this
Agreement. The parties agree that the provisions of this Section
10 shall extend without limitation beyond the date of the
expiration or other conclusion of this Agreement. THISCO agrees
to take all reasonably avoidable measures at THISCO's sole cost
and expense to ensure that Participant's Confidential
Information is not accessible to other persons, and to upgrade
such measures as often as necessary and practicable.
10.2 Use of Marks. Participant acknowledges that "TravelWeb" is a
service mark of THISCO and that it shall not use such mark
without the prior written approval of THISCO, which shall not be
unreasonably withheld or delayed and which shall not be required
for internal uses and uses consistent with this Agreement and
the promotion of TravelWeb to prospective viewers of Internet
Pages. Except as otherwise permitted herein, THISCO agrees that
it shall not use any of Participant's Marks or
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any portion thereof or elements contained therein without
Participant's prior written consent.
XI.
MISCELLANEOUS
11.1 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict
of laws principles. Any action brought relating to or arising
out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or
principal place of business of the party against whom the action
is brought (or any of them, if more than one).
11.2 Notice. All notices and other communications contemplated hereby
must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified
mail, return receipt requested, with postage prepaid, (c) sent
by overnight courier service (for next business day delivery),
shipping prepaid, (d) sent by telecopy with confirmation of
receipt of telecopy to the number indicated, or (e) transmitted
directly to the recipient by electronic data transmission
pursuant to arrangements made between the parties. Such notices
and other communications (except in the case of electronically
transmitted data) shall be addressed as follows:
IF TO THISCO: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Hilton Hotels Corporation
Suite 1100 9336 Civic Center Drive
Dallas, TX 75219 Beverly Hills, California 90210
Attention: John F. Davis, III
(if by telecopy to: Attention: Mr. Bruce Rosenberg
(214) 528-5675) (if by telecopy to: (310) 859-2513)
cc: General Counsel
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein,
notices will be deemed given and received when received.
11.3 Binding Effect. This Agreement will be binding upon and will
inure to the benefit of the legal representatives, successors
and duly authorized assigns of each party whether resulting from
merger, acquisition, reorganization or assignment pursuant to
the terms hereof.
11.4 Assignment; Authorized Agents. This Agreement is not assignable
by either party without the prior written consent of the other
and such consent
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shall not be unreasonably withheld or delayed. Provided however,
it is acknowledged and agreed that the obligations of THISCO as
set forth in Paragraphs 3.2 and 3.3 herein may be performed by
Cyber Publishing, Inc. or such other third party with whom
THISCO may contract to perform such services.
11.5 Entire Agreement. This Agreement and the Exhibits hereto shall
constitute the entire, sole and exclusive agreement between
THISCO and Participant with respect to the subject matter set
forth herein and shall supersede any and all other agreements,
oral or written. Each party hereto acknowledges that it has not
relied upon any representation or promise not set forth herein.
11.7 Parties' Independence. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length.
THE HOTEL INDUSTRY SWITCH COMPANY
a Delaware corporation
BY: /s/ JOHN F. DAVIS, III
------------------------------------------
John F. Davis, III
President
DATE: April 27, 1995
----------------------------------------
PARTICIPANT:
HILTON HOTELS CORPORATION
a Delaware corporation
BY: /s/ ROBERT DIRKS
------------------------------------------
Robert Dirks
ITS: Senior Vice President Marketing - Hotel
Operations
DATE: April 20, 1995
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EXHIBIT 10.15
TRAVELWEB PARTICIPANT AGREEMENT
This Agreement is entered into by and between The Hotel Industry
Switch Company, a Delaware corporation (hereinafter called "THISCO") and HILTON
INTERNATIONAL CO., a Delaware corporation (hereinafter called "Participant") to
be effective on the latest date of execution by the parties hereto on the terms
and conditions as set forth herein (the "Agreement").
I.
DEFINITIONS
The following definitions shall be applicable to this Agreement:
1.1 TravelWeb. A tradename owned by THISCO for its service to
provide a catalog of information on hotels, resorts, cruise
lines and other travel and lodging subjects which is
accessible by a Client Computer (as hereinafter defined) on
the Internet.
1.2 Internet. A worldwide network of computers with information
which is accessible by Client Computers (as hereinafter
defined).
1.3 TravelWeb Participant. A person or entity who enters into an
agreement with THISCO for the creation and publishing of
Internet Pages (as hereinafter defined).
1.4 TravelWeb Publication. One or more pages of Materials (as
hereinafter defined) to be developed into Internet Pages (as
hereinafter defined).
1.5 TravelWeb Order. A written order form, reasonably acceptable
to THISCO and in the form prescribed by THISCO, executed by
THISCO and Participant setting forth the information necessary
for the publication of Internet Pages (as hereinafter defined)
from the Materials (as hereinafter defined) and the agreed
fees and costs to be paid for the order. A copy of the current
TravelWeb Order Form (with additional required documents
attached thereto) is attached hereto and marked Exhibit A.
1.6 Change Order. A written change, on a form prescribed by
THISCO, in the TravelWeb Order mutually agreed to and executed
by THISCO and Participant.
1.7 Client Computer. A computer with access to information on the
Internet.
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1.8 Materials. All of the information, in documentary form or
otherwise, provided to THISCO by Participant to be used by
THISCO to publish the Internet Pages.
1.9 TravelWeb Access Information. Information regarding TravelWeb
access by Client Computers as is gathered by THISCO and made
available to Participant which shall include daily transaction
statistics, hourly transaction statistics, total transfers by
client domain, total transfers by reversed sub domain, total
transfers from each archive section and previous full summary
period, which shall include the date, time, page number and
originating domain for all accesses to Participant's TravelWeb
Pages.
1.10 Internet Page. The finished informational product created and
published by THISCO from the Materials pursuant to this
Agreement and a TravelWeb Order or a Change Order which
appears on an individual Client Computer screen and which is
available on and is accessible by Client Computers on the
Internet.
1.11 Authorized Representative. An authorized representative is any
person or entity with the express written right, authority
and/or obligation to perform the obligations of or act on
behalf of THISCO or Participant with respect to this
Agreement.
1.12 Certificate of Acceptance. Written acceptance by Participant
of the Internet Pages and authorization to publish them. The
Certificate of Acceptance will be in a form prescribed by
THISCO.
II.
INTENT OF THIS AGREEMENT
2.1 Mutual Intent. It is intended by both parties to this
Agreement that this Agreement and all exhibits hereto set
forth, in its entirety, all of the terms, conditions, rights
and obligations of THISCO and Participant with respect to the
publishing of Internet Pages by THISCO for the benefit of
Participant as more specifically set forth herein. THISCO
agrees to enter into separate agreements on the same terms and
conditions with each of Participant's franchisees which may,
from time to time, notify THISCO of their intent to enter into
such an agreement.
III.
CREATION AND PUBLICATION OF A TRAVELWEB BROCHURE;
DUTIES AND OBLIGATIONS OF THISCO AND PARTICIPANT
3.1 TravelWeb Order. The TravelWeb Order shall be completed in the
form attached hereto and marked Exhibit A (the "TravelWeb
Order Form") and shall contain all of the information
requested on the form for THISCO to
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publish the Internet Pages requested by Participant. The
TravelWeb Order Form may be amended or replaced by THISCO at
any time without notice and such new or amended form need not
be attached hereto as a replacement for Exhibit A to be
effective and to supersede Exhibit A. To be effective, any
TravelWeb Order Form must be executed by an Authorized
Representative of THISCO and Participant. A new TravelWeb
Order Form shall be completed and agreed to with respect to
each TravelWeb Publication to be created and published by
THISCO for the benefit of Participant pursuant to this
Agreement.
3.2 Materials for Creation and Publication of the Internet Pages.
Participant shall be solely responsible for providing to
THISCO all Materials reasonable and necessary for THISCO to
create and publish the Internet Pages pursuant to the
TravelWeb Order. All Materials shall be in form, substance,
condition and format as mutually agreed and shall meet or
exceed all of the requirements set forth on Exhibit A hereto
and all other reasonable and necessary requirements requested
by THISCO and mutually agreed with Participant. Exhibit A may
be amended by THISCO at any time. THISCO is hereby authorized
to utilize, consistent with the TravelWeb Order, all
copyrights, trademarks, trade names, service marks or other
proprietary marks or symbols contained within the Materials
(collectively, "Participant's Marks"), provided that THISCO
hereby acknowledges and agrees that it does not have and shall
not gain any usage or other rights or interests of any kind in
and to any Materials or Participant's Marks at any time.
3.3 Processing the Order; Creation of the Internet Pages;
Approvals. THISCO shall process the TravelWeb Order pursuant
to the schedule set forth therein but no later than fourteen
(14) business days from the date of receipt thereof. Upon
creation of the Internet Pages to be published pursuant to the
TravelWeb Order and this Agreement (but prior to such
publication), THISCO shall (i) deliver to Participant a
printed black and white copy of the completed Internet Pages
and (ii) notify Participant of and permit Participant access
to the TravelWeb server via its Client Computer to view the
completed Internet Pages. Participant shall, within seven (7)
business days of such delivery and notification, make any and
all written corrections or proposed amendments it may have to
the Internet Pages and shall provide THISCO with written
notice detailing such corrections and/or proposed amendments.
In the event the Internet Pages are approved, Participant
shall, within seven (7) business days of receipt of the
Internet Pages, provide THISCO with a Certificate of
Acceptance. In the event Participant does not provide written
notice to THISCO of corrections or proposed amendments or
approving the Internet Pages within seven (7) business days of
receipt of the Internet Pages, the Internet Page shall be
deemed disapproved by Participant and THISCO shall not publish
the Internet Pages on the Internet.
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3.4 Authority to Publish. Participant hereby authorizes and
directs THISCO to publish on the Internet as part of TravelWeb
the approved Internet Pages. No Internet Page may be changed
or revised without Participant's express written permission.
IV.
FEES AND COSTS
4.1 Creation and Publication Fees. For the creation and
development of the Internet Pages from the Materials provided
by Participant to THISCO, Participant shall pay to THISCO the
fees and costs set forth on each TravelWeb Brochure Order
and/or Change Order provided however the price for page
construction shall not exceed Seventy Five Dollars ($75.00)
per page, the price for picture processing shall not exceed
Forty Five Dollars ($45.00) per picture and the price for data
entry shall not exceed Twenty Dollars ($20.00) per page. Fees
and costs charged in connection with each TravelWeb Brochure
Order are subject to change only by mutual agreement.
4.2 Monthly Maintenance Fees. For maintaining the Internet Pages
on the Internet and the management and operation of the
TravelWeb, Participant shall pay to THISCO a monthly
maintenance fee as follows:
1 - 50 properties $3.00 per property
51 - 200 properties $2.75 per property
201 - 400 properties $2.50 per property
over 400 properties $1,000
The monthly maintenance fee is due on or before the fifth
(5th) day of each month following a month during which
Internet Pages have been published on the Internet pursuant to
this Agreement.
4.3 Additional Hypertext Connections. For all hypertext
connections to computers or servers connected to Internet not
on TravelWeb, Participant shall pay to THISCO Five Dollars
($5.00) per additional hypertext connection to computers or
servers connected to Internet not on TravelWeb.
4.4 Payment of Fees and Costs. THISCO shall invoice Participant
for all fees and costs and Participant shall pay each invoice
upon receipt and each invoice shall be past due thirty (30)
days thereafter.
V.
TERM AND TERMINATION
5.1 Term. Unless terminated as provided herein, the term of this
Agreement shall begin on the date this Agreement is executed
by both parties and shall terminate on the date of its first
(1st) anniversary hereof. This
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Agreement shall be automatically renewed and extended on the
same terms and conditions for additional one (1) year terms
thereafter unless, at least sixty (60) days prior to the
expiration of the initial one (1) year term or the expiration
of any additional one (1) year term, either party hereto shall
give notice of its intent not to renew and extend this
Agreement.
5.2 Termination. This Agreement may only be terminated prior to
the expiration of the initial one (1) year term or any
extended term (if applicable) on the occurrence of an Event of
Default set forth in Section 7.1 and the failure to cure
within the applicable time period as provided herein or in the
event this Agreement is not performable as the result of an
event of force majeure as set forth in Section 7.2 hereof.
5.3 Effect of Termination. In the event this Agreement is
terminated as permitted herein or the term of this Agreement
expires without being renewed and extended, the publication of
all Internet Pages shall immediately cease and all duties and
obligations as set forth herein shall immediately cease and
terminate except for the provisions set forth in Article 6,
Sections 7.6, 7.7, 9.1 and Articles 10 and 11 hereof and any
payments which may be due after the date of termination and
all Materials shall be returned to Participant.
VI.
INTELLECTUAL PROPERTY AND MATERIALS
6.1 Ownership of Materials. Participant represents and warrants
that it is the sole and exclusive owner, or has the authorized
right of use in connection herewith, of all Materials, and
Participant's Marks to be used hereby, by virtue of common or
statutory law, used in connection therewith and that the
publication of same on the Internet Pages is and shall be, at
all times material hereto, legal and shall not, in any manner,
violate any applicable law or the rights of any third party.
6.2 Protection of Intellectual Property Rights. Participant shall
be solely and exclusively responsible for the protection of
any and all of its intellectual property including, but not
limited to the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing
notice of ownership or protection of Participant's Marks in
connection with the Materials and the Internet Pages.
6.3 Ownership of Internet Pages. Subject to Section 3.2 hereof,
the Internet Pages, shall, at all times material to this
Agreement, be and remain the property of Participant and may
be used by Participant to be available for receiving on the
Internet via a server other than TravelWeb. THISCO may not use
or publish the Internet Pages or any portion thereof or
elements
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contained therein in any manner other than pursuant to this
Agreement without the prior written consent of Participant.
VII.
DEFAULT
7.1 Events of Default. Subject to Section 7.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The refusal or failure of either party (including
Participant's participating affiliates or
subsidiaries) to perform diligently and in good faith
each and every material provision of this Agreement;
or
(iii) The commencement by either party of a voluntary case
under Chapters 11 or 7 of the United States
Bankruptcy Code, as from time to time in effect, the
commencement against either party of an involuntary
case under said Chapters 11 or 7, either party
seeking relief as a debtor under any applicable law,
other than said Chapters 11 or 7, of any jurisdiction
relating to the liquidation or reorganization of
debtors or the modification of the rights of
creditors, the entry of a court order adjudging the
party bankrupt or insolvent, ordering its liquidation
or reorganization or assuming custody or appointing a
receiver or other custodian of its property, or its
making an assignment for the benefit of, or entering
into a composition with, its creditors.
7.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 7.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or
other events beyond the control of the defaulting party.
However, if any such occurrence results in any of the events
described in Section 6.1, and the same continues for more than
thirty (30) consecutive days, either party may terminate this
Agreement by providing notice as required herein.
7.3 Notice of Default and Opportunity to Cure. Upon the
occurrence of an Event of Default, the non-defaulting party
shall give notice of such default to the defaulting party and,
in the event of a monetary default, the defaulting party shall
have ten (10) business days from the date of such notice
within which to cure such default or, in the event of a
non-monetary default, the defaulting party shall have twenty
(20) business days within which to cure such default. In the
event such default is not cured within the time required
herein, this Agreement may then be terminated.
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7.4 Effect of Default.
(i) By Participant. In the event of a default of this
Agreement by Participant and the failure of
Participant to cure such default after notice and
opportunity to cure as provided herein, THISCO shall
be entitled (i) to terminate this Agreement and
THISCO's obligations and duties set forth herein
shall cease (ii) to cease use of all Materials, the
Internet Pages and any and all other Materials used
by, developed, or created by THISCO in the
performance of this Agreement, and (iii) pursue any
and all claims for fees and costs agreed to be paid
pursuant to this Agreement with offset for mitigation
resulting from THISCO's terminated obligation to
continue to develop and create Internet Pages as
required by the TravelWeb Order Form. It is
acknowledged and agreed by Participant that the
damages to THISCO for a default on this Agreement by
Participant would be difficult, if not impossible, to
measure and that the balance unpaid on any TravelWeb
Order Form is a fair and reasonable estimate of
THISCO's damages in the event of such default and
shall be the total amount due THISCO in such event.
(ii) By THISCO. In the event of a default of this
Agreement by THISCO and the failure of THISCO to cure
such default after notice and opportunity to cure as
provided herein, Participant may terminate this
Agreement and THISCO shall deliver to Participant all
Materials and all other materials used, developed
and/or created by THISCO in the development and
creation of the Internet Pages and THISCO shall
refund to Participant all amounts paid pursuant to
the TravelWeb Brochure Order less a reasonable amount
no greater than the price set forth on the applicable
TravelWeb Order Form for such parts of the
development and creation of the Internet Pages
accomplished by THISCO as represented by the
Materials delivered to Participant.
7.5 Errors on Internet Pages. Notwithstanding any other provision
hereof, in the event an Internet Page published pursuant to
this Agreement contains an error caused by THISCO, its
employees, agents, or subcontractors, other than an error
arising from THISCO's, its employees, agents or
subcontractors gross negligence or willful misconduct,
Participant's sole and exclusive remedy for such error shall
be THISCO's obligation to remove such Internet Page from the
Travel Web within twenty-four (24) hours of becoming aware, or
notified of, such error, and shall then cure such error by
correcting the information contained on the Internet Page and
restoring the corrected and approved Internet Page to the
TravelWeb as promptly as possible but in no event later than
seven (7) days of the date of notice from Participant of such
error, each at THISCO's sole cost and expense.
7.6 Waiver of Consequential Damages. Neither party shall be liable
to the other for any consequential damages proximately caused
or resulting from
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any default of this Agreement or arising out of the
performance of this Agreement, and each party hereby expressly
waives such damages.
7.7 Disclaimer and Limitation of Liabilities. THISCO WILL NOT BE
RESPONSIBLE OR LIABLE FOR ANY FALSIFICATIONS OR INACCURACIES
IN THE MATERIAL OR THE INTERNET PAGES NOR WILL IT HAVE ANY
LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE
INTERNET PAGES UNLESS EXPRESSLY SET FORTH HEREIN, OR EXCEPT TO
THE EXTENT RESULTING FROM THISCO'S, ITS EMPLOYEES', AGENTS',
OR SUBCONTRACTORS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE
PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY THISCO AND
WAIVED BY PARTICIPANT.
VIII.
TRAVELWEB ACCESS INFORMATION
8.1 TravelWeb Access Information. There shall be available to
Participant via TravelWeb current on line reports containing
TravelWeb Access Information.
IX.
INDEMNIFICATION
9.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify, defend and hold harmless THISCO and
THISCO's partners, successors, assigns, subsidiaries,
affiliates, and each such entity's directors, officers,
employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable
attorney's fees) ("THISCO's Losses") occurring on account of
Participant's fault except to the extent due to the fault of
THISCO. THISCO agrees to indemnify, defend and hold harmless
Participant, and Participant's partners, successors, assigns,
subsidiaries, affiliates, and each such entities' directors,
officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring
on account of THISCO's, its employees', agents', or
subcontractors' fault except to the extent due to the fault of
Participant. Promptly after receipt by an indemnified party of
notice of the commencement of any action or the presentation
or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 9.1, such
indemnified party shall give prompt notice thereof to the
indemnifying party and the indemnifying party shall be
entitled to participate therein or, to the extent that it
shall wish, assume the defense thereof with its own counsel.
If the indemnifying party elects to assume the defense of any
such action or claim, the indemnifying party
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shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation
and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. Whether or not an
indemnifying party elects to assume the defense of any action
or claim, the indemnifying party shall not compromise or
settle any such action or claim without the indemnified
party's written consent (which consent shall not be
unreasonably withheld). The parties agree to cooperate to the
fullest extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
X.
CONFIDENTIALITY
10.1 Confidential Information. During the term of this Agreement,
it is acknowledged by Participant and THISCO that each may
receive or have access to confidential and proprietary
information of the other party including, but not limited to,
marketing information, business plans, financial information,
and trade secrets ("Confidential Information"). Each party
acknowledges that it shall not acquire any ownership or other
rights in or to Confidential Information of the other, and
shall use the Confidential Information only for the purposes
of the performance of this Agreement, and shall keep
confidential and not disclose the Confidential Information to
any other person, firm or corporation without the prior
written consent of the other party. Any Confidential
Information transmitted in writing or by other tangible media
shall remain the property of the owner and shall be returned
to the owner at its request, together with all copies made
thereof, at the conclusion of this Agreement. The parties
agree that the provisions of this Section 10 shall extend
without limitation beyond the date of the expiration or other
conclusion of this Agreement. THISCO agrees to take all
reasonably avoidable measures at THISCO's sole cost and
expense to ensure that Participant's Confidential Information
is not accessible to other persons, and to upgrade such
measures as often as necessary and practicable.
10.2 Use of Marks. Participant acknowledges that "TravelWeb" is a
service mark of THISCO and that it shall not use such mark
without the prior written approval of THISCO, which shall not
be unreasonably withheld or delayed and which shall not be
required for internal uses and uses consistent with this
Agreement and the promotion of TravelWeb to prospective
viewers of Internet Pages. Except as otherwise permitted
herein, THISCO agrees that it shall not use any of
Participant's Marks or any portion thereof or elements
contained therein without Participant's prior written consent.
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XI.
MISCELLANEOUS
11.1 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its
conflict of laws principles. Any action brought relating to or
arising out of this Agreement must be brought in the state or
federal courts situated in the county and state of the
residence or principal place of business of the party against
whom the action is brought (or any of them, if more than one).
11.2 Notice. All notices and other communications contemplated
hereby must be in writing (except in the case of
electronically transmitted data) and (a) personally delivered,
(b) deposited in the United States mail, first-class,
registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for
next business day delivery), shipping prepaid, (d) sent by
telecopy with confirmation of receipt of telecopy to the
number indicated, or (e) transmitted directly to the recipient
by electronic data transmission pursuant to arrangements made
between the parties. Such notices and other communications
(except in the case of electronically transmitted data) shall
be addressed as follows:
IF TO THISCO: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Hilton International Co.
Suite 1100 International Court
Dallas, TX 75219 2 - 3 Rhodes Way
Attention: John F. Davis, III Watford, Herts WD24YW
(if by telecopy to: Attention: Legal Department
(214) 528-5675) with a copy to Geoffrey Breeze
(if by telecopy to:
44 1923 817319)
or such persons or addresses as any party may request by
notice duly given hereunder. Except as otherwise specified
herein, notices will be deemed given and received when
received.
11.3 Binding Effect. This Agreement will be binding upon and will
inure to the benefit of the legal representatives, successors
and duly authorized assigns of each party whether resulting
from merger, acquisition, reorganization or assignment
pursuant to the terms hereof.
11.4 Assignment; Authorized Agents. This Agreement is not
assignable by either party without the prior written consent
of the other and such consent shall not be unreasonably
withheld or delayed. Provided however, it is acknowledged and
agreed that the obligations of THISCO as set forth in
Paragraphs 3.2 and 3.3 herein may be performed by Cyber
Publishing, Inc.
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or such other third party with whom THISCO may contract to
perform such services.
11.5 Entire Agreement. This Agreement and the Exhibits hereto
shall constitute the entire, sole and exclusive agreement
between THISCO and Participant with respect to the subject
matter set forth herein and shall supersede any and all other
agreements, oral or written. Each party hereto acknowledges
that it has not relied upon any representation or promise not
set forth herein.
11.7 Parties' Independence. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length.
THE HOTEL INDUSTRY SWITCH COMPANY
a Delaware corporation
BY: /s/ JOHN F. DAVIS, III
----------------------------
John F. Davis, III
President
DATE: 30th May 1995
--------------------------
PARTICIPANT:
HILTON INTERNATIONAL CO.
a Delaware corporation
BY: /s/ GEOFFREY B. BREEZE
--------------------------
Geoffrey Breeze
Vice President - Corporate Marketing
DATE: 18 May 1995
-------------------------
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EXHIBIT 10.16
TRAVELWEB(SM) PARTICIPANT AGREEMENT
FOR INTERNET PAGES, ON LINE AVAILABILITY AND RESERVATIONS
This Agreement is entered into by and between TravelWeb, Inc. (hereinafter
called "TWI") and Choice Hotels International, Inc. (hereinafter called
"Participant") to be effective on the latest date of execution by both parties
hereto on the terms and conditions as set forth herein (the "Agreement").
I.
DEFINITIONS
The following definitions shall be applicable to this Agreement:
1.1 TravelWeb(SM). The service mark and trade name owned by TWI for
its service to provide access to information on hotels, resorts,
cruise lines and other travel and lodging subjects and a limited
access to TravelWeb(sm) Participant's reservation system with the
interactive capability to permit an operator of a Client
Computer (as hereinafter defined) to make a reservation.
1.2 Internet. A worldwide network of computers with information
which is accessible by Client Computers.
1.3 TravelWeb(sm) Participant. A person or entity who enters into an
agreement with TWI to publish Internet Pages (as hereinafter
defined) and to provide access to the TravelWeb(sm) Participant's
reservation system with the capability to make and cancel a
reservation.
1.4 TravelWeb(sm) Order Form. A written order form, acceptable to TWI
and in the form prescribed by TWI, executed by TWI and
Participant setting forth the information necessary for the
publication of Internet Pages (as hereinafter defined) from the
information available on the UltraSelect Course Filter database
(for "Lite Line" pages) or from Materials (as hereinafter
defined) (for brochures) and, in the event different from those
set forth on Exhibit A hereto, the agreed fees and costs to be
paid for the order.
1.5 Change Order. A written change, on a form prescribed by TWI, in
the TravelWeb(sm) Order mutually agreed to and executed by TWI
and Participant.
1.6 Client Computer. A computer with access to information on the
Internet.
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1.7 TravelWeb(sm) Reservation. A TravelWeb(sm) Reservation is a
reservation made with a TravelWeb(sm) Participant via
TravelWeb(sm) by an operator of a Client Computer.
1.8 Net TravelWeb(sm) Reservation. Net TravelWeb(sm) Reservations
within a particular time period equals the number of reservation
made by an operator of a Client Computer via TravelWeb(sm) within
such time period, less the number of reservations made by an
operator of a Client Computer as to which notice of cancellation
is received via TravelWeb(sm) within such time period.
1.9 Materials. All of the information, in documentary form or
otherwise, provided to TWI by Participant to be used by TWI to
create and publish the Internet Pages.
1.10 TravelWeb(sm) Activity Report. An on line report available only
to Participant and its Authorized Representatives via
TravelWeb(sm) providing information regarding the viewing of
Participant's Internet Pages by operators of Client Computers (to
include, without limitation, daily transaction statistics, total
transfers by client domain and total transfers from each archive
section) and all available data prepared by TWI regarding
TravelWeb(sm) Reservations with Participant.
1.11 Internet Page. The finished informational product created and
published by TWI from the information in the UltraSelect Course
Filter database (for "Lite Line" pages) and the Materials (for
brochures) pursuant to this Agreement and a TravelWeb(sm) Order
or a Change Order which appears on an individual Client Computer
screen and which is available on and is accessible by Client
Computers on the Internet.
1.12 Authorized Representative. An authorized representative is any
person or entity with the express right, authority and/or
obligation to perform the obligations of or act on behalf of TWI
or Participant with respect to this Agreement.
1.13 Certificate of Internet Page Acceptance. Written acceptance by
Participant of the Internet Pages and authorization to publish
them. The Certificate of Internet Page Acceptance will be in a
form prescribed by TWI.
1.14 Interface. The connection created by TWI between TravelWeb(sm)
and Participant's Reservation System pursuant to the technical
and functional design specifications set forth in the UltraSwitch
UltraSelect HRS Interface Specifications (the "Specifications").
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1.15 Interactive Portion of TravelWeb(sm). The functional capability
provided by TWI via the Interface of on-line Client Computers'
access via TravelWeb(sm) to a Participant's Reservation system
with the capability to make and cancel a reservation.
II.
INTENT OF THIS AGREEMENT
2.1 Mutual Intent. It is mutually intended that this Agreement and
all documents made reference to herein, set forth, in its
entirety, all of the terms, conditions, rights and obligations
of TWI and Participant with respect to the publishing of
Internet Pages by TWI and the installation and operation of the
Interface by TWI as specifically set forth herein. This
Agreement is not exclusive and Participant may publish the
Internet Pages and accept Internet Reservations with any other
person or entity.
III.
CREATION AND PUBLICATION OF A TRAVELWEB(TM) LITE LINE INTERNET
PAGES; DUTIES AND OBLIGATIONS OF TWI AND PARTICIPANT
3.1 TravelWeb(sm) Order. A TravelWeb(sm) Order may be for "Lite Line"
pages, which shall contain only the information available from
the UltraSelect Course Filter database, or for brochures, which
shall contain information from the Materials provided by
Participant. Each TravelWeb(sm) Order shall be completed by the
respective property on a TravelWeb(sm) Order Form. The
TravelWeb(sm) Order Form may be amended or replaced by TWI at
any time without notice prior to any TravelWeb(sm) Order being
executed. To be effective, any TravelWeb(sm) Order Form must be
executed by an Authorized Representative of TWI and Participant.
A new TravelWeb(sm) Order Form shall be completed and agreed to
with respect to each request for Internet Pages to be created
and published by TWI.
3.2 Materials for Creation and Publication of the Internet Pages.
TWI shall use the information available in the UltraSelect
Course Filter database for Lite Line Pages. Participant shall be
solely responsible for providing to TWI all Materials reasonable
and necessary for TWI to create and publish all other Internet
Pages pursuant to the TravelWeb(sm) Order. All Materials shall
be in form, substance, condition and format as required by TWI
and shall meet or exceed all of the requirements set forth in
the TravelWeb(sm) Order Form and in all other reasonable and
necessary requirements requested by TWI. TWI is hereby
authorized to utilize, consistent with the TravelWeb(sm) Order
and for no other purposes other than those expressly set forth
in this Agreement, all copyrights, trademarks, trade names,
service marks or other proprietary
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marks or symbols contained within the Materials (collectively,
"Participant's Marks").
3.3 Processing the Order: Creation of the Internet Pages Approvals.
TWI shall process the TravelWeb(SM) Order pursuant to the
schedule set forth therein. Upon creation of the Internet Pages
to be published pursuant to the TravelWeb(SM) Order and this
Agreement, TWI shall deliver to Participant, for inspection and
approval, the completed Internet Pages. Participant shall,
within seven (7) days of such delivery, make any and all written
corrections or proposed amendments it may have to the Internet
Pages and shall provide TWI with written notice detailing such
corrections and/or proposed amendments. In the event the
Internet Pages are approved, Participant shall, within seven (7)
days of receipt of the Internet Pages, provide TWI with a
Certificate of Acceptance. Notwithstanding the above and
foregoing, in the event Participant does not provide written
notice to TWI of corrections or proposed amendments or approving
the Internet Pages within seven (7) days of receipt of the
Internet Pages, approval of the Internet Pages shall be deemed
given by Participant to TWI and TWI shall be authorized to
publish the Internet Pages on the Internet. As used in this
Section 3.3, Participant shall mean the parent corporate entity
of Participant with respect to LiteLine pages and refers to
Participant's franchised hotels with respect to brochures.
3.4 Authority to Publish. Participant hereby authorizes and directs
TWI to publish on the Internet as part of TravelWeb(SM) the
approved or deemed approved Internet Pages.
3.5 TravelWeb(SM) Management. TWI shall be responsible for all costs
associated with the connection of the TravelWeb(SM) server to the
Internet and all hardware and software maintenance for such
server. TWI shall insure that the server is monitored for
failures 24 hours per day, seven days per week and will use
commercially reasonable efforts to assure that the server is
operational and available on the Internet 98% of the time, 24
hours per day, seven days per week for each rolling 90-day
period.
IV.
THE INTERFACE: DUTIES AND OBLIGATIONS OF TWI AND PARTICIPANT
4.1 Duties of TWI. TWI shall be responsible for all costs associated
with the production, development, service and maintenance of the
Interface and the Interactive Portion of TravelWeb(SM) including,
but not limited to providing all reasonable and necessary
personnel, technical support, hardware and software to produce
the Interface between Client Computers and Participant's
reservation system meeting or exceeding the Specifications. TWI
will periodically review and update, as is reasonable and
necessary, all
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security applications of the Interactive Portion of TravelWeb(SM)
including, without limitation, the current Client Computer use
limitations.
4.2 Duties of Participant. Participant shall provide all reasonable
and necessary personnel and technical support, reasonable and
necessary programming and modification of its reservation system
and all other reasonable and necessary accommodations to produce
a dependable and operable Interface with its reservation system
and shall cooperate fully with TWI personnel to produce the
Interface. Through the Interface, Participant will permit access
to Participant's reservation system by all Client Computers
utilizing TravelWeb(SM) and will permit all such Client Computers
to reserve and cancel rooms available to be reserved in
Participant's reservation system and to make credit card
payments to Participant in connection with the TravelWeb(SM)
Reservation. Neither the Internet Pages nor the information
contained in Participant's reservation system shall contain any
information which is intended to or is otherwise likely to cause
any user of a Client Computer to make a reservation with
Participant by any means other than the Interactive Portion of
TravelWeb(SM) except that the listing may contain the franchised
hotel's direct telephone number.
4.3 Implementation of the Interface. The Interface shall be
implemented pursuant to a mutually agreeable schedule.
4.4 Enhancement or Modification of the Interactive Portion of
TravelWebsm. TWI may undertake to modify the operation or
enhance the capability of the Interactive Portion of
TravelWebsm. In such event, TWI shall provide notice to
Participant of such modification or enhancement at least 30 days
prior to such modification or enhancement taking effect and will
make such adjustments and modifications to TravelWeb(SM) at TWI's
sole expense, as are reasonable and necessary to maintain the
Interface with Participant. Participant agrees to cooperate with
TWI with regard to its modification or enhancement of the
Interactive Portion of TravelWeb(SM).
4.5 Modification of Participant's Reservation System. In the event
Participant modifies its reservation system or modification of
its reservation system is required for Participant if it
continues to participate in the Interactive Portion of
TravelWebsm, Participant shall pay for such modification to its
reservation system. In the event Participant modifies its
reservation system and such modification requires TWI to modify
the Interface or the Interactive Portion of TravelWeb(SM) to
maintain the Interface and to comply with its functional
specifications with Participant, Participant shall pay TWI its
standard consulting rate and all reasonable expenses incurred by
TWI as a result of the modification.
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V.
FEES AND COSTS
5.1 Creation and Publication Fees. For the creation and development
of the Internet Pages, Participant shall pay to TWI the fees and
costs set forth on Exhibit A attached hereto or, if otherwise
agreed, as set forth on each TravelWeb(SM) Order Form and/or
Change Order Form.
5.2 TravelWeb(SM) Reservation Fees. For each Net TravelWeb(SM)
Reservation processed pursuant to this Agreement, Participant
shall pay to TWI U.S. $2.00. The TravelWeb(SM) Reservation Fee
may be increased up to 10% once each year. The TravelWeb(SM)
Reservation Fee is in addition to the fees to be paid by
Participant for transactions utilizing TWI's UltraSwitch system.
5.3 Communication Line Costs. Participant shall pay all costs of
communication lines required for the Interface and operation of
the Interactive Portion of TravelWeb(SM).
5.4 Payment of Fees and Costs. TWI shall provide to Participant an
invoice itemizing all fees and costs and Participant shall pay
each invoice upon receipt and each invoice shall be past due
thirty (30) days thereafter.
VI.
TRAVELWEB (TM) REPORTS
6.1 TravelWeb(SM) Activity Reports. TWI shall provide to Participant
via TravelWeb(SM) current on line TravelWeb(SM) Activity Reports.
VII.
TERM AND TERMINATION
7.1 Term. Unless terminated as provided herein, the term of this
Agreement shall begin on the date this Agreement is executed by
both parties and shall terminate on the date of its third (3rd)
anniversary. This Agreement shall be automatically renewed and
extended for additional one (1) year terms unless, at least
sixty (60) days prior to the expiration of any one (1) year
term, either party hereto shall give notice of its intent not to
renew and extend this Agreement.
7.2 Termination. This Agreement may only be terminated prior to the
expiration of the initial three (3) year term or any extended
term (if applicable) in the
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event of a breach hereof and the failure to cure within the
applicable time period as provided herein or in the event this
Agreement is not performable as the result of an event of force
majeure as set forth in Section 9.2 hereof.
7.3 Effect of Termination. In the event this Agreement is terminated
as permitted herein or the term of this Agreement expires
without being renewed and extended, the publication of all
Internet Pages and access to Participant's reservation system
via TravelWeb(SM) shall cease and all duties and obligations as
set forth herein shall immediately cease and terminate except
for the provisions set forth in Article VIII, Sections 9.7,
9.8, 10.1 and Articles 11 and 12 hereof and any payments which
may be due after the date of termination and all Materials shall
be returned to Participant. Notwithstanding the immediately
preceding sentence, any TravelWeb Order or Change Order not
complete at the date of termination shall be completed provided
the properties being the subject of the order contract with TWI
for completion and publication of the pages.
VIII.
INTELLECTUAL PROPERTY AND DATA
8.1 Ownership of Materials. Participant represents and warrants that
it is the sole and exclusive owner, or has the authorized right
of use in connection herewith, of all Materials and
Participant's Marks to be used hereby, by virtue of common or
statutory law, used in connection therewith and that the
publication of same on the Internet Pages is and shall be, at
all times material hereto, legal and shall not, in any manner,
violate any applicable law or the rights of any third party.
8.2 Protection of Intellectual Property Rights. Participant shall be
solely and exclusively responsible for the protection of any and
all of its intellectual property including, but not limited to
the inclusion of any and all statutory or other notices
customarily used or required for purposes of providing notice of
ownership or protection of Participant's Marks in connection
with the Materials, the Internet Pages and the Interactive
Portion of TravelWebsm. TWI shall have no responsibility for the
protection or enforcement of any rights of Participant with
respect to Participant's Marks or the information contained on
an Internet Page.
8.3 Ownership of Internet Pages. The Internet Pages, shall, at all
times material to this Agreement, be and remain the property of
Participant. TWI may not use or publish the Internet Pages in
any manner other than pursuant to this Agreement without the
prior written consent of Participant.
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8.4 TravelWeb(SM) Reservation Information. Subject to Participant's
right to receive information pursuant to Section 6.1 hereof, TWI
shall own all statistical data regarding a Client Computer's
access to TravelWeb(SM) and the name and address of the user of
each Client Computer accessing TravelWeb(SM) provided TWI shall
not use or distribute such data in any manner which is specific
to Participant or reasonably determinable as related to
Participant (except as required to perform this Agreement). TWI
may use all aggregate data generated from the Interactive
Portion of TravelWeb(SM) provided such data is not specific to
Participant or reasonably determinable as related to
Participant, and does not indicate that a customer is a customer
of Participant.
IX.
DEFAULT
9.1 Events of Default. Subject to Section 9.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or any of its participating
affiliates (being a company controlled by Participant or
under common control with another company) or franchisees
to satisfy the obligations set forth in this Agreement;
(iii) The refusal or failure of either party (including
Participant's participating affiliates, or subsidiaries)
to perform diligently and in good faith each and every
material provision of this Agreement; or
(iv) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as
from time to time in effect, the commencement against
either party of an involuntary case under said Chapter 11
or 7, either party seeking relief as a debtor under any
applicable law, other than said Chapter 11 or 7, of any
jurisdiction relating to the liquidation or reorganization
of debtors or the modification of the rights of creditors,
the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or
assuming custody or appointing a receiver or other
custodian of its property, or its making an assignment for
the benefit of, or entering into a composition with, its
creditors.
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9.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 9.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages
or delays, utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section
9.1, and the same continues for more than thirty (30)
consecutive days, either party may terminate this Agreement by
providing notice as required herein.
9.3 Notice of Default and Opportunity to Cure. Upon the occurrence
of an Event of Default, the non-defaulting party shall give
notice of such default to the defaulting party and, in the event
of a monetary default, the defaulting party shall have ten (10)
days from the date of such notice within which to cure such
default or, in the event of a non-monetary default, the
defaulting party shall have twenty (20) days within which to
cure such default. In the event such default is not cured within
the time required herein, this Agreement may then be terminated.
9.4 Effect of Default.
(i) By Participant. In the event of a default of this
Agreement by Participant and the failure of Participant to
cure such default after notice and opportunity to cure as
provided herein, TWI shall be entitled (i) to terminate
this Agreement and TWI's obligations and duties set forth
herein shall cease (ii) to retain Materials, the Internet
Pages and any and all other Materials used by, developed,
or created by TWI in the performance of this Agreement,
and (iii) pursue any and all claims for fees and costs
agreed to be paid pursuant to this Agreement without any
offset for mitigation resulting from TWI's terminated
obligation to continue to develop and create Internet
Pages as required by the TravelWeb(SM) Order. It is
acknowledged and agreed by Participant that the damages to
TWI for a default on this Agreement by Participant would
be difficult, if not impossible, to measure and that the
balance unpaid on any TravelWeb(SM) Order in addition to
any unpaid TravelWeb(SM) Reservation Fees or other fees is
a fair and reasonable estimate of TWI's damages in the
event of such default and shall be the total amount due TWI
in such event.
(ii) By TWI. In the event of a default of this Agreement by TWI
and the failure of TWI to cure such default after notice
and opportunity to cure as provided herein, Participant
may terminate this Agreement and TWI shall deliver to
Participant all Materials and all other materials used,
developed and/or created by TWI in the development and
creation of the Internet Pages and TWI shall refund to
Participant all amounts paid pursuant to the TravelWeb(SM)
Order less a reasonable amount (no greater than the price
set forth on the applicable
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TravelWeb(SM) Order) for such portion of the development
and creation of the Internet Pages accomplished by TWI as
represented by the Materials delivered to Participant.
9.5 Risk of Internet Usage. Each party acknowledges and agrees that
the Internet is a communication medium over which the parties
have no control and that its continued utilization in its
present form at current costs is uncertain. Therefore, if at any
time during the term of this Agreement the cost of access to the
Internet increases or there is imposed a fee or cost for use of
the Internet communication lines, or there is imposed any law,
governmental ruling, or regulation the result of which increases
the cost of access to or usage of the Internet or otherwise
makes it impractical, in either party's sole discretion, to
continue to perform this Agreement, either party may, upon
notice to the other party, immediately terminate the Interactive
Portion of TravelWeb(SM), the Interface, and/or this Agreement
without such action constituting an event of default.
9.6 Errors on Internet Pages. Notwithstanding any other provision
hereof, in the event an Internet Page published pursuant to this
Agreement contains an error caused by TWI, its employees, agents
or subcontractors, other than an error arising from TWI's gross
negligence or willful misconduct, Participant's sole and
exclusive remedy for such error shall be TWI's obligation to
remove such Internet Page from TravelWeb(SM) within twenty four
(24) hours of becoming aware or notified of such error and shall
then cure such error by correcting the information contained on
the Internet Page and restoring the corrected and approved
Internet Page as promptly as reasonably possible but in no event
later than seven (7) days of date of notice from Participant of
such error, each at TWI's sole cost and expense.
9.7 Waiver of Consequential Damages. Neither party shall be liable
to the other for any consequential damages proximately caused or
resulting from any default of this Agreement or arising out of
the performance of this Agreement, and each party hereby
expressly waives such damages.
9.8 Disclaimer and Limitation of Liabilities. TWI WILL NOT BE
RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR INACCURACIES
IN THE MATERIAL OR THE INTERNET PAGES; (ii) NOR WILL IT HAVE ANY
LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE
INTERNET PAGES UNLESS EXPRESSLY SET FORTH HEREIN, OR (iii) ANY
CLAIM, DAMAGE OR LIABILITY OF ANY NATURE ARISING OUT OF A CLIENT
COMPUTER'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM AND/OR ANY
TRANSACTION OR THE USE OF A CREDIT CARD OR OTHER DEBIT DEVISE IN
CONNECTION THEREWITH, EXCEPT TO THE EXTENT RESULTING FROM THE
FAILURE OF THE INTERACTIVE PORTION OF TRAVELWEB(TM) TO PERFORM
PURSUANT TO THE SPECIFICATIONS (PROVIDED HOWEVER, TWI SHALL NOT
BE LIABLE FOR ANY FAILURE OR
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DEFECT RESULTING FROM ANY THIRD PARTY SOFTWARE APPLICATION SET
FORTH AS PART OF THE SPECIFICATIONS) OR FROM TWI'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR
OTHERWISE, ARE DISCLAIMED BY TWI AND WAIVED BY PARTICIPANT.
X.
INDEMNIFICATION
10.1 Indemnification in the Event of Certain Losses. Subject to the
other provisions hereof, Participant agrees to indemnify, defend
and hold harmless TWI and TWI's partners, successors, assigns,
subsidiaries, affiliates, and each such entities directors,
officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("TWI's Losses") occurring on
account of Participant's fault except to the extent due to the
fault of TWI. Subject to the other provisions hereof, TWI agrees
to indemnify, defend and hold harmless Participant, and
Participant's partners, successors, assigns, subsidiaries,
affiliates, and each such entities directors, officers,
employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable
attorney's fees) ("Participant's Losses") occurring on account
of TWI's fault except to the extent due to the fault of
Participant. Promptly after receipt by an indemnified party of
notice of the commencement of any action or the presentation or
other assertion of any claim which could result in any
indemnification claim pursuant to this Section 10.1, such
indemnified party shall give prompt notice thereof to the
indemnifying party and the indemnifying party shall be entitled
to participate therein or, to the extent that it shall wish,
assume the defense thereof with its own counsel. If the
indemnifying party elects to assume the defense of any such
action or claim, the indemnifying party shall not be liable to
the indemnified party for any fees of other counsel or other
expenses, in each case subsequently incurred by such indemnified
party in connection with the defense thereof, other than
reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. Whether or not an indemnifying party elects to
assume the defense of any action or claim, the indemnifying
party shall not compromise or settle any such action or claim
without the indemnified party's written consent (which consent
shall not be unreasonably withheld). The parties agree to
cooperate to the fullest extent possible in connection with any
claim for which indemnification is or may be sought under this
Agreement.
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XI.
CONFIDENTIALITY
11.1 Confidential Information. During the term of this Agreement, it
is acknowledged by Participant and TWI that each may receive or
have access to confidential and proprietary information of the
other party including, but not limited to, the UltraSwitch
UltraSelect HRS Interface Specifications, Participant's
reservation system specification, marketing information,
business plans, financial information and other proprietary
information or trade secrets ("Confidential Information"). Each
party acknowledges that it shall not acquire any ownership or
other rights in or to Confidential Information of the other, and
shall use the Confidential Information only for the purposes of
the performance of this Agreement, and shall keep confidential
and not disclose the Confidential Information to any other
person, firm or corporation without the prior written consent of
the other party. Any Confidential Information transmitted in
writing or by other tangible media shall remain the property of
the owner and shall be returned to the owner at its request,
together with all copies made thereof, at the conclusion of this
Agreement. The parties agree that the provisions of this Section
11 shall extend, without limitation, beyond the date of the
expiration or other conclusion of this Agreement. Each party
agrees to take all reasonably avoidable measures, at their own
expense, to ensure that the other party's Confidential
Information is not accessible to other persons and to upgrade
such measures as often as necessary and practicable.
11.2 Use of Marks. Participant acknowledges that "TravelWeb(sm)" is a
trade name and servicemark of TWI and that it shall not use such
mark without the prior written approval of TWI. Except as
otherwise permitted herein, TWI agrees that it shall not use any
of Participant's Marks or any portion thereof or elements
contained therein without Participant's prior written consent.
XII.
MISCELLANEOUS
12.1 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict
of laws principles. Any action brought relating to or arising
out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or
principal place of business of the party against whom the action
is brought (or any of them, if more than one).
12.2 Notice. All notices and other communications contemplated hereby
must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified
mail, return receipt requested, with postage prepaid, (c) sent
by overnight courier service (for next business day delivery),
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shipping prepaid, (d) sent by telecopy with confirmation of
receipt of telecopy to the number indicated, or (e) transmitted
directly to the recipient by electronic data transmission
pursuant to arrangements made between the parties. Such notices
and other communications (except in the case of electronically
transmitted data) shall be addressed as follows:
IF TO TWI: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Choice Hotels International, Inc.
Suite 1100 10750 Columbia Pike
Dallas, TX 75219 Silver Spring, MD 20901
Attention: John F. Davis, III Attention: General Counsel
(if by telecopy: (if by telecopy: (301) 905-4007)
(214) 528-5675) With a copy to James R. Yoakum
[at same address]
(if by telecopy to: (301) 905-4007)
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein,
notices will be deemed given and received when received.
12.3 Binding Effect. This Agreement will be binding upon and will
inure to the benefit of the legal representatives, successors
and duly authorized assigns of each party whether resulting from
merger, acquisition, reorganization or assignment pursuant to
the terms hereof.
12.4 Assignment; Authorized Agents. This Agreement is not assignable
by either party without the prior written consent of the other
and such consent shall not be unreasonably withheld or delayed;
provided, however, it is acknowledged and agreed that the
obligations of TWI as set forth in paragraphs 3.2 and 3.3 herein
may be performed by any Authorized Representative.
Notwithstanding any restrictions herein on assignment or
transfer, either party shall have the right at its option to
assign and transfer all of its rights and interests hereunder to
any entity or entities resulting from an acquisition, merger or
sale of substantially all assets.
12.5 Entire Agreement. This Agreement, the Exhibits hereto, and the
documents made reference to herein (and any replacements and/or
amendments thereto) shall constitute the entire, sole and
exclusive agreement between TWI and Participant with respect to
the subject matter set forth herein and shall supersede and
cause the mutual termination of any and all other agreements,
oral or written with respect to TravelWeb(SM) including, but not
limited to, that certain TravelWeb(SM) Participant Agreement
between TWI and Participant with an effective date of ________.
Each party hereto acknowledges
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that it has not relied upon any representation or promise not
set forth herein.
12.6 Parties Independence. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length.
12.7 Franchisees. TravelWeb acknowledges that Participant consists of
a system of franchised hotels and that the responsibility of
Choice Hotels, Inc., with respect to property level obligations
contained herein, shall be limited to best efforts to compel its
franchisees to comply with their respective obligations.
TRAVELWEB, INC.
BY: /s/ JOHN F. DAVIS, III
-------------------------
John F. Davis, III
President
DATE:
----------------------------
PARTICIPANT:
CHOICE HOTELS INTERNATIONAL, INC.
BY: /s/ JAMES R. YOAKUM
-------------------------------
-------------------------------
ITS: SR VP INFORMATION SYSTEMS
-----------------------------
DATE: 9/3/96
----------------------------
-14-
<PAGE> 1
EXHIBIT 10.17
TRAVELWEB PARTICIPANT AGREEMENT
TravelWeb, Inc. (TWI) hereby offers to the below named Participant the
right to participate in TWI's TravelWeb on the following terms and conditions:
1. Duties of TWI. (a) For publication of pages on the Internet,
upon receipt and acceptance by TWI of TWI's TravelWeb Order Form and any Change
Order, to payment by Participant of the fees as set forth therein and receipt
from Participant of all reasonable and necessary information and materials
required to process the TravelWeb Order or Change Order, TWI shall proceed to
create or modify pages of information to be published on the Internet via TWI's
TravelWeb and, subject to Participant's prior approval of the pages, shall
publish the pages on the Internet. (b) In accordance with a mutually agreed
schedule for implementation, TWI shall produce an operable interface between
Participant's reservation system and the TravelWeb Internet site which will
permit the user of a computer accessing TravelWeb to access Participant's
reservation system with the capability to make, change and cancel a reservation.
2. Duties of Participant. (a) For the publication of pages on the
Internet via TravelWeb, Participant shall complete a TravelWeb Order Form in
form and substance as required by TWI for each publication. Participant shall
provide to TWI all reasonable and necessary materials required by TWI to
process the TravelWeb Order. TWI will submit the pages to be published to
Participant for approval and Participant may make a single request for changes
at no charge. In the event Participant wants to make further changes or wants
to change any TravelWeb Order, Participant shall execute a Change Order on a
form prescribed by TWI and shall pay the agreed charges for the changes.
Participant agrees to pay all fees and costs as set forth in each TravelWeb
Order Form and Change Order. Upon approval by Participant of the pages to be
published, Participant hereby authorizes and directs TWI to publish the pages
of information on the Internet via TWI's TravelWeb site. (b) For access to
Participant's reservation system and reservation capabilities via TravelWeb,
Participant agrees to provide all reasonable and necessary personnel, technical
support, programming and modification of its reservation system and all other
reasonable and necessary accommodations to produce a dependable and operable
interface as required by TWI which will permit a user of a computer accessing
the TravelWeb site on the Internet to make, change and cancel reservations and
to make credit card payments in connection with a reservation.
3. Fees. For maintaining the published pages on the Internet and
the management and operation of TravelWeb, Participant shall pay to TWI a
monthly maintenance fee for all or any part of a month during which pages are
published (the "Maintenance Fee") as follows:
1 - 50 properties = $3.00 per property;
51 - 200 properties = $2.75 per property;
201 - 400 properties = $2.50 per property;
over 400 properties = $1,000
For each Net TravelWeb Reservation, Participant shall pay to
TWI a fee of $2.00 (the "TravelWeb Reservation Fee"). Net TravelWeb
Reservations within a particular time period equals the number of reservations
made by a user of a computer accessing the TravelWeb site on the Internet
within such time period less the number of reservations made by a user of a
computer accessing the TravelWeb site on the Internet as to which notice of
cancellation is received via TravelWeb within such time period.
Participant shall make all payments as required by each
TravelWeb Order Form and Change Order. TWI shall invoice Participant monthly
for all Maintenance Fees and TravelWeb Reservation Fees and Participant shall
pay each invoice upon receipt and each invoice shall be past due and it shall
be a breach of this agreement if it is not paid within thirty (30) days after
the date of the invoice. All payments to TWI shall be made in U.S. Dollars. TWI
may increase the fees up to 10% of the then-existing fee once each calendar
year.
4. Term. The initial term of this agreement shall be for one (1)
year from the date hereof provided that the agreement shall be automatically
renewed and extended for additional one (1) year terms thereafter unless, at
least sixty (60) days prior to expiration of the initial one (1) year term or
the expiration of any additional (1) year term, either party hereto shall give
notice of its intent not to renew and extend this agreement.
5. Property rights. The published pages are acknowledged to be the
sole property of Participant and TWI may not use or publish any of the
information or part in any manner other than pursuant to this agreement.
Participant shall be solely and exclusively responsible for the protection of
any and all of its intellectual property including, but not limited to the
inclusion on the pages to be published of any and all statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service
marks, or copyrights in connection with the information to be placed on the
published pages. TravelWeb is the trade name and service mark of TWI and may
not be used without the prior written consent of TWI. All information disclosed
to Participant in connection with the creation of the interfaces provided
herein is confidential and proprietary property of TWI and shall not be
disclosed to any third party without the prior written consent of TWI.
6. Disclaimer, Limitation of Liabilities and Risk of Internet
Usage. TWI WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION PUBLISHED PURSUANT TO THIS agreement,
(ii) ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE PUBLICATION OF PAGES ON THE
INTERNET OR CREATION OR FUNCTIONALITY OF THE INTERFACE UNLESS EXPRESSLY SET
FORTH HEREIN, (iii) ALL CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT
OF A COMPUTER OPERATOR'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM AND/OR THE
MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD OR
OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM
ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET, EXCEPT TO
THE EXTENT RESULTING FROM TWI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE ARE DISCLAIMED BY TWI AND
WAIVED BY PARTICIPANT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS
TO ITS RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA TRAVELWEB IS
AT PARTICIPANT'S OWN RISK. Participant acknowledges and agrees that the
Internet is a communication medium over which TWI has no control and that its
continued utilization in its present form current costs is uncertain.
Therefore, if at any time during the term of this agreement, the cost of access
to the Internet by TWI increases or there is imposed a fee or cost for access
or use of the Internet communication lines, or there is imposed any law,
governmental ruling, or regulation the result of which increases the cost of
access to or usage of the Internet otherwise makes it impractical, in TWI's
sole discretion, to continue to perform this agreement, TWI, may upon notice to
Participant, immediately terminate this agreement with such action constituting
an event of default. TWI shall not be liable for any breach of this agreement
resulting from an act of God, accidents, power or telecommunication outages,
delays, mechanical defects or other events beyond its control. TWI's only
liability for its errors on the published pages shall be to correct the
information on the pages within seven days of notice from Participant.
7. Breach. In the event of a breach of this agreement, the
non-breaching party may terminate this agreement after providing notice to the
other party of such breach and the failure of the breaching party to cure the
breach within ten (10) days of receipt of the notice. Upon breach by
Participant and failure to timely cure TWI to immediately cease the publication
of all Participant's pages on the Internet and terminate the interface.
8. Miscellaneous. This agreement shall be interpreted in
accordance with the laws of the State of Texas and any legal proceeding arising
out of this agreement shall have venue in Dallas County, Texas. This agreement
shall be binding upon and inure to the benefit of the legal representatives,
successors and assigns of the parties hereto, agreement and the TravelWeb Order
Forms and Change Orders contain all the provisions of any agreement between TWI
and Participant with respect to the publication of pages the Internet and the
creation of an interface as provided herein and Participant has not relied upon
any promises or representations by TWI with respect to the subject matter
except set forth herein.
TRAVELWEB, INC. PARTICIPANT: LA QUINTA INNS, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ W.C. HAMMETT
----------------------- ------------------------------
John F. Davis, III
President Its: Senior Vice President
-----------------------------
Date: April 18, 1996 Date: February 14, 1996
--------------------- ----------------------------
<PAGE> 1
EXHIBIT 10.18
TRAVELWEB PARTICIPANT AGREEMENT
TravelWeb, Inc. (TWI) hereby offers to be below named Participant the
right to participate in TWI's TravelWeb on the following terms and conditions:
1. Duties of TWI. (a) For publication of pages on the Internet,
upon receipt and acceptance by TWI of TWI's TravelWeb Order Form and any Change
Order, the payment by Participant of the fees as set forth therein and receipt
from Participant of all reasonable and necessary information and materials
required to process the TravelWeb Order or Change Order, TWI shall proceed to
create or modify pages of information to be published on the Internet via TWI's
TravelWeb and, subject to Participant's prior approval of the pages, shall
publish the pages on the Internet. (b) In accordance with a mutually agreed
schedule for implementation, TWI shall produce an operable interface between
Participant's reservation system and the TravelWeb Internet site which will
permit the user of a computer accessing TravelWeb to access Participant's
reservation system with the capability to make, change and cancel a
reservation.
2. Duties of Participant. (a) For the publication of pages on the
Internet via TravelWeb, Participant shall complete a TravelWeb Order Form in
form and substance as required by TWI for each publication. Participant shall
provide to TWI all reasonable and necessary materials required by TWI to
process the TravelWeb Order. TWI will submit the pages to be published to
Participant for approval and Participant may make a single request for changes
at no charge. In the event Participant wants to make further changes or wants
to change any TravelWeb Order, Participant shall execute a Change Order on a
form prescribed by TWI and shall pay the agreed charges for the changes.
Participant agrees to pay all fees and costs as set forth in each TravelWeb
Order Form and Change Order. Upon approval by Participant of the pages to be
published, Participant hereby authorizes and directs TWI to publish the pages
of information on the Internet via TWI's TravelWeb site. (b) For access to
Participant's reservation system and reservation capabilities via TravelWeb,
Participant agrees to provide all reasonable and necessary personnel, technical
support, programming and modification of its reservation system and all other
reasonable and necessary accommodations to produce a dependable and operable
interface as required by TWI which will permit a user of a computer accessing
the TravelWeb site on the Internet to make, change and cancel reservations and
to make credit card payments in connection with a reservation.
3. Fees.
A. Monthly Maintenance Fees. For maintaining the
published pages on the Internet and the management and operation of TravelWeb,
Participant shall pay to TWI a monthly maintenance fee for all or any part of a
month during which pages are published (the "Maintenance Fee") as follows:
<TABLE>
<S> <C> <C>
1 - 50 properties = $3.00 per property;
51 - 200 properties = $2.75 per property;
201 - 400 properties = $2.50 per property;
over 400 properties = $1,000
</TABLE>
B. Page Building Fees. The fees for creation of pages to
be published on TWI's TravelWeb are as follows:
<TABLE>
<S> <C>
Picture Processing per Image $35.00
Data Entry per Page $15.00
Construction per Page $65.00
------
TOTAL PER PAGE $115.00
</TABLE>
These page building fees will prevail for the initial
one (1) year term of this Agreement. After the initial one (1) year term, the
page building fees will be subject to negotiation on an annual basis.
C. Reservation Fee. For each Net TravelWeb Reservation,
Participant shall pay to TWI a fee of $2.00 (the "TravelWeb Reservation Fee").
Net TravelWeb Reservations within a particular time period equals the number of
reservations made by a user of a computer accessing the TravelWeb site on the
Internet within such time period less the number of reservations made by a user
of a computer accessing the TravelWeb site on the Internet as to which notice of
cancellation is received via TravelWeb within such time period. After the
initial six months of this Agreement, Participant and TWI may review the
TravelWeb Reservation Fee and Participant and TWI shall diligently and in good
faith attempt to agree on a new TravelWeb Reservation Fee to be applicable for
the term of the contract. If the parties fail to reach such agreement, the
TravelWeb Reservation fee shall remain $2.00 per reservation until the end of
the initial term of this agreement.
Participant shall make all payments as required by each
TravelWeb Order Form and Change Order. TWI shall invoice Participant monthly
for all Maintenance Fees and TravelWeb Reservation Fees and Participant shall
pay each invoice upon receipt and each invoice shall be past due and it shall
be a breach of this agreement if it is not paid with thirty (30) days after the
date of the invoice. All payments to TWI shall be made in U.S. Dollars. TWI
may increase the fees up to 10% of the then-existing fee once each calendar
year.
4. Term. The initial term of this agreement shall be for (1) year
from the effective date set forth below. After the initial one
(1) year term this Agreement shall continue on a month to month
basis, until such time as either party gives at least thirty
(30) days prior written notice of intent to terminate.
<PAGE> 2
5. Property Rights. The published pages are acknowledged to be the
sole property of Participant and TWI may not use or publish any of the
information or pages in any manner other than pursuant to this agreement.
Participant shall be solely and exclusively responsible for the protection of
any and all of its intellectual property including, but not limited to the
inclusion of the pages to be published of any and all statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service
marks, or copyrights in connection with the information to be placed on the
published pages. TravelWeb is the trade name and service mark of TWI and may
not be used without the prior written consent of TWI. All information disclosed
to Participant by TWI in connection with the creation of the interface
provided herein is confidential and proprietary property of TWI and shall not
be disclosed to any third party without the prior written consent of TWI.
6. Disclaimer, Limitation of Liabilities and Risk of Internet
Usage. TWI WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION PUBLISHED PURSUANT TO THIS AGREEMENT,
(ii) ANY ACT OF FAILURE TO ACT WITH RESPECT TO THE PUBLICATION OF PAGES ON THE
INTERNET OR CREATION OR FUNCTIONALITY OF THE INTERFACE UNLESS EXPRESSLY SET
FORTH HEREIN, (iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF
A COMPUTER OPERATOR'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM AND/OR THE
MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD OR
OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM ANY
INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET, EXCEPT TO THE
EXTENT RESULTING FROM TWI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE ARE DISCLAIMED BY TWI AND
WAIVED BY PARTICIPANT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS
TO ITS RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA TRAVELWEB IS
AT PARTICIPANT'S OWN RISK. Participant acknowledges and agrees that the Internet
is a communication medium over which TWI has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if at
any time during the term of this agreement, the cost of access to the Internet
by TWI increases or there is imposed a fee or cost for access to or use of the
Internet communication lines, or there is imposed any law, governmental ruling,
or regulation the result of which increases the cost of access to or usage of
the Internet or otherwise makes it impractical, in TWI's sole discretion, to
continue to perform this agreement, TWI may upon notice to Participant
immediately terminate this agreement without such action constituting an event
of default. TWI shall not be liable for any breach of this agreement resulting
from an act of God, accidents, power or telecommunication outages or delays,
mechanical defect or other events beyond its control. TWI's only liability for
its errors on the published pages shall be to correct the information on the
pages within seven (7) days of notice from Participant.
7. Breach. In the event of a breach of this agreement, the
non-breaching party may terminate this agreement after providing notice to the
other party of such breach and the failure of the breaching party to cure the
breach within ten (10) days of receipt of the notice. Upon breach by Participant
and failure to timely cure TWI may immediately cease the publication of all
Participant's pages on the Internet and terminate the interface.
8. Miscellaneous. This agreement shall be interpreted in
accordance with the laws of the State of Texas and any legal proceeding arising
out of this agreement shall have venue in Dallas County, Texas. This agreement
shall be binding upon and inure to the benefit of the legal representatives,
successors and assigns of the parties hereto. This agreement and the TravelWeb
Order Forms and Change Orders contain all the provisions of any agreement
between TWI and Participant with respect to the publication of pages on the
Internet and the creation of an interface as provided herein and Participant
has not relied upon any promises or representations by TWI with respect to the
subject matter except as set forth herein.
TRAVELWEB, INC. PARTICIPANT: HFS INCORPORATED
By: /s/ JOHN F. DAVIS, III By: /s/ MICHAEL H. KISTNER
---------------------- -------------------------
John F. Davis, III Michael H. Kistner
President Vice President MIS
Date: 5/31/96 Date: 5/28/1996
--------------------- ----------------------
Effective Date: 5/31/96
-----------
- -
<PAGE> 1
EXHIBIT 10.19
TRAVELWEB PARTICIPANT AGREEMENT
TravelWeb, Inc. (TWI) hereby offers to the below named Participant
the right to participate in TWI's TravelWeb on the following terms and
conditions:
1. Duties of TWI. (a) For publication of pages on the Internet, upon
receipt and acceptance by TWI of TWI's TravelWeb Order Form and any Change
Order, the payment by Participant of the fees as set forth therein and receipt
from Participant of all reasonable and necessary information and materials
required to process the TravelWeb Order or Change Order, TWI shall proceed to
create or modify pages of information to be published on the Internet via TWI's
TravelWeb and, subject to Participant's prior approval of the pages, shall
publish the pages on the Internet. (b) In accordance with a mutually agreed
schedule for implementation, TWI shall produce an operable interface between
Participant's reservation system and the TravelWeb Internet site which will
permit the user of a computer accessing TravelWeb to access Participant's
reservation system with the capability to make, change and cancel a
reservation.
2. Duties of Participant. (a) For the publication of pages on the Internet
via TravelWeb, Participant shall complete a TravelWeb Order Form in form and
substance as required by TWI for each publication. Participant shall provide to
TWI all reasonable and necessary materials required by TWI to process the
TravelWeb Order. TWI will submit the pages to be published to Participant for
approval and Participant may make a single request for changes at no charge. In
the event Participant wants to make further changes or wants to change any
TravelWeb Order, Participant shall execute a Change Order on a form prescribed
by TWI and shall pay the agreed charges for the changes. Participant agrees to
pay all fees and costs as set forth in each TravelWeb Order Form and Change
Order. Upon approval by Participant of the pages to be published, Participant
hereby authorizes and directs TWI to publish the pages of information on the
Internet via TWI's TravelWeb site. (b) For access to Participant's reservation
system and reservation capabilities via TravelWeb, Participant agrees to
provide all reasonable and necessary personnel, technical support, programming
and modification of its reservation system and all other reasonable and
necessary accommodations to produce a dependable and operable interface as
required by TWI which will permit a user of a computer accessing the TravelWeb
site on the Internet to make, change and cancel reservations and to make credit
card payments in connection with a reservation.
3. Fees. For maintaining the published pages on the Internet and the
management and operation of TravelWeb, Participant shall pay to TWI a monthly
maintenance fee for all or any part of a month during which pages are published
(the "Maintenance Fee") as follows:
1 - 50 properties = $3.00 per property;
51 - 200 properties = $2.75 per property;
201 - 400 properties = $2.50 per property;
over 400 properties = $1,000
For each Net TravelWeb Reservation, Participant shall pay to TWI a fee
of $2.00 (the "TravelWeb Reservation Fee"). Net TravelWeb Reservations within a
particular time period equals the number of reservations made by a user of a
computer accessing the TravelWeb site on the Internet within such time period
less the number of reservations made by a user of a computer accessing the
TravelWeb site on the Internet as to which notice of cancellation is received
via TravelWeb within such time period.
Participant shall make all payments as required by each TravelWeb Order
Form and Change Order. TWI shall invoice Participant monthly for all
Maintenance Fees and TravelWeb Reservation Fees and Participant shall pay each
invoice upon receipt and each invoice shall be past due and it shall be a
breach of this agreement if it is not paid within thirty (30) days after the
date of the invoice. All payments to TWI shall be made in U.S. Dollars. TWI may
increase the fees up to 10% of the then-existing fee once each calendar year.
4. Term. The initial term of this agreement shall be for three (3) years
from the date hereof provided that the agreement shall be automatically renewed
and extended for additional one (1) year terms thereafter unless, at least
sixty (60) days prior to expiration of the initial three (3) year term or the
expiration of any additional (1) year term, either party hereto shall give
notice of its intent not to renew and extend this agreement.
5. Property Rights. The published pages are acknowledged to be the sole
property of Participant and TWI may not use or publish any of the information
or pages in any manner other than pursuant to this agreement. Participant shall
be solely and exclusively responsible for the protection of any and all of its
intellectual property including, but not limited to the inclusion on the pages
to be published of any and all statutory or other notices customarily used or
required for purposes of providing notice of ownership or protection of
Participant's trademarks, trade names, service marks, or copyrights in
connection with the information to be placed on the published pages. TravelWeb
is the trade name and service mark of TWI and may not be used without the prior
written consent of TWI. All information disclosed to Participant in connection
with the creation of the interface as provided herein is confidential and
proprietary property of TWI and shall not be disclosed to any third party
without the prior written consent of TWI.
6. Disclaimer, Limitation of Liabilities and Risk of Internet Usage. TWI
WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR INACCURACIES IN
ANY OF THE INFORMATION PUBLISHED PURSUANT TO THIS agreement, (ii) ANY ACT OR
FAILURE TO ACT WITH RESPECT TO THE PUBLICATION OF PAGES ON THE INTERNET OR
CREATION OR FUNCTIONALITY OF THE INTERFACE UNLESS EXPRESSLY SET FORTH HEREIN,
(iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF A COMPUTER
OPERATOR'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM AND/OR THE MAKING,
CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD OR OTHER
DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM ANY
INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET, EXCEPT TO THE
EXTENT RESULTING FROM TWI'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE ARE DISCLAIMED BY TWI AND
WAIVED BY PARTICIPANT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS
TO ITS RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA TRAVELWEB IS
AT PARTICIPANT'S OWN RISK. Participant acknowledges and agrees that the Internet
is a communication medium over which TWI has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if at
any time during the term of this agreement, the cost of access to the Internet
by TWI increases or there is imposed a fee or cost for access to or use of the
Internet communication lines, or there is imposed any law, governmental ruling,
or regulation the result of which increases the cost of access to or usage of
the Internet or otherwise makes it impractical, in TWI's sole discretion, to
continue to perform this agreement, TWI, may upon notice to Participant,
immediately terminate this agreement without such action constituting an event
of default. TWI shall not be liable for any breach of this agreement resulting
from an act of God, accidents, power or telecommunication outages or delays,
mechanical defects or other events beyond its control. TWI's only liability for
its errors on the published pages shall be to correct the information on the
pages within seven (7) days of notice from Participant.
7. Breach. In the event of a breach of this agreement, the non-breaching
party may terminate this agreement after providing notice to the other party of
such breach and the failure of the breaching party to cure the breach within
ten (10) days of receipt of the notice. Upon breach by Participant and failure
to timely cure TWI may immediately cease the publication of all Participant's
pages on the Internet and terminate the interface.
8. Miscellaneous. This agreement shall be interpreted in accordance with
the laws of the State of Texas and any legal proceeding arising out of this
agreement shall have venue in Dallas County, Texas. This agreement shall be
binding upon and inure to the benefit of the legal representatives, successors
and assigns of the parties hereto. This agreement and the TravelWeb Order Forms
and Change Orders contain all the provisions of any agreement between TWI and
Participant with respect to the publication of pages on the Internet and the
creation of an interface as provided herein and Participant has not relied upon
any promises or representations by TWI with respect to the subject matter
except as set forth herein.
TRAVELWEB, INC. PARTICIPANT: ITT SHERATON CORPORATION
By: /s/ JOHN F. DAVIS, III By: /s/ BARBARA COLEMAN
---------------------------- ------------------------------------
John F. Davis, III Its: MGR. EXTERNAL CHANNEL DIST.
President -----------------------------------
Date: April 18, 1996 Date: March 11, 1996
---------------------------- ------------------------------------
<PAGE> 1
EXHIBIT 10.20
[PEGASUS LETTERHEAD]
December 20, 1995
Bruce W. Wolf
Vice President - Distribution Marketing
MARRIOTT INTERNATIONAL, INC.
One Marriott Drive, Dept. 939.07
Washington, DC 20058
Dear Bruce,
As I mentioned in our conversation today, TravelWeb(TM) is continually
receiving a great amount for publicity. In fact, TravelWeb(TM) was just named
one of the Top 50 Sites by Home Computing Magazine and TravelWeb(TM) is
currently receiving more than 35,000 page accesses per day. I imagine after the
booking capability goes live next week, the publicity will become enormous.
THISCO is currently working with Marriott in the development of the UltraSelect
interface. Therefore, the only necessary element to begin taking Marriott
bookings via TravelWeb(TM) is page building.
THISCO would like to propose the following fees for the creation of
TravelWeb(TM) 'electronic brochures' for Marriott International. Fees include
all picture processing, data entry, and page construction for pages to be
created and published on the Internet's World Wide Web. Several brochure price
options are included due to the variety of Marriott International properties.
Number
------
of Properties Brochure option
- ------------- ---------------
750 One page brochure (Hotel Start page only) $75.00
- basic property information
- general description
- appropriate Marriott brand logo
125 Two page brochure $190.00
(Hotel Start page and Hotel Start Picture page)
- same as one page option plus a property photo
page
<PAGE> 2
December 20, 1995
Page Two
125 Five page brochure $550.00
(Hotel Start page plus (4) additional pages)
- Hotel Start Picture page
- Area Information page
- Rooms page
- Additional picture page
Page options in the five page brochure can be modified according to the
property being built.
Each additional page built will be involved on an individual basis according to
the following:
Picture Processing per Image 35.00
Data Entry per page 15.00
Construction per page 65.00
-----
$115.00 per page
Pages built which can be shared by more than one property can be accessed from
each applicable brochure. For example, an Area Information page can be shared
by several properties within a common destination. These pages would only be
invoiced for page building one time.
Also, as we agreed, THISCO will link Marriott International's website with
TravelWeb's booking capabilities at no additional fee. Efforts will be made to
make this link transparent to the customer.
All of the above fees are based on the assumption that Marriott International
provides acceptable quality 35mm slide images as well as complete digital
information for each property. (Digital information would be supplied via the
TravelWeb(TM) page building diskettes.) All prices are preferred rates based on
the volume of page building for Marriott International. The above fees assume
the Marriott International brochures will be developed using TravelWeb(TM)
standards.
Monthly maintenance fees of $2.50 will be assessed for each Marriott
International property with a maximum fee cap of $1,000.00 per month.
<PAGE> 3
December 20, 1995
Page Three
The proposal is valid until 12/31/95.
All page production and maintenance fees presented in this proposal will be
valid through
THISCO will have each Marriott International "electronic brochures" prepared
for review within 3 weeks of receipt of all automated information and images.
THISCO retains the rights to the design and other intellectual property
developed or utilized as part of this project except for the Marriott supplied
information. Marriott assumes TravelWeb has the legal right and authority to
the intellectual property described above.
Fees for this project would be due and payable on the following schedule:
FEE DATE
--- ----
50% of page creation Upon acceptance of this bid and prior to
commencement of page production
50% of page creation Upon completion of the brochures and prior to
any "live" presentation of the Internet
Maintenance Monthly following display on the Internet
If the fees and terms are acceptable, please indicate your acceptance below.
Once again, Bruce, we are eager to begin working with Marriott International so
please fell free to call me with any questions or comments. Thank you for your
interest.
Sincerely, AGREED TO AND ACCEPTED BY:
/s/JOHN F. DAVIS, III /s/BRUCE WOLFF
- -------------------------- ---------------------------
John F. Davis, III Bruce Wolff
President Vice President - Marketing Distribution
cc: Charles Zug
Kendall Paine
<PAGE> 1
EXHIBIT 10.21
AMENDMENT AND ADDENDUM
TO HCC PARTICIPANT AGREEMENT
This Amendment and Addendum to HCC Participant Agreement is entered
into by and between THE HOTEL CLEARING CORPORATION, a Delaware corporation
("HCC"), and HYATT HOTELS CORPORATION ("Participant"), to be effective the date
of the last signature of the parties to this Agreement. This Amendment and
Addendum to HCC Participant Agreement is hereinafter called the "Amendment."
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement (the "Participant Agreement") which is in full force and
effect and pursuant to which both parties are fully performing.
2. HCC and Participant have agreed to amend and supplement the
Participant Agreement to provide for additional services to be performed by HCC
and various other agreements ancillary thereto.
3. HCC and Participant intend for this Amendment to set forth the
entirety of their agreement reached this date with respect to the matters set
forth herein.
AGREEMENT
FOR AND IN CONSIDERATION of the above-stated agreed facts, which are
hereby acknowledged and confessed by the parties hereto as true and correct,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, HCC and Participant agree as follows:
1. Subsection (iii) of 1.1 of the Participant Agreement is hereby
deleted in its entirety.
2. The following new definitions are hereby added to Section 1.1
of the Participant Agreement:
(viii) Non-Subscriber. A Non-Subscriber is any person or
entity who has not executed an HCC Subscriber Agreement who makes
reservations with a Participating Entity for a Non-Subscriber
Commission.
(ix) [*] are the [*] paid pursuant to this [*] by [*]
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] made with [*] will be based on reservation information and
commission rates [*]
(x) Non-Subscriber Transactions. A Non-Subscriber
Transaction is a reservation, cancellation, no show,
non-commissionable or partially commissionable message with respect to
a transaction generated by a Non- Subscriber which is reported on a
monthly billing statement.
3. Sections 2.1(ii), (iii), (iv), and (vi) are hereby deleted in
their entirety and are hereby replaced with the following:
(ii) provide billing statements for Subscriber and
Non-Subscriber Commissions, Transaction Fees (as defined below),
Non-Subscriber Transaction Fees (as defined below), and other fees,
costs and expenses to Participant on a regular (normally monthly)
basis as provided in Section 3 below;
(iii) debit Participant's designated bank account for such
Subscriber and Non-Subscriber Commissions, Transaction Fees,
Non-Subscriber Transaction Fees, and other fees, costs and expenses,
no sooner than forty-eight (48) hours after providing billing
statements for such Subscriber and Non- Subscriber Commissions
Transaction Fees, Non-Subscriber Transaction Fees, and other fees,
costs and expenses as provided in Section 3 below;
(iv) distribute collected Subscriber and Non-Subscriber
Commissions to the appropriate Subscribers and Non-Subscribers based
upon the information provided by Participant to HCC as set forth in
the billing statements as provided in Section 3 below provided that
for Non-Subscribers there shall be a maximum of ten (10)
Non-Subscriber Transactions reported per billing statement;
(vi) provide telephone customer support services from 8:00
a.m. to 5:00 p.m., Central Standard time, Monday through Friday,
exclusive of legal holidays for Subscriber transactions; and
4. A new Section 2.1(vii) is hereby added to the Participant
Agreement as follows:
(vii) provide Participant monthly property transaction
reports which shall include the name of each property, the number of
transactions for each property and an average cost per transaction.
*Confidential Treatment Requested
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<PAGE> 3
5. Section 3.4 is hereby deleted in its entirety.
6. A new Section 3.11 is hereby added to the Participant
Agreement as follows:
3.11 Fees and Costs for Processing Non-Subscriber
Transactions. For each Non-Subscriber Transaction, Participant shall
pay HCC monthly transaction fees ("Non-Subscriber Transaction Fees")
of the greater of (i) [*] per Non-Subscriber Transaction reported on
a billing statement or (ii) [*] for each billing statement issued plus
all postage costs incurred by HCC to report Participant's Non-
Subscriber Transactions. Participant shall pay HCC [*] for processing
costs in addition to postage and the fees otherwise set forth herein.
Prior to the expiration of one year from the date of the
Amendment to this Participant Agreement, Participant and HCC shall
diligently and in good faith attempt to agree on Non-Subscriber
Transaction Fees to be applicable to the Participant Agreement
beginning the thirteenth month after the date of the Amendment. In
the event Participant and HCC do not agree on Non-Subscriber
Transaction Fees to be applicable to the Participant Agreement
beginning the thirteenth month after the date of the Amendment, the
Participant Agreement will terminate with respect to the processing
and reporting of Non-Subscriber Transactions and Commissions.
7. A new Section 3.12 is hereby added to the Participant
Agreement as follows:
3.12 [*] Commissions in the travel agents' local currency.
[*] in U.S. Dollars only.
8. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is hereby replaced with the following:
4.1 Term of Agreement. The term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall
expire December 31, 2000. This Agreement will be automatically renewed
and extended for additional 12 month periods unless at least thirty
days prior to the expiration of the initial term or at least thirty
days prior to the expiration of any additional 12 month period,
either party provides written notice to the other of its decision not
to renew and extend.
9. This Amendment shall be and hereby is incorporated into the
Participant Agreement for all intents and purposes and all terms, provisions,
and definitions of the Participant Agreement shall apply.
*Confidential Treatment Requested
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10. Except where inconsistent with the terms of this Amendment,
the Participant Agreement is hereby ratified and affirmed in all respects.
THE HOTEL CLEARING CORPORATION HYATT HOTELS CORPORATION
By: /s/ JOHN F. DAVIS, III By: /s/ Peter Connoly
-------------------------- -----------------------------
John F. Davis, III
President Its:
----------------------------
Date: 2/14/96 Date:
------------------------ ---------------------------
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<PAGE> 5
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and Hyatt Hotels
Corporation, a Delaware corporation ("Participant"), to be effective the _____
day of ____________, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Properties.
(iii) [deleted by amendment]
(iv) Participating Entity. A Participating Entity
is an operator of a hotel reservation system that has executed a HCC
Participant Agreement.
(v) Subscriber. A Subscriber is any person or
entity who has executed an HCC Subscriber Agreement and makes reservations with
a Participating Entity. A list of current Subscribers will be provided by HCC
to Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber
Commissions are the commissions paid by Participant to Subscribers for
reservations made with Participant. Subscriber Commissions will be based on
commission rates provided to HCC by the Participant.
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<PAGE> 6
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common ownership with
HCC, to provide an interface between Subscribers and hotel reservation systems
with the capability to provide immediate room confirmation numbers for each
hotel property participating in UltraSwitch.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC
System for the use and benefit of Participant and other Participating Entities.
HCC will provide all reasonable and necessary technical support, hardware and
software, and modifications to the HCC System to provide clearinghouse services
to Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated
affiliates and franchisees of Participant) to Subscribers as being a HCC System
Participant through the use of UltraSwitch or other central reservation system
services (and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber and
Non-Subscriber Commissions, [*] (as defined below) and other fees, costs and
expenses to [*] on a regular (normally monthly) basis as provided in Section 3
below;
(iii) debit [*] for such [*] and [*] and other
fees, costs and expense, no sooner than forty-eight (48) hours after providing
[*] for such [*] and other fees, costs and expenses as provided in Section 3
below;
(iv) distribute collected Subscriber and
Non-Subscriber Commissions to the appropriate Subscribers and Non-Subscribers
based upon the information provided by Participant to HCC as provided herein;
*Confidential Treatment Requested
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<PAGE> 7
(v) provide periodic (normally monthly) reports
to Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
(vi) provide telephone customer support services
from 8:00 a.m. to 5:00 p.m., Central Standard time, Monday through Friday,
exclusive of legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, whether directly to the property or through the use of a central
reservation "800" phone number) no loss often than on a weekly basis. All
information provided by Participant with respect to reservations, Subscribers
and Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement.
2.3 Schedule of Implementation of HCC System. HCC will proceed
with the implementation of the HCC System, with a proposed HCC System
activation date of April 1, 1992, but not later than September 30, 1992. For
the purposes of this Agreement, the actual
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<PAGE> 8
activation date (the "Activation Date") will be the date that HCC notifies
Subscriber that the HCC Board of Directors has determined that the HCC System
is operational and capable of processing sufficient aggregate transaction
volume of the Participating Entities. HCC will provide Participants with at
least thirty (30) days' prior notice of activation of the HCC System. HCC will
provide Participant with appropriate specifications to assist Participant in
preparing for utilization of the HCC System at least one hundred twenty (120)
days prior to the Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit
the development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred, Participant's obligation to pay the Contingency Fee is absolute
and shall continue until Participant is capable of and ready to deliver to the
HCC System reservation commission data from at least seventy-five percent (75%)
of its properties in the United States (calculated based on total number of
rooms rather than number of individual hotels) in a regular and timely manner
as contemplated by this Agreement ("Participant Readiness") and
*Confidential Treatment Requested
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<PAGE> 9
continues and delivers to HCC the volume of reservation commissions required
for Participant Readiness after the Activation Date. At such time, Participant
will begin paying transaction fees ("Transaction Fees") of [*] per
Commissionable Reservation, and upon payment of such Transaction Fees, will be
relieved of its obligations to pay any further Contingency Fees under this
section. For the remainder, if any, of the six (6) month period referred to
above, the Transaction Fees payable by Participant will be subject to a minimum
monthly Transaction Fee of [*] multiplied by the Monthly Base Transactions
indicated on Exhibit "B". If Participant Readiness (or the Activation Date, if
later) occurs other than at the beginning of a month, Participant will receive
a credit against the fees otherwise payable by Participant under this
Agreement, in the amount of a pro rata portion of the Contingency Fee paid to
HCC for that month, based upon the number of days in the month following
Participation Readiness (or the Activation Date, if later). HCC may, at its
sole discretion, change the Transaction Fees charged to Participant as provided
above, upon ninety (90) days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant hereby authorizes HCC to debit all such fees from
Participant's designated bank account as provided in Exhibit "B". Participant
is responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchises
that utilize the HCC System under this Agreement.
*Confidential Treatment Requested
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3.2 Subscriber Commissions. Participant agrees to make available
for debit by HCC all Subscriber Commissions shown on billing statements as
provided in Section 3.5. Participant hereby authorizes HCC to debit such
Subscriber Commissions from Participant's designated bank account as provided
in Exhibit "C". Participant is responsible for collection and payment to HCC
of all such Subscriber Commissions that are attributable to Participant and all
of Participant's affiliates and franchisees that utilize the HCC System under
this Agreement. Payments to Subscribers will be made in appropriate local
currency.
3.3 Other Fees, Costs and Expenses. Participant also agrees to
pay HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved by the Board of Directors of HCC.
Participant hereby authorizes HCC to debit such fees from Participant's
designated bank account as provided in Exhibit "B". HCC will give Participant
prior notice of debits made under the terms of this Section 3.3. Participant
is responsible for collection and payment to HCC of all such fees, costs and
other expenses that are attributable to Participant and all of Participant's
affiliates and franchisees that utilize the HCC System under this Agreement.
3.4 [deleted by amendment]
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide periodic (normally monthly) billing
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statements detailing (i) Subscriber Commissions to be paid by Participant for
the period covered by such billing statement; (ii) Transaction Fees to be paid
by Participant, based on Commissionable Reservations for the period covered by
such billing statement; (iii) other fees, costs and additional expenses to be
paid by Participant for the period covered by such billing statement; and (iv)
[*] to be paid to [*] for the most recent quarterly period preceding such
billing statement, which [*] and included in billing statements only on a
quarterly basis. Items (i) through (iv) may be included on separate billing
statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
3.7 Additional Authorizations. Participant agrees to execute and
deliver to Participant's bank(s) debit authorization(s) in the form of Exhibit
"E" attached hereto, and to execute and deliver to such bank(s) or other
appropriate persons any and all documents, give to such bank(s) or other
persons any and all directions, and to take all other actions that are
necessary or appropriate to permit HCC to debit amounts to be paid hereunder by
Participant directly from Participant's designated bank account(s).
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least
*Confidential Treatment Requested
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thirty (30) days prior to the expiration of any additional twelve (12) month
period, either party provides written notice to the other of its decision not
to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify and all Subscribers of
such default and suspension, whether through the UltraSwitch system, central
reservation systems, or otherwise. Upon notification by Participant to HCC of
any default in payment by any affiliate or franchisee of Participant of
payments due under this Agreement and until notification by Participant of the
cure of such default, HCC shall have the right to suspend the status of such
affiliate or franchise as a Participating Entity and to notify all subscribers
of such default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said
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Chapter 11 or 7, or any jurisdiction relating to the liquidation or
reorganization of debtors or the modification of the rights of creditors, the
entry of a court order adjudging the party bankrupt or insolvent, ordering its
liquidation or reorganization or assuming custody or appointing a receiver or
other custodian of its property, or its making an assignment for the benefit
of, or entering into a composition with, its creditors;
(iv) The deferral [*] of payment of all [*], as provided in
Section 3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
*Confidential Treatment Requested
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7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use UltraSwitch software or related property by reason
of this Agreement, and that use of such UltraSwitch services by Participant
would be permitted only under a separate agreement with THISCO. Participant
acknowledges that it will have no access to and will not use the HCC System or
related property, other than as specifically provided for in this Agreement,
and that such system and related property is confidential and proprietary
property of HCC. HCC acknowledges that the specific information concerning
Participant's reservations, whether processed through the UltraSwitch system or
otherwise provided by Participant to HCC outside of the UltraSwitch system, is
the property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. The aggregate data from the HCC System will become the property
of HCC. Any use of HCC service Marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may describe the
HCC System contemplated by this Agreement in its franchise offering circular
and other materials as required by state or federal law. The provisions of
this Section 7.1 will remain binding and in force and effect as long as such
information remains confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's
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Losses"). Subject to Section 9.2, HCC agrees to indemnify and hold harmless
Participant, and Participant's affiliates, directors, officers, employees and
stockholders, from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) ("Participant's Losses")
occurring as a result of or arising out of a material breach of this Agreement
on account of HCC's fault to the extent not caused by the fault of Participant.
Promptly after receipt by an indemnified party of notice of the commencement of
any action or the presentation or other assertion of any claim which could
result in any indemnification claim pursuant to this Section 8.1, such
indemnified party will give prompt notice thereof to the indemnifying party and
the indemnifying party will be entitled to participate therein or, to the
extent that it wishes, assume the defense thereof with its own counsel. If the
indemnifying party elects to assume the defense of any such action or claim,
the indemnifying party shall not be liable to the indemnified party for any
fees of other counsel or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from
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any breach of this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
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<PAGE> 17
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other commissions (except in the case of
electronically transmitted data) shall be addressed as follows:
<TABLE>
<CAPTION>
IF TO HCC: IF TO PARTICIPANT:
<S> <C>
3811 Turtle Creek Blvd. 200 West Madison
Dallas, TX 75219 Chicago, Illinois 60606
Attention: John F. Davis, III Attention: General Counsel
(if by telecopy to: (if by telecopy to:
(214) 528-5675) (312) 750-8581)
</TABLE>
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements
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<PAGE> 18
and representations, verbal or written, with respect to the subject matter of
this Agreement. There are no representations, warranties or agreements made or
relied upon by either party with respect to the subject matter of this
Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION HYATT HOTELS CORPORATION
By: /s/ JOHN F. DAVIS, III By: /s/ PETER CONNOLY
----------------------------- ----------------------------
John F. Davis, III,
President Title:
-------------------------
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<PAGE> 19
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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<PAGE> 20
EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base
Transactions, or Monthly Base Transactions of [*] (Annual Base Transactions
divided by 12).
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement are to be debited directly from Participant's bank account,
described as follows:
Bank Name:
-------------------------------------------------
Account Number:
--------------------------------------------
Other Appropriate Information:
-----------------------------
-----------------------------------------------------------
-----------------------------------------------------------
3. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements. The
Contingency Fee will automatically be debited from the account designated above
on the first business day of each month during which the Contingency Fee is
payable.
*Confidential Treatment Requested
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<PAGE> 21
EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be debited directly from
Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements.
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<PAGE> 22
EXHIBIT "D"
[deleted by amendment]
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<PAGE> 23
EXHIBIT "E"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing
Corporation to debit the undersigned's account identified above, and to
transfer sums from such account by wire transfer, debit memo, draft or check,
all without further instruction or verification of such transfer instructions
from the undersigned. This authorization will remain in full force and effect
until written notification of cancellation is given by the undersigned to the
bank or other financial institution identified above.
------------------------------
By:
---------------------------
Title:
------------------------
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<PAGE> 24
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
-20-
<PAGE> 1
EXHIBIT 10.22
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by
and between the HOTEL CLEARING CORPORATION, hereinafter called "HCC", and
INTER-CONTINENTAL HOTELS, hereinafter called "Participant", to be effective the
15th day of September, 1993 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective
____________________(hereinafter called the "Participant
Agreement").
2. HCC and Participant have mutually agreed to amend the term of
the Participant Agreement and the provisions of the
Participant Agreement relating to the amount and payment of
Participant Commissions (as defined in the Participant
Agreement).
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the term of the
Participant Agreement and the provisions relating to the
amount and payment of Participant Commissions.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.4 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"3.4 [*] In consideration of the benefits that [*] will
obtain from [*] processed by [*] through the HCC
System, [*] agrees to [*] certain [*] as hereinafter
provided. Such [*] will be [*] at such times and in
such total amounts as [*] may determine to be
appropriate provided that [*] shall be [*] the [*]
(as hereinafter defined). The [*] payable [*] shall
be determined by dividing the total number of [*] for
all stockholder [*] for the applicable time period
(as determined by [*]) into the total amount of funds
available [*] (as determined by [*] and after making
allowance for [*] as hereinafter defined) and
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] by the number of [*] transactions [*] by [*] for
the applicable period. [*] are those amounts due to
[*] pursuant to agreements which require payments
[*] the [*] to [*] as [*] including, but not
limited to, amounts due to [*] and key [*] of [*]."
2. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this
Agreement, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire December
31, 1998. This Agreement will be automatically
renewed and extended for additional twelve (12) month
periods unless, at least thirty (30) days prior to
the expiration of the initial term or any additional
twelve (12) month period, either party provides
written notice to the other of its decision not to
renew and extend."
3. Exhibit D to the Participant Agreement is deleted.
4. This First Amendment shall be and hereby is incorporated into
the Participant Agreement for all intents and purposes and all
terms, provisions and definitions of the Participant Agreement
shall apply.
5. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified
and affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
------------------------------
John F. Davis, III
President
Date:
----------------------------
INTER-CONTINENTAL HOTELS
By: /s/ PAUL J. TRAVERS
------------------------------
Its:
-----------------------------
Date: 9/9/93
----------------------------
*Confidential Treatment Requested
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<PAGE> 3
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and
Inter-Continental Hotel Corporation ("Participant"), to be effective the _____
day of ____________, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Properties.
(iii) [*]. [*] are the [*] paid by [*] for [*] processed
[*].
(iv) Participating Entity. A Participating Entity
is an operator of a hotel reservation system that has executed a HCC
Participant Agreement.
(v) Subscriber. A Subscriber is any person or
entity who has executed an HCC Subscriber Agreement and makes reservations with
a Participating Entity. A list of current Subscribers will be provided by HCC
to Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber
Commissions are the commissions paid by Participant to Subscribers for
reservations made with Participant. Subscriber Commissions will be based on
commission rates provided to HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common
*Confidential Treatment Requested
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<PAGE> 4
ownership with HCC, to provide an interface between Subscribers and hotel
reservation systems with the capability to provide immediate room confirmation
numbers for each hotel property participating in UltraSwitch.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC
System for the use and benefit of Participant and other Participating Entities.
HCC will provide all reasonable and necessary technical support, hardware and
software, and modifications to the HCC System to provide clearinghouse services
to Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated
affiliates and franchisees of Participant) to Subscribers as being a HCC System
Participant through the use of UltraSwitch or other central reservation system
services (and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant on a regular (normally monthly) basis as provided in
Section 3 below;
(iii) debit Participant's designated bank account
for such Subscriber Commissions, transaction fees and other fees, costs and
expense, no sooner than forty-eight (48) hours after providing billing
statements for such Subscriber Commissions, Transaction Fees and other fees,
costs and expenses as provided in Section 3 below;
(iv) distribute collected Subscriber Commissions
to the appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(v) provide periodic (normally monthly) reports
to Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
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<PAGE> 5
(vi) provide telephone customer support services
from 8:00 a.m. to 8:00 p.m., Eastern time, Monday through Friday, exclusive of
legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, whether directly to the property or through the use of a central
reservation "800" phone number) no loss often than on a weekly basis. All
information provided by Participant with respect to reservations, Subscribers
and Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement.
2.3 Schedule of Implementation of HCC System. HCC will proceed
with the implementation of the HCC System, with a proposed HCC System
activation date of April 1, 1992, but not later than September 30, 1992. For
the purposes of this Agreement, the actual activation date (the "Activation
Date") will be the date that HCC notifies Subscriber that the HCC Board of
Directors has determined that the HCC System is operational and capable of
processing sufficient aggregate transaction volume of the Participating
Entities. HCC will provide Participants with at least thirty (30)
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<PAGE> 6
days' prior notice of activation of the HCC System. HCC will provide
Participant with appropriate specifications to assist Participant in preparing
for utilization of the HCC System at least one hundred twenty (120) days prior
to the Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit
the development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred, Participant's obligation to pay the Contingency Fee is absolute
and shall continue until Participant is capable of and ready to deliver to the
HCC System reservation commission data from at least seventy-five percent (75%)
of its properties in the United States (calculated based on total number of
rooms rather than number of individual hotels) in a regular and timely manner
as contemplated by this Agreement ("Participant Readiness") and continues and
delivers to HCC the volume of reservation commissions required for Participant
Readiness after the Activation Date. At such time, Participant will begin
paying transaction fees ("Transaction Fees") of [*] per Commissionable
Reservation, and upon payment of such Transaction Fees, will be
*Confidential Treatment Requested
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<PAGE> 7
relieved of its obligations to pay any further Contingency Fees under this
section. For the remainder, if any, of the six (6) month period referred to
above, the Transaction Fees payable by Participant will be subject to a minimum
monthly Transaction Fee of [*] multiplied by the Monthly Base Transactions
indicated on Exhibit "B". If Participant Readiness (or the Activation Date, if
later) occurs other than at the beginning of a month, Participant will receive
a credit against the fees otherwise payable by Participant under this
Agreement, in the amount of a pro rata portion of the Contingency Fee paid to
HCC for that month, based upon the number of days in the month following
Participation Readiness (or the Activation Date, if later). HCC may, at its
sole discretion, change the Transaction Fees charged to Participant as provided
above, upon ninety (90) days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant hereby authorizes HCC to debit all such fees from
Participant's designated bank account as provided in Exhibit "B". Participant
is responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchises
that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to make available
for debit by HCC all Subscriber Commissions shown on billing statements as
provided in Section 3.5. Participant hereby authorizes HCC to debit such
Subscriber Commissions from Participant's designated bank account as provided
in Exhibit "C". Participant is responsible for collection and payment to HCC
of all
*Confidential Treatment Requested
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<PAGE> 8
such Subscriber Commissions that are attributable to Participant and all of
Participant's affiliates and franchisees that utilize the HCC System under this
Agreement. Payments to Subscribers will be made in appropriate local currency.
3.3 Other Fees, Costs and Expenses. Participant also agrees to
pay HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved by the Board of Directors of HCC.
Participant hereby authorizes HCC to debit such fees from Participant's
designated bank account as provided in Exhibit "B". HCC will give Participant
prior notice of debits made under the terms of this Section 3.3. Participant
is responsible for collection and payment to HCC of all such fees, costs and
other expenses that are attributable to Participant and all of Participant's
affiliates and franchisees that utilize the HCC System under this Agreement.
3.4 [deleted by amendment]
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and
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<PAGE> 9
(iv) [*] to be paid to [*] for the most recent quarterly period preceding such
billing statement, which [*] will be [*] included in billing statements only
on a quarterly basis. Items (i) through (iv) may be included on separate
billing statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
3.7 Additional Authorizations. Participant agrees to execute and
deliver to Participant's bank(s) debit authorization(s) in the form of Exhibit
"E" attached hereto, and to execute and deliver to such bank(s) or other
appropriate persons any and all documents, give to such bank(s) or other
persons any and all directions, and to take all other actions that are
necessary or appropriate to permit HCC to debit amounts to be paid hereunder by
Participant directly from Participant's designated bank account(s).
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
*Confidential Treatment Requested
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<PAGE> 10
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify and all Subscribers of
such default and suspension, whether through the UltraSwitch system, central
reservation systems, or otherwise. Upon notification by Participant to HCC of
any default in payment by any affiliate or franchisee of Participant of
payments due under this Agreement and until notification by Participant of the
cure of such default, HCC shall have the right to suspend the status of such
affiliate or franchise as a Participating Entity and to notify all subscribers
of such default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said Chapter 11 or 7, or any jurisdiction relating to the
liquidation or reorganization of debtors or the modification of the rights of
creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its
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<PAGE> 11
property, or its making an assignment for the benefit of, or entering into a
composition with, its creditors;
(iv) The deferral [*] of payment of all [*] as provided in Section
3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will
*Confidential Treatment Requested
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be treated as confidential and proprietary subject only to disclosure where
required by law. Such designation may be removed by each party making the
designation. Participant acknowledges that it will have no access to and will
not use UltraSwitch software or related property by reason of this Agreement,
and that use of such UltraSwitch services by Participant would be permitted
only under a separate agreement with THISCO. Participant acknowledges that it
will have no access to and will not use the HCC System or related property,
other than as specifically provided for in this Agreement, and that such system
and related property is confidential and proprietary property of HCC. HCC
acknowledges that the specific information concerning Participant's
reservations, whether processed through the UltraSwitch system or otherwise
provided by Participant to HCC outside of the UltraSwitch system, is the
property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. The aggregate data from the HCC System will become the property
of HCC. Any use of HCC service Marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may describe the
HCC System contemplated by this Agreement in its franchise offering circular
and other materials as required by state or federal law. The provisions of
this Section 7.1 will remain binding and in force and effect as long as such
information remains confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable
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<PAGE> 13
attorney's fees) ("Participant's Losses") occurring as a result of or arising
out of a material breach of this Agreement on account of HCC's fault to the
extent not caused by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
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<PAGE> 14
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c)
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<PAGE> 15
sent by overnight courier service (for next business day delivery), shipping
prepaid, (d) sent by telecopy with confirmation of receipt of telecopy to the
number indicated, or (e) transmitted directly to the recipient by electronic
data transmission pursuant to arrangements made between the parties. Such
notices and other commissions (except in the case of electronically transmitted
data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd.
Dallas, TX 75219
Attention: John F. Davis, III
(if by telecopy to:
(214) 528-5675)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
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<PAGE> 16
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION INTER-CONTINENTAL HOTELS CORP.
By: /s/ JOHN F. DAVIS, III By: /s/ JOHN CAHILL
----------------------- --------------------------
John F. Davis, III, Title: Senior V. P.
President -----------------------
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<PAGE> 17
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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<PAGE> 18
EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base Transactions,
or Monthly Base Transactions of [*] (Annual Base Transactions divided by 12).
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement are to be debited directly from Participant's bank account,
described as follows:
Bank Name:
-------------------------------------------------
Account Number:
---------------------------------------------
Other Appropriate Information:
------------------------------
------------------------------------------------------------
------------------------------------------------------------
3. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements. The
Contingency Fee will automatically be debited from the account designated above
on the first business day of each month during which the Contingency Fee is
payable.
*Confidential Treatment Requested
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<PAGE> 19
EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be debited directly from
Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements.
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<PAGE> 20
EXHIBIT "D"
[deleted by amendment]
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<PAGE> 21
EXHIBIT "E"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing
Corporation to debit the undersigned's account identified above, and to
transfer sums from such account by wire transfer, debit memo, draft or check,
all without further instruction or verification of such transfer instructions
from the undersigned. This authorization will remain in full force and effect
until written notification of cancellation is given by the undersigned to the
bank or other financial institution identified above.
----------------------------------
By:
-------------------------------
Title:
----------------------------
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<PAGE> 22
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
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<PAGE> 1
EXHIBIT 10.23
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and
between THE HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and ITT
SHERATON CORPORATION ("Participant"), to be effective the 28 day of May, 1997.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals
the number of reservations (both voice and
electronic) processed through the HCC System within
such time period that are identified as
"commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC
and for which a travel agent commission is paid
pursuant to this Agreement.
(ii) HCC System. The HCC System is HCC's automated
clearinghouse system to provide for the coordination
of reservation information, transfer of hotel
reservation commissions and ancillary services to
Travel Agents and Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has
executed a HCC Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel
agency who has executed an HCC Subscriber Agreement.
A list of current HCC Travel Agents will be
periodically provided by HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant
to HCC Travel Agents pursuant to this Agreement. HCC
Travel Agent Commissions will be based on commission
rates provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System
for the use and benefit of Participant, its franchisees and
affiliates, and other Participating Entities. HCC will provide
all reasonable and necessary technical support, hardware and
software, except as otherwise provided herein, and
modifications to the HCC System to provide clearinghouse
services to Participant and its franchisees and affiliates as
described below. Upon compliance with the terms of this
Agreement by Participant, its franchisees and affiliates, and
subject to Section 5 hereof, HCC will provide the following
clearinghouse services to Participant and its franchisees
and affiliates:
(i) identify Participant to travel agents as being a HCC
System Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and
other fees, costs and expenses to Participant no later
than the fifteenth (15th) business day after the end
of each month as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions
received from Participant and its affiliates and
franchisees to the appropriate HCC Travel Agents as
set forth in the HCC Travel Agent Commission
information provided by Participant;
(iv) provide no later than the fifteenth (15th) business
day of each month reports to Participant and HCC
Travel Agents reflecting HCC Travel Agents'
reservation transactions with Participant and HCC
Travel Agent Commissions owed based upon the data
provided to HCC by Participant and its affiliates and
franchisees who are participating in the HCC System;
and
(v) provide telephone customer support services from 8:00
a.m. to 5:00 p.m., U.S. Central time, Monday through
Friday, exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently
and in good faith do the following:
(i) Cooperate reasonably with HCC personnel with respect
to the implementation of the HCC System between HCC
Travel Agents and Participant and its affiliates and
franchisees;
(ii) Provide HCC with all that is reasonably required by
HCC to process all reservations (including all
reservations made electronically or by voice, through
the use of a central reservation "800" phone number,
inclusive of no-shows, cancellations and
non-commissionable transactions) made by HCC Travel
Agents with Participant and, subject to 2.2(iv), its
affiliates and franchisees no less often than on a
semi-monthly basis such data being complete and
accurate to the best of Participant's knowledge and
ability and inclusive of all of the information to
permit HCC to provide the clearinghouse services
described in Section 2.1 hereof and, without
limitation, being such information as set forth on
Exhibit A hereof; and permit and authorize HCC to
obtain and use such data concerning such reservations
made with Participant and, subject to 2.2(iv), its
affiliates and franchisees except such data designated
as confidential pursuant to Section 7 hereof. The
foregoing shall be subject to receipt by Participant
from HCC of the instructions, specifications,
directions, information, assistance, and cooperation
reasonably required by Participant to provide the
foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to
this Agreement within two (2) business days of receipt
of the billing statement described in Section 3.5
hereof;
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<PAGE> 3
(iv) Use its reasonable efforts to cause each of its
franchisees and affiliates to fully and timely
participate in the HCC System pursuant to this
Agreement;
(vi) Permit HCC to use its name as an entity participating
in the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or
enhance the capability of the HCC System, and Participant
agrees to cooperate reasonably with HCC to the extent
reasonably necessary to effectuate modifications and
enhancements of the HCC System. If Participant determines that
such modification or enhancement is likely to require
Participant to make significant modifications to its central
reservation system (any such modifications to be at
Participant's sole expense), HCC will provide at least ninety
(90) days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this
Agreement upon sixty (60) days notice to HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For the first [*] Commissionable Reservations
processed each month, Participant shall pay HCC a
transaction fee ("HCC Transaction Fee") each month of
U.S. [*] for each such Commissionable Reservation
processed. For any month wherein the total of
Commissionable Reservations is greater than [*] but
less than [*] shall be due from either party
for each such Commissionable Reservation over [*]
but less than [*].
(b) For each Commissionable Reservation in excess of [*]
processed each month, [*] a transaction fee each
month (the [*]) as follows:
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but less
than [*] a Participant Transaction Fee of [*] for
each Commissionable Reservation between [*] and
[*];
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but
less than [*] a Participant Transaction Fee of
[*] for each Commissionable Reservation between
[*] and [*];
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] and
less than [*] a Participant Transaction Fee of
[*] for each Commissionable Reservation between
[*] and [*]; and
For any month wherein the total of Commissionable
Reservations processed are in excess of [*], a
Participant Transaction Fee of [*] for each
Commissionable Reservation in excess of [*].
*Confidential Treatment Requested
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<PAGE> 4
Provided however, notwithstanding the preceding provisions
of this 3.1(b), the total Participant Transaction Fee paid
per month shall not exceed an amount equal to [*] per
Commissionable Reservation in the aggregate.
3.2 Commission Payments. HCC shall pay HCC Travel Agent
Commissions in the travel agent's local currency or the
currency requested by the travel agency. HCC shall be
responsible for complying with laws and regulations
relating to the treatment of unclaimed property (sometimes
referred to as "escheatment" laws) resulting from checks
issued to travel agents under this Agreement. The parties
will jointly establish mutually acceptable procedures to
be implemented by HCC in order to comply with such laws
and regulations. The parties will meet to establish such
procedures by no later than thirty (30) days after the
effective date, and will cooperate and work diligently
with one another in order to finalize same as promptly as
practical.
3.3 Disputed Commissions. HCC will provide Participant
and HCC Travel Agents with periodic reports indicated
under Section 2.1(iv) that will indicate any exceptions to
HCC Travel Agent Commissions, based on discrepancies
between information given HCC by Participant compared to
other information available to HCC. With respect to all
exceptions as to which Participant provides supporting
documentation, HCC will forward such documentation to the
appropriate HCC Travel Agent(s), and the HCC Travel Agents
involved may pursue such dispute directly with
Participant('s) franchisees, but HCC will not have any
liability to either Participant or any travel agent (HCC
or non-HCC) with respect to the resolution of any disputed
commission. No dispute concerning any travel agent
commissions will in any way affect or reduce the
obligations of Participant to (i) timely pay all other HCC
Travel Agent Commissions reported to HCC for processing
and (ii) timely pay to HCC all Transaction Fees and other
fees, costs and additional expenses owed by Participant
under this Agreement; nor shall any such dispute in any
way affect or reduce the obligations of HCC to timely pay
Participant all Participant Transaction Fees due under
this Agreement.
3.4 Billing Statements. Based upon the information provided
HCC by or with respect to Participant pursuant to Section
2.2, above, HCC will provide Participant a monthly billing
statement detailing (i) HCC Travel Agent Commissions to be
paid by Participant for the period covered by such billing
statement; (ii) HCC Transaction Fees to be paid by
Participant, based on Commissionable Reservations for the
period covered by such billing statement; (iii) [*] (iv)
[*] and (v) all other costs and fees owed by Participant
pursuant to this Agreement. All fees and costs shall be
paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement
shall begin on the effective date set forth at the
beginning of this Agreement and, unless earlier terminated
pursuant to the provisions of this Agreement, shall expire
on the last day of the sixtieth (60th) month after the
date of this Agreement. However, this Agreement will be
automatically renewed and extended for additional twelve
(12) month periods unless, at least sixty (60) days prior
to the expiration of the initial term of this Agreement or
any additional twelve (12) month period, either party
provides written notice to the other of its decision
not to renew and extend.
*Confidential Treatment Requested
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<PAGE> 5
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an
Event of Default (as defined below) by either party
and the failure of such party to cure such default
after notice and opportunity to cure as provided by
Section 6.3 below, the nondefaulting party may
terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event
of Default by Participant and the failure of
Participant to cure such default after notice and
opportunity to cure as provided by Section 6.3 below,
then, if HCC does not terminate this Agreement under
Section 5.1, until such time as such Event of Default
is cured HCC shall have the right to suspend the
status of Participant as a Participating Entity and
to notify all HCC Travel Agents of such default and
suspension through central reservation systems or
otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any
one of the following will be considered an Event of
Default:
(i) The failure of either party to pay any amount
due hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy
the obligations set forth in this Agreement;
(iii) The refusal or failure of either party to
perform diligently and in good faith each and
every material provision of this Agreement;
(iv) If either HCC or Participant (the "Defaulting
Party") becomes insolvent, takes any step
leading to its cessation as a going concern,
or ceases business operations for reasons
other than a strike and other than assignment
as allowed by this Agreement, then the other
party (the "Insecure Party") may immediately
terminate this Agreement upon written notice
to the other party unless the Defaulting
Party immediately gives the Insecure Party
adequate assurance of the future performance
of this Agreement. If bankruptcy proceedings
are commenced with respect to the Defaulting
Party, and if this Agreement has not
otherwise terminated, then the Insecure Party
may suspend all further performance of this
Agreement until the Defaulting Party assumes
or rejects this Agreement pursuant to Section
365 of the Bankruptcy Code or any similar or
successor provision. Any such suspension of
further performance by the Insecure Party
pending the Defaulting Party's assumption or
rejection will not be a breach of this
Agreement.
Any such Event of Default shall not relieve the defaulting
party from any of its obligations hereunder, and the
non-defaulting party shall, except as provided in this
Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of
Default if such event listed in Section 6.1 is caused
by or results from acts of God, fire, war, civil
unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However,
if any such occurrence results in any of the events
described in Section 6.1, and the same continues for
more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as
required herein.
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<PAGE> 6
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the
defaulting party specifying the alleged default. In the case
of a monetary default by either party, the defaulting party
will only be allowed to cure such default within two (2)
business days after receipt of such notice, by delivering that
amount owed to HCC in good funds into the non-defaulting
party's bank account. In all other instances, the defaulting
party will be entitled to fifteen (15) days from receipt of
notice within which to cure the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each may
receive confidential and proprietary information that is the
property of the other party. All such confidential and
proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary
subject only to disclosure where required by law. Such
designation may be removed by each party making the
designation. Participant acknowledges that it will have no
access to and will not use the HCC System or related property,
other than as specifically provided for in this Agreement, and
that such system and related property is confidential and
proprietary property of HCC. Any use of HCC service marks or
trade names by Participant is subject to prior written
approval of HCC, provided, that Participant may describe the
HCC System contemplated by this Agreement in its franchise
offering circular and other materials as required by state or
federal law. Unless otherwise provided herein, any use of
Participant's service marks or trade names by HCC is subject
to prior written approval of Participant. The provisions of
this Section 7.1 will remain binding and in force and effect
as long as such information remains confidential (other than
by breach of this Agreement), notwithstanding the expiration
or termination of this Agreement at any time. Except as is
necessary in connection with the performance of this Agreement
and HCC's business, information regarding the reservations and
other transactions of Participant processed by HCC shall be
treated as confidential whether or not so marked or otherwise
identified as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders,
from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a
result of or arising out of a material breach of this
Agreement on account of Participant's (or its franchisees)
fault, to the extent not caused by the fault of HCC ("HCC's
Losses"). HCC agrees to indemnify and hold harmless
Participant, and Participant's affiliates, directors,
officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring
as a result of or arising out of a material breach of this
Agreement on account of HCC's fault to the extent not caused
by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action
or the presentation or other assertion of any claim which
could result in any indemnification claim pursuant to this
Section 8.1, such indemnified party will give prompt notice
thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that
it wishes, assume the defense thereof with its own counsel. If
the indemnifying party elects to assume the defense of
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<PAGE> 7
any such action or claim, the indemnifying party shall not be
liable to the indemnified party for any fees of other counsel
or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than
reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The parties agree to cooperate to the fullest
extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party
shall not be liable for any compromise or settlement of any
such action or claim effected without its consent (which shall
not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY
PARTICIPANT OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE
TO ACT WITH RESPECT TO THE DATA OR THE PAYMENT OF COMMISSIONS
UNLESS EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO
HCC'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ALL WARRANTIES,
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR
OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof,
neither party will be liable to the other for any
consequential damages caused or resulting from any breach of
this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such
damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. There shall
be a panel of three arbitrators. Each party will select one
arbitrator within thirty (30) days of notice of the dispute,
and the two (2) arbitrators selected shall select a third
neutral arbitrator within thirty (30) days after the second
arbitrator is chosen. All reasonable and necessary costs and
fees (including attorney's fees) incurred in connection with
the arbitration will be borne by the losing party or assessed
in the award as otherwise deemed appropriate by the
arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be
determined by HCC. If the demand for arbitration is initiated
by HCC, venue of the arbitration proceedings will be
determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations
commissions clearinghouse services and that each party may
contract with other parties providing same or similar
services.
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<PAGE> 8
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length. HCC will not be
deemed by this Agreement to be granting a license to
Participant with respect to the HCC System or any software or
service mark related thereto, or otherwise, this being a
contract for the use and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the
non-assigning party, and such consent shall not be
unreasonably withheld or delayed provided that Participant may
assign this Agreement to a wholly-owned subsidiary or in
connection with the sale of its reservation system or
franchise system and either party may assign this Agreement
without consent in the event of a merger, consolidation, or
sale of substantially all of its assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of
electronically transmitted data) and (a) personally delivered,
(b) deposited in the United States mail, first-class,
registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for
next business day delivery), shipping prepaid, (d) sent by
telecopy or facsimile with confirmation of receipt to the
number indicated, or (e) transmitted directly to the recipient
by electronic data transmission pursuant to arrangements made
between the parties. Such notices and other communications
(except in the case of electronically transmitted data) shall
be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Attention: John F. Davis, III
If by telecopy/facsimile to:
528-5675
or such persons or addresses as any party may request by
notice duly given hereunder. Except as otherwise specified
herein, notices will be deemed given and received when
received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its
conflict of laws principles. Subject to the agreement to
arbitrate and the jurisdiction and venue provisions set forth
in Section 10.1 hereof, any action brought relating to or
arising out of this Agreement must be brought in the state or
federal courts situated in the county and state of the
residence or principal place of business of the party against
whom the action is brought (or any of them, if more than one).
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<PAGE> 9
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and
Participant with respect to the provision of services under
the HCC System and supersedes and replaces any and all other
agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon
by either party with respect to the subject matter of this
Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives,
successors and duly authorized assigns of each party whether
resulting from merger, acquisition, reorganization or
assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept
confidential and shall be disclosed only to those persons and
entities as required by law or as permitted by the other party
hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION ITT SHERATON CORPORATION
By: /s/ NICHOLAS M. JENT By: /s/ DAVID VAN KALSBEEK
------------------------------ --------------------------
Its: V.P. SALES Its: SR. V.P.
----------------------------- -------------------------
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<PAGE> 10
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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<PAGE> 1
EXHIBIT 10.24
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE HOTEL
CLEARING CORPORATION, a Delaware corporation ("HCC"), and LA QUINTA INNS, INC.
("Participant"), to be effective the 29 day of May 1997.
Section 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals
the number of reservations (both voice and
electronic) processed through the HCC System within
such time period that are identified as
"commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC and
for which a travel agent commission is paid pursuant
to this Agreement.
(ii) HCC System. The HCC System is HCC's automated
clearinghouse system to provide for the coordination
of reservation information, transfer of hotel
reservation commissions and ancillary services to
Travel Agents and Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has
executed a HCC Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel
agency who has executed an HCC Subscriber Agreement. A
list of current HCC Travel Agents will be periodically
provided by HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant to
HCC Travel Agents pursuant to this Agreement. HCC
Travel Agent Commissions will be based on commission
rates provided by Participant to HCC.
Section 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for
the use and benefit of Participant, its franchisees and
affiliates, and other Participating Entities. HCC will provide
all reasonable and necessary technical support, hardware and
software, except as otherwise provided herein, and modifications
to the HCC System to provide clearinghouse services to
Participant and its franchisees and affiliates as described
below. Upon compliance with the terms of this Agreement by
Participant, its franchisees and affiliates, and subject to
Section 5 hereof, HCC will provide the following clearinghouse
services to Participant and its franchisees and affiliates:
(i) identify Participant to travel agents as being a HCC System
Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and
other fees, costs and expenses to Participant no later
than the fifteenth (15th) business day after the end of
each month as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions
received from Participant and its affiliates and
franchisees to the appropriate HCC Travel Agents as set
forth in the HCC Travel Agent Commission information
provided by Participant;
(iv) provide no later than the fifteenth (15th) business day
of each month reports to Participant and HCC Travel
Agents reflecting HCC Travel Agents' reservation
transactions with Participant and HCC Travel Agent
Commissions owed based upon the data provided to HCC by
Participant and its affiliates and franchisees who are
participating in the HCC System; and
(v) provide telephone customer support services from 8:00
a.m. to 5:00 p.m., U.S. Central time, Monday through
Friday, exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently and in good
faith do the following:
(i) Cooperate reasonably with HCC personnel with respect to
the implementation of the HCC System between HCC Travel
Agents and Participant and its affiliates and
franchisees;
(ii) Provide HCC with all that is reasonably required by HCC
to process all reservations (including all reservations
made electronically or by voice, through the use of a
central reservation "800" phone number, inclusive of
no-shows, cancellations and non-commissionable
transactions) made by HCC Travel Agents with Participant
and, subject to 2.2(iv), its affiliates and franchisees
no less often than on a semi-monthly basis such data
being complete and accurate to the best of Participant's
knowledge and ability and inclusive of all of the
information to permit HCC to provide the clearinghouse
services described in Section 2.1 hereof and, without
limitation, being such information as set forth on
Exhibit A hereof; and permit and authorize HCC to obtain
and use such data concerning such reservations made with
Participant and, subject to 2.2(iv), its affiliates and
franchisees except such data designated as confidential
pursuant to Section 7 hereof. The foregoing shall be
subject to receipt by Participant from HCC of the
instructions, specifications, directions, information,
assistance, and cooperation reasonably required by
Participant to provide the foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to
this Agreement within two (2) business days of receipt
of the billing statement described in Section 3.5
hereof;
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<PAGE> 3
(iv) Use its reasonable efforts to cause each of its
franchisees and affiliates to fully and timely
participate in the HCC System pursuant to this
Agreement;
(vi) Permit HCC to use its name as an entity participating in
the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or
enhance the capability of the HCC System, and Participant
agrees to cooperate reasonably with HCC to the extent
reasonably necessary to effectuate modifications and
enhancements of the HCC System. If Participant determines that
such modification or enhancement is likely to require
Participant to make significant modifications to its central
reservation system (any such modifications to be at
Participant's sole expense), HCC will provide at least ninety
(90) days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this
Agreement upon sixty (60) days notice to HCC.
Section 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For the first [*] Commissionable Reservations processed
each month, Participant shall pay HCC a transaction fee
("HCC Transaction Fee") each month of U.S. [*] for each
such Commissionable Reservation processed. For any month
wherein the total of Commissionable Reservations is
greater than [*] but less than [*] shall be due from
either party for each such Commissionable Reservation
over [*] but less than [*].
(b) For each Commissionable Reservation in excess of [*]
processed each month, [*] a transaction fee each month
(the [*]) as follows:
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but less
than [*] a Participant Transaction Fee of [*] for each
Commissionable Reservation between [*] and [*];
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but less
than [*] a Participant Transaction Fee of [*] for each
Commissionable Reservation between [*] and [*];
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] and less
than [*], a Participant Transaction Fee of [*] for each
Commissionable Reservation between [*] and [*]; and
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] a
Participant Transaction Fee of [*] for each
Commissionable Reservation in excess of [*].
*Confidential Treatment Requested
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<PAGE> 4
Provided however, notwithstanding the preceding provisions of
this 3.1(b), the total Participant Transaction Fee paid per
month shall not exceed an amount equal to [*] per Commissionable
Reservation in the aggregate.
3.2 Commission Payments. HCC shall pay HCC Travel Agent Commissions
in the travel agent's local currency or the currency requested
by the travel agency. HCC shall be responsible for complying
with laws and regulations relating to the treatment of unclaimed
property (sometimes referred to as "escheatment" laws) resulting
from checks issued to travel agents under this Agreement. The
parties will jointly establish mutually acceptable procedures to
be implemented by HCC in order to comply with such laws and
regulations. The parties will meet to establish such procedures
by no later than thirty (30) days after the effective date, and
will cooperate and work diligently with one another in order to
finalize same as promptly as practical.
3.3 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section
2.1(iv) that will indicate any exceptions to HCC Travel Agent
Commissions, based on discrepancies between information given
HCC by Participant compared to other information available to
HCC. With respect to all exceptions as to which Participant
provides supporting documentation, HCC will forward such
documentation to the appropriate HCC Travel Agent(s), and the
HCC Travel Agents involved may pursue such dispute directly with
Participant('s) franchisees, but HCC will not have any liability
to either Participant or any travel agent (HCC or non-HCC) with
respect to the resolution of any disputed commission. No dispute
concerning any travel agent commissions will in any way affect
or reduce the obligations of Participant to (i) timely pay all
other HCC Travel Agent Commissions reported to HCC for
processing and (ii) timely pay to HCC all Transaction Fees and
other fees, costs and additional expenses owed by Participant
under this Agreement; nor shall any such dispute in any way
affect or reduce the obligations of HCC to timely pay
Participant all Participant Transaction Fees due under this
Agreement.
3.4 Billing Statements. Based upon the information provided HCC by
or with respect to Participant pursuant to Section 2.2, above,
HCC will provide Participant a monthly billing statement
detailing (i) HCC Travel Agent Commissions to be paid by
Participant for the period covered by such billing statement;
(ii) HCC Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such
billing statement; (iii) [*] based on [*] for the period
covered by such billing statements, (iv) any [*] of the [*]
which is due and (v) all other costs and fees owed by
Participant pursuant to this Agreement. All fees and costs shall
be paid in U.S. dollars.
Section 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall
begin on the effective date set forth at the beginning of this
Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire on the last day of
the sixtieth (60th) month after the date of this Agreement.
However, this Agreement will be automatically renewed and
extended for additional twelve (12) month periods unless, at
least sixty (60) days prior to the expiration of the initial term
of this Agreement or any additional twelve (12) month period,
either party provides written notice to the other of its decision
not to renew and extend.
*Confidential Treatment Requested
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<PAGE> 5
Section 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of
such party to cure such default after notice and opportunity to
cure as provided by Section 6.3 below, the nondefaulting party
may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default
by Participant and the failure of Participant to cure such
default after notice and opportunity to cure as provided by
Section 6.3 below, then, if HCC does not terminate this
Agreement under Section 5.1, until such time as such Event of
Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify all HCC
Travel Agents of such default and suspension through central
reservation systems or otherwise.
Section 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material
provision of this Agreement;
(iv) If either HCC or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its
cessation as a going concern, or ceases business
operations for reasons other than a strike and other than
assignment as allowed by this Agreement, then the other
party (the "Insecure Party") may immediately terminate
this Agreement upon written notice to the other party
unless the Defaulting Party immediately gives the
Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings
are commenced with respect to the Defaulting Party, and
if this Agreement has not otherwise terminated, then the
Insecure Party may suspend all further performance of
this Agreement until the Defaulting Party assumes or
rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor provision.
Any such suspension of further performance by the
Insecure Party pending the Defaulting Party's assumption
or rejection will not be a breach of this Agreement.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall,
except as provided in this Agreement, be entitled to whatever
remedies at law or in equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages
or delays, utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section
6.1, and the same
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<PAGE> 6
continues for more than thirty (30) consecutive days, either
party may terminate this Agreement by providing notice as
required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting
party specifying the alleged default. In the case of a monetary
default by either party, the defaulting party will only be
allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in
good funds into the non-defaulting party's bank account. In all
other instances, the defaulting party will be entitled to
fifteen (15) days from receipt of notice within which to cure
the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it
is acknowledged by Participant and HCC that each may receive
confidential and proprietary information that is the property of
the other party. All such confidential and proprietary
information will be marked or otherwise identified as such and
will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be
removed by each party making the designation. Participant
acknowledges that it will have no access to and will not use the
HCC System or related property, other than as specifically
provided for in this Agreement, and that such system and related
property is confidential and proprietary property of HCC. Any
use of HCC service marks or trade names by Participant is
subject to prior written approval of HCC, provided, that
Participant may describe the HCC System contemplated by this
Agreement in its franchise offering circular and other materials
as required by state or federal law. Unless otherwise provided
herein, any use of Participant's service marks or trade names by
HCC is subject to prior written approval of Participant. The
provisions of this Section 7.1 will remain binding and in force
and effect as long as such information remains confidential
(other than by breach of this Agreement), notwithstanding the
expiration or termination of this Agreement at any time. Except
as is necessary in connection with the performance of this
Agreement and HCC's business, information regarding the
reservations and other transactions of Participant processed by
HCC shall be treated as confidential whether or not so marked or
otherwise identified as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's affiliates,
directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) occurring as a result of
or arising out of a material breach of this Agreement on account
of Participant's (or its franchisees) fault, to the extent not
caused by the fault of HCC ("HCC's Losses"). HCC agrees to
indemnify and hold harmless Participant, and Participant's
affiliates, directors, officers, employees and stockholders,
from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorneys fees) ("Participant's
Losses") occurring as a result of or arising out of a material
breach of this Agreement on account of HCC's fault to the extent
not caused by the fault of Participant. Promptly after receipt
by an indemnified party of notice of the commencement of any
action or the presentation or other assertion of any claim which
could result in any indemnification claim pursuant to this
Section 8.1, such indemnified party will give prompt notice
thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that
it wishes, assume the defense
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<PAGE> 7
thereof with its own counsel. If the indemnifying party elects
to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party
for any fees of other counsel or other expenses subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation
and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. The parties agree to cooperate
to the fullest extent possible in connection with any claim for
which indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party
shall not be liable for any compromise or settlement of any such
action or claim effected without its consent (which shall not be
unreasonably withheld).
Section 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE FOR
ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY
PARTICIPANT OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO
ACT WITH RESPECT TO THE DATA OR THE PAYMENT OF COMMISSIONS
UNLESS EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO HCC'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ALL WARRANTIES, EXPRESS
OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR
OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Conseguential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof,
neither party will be liable to the other for any consequential
damages caused or resulting from any breach of this Agreement or
arising out of the performance of this Agreement, and each party
hereby expressly waives such damages..
Section 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, will be
settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. There shall be
a panel of three arbitrators. Each party will select one
arbitrator within thirty (30) days of notice of the dispute, and
the two (2) arbitrators selected shall select a third neutral
arbitrator within thirty (30) days after the second arbitrator
is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the
arbitration will be borne by the losing party or assessed in the
award as otherwise deemed appropriate by the arbitrators. If the
demand for arbitration is initiated by Participant, venue of the
arbitration proceedings will be determined by HCC. If the demand
for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations
commissions clearinghouse services and that
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<PAGE> 8
each party may contract with other parties providing same or
similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length. HCC will not be
deemed by this Agreement to be granting a license to Participant
with respect to the HCC System or any software or service mark
related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the
non-assigning party, and such consent shall not be unreasonably
withheld or delayed provided that Participant may assign this
Agreement to a wholly-owned subsidiary or in connection with the
sale of its reservation system or franchise system and either
party may assign this Agreement without consent in the event of
a merger, consolidation, or sale of substantially all of its
assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified
mail, return receipt requested, with postage prepaid, (c) sent
by overnight courier service (for next business day delivery),
shipping prepaid, (d) sent by telecopy or facsimile with
confirmation of receipt to the number indicated, or (e)
transmitted directly to the recipient by electronic data
transmission pursuant to arrangements made between the parties.
Such notices and other communications (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 8401 Datapoint
Suite 1100 Suite 200
Dallas, TX 75219 San Antonio, TX 78229
Attention: John F. Davis, III Attn: Jackie Burke
If by telecopy/facsimile to: 210/616-7649
528-5675
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein,
notices will be deemed given and received when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict
of laws principles. Subject to the agreement to arbitrate and
the jurisdiction and venue provisions set forth in Section 10.1
hereof, any action brought relating to or arising out of this
Agreement must be brought in the state or federal courts
situated in the county and state of the residence or principal
place of business of the party against whom the action is
brought (or any of them, if more than one).
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<PAGE> 9
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and
Participant with respect to the provision of services under the
HCC System and supersedes and replaces any and all other
agreements and representations, verbal or written, with respect
to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by
either party with respect to the subject matter of this
Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon and
will inure to the benefit of the legal representatives,
successors and duly authorized assigns of each party whether
resulting from merger, acquisition, reorganization or assignment
pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential
and shall be disclosed only to those persons and entities as
required by law or as permitted by the other party hereto. The
parties may, however, disclose the existence of this Agreement
to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION LA QUINTA INNS, INC.
By: /s/ NICK JENT By: /s/ W. C. HAMMETT, JR.
--------------------------- ---------------------------
Its: V.P. SALES Its: SR VP & CFO
-------------------------- --------------------------
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<PAGE> 10
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
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<PAGE> 1
EXHIBIT 10.25
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and HFS
INCORPORATED, formerly known as Hospitality Franchise Systems, Inc.
("Participant"), to be effective the 27th day of December, 1995.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC and for which a travel
agent commission is paid pursuant to this Agreement.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Travel Agents and Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC Participant
Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel
agency who has executed an HCC Subscriber Agreement. A list of current HCC
Travel Agents will be periodically provided by HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant to HCC Travel Agents
pursuant to this Agreement. HCC Travel Agent Commissions will be based on
commission rates provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System
for the use and benefit of Participant, its franchisees and affiliates, and
other Participating Entities. HCC will provide all reasonable and necessary
technical support, hardware and software, except as otherwise provided herein,
and modifications to the HCC System to provide clearinghouse services to
Participant and its franchisees and affiliates as described below. Upon
compliance with the terms of this Agreement by Participant, its franchisees and
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
affiliates, and subject to Section 5 hereof, HCC will provide the following
clearinghouse services to Participant and its franchisees and affiliates:
(i) identify Participant to travel agents as being a HCC
System Participating Entity;
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant no later than the fifteenth (15th) business day after
the end of each month as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions
received from Participant and its affiliates and franchisees to the appropriate
HCC Travel Agents as set forth in the HCC Travel Agent Commission information
provided by Participant;
(iv) provide no later than the fifteenth (15th) business
day of each month reports to Participant and HCC Travel Agents reflecting HCC
Travel Agents' reservation transactions with Participant and HCC Travel Agent
Commissions owed based upon the data provided to HCC by Participant and its
affiliates and franchisees who are participating in the HCC System; and
(v) provide telephone customer support services from 8:00
a.m. to 5:00 p.m., U.S. Central time, Monday through Friday, exclusive of legal
holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC.
2.2 Duties of Participant. Participant shall diligently and in
good faith do the following:
(i) Cooperate fully with HCC personnel with respect to
the implementation of the HCC System between HCC Travel Agents and Participant
and its affiliates and franchisees;
(ii) Provide HCC with all that is required by HCC to
process all reservations (including all reservations made electronically or by
voice, through the use of a central reservation "800" phone number, inclusive
of no-shows, cancellations and non-commissionable transactions) made by HCC
Travel Agents with Participant and its affiliates and franchisees no less often
than on a semi-monthly basis such data being complete and accurate to the best
of Participant's knowledge and ability and inclusive of all of the information
to permit HCC to provide the clearinghouse services described in Section 2.1
hereof and, without limitation, being such information as set forth on Exhibit
A hereof; and permit and authorize HCC to obtain and use such data concerning
such reservations made with Participant and its affiliates and franchisees
except such data designated as confidential pursuant to Section 7 hereof.
Because efficient and reliable operation of the clearinghouse services offered
by the HCC System is dependent on the use of data from
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<PAGE> 3
transactions carried by UltraSwitch, Participant agrees to process all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement;
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to this Agreement;
(iv) Continually use its best efforts to cause each of its
franchisees and affiliates to fully and timely participate in the HCC System
pursuant to this Agreement;
(vi) Permit HCC to use its name as an entity participating
in the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. If Participant
determines that such modification or enhancement is likely to require
Participant to make significant modifications to its central reservation system
(any such modifications to be at Participant's sole expense), HCC will provide
at least ninety (90) days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this Agreement upon
sixty (60) days notice to HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions. Participant
shall pay HCC monthly transaction fees for processing HCC Travel Agent
Commissions ("HCC Travel Agent Transaction Fees") of U.S. [*] per
HCC Travel Agent Commissionable Reservation.
3.2 Commission Payments. HCC shall pay HCC Travel Agent
Commissions in the travel agent's local currency or the currency requested by
the travel agency.
3.3 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section 2.1(iv) that will
indicate any exceptions to HCC Travel Agent Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC. With respect to all exceptions as to which Participant
provides supporting documentation, HCC will forward such documentation to the
appropriate HCC Travel Agent(s), and the HCC Travel Agents involved may pursue
such dispute directly with Participant('s) franchisees, but HCC will not have
any liability to either Participant or any travel agent (HCC or non-HCC) with
respect to the resolution of any disputed commission. No dispute concerning
any travel agent commissions will in any way affect or reduce the obligations
of Participant to (i) timely pay all other HCC Travel Agent Commissions
reported to HCC for processing and (ii) timely
*Confidential Treatment Requested
-3-
<PAGE> 4
pay to HCC all Transaction Fees and other fees, costs and additional expenses
owed by Participant under this Agreement.
3.4 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide monthly billing statements detailing (i) HCC Travel Agent Commissions
to be paid by Participant for the period covered by such billing statement; and
(ii) [*] to be [*] for the period covered by such billing statement. All fees
and costs shall be paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall
begin on the effective date set forth at the beginning of this Agreement and,
unless earlier terminated pursuant to the provisions of this Agreement, shall
expire on the last day of the seventy second (72nd) month after the date of
this Agreement. However, this Agreement will be automatically renewed and
extended for additional twelve (12) month periods unless, at least thirty (30)
days prior to the expiration of the initial term of this Agreement or any
additional twelve (12) month period, either party provides written notice to
the other of its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify all HCC Travel Agents of
such default and suspension through central reservation systems or otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
*Confidential Treatment Requested
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<PAGE> 5
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material provision of this
Agreement;
(iv) If either HCC or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as a going concern,
or ceases business operations for reasons other than a strike and other than
assignment as allowed by this Agreement, then the other party (the "Insecure
Party") may immediately terminate this Agreement upon written notice to the
other party unless the Defaulting Party immediately gives the Insecure Party
adequate assurance of the future performance of this Agreement. If bankruptcy
proceedings are commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure Party may suspend all
further performance of this Agreement until the Defaulting Party assumes or
rejects this Agreement pursuant to Section 365 of the Bankruptcy Code or any
similar or successor provision. Any such suspension of further performance by
the Insecure Party pending the Defaulting Party's assumption or rejection will
not be a breach of this Agreement.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. In the case of a monetary default by
Participant, Participant will only be allowed to cure such default within two
(2) business days after receipt of such notice, by delivering that amount owed
to HCC in good funds into HCC's bank account. In all other instances, the
defaulting party will be entitled to fifteen (15) days from receipt of notice
within which to cure the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each may receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use the HCC System or related
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<PAGE> 6
property, other than as specifically provided for in this Agreement, and that
such system and related property is confidential and proprietary property of
HCC. Any use of HCC service marks or trade names by Participant is subject to
prior written approval of HCC, provided, that Participant may describe the HCC
System contemplated by this Agreement in its franchise offering circular and
other materials as required by state or federal law. Unless otherwise provided
herein, any use of Participant's service marks or trade names by HCC is subject
to prior written approval of Participant. The provisions of this Section 7.1
will remain binding and in force and effect as long as such information remains
confidential (other than by breach of this Agreement), notwithstanding the
expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's affiliates, directors,
officers, employees and stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring as a result of or arising out of a material breach of this Agreement
on account of Participant's (or its affiliates or franchisees) fault, to the
extent not caused by the fault of HCC ("HCC's Losses"). HCC agrees to
indemnify and hold harmless Participant, and Participant's affiliates,
directors, officers, employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
("Participant's Losses") occurring as a result of or arising out of a material
breach of this Agreement on account of HCC's fault to the extent not caused by
the fault of Participant. Promptly after receipt by an indemnified party of
notice of the commencement of any action or the presentation or other assertion
of any claim which could result in any indemnification claim pursuant to this
Section 8.1, such indemnified party will give prompt notice thereof to the
indemnifying party and the indemnifying party will be entitled to participate
therein or, to the extent that it wishes, assume the defense thereof with its
own counsel. If the indemnifying party elects to assume the defense of any
such action or claim, the indemnifying party shall not be liable to the
indemnified party for any fees of other counsel or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof,
other than reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The parties agree to
cooperate to the fullest extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement. Whether or not the
indemnifying party elects to assume the defense of any such action or claim,
the indemnifying party shall not be liable for any compromise or settlement of
any such action or claim effected without its consent (which shall not be
unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
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<PAGE> 7
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY PARTICIPANT OR
THE INFORMATION PROCESSED BY OR THROUGH THE HCC SYSTEM NOR WILL IT HAVE ANY
LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE DATA OR THE PAYMENT
OF COMMISSIONS UNLESS EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO HCC'S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof, neither party will
be liable to the other for any consequential damages caused or resulting from
any breach of this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
within thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant with respect to the HCC System or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
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<PAGE> 8
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the non-assigning party, and
such consent shall not be unreasonably withheld or delayed provided that
Participant may assign this Agreement in connection with the sale of its
reservation system or franchise system and either party may assign this
Agreement without consent in the event of a merger, consolidation, or sale of
substantially all of its assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first-class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy or facsimile with
confirmation of receipt to the number indicated, or (e) transmitted directly to
the recipient by electronic data transmission pursuant to arrangements made
between the parties. Such notices and other communications (except in the case
of electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. HFS Incorporated
Suite 1100 3838 E. Van Buren
Dallas, TX 75219 Phoenix, AZ 85008
Attention: John F. Davis, III Attention: Doug Patterson
If by telecopy/facsimile to: If by telecopy/facsimile to:
(214) 528-5675 (602) 389-3909
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in Section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
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<PAGE> 9
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION HFS INCORPORATED
By: /s/ JOHN F. DAVIS, III By: /s/ MICHAEL KISTNER
---------------------------- --------------------------
John F. Davis, III,
President Its:
-------------------------
May 1, 1997
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<PAGE> 10
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
<PAGE> 1
EXHIBIT 10.26
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by
and between the HOTEL CLEARING CORPORATION, hereinafter called "HCC", and
WESTIN HOTELS & RESORTS, hereinafter called "Participant", to be effective the
12th day of September, 1993 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective ____________________
(hereinafter called the "Participant Agreement").
2. HCC and Participant have mutually agreed to amend the term of
the Participant Agreement and the provisions of the Participant
Agreement relating to the amount and payment of Participant
Commissions (as defined in the Participant Agreement).
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the term of the
Participant Agreement and the provisions relating to the amount
and payment of Participant Commissions.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.4 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"3.4 [*]. In consideration of the benefits that [*] will
obtain from [*] processed by [*] through the HCC
System, [*] agrees to [*] certain [*] as hereinafter
provided. Such [*] will be [*] at such times and in
such total amounts as the [*] may determine to be
appropriate provided that [*] shall be [*] the [*] (as
hereinafter defined). The [*] payable to [*] shall be
determined by dividing the total number of [*] for all
stockholder [*] for the applicable time period (as
determined by [*]) into the total amount of funds
available [*] (as determined by [*] and after making
allowance for [*], as hereinafter defined) and
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] by the number of [*] transactions [*] by [*] for the
applicable period. [*] are those amounts due to [*]
pursuant to agreements which require payments [*] the
[*] to [*] as [*] including, but not limited to,
amounts due to [*] and key [*] of [*]."
2. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this Agreement,
unless earlier terminated pursuant to the provisions of
this Agreement, shall expire December 31, 1998. This
Agreement will be automatically renewed and extended
for additional twelve (12) month periods unless, at
least thirty (30) days prior to the expiration of the
initial term or any additional twelve (12) month
period, either party provides written notice to the
other of its decision not to renew and extend."
3. Exhibit D to the Participant Agreement is deleted.
4. This First Amendment shall be and hereby is incorporated into
the Participant Agreement for all intents and purposes and all
terms, provisions and definitions of the Participant Agreement
shall apply.
5. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified
and affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
-----------------------------
John F. Davis, III
President
Date:
---------------------------
WESTIN HOTELS & RESORTS
By: /s/ MARC PUJALET
-----------------------------
Its:
-----------------------------
Date: 9/3/93
----------------------------
*Confidential Treatment Requested
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<PAGE> 3
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and WESTIN HOTELS
COMPANY, a Delaware corporation ("Participant"), to be effective the 18th day
of December, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Properties.
(iii) [*]. [*] are the [*] paid by [*] for [*] processed
[*].
(iv) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC Participant
Agreement.
(v) Subscriber. A Subscriber is any person or entity who
has executed an HCC Subscriber Agreement and makes reservations with a
Participating Entity. A list of current Subscribers will be provided by HCC
to Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber Commissions are
the commissions paid by Participant to Subscribers for reservations made with
Participant. Subscriber Commissions will be based on commission rates provided
to HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common ownership with
HCC, to provide an interface between Subscribers and hotel reservation systems
with the capability to provide immediate room confirmation numbers for each
hotel property participating in UltraSwitch.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System
for the use and benefit of Participant and other Participating Entities. HCC
will provide all reasonable and necessary technical support, hardware and
software, and modifications to the HCC System to provide clearinghouse services
to Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
*Confidential Treatment Requested
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<PAGE> 4
(i) identify Participant (and designated affiliates and
franchisees of Participant) to Subscribers as being a HCC System Participant
through the use of UltraSwitch or other central reservation system services
(and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber Commissions,
Transaction Fees (as defined below) and other fees, costs and expenses to
Participant on a regular (normally monthly) basis as provided in Section 3
below;
(iii) debit Participant's designated bank account for such
Subscriber Commissions, transaction fees and other fees, costs and expense, no
sooner than forty-eight (48) hours after providing billing statements for such
Subscriber Commissions, Transaction Fees and other fees, costs and expenses as
provided in Section 3 below;
(iv) distribute collected Subscriber Commissions to the
appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(v) provide periodic (normally monthly) reports to
Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
(vi) provide telephone customer support services from
8:00 a.m. to 8:00 p.m., Eastern time, Monday through Friday, exclusive of legal
holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, whether directly to the property or through the use of a central
reservation "800" phone number) no loss often than on a weekly basis. All
information provided by Participant with respect to reservations, Subscribers
and Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement.
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<PAGE> 5
2.3 Schedule of Implementation of HCC System. HCC will proceed
with the implementation of the HCC System, with a proposed HCC System
activation date of April 1, 1992, but not later than September 30, 1992. For
the purposes of this Agreement, the actual activation date (the "Activation
Date") will be the date that HCC notifies Subscriber that the HCC Board of
Directors has determined that the HCC System is operational and capable of
processing sufficient aggregate transaction volume of the Participating
Entities. HCC will provide Participants with at least thirty (30) days' prior
notice of activation of the HCC System. HCC will provide Participant with
appropriate specifications to assist Participant in preparing for utilization
of the HCC System at least one hundred twenty (120) days prior to the
Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit
the development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred, Participant's obligation to pay the Contingency Fee is absolute
and shall continue until Participant is capable of and ready to deliver to the
HCC System reservation commission data from at least seventy-five percent (75%)
of its properties in the United States (calculated based on total number of
rooms rather than number of individual hotels) in a regular and timely manner
as contemplated by this Agreement ("Participant Readiness") and continues and
delivers to HCC the volume of reservation commissions required for Participant
Readiness after the Activation Date. At such time, Participant will begin
paying transaction fees ("Transaction Fees") of [*] per Commissionable
Reservation, and upon payment of such Transaction Fees, will be relieved of its
obligations to pay any further Contingency Fees under this section. For the
remainder, if any, of the six (6) month period referred to above, the
Transaction Fees payable by Participant will be subject to a minimum monthly
Transaction Fee of [*] multiplied by the Monthly Base Transactions indicated on
Exhibit "B". If Participant Readiness (or the Activation Date, if later) occurs
other than at the beginning of a month, Participant will receive a credit
against the fees otherwise payable by Participant under this Agreement, in the
amount of a pro
*Confidential Treatment Requested
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<PAGE> 6
rata portion of the Contingency Fee paid to HCC for that month, based upon the
number of days in the month following Participation Readiness (or the
Activation Date, if later). HCC may, at its sole discretion, change the
Transaction Fees charged to Participant as provided above, upon ninety (90)
days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant hereby authorizes HCC to debit all such fees from
Participant's designated bank account as provided in Exhibit "B". Participant
is responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchises
that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to make available
for debit by HCC all Subscriber Commissions shown on billing statements as
provided in Section 3.5. Participant hereby authorizes HCC to debit such
Subscriber Commissions from Participant's designated bank account as provided
in Exhibit"C". Participant is responsible for collection and payment to HCC of
all such Subscriber Commissions that are attributable to Participant and all of
Participant's affiliates and franchisees that utilize the HCC System under this
Agreement. Payments to Subscribers will be made in appropriate local currency.
3.3 Other Fees, Costs and Expenses. Participant also agrees to
pay HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved by the Board of Directors of HCC.
Participant hereby authorizes HCC to debit such fees from Participant's
designated bank account as provided in Exhibit "B". HCC will give Participant
prior notice of debits made under the terms of this Section 3.3. Participant
is responsible for collection and payment to HCC of all such fees, costs and
other expenses that are attributable to Participant and all of Participant's
affiliates and franchisees that utilize the HCC System under this Agreement.
3.4 [deleted by amendment]
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<PAGE> 7
deferral; provided, however, that HCC may not defer payment of all Participant
Commissions for more than two (2) consecutive calendar quarters. HCC will have
the right to set off against any Participant Commissions the amount of any
fees, costs, expenses and/or other amounts owing from Participant to HCC.
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and (iv) [*] to be paid to [*]
for the most recent quarterly period preceding such billing statement, which
[*] will be [*] included in billing statements only on a quarterly basis.
Items (i) through (iv) may be included on separate billing statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
3.7 Additional Authorizations. Participant agrees to execute and
deliver to Participant's bank(s) debit authorization(s) in the form of Exhibit
"E" attached hereto, and to execute and deliver to such bank(s) or other
appropriate persons any and all documents, give to such bank(s) or other
persons any and all directions, and to take all other actions that are
necessary or appropriate to permit HCC to debit amounts to be paid hereunder by
Participant directly from Participant's designated bank account(s).
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
*Confidential Treatment Requested
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<PAGE> 8
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify and all Subscribers of
such default and suspension, whether through the UltraSwitch system, central
reservation systems, or otherwise. Upon notification by Participant to HCC of
any default in payment by any affiliate or franchisee of Participant of
payments due under this Agreement and until notification by Participant of the
cure of such default, HCC shall have the right to suspend the status of such
affiliate or franchise as a Participating Entity and to notify all subscribers
of such default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said Chapter 11 or 7, or any jurisdiction relating to the
liquidation or reorganization of debtors or the modification of the rights of
creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its property, or its making an
assignment for the benefit of, or entering into a composition with, its
creditors;
(iv) The deferral [*] of payment of all [*] as provided in
Section 3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other
*Confidential Treatment Requested
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<PAGE> 9
events beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section 6.1, and the same
continues for more than thirty (30) consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use UltraSwitch software or related property by reason
of this Agreement, and that use of such UltraSwitch services by Participant
would be permitted only under a separate agreement with THISCO. Participant
acknowledges that it will have no access to and will not use the HCC System or
related property, other than as specifically provided for in this Agreement,
and that such system and related property is confidential and proprietary
property of HCC. HCC acknowledges that the specific information concerning
Participant's reservations, whether processed through the UltraSwitch system or
otherwise provided by Participant to HCC outside of the UltraSwitch system, is
the property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. Except as required in the performance of this Agreement, HCC
shall not use or disseminate any information which, directly or indirectly,
identifies Participant by name, address, code, or other means of identification
or Participant's room configuration, occupancy rate or Participants contracts
regarding rate of commission. The aggregate data from the HCC System will
become the property of HCC. Any use of HCC service Marks or trade names by
Participant is subject to prior written approval of HCC, provided, that
Participant may describe the HCC System contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions of this Section 7.1 will remain binding and in force and
effect as long as such information remains confidential (other than by breach
of this Agreement), notwithstanding the expiration or termination of this
Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material
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<PAGE> 10
breach of this Agreement on account of Participant's fault, to the extent not
caused by the fault of HCC ("HCC's Losses"). Subject to Section 9.2, HCC
agrees to indemnify and hold harmless Participant, and Participant's
affiliates, directors, officers, employees and stockholders, from and against
any losses, claims, liabilities, damages or expenses (including reasonable
attorney's fees) ("Participant's Losses") occurring as a result of or arising
out of a material breach of this Agreement on account of HCC's fault to the
extent not caused by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the
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<PAGE> 11
demand for arbitration is initiated by Participant, venue of the arbitration
proceedings will be determined by HCC. If the demand for arbitration is
initiated by HCC, venue of the arbitration proceedings will be determined by
Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first-class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other commissions (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 2001 - 6th Avenue
Dallas, TX 75219 Seattle, WA 98121
Attention: John F. Davis, III
(if by telecopy to:
(214) 528-5675)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the
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county and state of the residence or principal place of business of the party
against whom the action is brought (or any of them, if more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION WESTIN HOTELS COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ MICHAEL STONE
-------------------------- ----------------------------
John F. Davis, III, Title:
President -------------------------
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<PAGE> 13
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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<PAGE> 14
EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base Transactions,
or Monthly Base Transactions of [*] (Annual Base Transactions divided by 12).
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement are to be debited directly from Participant's bank account,
described as follows:
Bank Name: _________________________________________________
Account Number:_____________________________________________
Other Appropriate Information:______________________________
____________________________________________________________
3. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements. The
Contingency Fee will automatically be debited from the account designated above
on the first business day of each month during which the Contingency Fee is
payable.
*Confidential Treatment Requested
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<PAGE> 15
EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be debited directly from
Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements.
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<PAGE> 16
EXHIBIT "D"
[deleted by amendment]
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<PAGE> 17
EXHIBIT "E"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing
Corporation to debit the undersigned's account identified above, and to
transfer sums from such account by wire transfer, debit memo, draft or check,
all without further instruction or verification of such transfer instructions
from the undersigned. This authorization will remain in full force and effect
until written notification of cancellation is given by the undersigned to the
bank or other financial institution identified above.
__________________________________
By:_______________________________
Title:____________________________
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<PAGE> 18
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
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<PAGE> 1
EXHIBIT 10.27
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by
and between the HOTEL CLEARING CORPORATION, hereinafter called "HCC", and BEST
WESTERN INTERNATIONAL, hereinafter called "Participant", to be effective the
15th day of August, 1993 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective ____________________
(hereinafter called the "Participant Agreement").
2. HCC and Participant have mutually agreed to amend the term of
the Participant Agreement and the provisions of the Participant
Agreement relating to the amount and payment of Participant
Commissions (as defined in the Participant Agreement).
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the term of the
Participant Agreement and the provisions relating to the amount
and payment of Participant Commissions.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.4 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"3.4 [*]. In consideration of the benefits that [*] will
obtain from [*] processed by [*] through the HCC
System, [*] agrees to [*] certain [*] as hereinafter
provided. Such [*] will be [*] at such times and in
such total amounts as the [*] may determine to be
appropriate provided that [*] shall be [*] the [*] (as
hereinafter defined). The [*] payable to [*] shall be
determined by dividing the total number of [*] for all
stockholder [*] for the applicable time period (as
determined by [*]) into the total amount of funds
available [*] (as determined by [*] and after making
allowance for [*], as hereinafter defined) and
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] by the number of [*] transactions [*] by [*]
for the applicable period. [*] are those amounts due
to [*] pursuant to agreements which require payments
[*] the [*] to [*] as [*] including, but not limited
to, amounts due to [*] and key [*] of [*]."
2. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this Agreement,
unless earlier terminated pursuant to the provisions of
this Agreement, shall expire December 31, 1998. This
Agreement will be automatically renewed and extended
for additional twelve (12) month periods unless, at
least thirty (30) days prior to the expiration of the
initial term or any additional twelve (12) month
period, either party provides written notice to the
other of its decision not to renew and extend."
3. Exhibit D to the Participant Agreement is deleted.
4. This First Amendment shall be and hereby is incorporated into
the Participant Agreement for all intents and purposes and all
terms, provisions and definitions of the Participant Agreement
shall apply.
5. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified
and affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
--------------------------------
John F. Davis, III
President
Date:
------------------------------
BEST WESTERN INTERNATIONAL
By: /s/ WILLIAM S. WATSON
--------------------------------
Its: Senior V. P. Marketing
-------------------------------
Date:
------------------------------
*Confidential Treatment Requested
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<PAGE> 3
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and BEST WESTERN
INTERNATIONAL, INC., an Arizona corporation ("Participant"), to be effective
the 18th day of December, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Properties.
(iii) [*]. [*] are the [*] paid by [*] for [*] processed
[*].
(iv) Participating Entity. A Participating Entity
is an operator of a hotel reservation system that has executed a HCC
Participant Agreement.
(v) Subscriber. A Subscriber is any person or
entity who has executed an HCC Subscriber Agreement and makes reservations with
a Participating Entity. A list of current Subscribers will be provided by HCC
to Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber
Commissions are the commissions paid by Participant to Subscribers for
reservations made with Participant. Subscriber Commissions will be based on
commission rates provided to HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common ownership with
HCC, to provide an interface between Subscribers and hotel reservation systems
with the capability to provide immediate room confirmation numbers for each
hotel property participating in UltraSwitch.
*Confidential Treatment Requested
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<PAGE> 4
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC
System for the use and benefit of Participant and other Participating Entities.
HCC will provide all reasonable and necessary technical support, hardware and
software, and modifications to the HCC System to provide clearinghouse services
to Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated affiliates and
franchisees of Participant) to Subscribers as being a HCC System Participant
through the use of UltraSwitch or other central reservation system services
(and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant on a regular (normally monthly) basis as provided in
Section 3 below;
(iii) debit Participant's designated bank account
for such Subscriber Commissions, transaction fees and other fees, costs and
expense, no sooner than forty-eight (48) hours after providing billing
statements for such Subscriber Commissions, Transaction Fees and other fees,
costs and expenses as provided in Section 3 below;
(iv) distribute collected Subscriber Commissions
to the appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(v) provide periodic (normally monthly) reports
to Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
(vi) provide telephone customer support services
from 8:00 a.m. to 8:00 p.m., Eastern time, Monday through Friday, exclusive of
legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, through the use of a central reservation "800" phone number) no loss
often than on
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<PAGE> 5
a weekly basis. All information provided by Participant with respect to
reservations, Subscribers and Subscriber Commissions must be complete and
accurate to the best of Participant's ability, and must be inclusive of all the
information necessary to permit HCC to provide the clearinghouse services
described in Section 2.1. The initial information that Participant must
provide to HCC is indicated on Exhibit "A". Because efficient and reliable
operation of the clearinghouse services offered by the HCC System is dependent
on the use of data from transactions carried by UltraSwitch, Participant agrees
to run all of its electronic reservation transactions through the UltraSwitch
system so long as it is a party to this Agreement.
2.3 Schedule of Implementation of HCC System. HCC will proceed
with the implementation of the HCC System, with a proposed HCC System
activation date of April 1, 1992, but not later than September 30, 1992. For
the purposes of this Agreement, the actual activation date (the "Activation
Date") will be the date that HCC notifies Subscriber that the HCC Board of
Directors has determined that the HCC System is operational and capable of
processing sufficient aggregate transaction volume of the Participating
Entities. HCC will provide Participants with at least thirty (30) days' prior
notice of activation of the HCC System. HCC will provide Participant with
appropriate specifications to assist Participant in preparing for utilization
of the HCC System at least one hundred twenty (120) days prior to the
Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit
the development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred, Participant's obligation to pay the Contingency Fee is absolute
and shall continue until Participant is capable of and ready to deliver to the
HCC System reservation commission data from at least fifty percent (50%) of its
properties
*Confidential Treatment Requested
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<PAGE> 6
in the United States (calculated based on total number of rooms rather than
number of individual hotels) in a regular and timely manner as contemplated by
this Agreement ("Participant Readiness") and continues and delivers to HCC the
volume of reservation commissions required for Participant Readiness after the
Activation Date. At such time, Participant will begin paying transaction fees
("Transaction Fees") of [*] per Commissionable Reservation, and upon payment of
such Transaction Fees, will be relieved of its obligations to pay any further
Contingency Fees under this section. For the remainder, if any, of the six (6)
month period referred to above, the Transaction Fees payable by Participant
will be subject to a minimum monthly Transaction Fee of [*] multiplied by the
Monthly Base Transactions indicated on Exhibit "B". If Participant Readiness
(or the Activation Date, if later) occurs other than at the beginning of a
month, Participant will receive a credit against the fees otherwise payable by
Participant under this Agreement, in the amount of a pro rata portion of the
Contingency Fee paid to HCC for that month, based upon the number of days in
the month following Participation Readiness (or the Activation Date, if later).
HCC may, at its sole discretion, change the Transaction Fees charged to
Participant as provided above, upon ninety (90) days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant hereby authorizes HCC to debit all such fees from
Participant's designated bank account as provided in Exhibit "B". Participant
is responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchises
that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to make available
for debit by HCC all Subscriber Commissions shown on billing statements as
provided in Section 3.5. Participant hereby authorizes HCC to debit such
Subscriber Commissions from Participant's designated bank account as provided
in Exhibit "C". Participant is responsible for collection and payment to HCC
of all such Subscriber Commissions that are attributable to Participant and all
of Participant's affiliates and franchisees that utilize the HCC System under
this Agreement. Payments to Subscribers will be made in appropriate local
currency.
*Confidential Treatment Requested
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<PAGE> 7
3.3 Other Fees, Costs and Expenses. Participant also agrees to
pay HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved by the Board of Directors of HCC.
Participant hereby authorizes HCC to debit such fees from Participant's
designated bank account as provided in Exhibit "B". HCC will give Participant
prior notice of debits made under the terms of this Section 3.3. Participant
is responsible for collection and payment to HCC of all such fees, costs and
other expenses that are attributable to Participant and all of Participant's
affiliates and franchisees that utilize the HCC System under this Agreement.
3.4 [deleted by amendment]
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and (iv) [*] to be paid to [*]
for the most recent quarterly period preceding such billing statement, which
[*] will be [*] and included in billing statements only on a quarterly basis.
Items (i) through (iv) may be included on separate billing statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber
*Confidential Treatment Requested
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<PAGE> 8
Commissions and (ii) timely pay to HCC all Transaction Fees and other fees,
costs and additional expenses owed by Participant under this Agreement.
3.7 Additional Authorizations. Participant agrees to execute and
deliver to Participant's bank(s) debit authorization(s) in the form of Exhibit
"E" attached hereto, and to execute and deliver to such bank(s) or other
appropriate persons any and all documents, give to such bank(s) or other
persons any and all directions, and to take all other actions that are
necessary or appropriate to permit HCC to debit amounts to be paid hereunder by
Participant directly from Participant's designated bank account(s).
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify and all Subscribers of
such default and suspension, whether through the UltraSwitch system, central
reservation systems, or otherwise. Upon notification by Participant to HCC of
any default in payment by any affiliate or franchisee of Participant of
payments due under this Agreement and until notification by Participant of the
cure of such default, HCC shall have the right to suspend the status of such
affiliate or franchise as a Participating Entity and to notify all subscribers
of such default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 9
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said Chapter 11 or 7, or any jurisdiction relating to the
liquidation or reorganization of debtors or the modification of the rights of
creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its property, or its making an
assignment for the benefit of, or entering into a composition with, its
creditors;
(iv) The deferral [*] of payment of all [*], as provided in Section
3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
*Confidential Treatment Requested
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<PAGE> 10
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use UltraSwitch software or related property by reason
of this Agreement, and that use of such UltraSwitch services by Participant
would be permitted only under a separate agreement with THISCO. Participant
acknowledges that it will have no access to and will not use the HCC System or
related property, other than as specifically provided for in this Agreement,
and that such system and related property is confidential and proprietary
property of HCC. HCC acknowledges that the specific information concerning
Participant's reservations, whether processed through the UltraSwitch system or
otherwise provided by Participant to HCC outside of the UltraSwitch system, is
the property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. The aggregate data from the HCC System will become the property
of HCC. Any use of HCC service Marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may describe the
HCC System contemplated by this Agreement in its franchise offering circular
and other materials as required by state or federal law. The provisions of
this Section 7.1 will remain binding and in force and effect as long as such
information remains confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring as a result of
or arising out of a material breach of this Agreement on account of HCC's fault
to the extent not caused by the fault of Participant. Promptly after receipt
by an indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the
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indemnifying party shall not be liable to the indemnified party for any fees of
other counsel or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
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10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other commissions (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 20400 N. 29th Ave
Dallas, TX 75219 Phoenix, AZ 85027
Attention: John F. Davis, III Attention: Keith Barlow
(if by telecopy to: (if by telecopy to: 602-750-6299)
(214) 528-5675)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal
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place of business of the party against whom the action is brought (or any of
them, if more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION BEST WESTERN INTERNATIONAL, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ KEITH BARLOW
----------------------- --------------------------
John F. Davis, III, Title: V. P. Reservations &
President Systems Development
-----------------------
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<PAGE> 14
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base Transactions,
or Monthly Base Transactions of [*] (Annual Base Transactions divided by 12).
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement are to be debited directly from Participant's bank account,
described as follows:
Bank Name:
-------------------------------------------------
Account Number:
---------------------------------------------
Other Appropriate Information:
------------------------------
------------------------------------------------------------
------------------------------------------------------------
3. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements. The
Contingency Fee will automatically be debited from the account designated above
on the first business day of each month during which the Contingency Fee is
payable.
*Confidential Treatment Requested
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EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be debited directly from
Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements.
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EXHIBIT "D"
[deleted by amendment]
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<PAGE> 18
EXHIBIT "E"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing
Corporation to debit the undersigned's account identified above, and to
transfer sums from such account by wire transfer, debit memo, draft or check,
all without further instruction or verification of such transfer instructions
from the undersigned. This authorization will remain in full force and effect
until written notification of cancellation is given by the undersigned to the
bank or other financial institution identified above.
----------------------------------
By:
-------------------------------
Title:
----------------------------
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<PAGE> 19
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
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<PAGE> 1
EXHIBIT 10.28
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by
and between the HOTEL CLEARING CORPORATION, hereinafter called "HCC", and UTELL
INTERNATIONAL, hereinafter called "Participant", to be effective the 28th day
of June, 1994 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective ________________
(hereinafter called the "Participant Agreement").
2. HCC and Participant have mutually agreed to amend the term of
the Participant Agreement and the provisions of the
Participant Agreement relating to the amount and payment of
Participant Commissions (as defined in the Participant
Agreement).
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the term of the
Participant Agreement and the provisions relating to the
amount and payment of Participant Commissions.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.4 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"3.4 [*]. In consideration of the benefits that [*] will
obtain from [*] processed by [*] through the HCC
System, [*] agrees to [*] certain [*] as hereinafter
provided. Such [*] will be [*] at such times and in
such total amounts as [*] may determine to be
appropriate provided that [*] shall be [*] the [*] (as
hereinafter defined). The [*] payable to [*] shall be
determined by dividing the total number of [*] for all
stockholder [*] for the applicable time period (as
determined by [*]) into the total amount of funds
available [*] (as determined by [*] and after making
allowance for [*], as hereinafter defined) and
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] by the number of [*] transactions [*] by [*] for
the applicable period. [*] are those amounts due to
[*] pursuant to agreements which require payments [*]
the [*] to [*] as [*] including, but not limited to,
amounts due to [*] and key [*] of [*]."
2. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this
Agreement, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire
December 31, 1998. This Agreement will be
automatically renewed and extended for additional
twelve (12) month periods unless, at least thirty
(30) days prior to the expiration of the initial term
or any additional twelve (12) month period, either
party provides written notice to the other of its
decision not to renew and extend."
3. Exhibit D to the Participant Agreement is deleted.
4. This First Amendment shall be and hereby is incorporated into
the Participant Agreement for all intents and purposes and all
terms, provisions and definitions of the Participant Agreement
shall apply.
5. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified
and affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
-------------------------------
John F. Davis, III
President
Date:
-----------------------------
UTELL INTERNATIONAL
By: /s/ MIKE HOPE
-------------------------------
Its: President
------------------------------
Date:
-----------------------------
*Confidential Treatment Requested
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HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and UTELL
INTERNATIONAL, LTD., ("Participant"), to be effective the 20th day of December,
1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Properties.
(iii) [*]. [*] are the [*] paid by [*] for [*]
processed [*].
(iv) Participating Entity. A Participating Entity
is an operator of a hotel reservation system that has executed a HCC
Participant Agreement.
(v) Subscriber. A Subscriber is any person or
entity who has executed an HCC Subscriber Agreement and makes reservations with
a Participating Entity. A list of current Subscribers will be provided by HCC
to Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber
Commissions are the commissions paid by Participant to Subscribers for
reservations made with Participant. Subscriber Commissions will be based on
commission rates provided to HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The
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Hotel Industry Switch Company ("THISCO"), which has certain common ownership
with HCC, to provide an interface between Subscribers and hotel reservation
systems with the capability to provide immediate room confirmation numbers for
each hotel property participating in UltraSwitch.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC
System for the use and benefit of Participant and other Participating Entities.
HCC will provide all reasonable and necessary technical support, hardware and
software, and modifications to the HCC System to provide clearinghouse services
to Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated
affiliates and franchisees of Participant) to Subscribers as being a HCC System
Participant through the use of UltraSwitch or other central reservation system
services (and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant on a regular (normally monthly) basis as provided in
Section 3 below;
(iii) distribute collected Subscriber Commissions
to the appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(iv) provide periodic (normally monthly) reports
to Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
(v) provide telephone customer support services
from 8:00 a.m. to 8:00 p.m., Eastern time, Monday through Friday, exclusive of
legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached,
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<PAGE> 5
although the timing and exact details of such procedures as implemented by HCC
in operation of the HCC system may be different due to computer-related and
other operational constraints. Such procedures are subject to change from time
to time as circumstances require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, whether directly to the property or through the use of a central
reservation "800" phone number) no loss often than on a weekly basis. All
information provided by Participant with respect to reservations, Subscribers
and Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees, with respect to all
interfaces existing between UTELL and the UltraSwitch, to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement.
2.3 Schedule of Implementation of HCC System. HCC will proceed
with the implementation of the HCC System, with a proposed HCC System
activation date of April 1, 1992, but not later than September 30, 1992. For
the purposes of this Agreement, the actual activation date (the "Activation
Date") will be the date that HCC notifies Subscriber that the HCC Board of
Directors has determined that the HCC System is operational and capable of
processing sufficient aggregate transaction volume of the Participating
Entities. HCC will provide Participants with at least thirty (30) days' prior
notice of activation of the HCC System. HCC will provide Participant with
appropriate specifications to assist Participant in preparing for utilization
of the HCC System at least one hundred twenty (120) days prior to the
Activation Date.
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2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit
the development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred and limited in duration by the immediately preceding sentence,
Participant's obligation to pay the Contingency Fee is absolute and shall
continue until Participant is capable of and ready to deliver to the HCC System
reservation commission data from at least seventy-five percent (75%) of its
properties in the United States (calculated based on total number of rooms
rather than number of individual hotels) in a regular and timely manner as
contemplated by this Agreement ("Participant Readiness") and continues and
delivers to HCC the volume of reservation commissions required for Participant
Readiness after the Activation Date. At such time, Participant will begin
paying transaction fees ("Transaction Fees") of [*] per Commissionable
Reservation, and upon payment of such Transaction Fees, will be relieved of its
obligations to pay any further Contingency Fees under this section. For the
remainder, if any, of the six (6) month period referred to above, the
Transaction Fees payable by
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Participant will be subject to a minimum monthly Transaction Fee of [*]
multiplied by the Monthly Base Transactions indicated on Exhibit "B".
If Participant Readiness (or the Activation Date, if later) occurs other than
at the beginning of a month, Participant will receive a credit against the fees
otherwise payable by Participant under this Agreement, in the amount of a pro
rata portion of the Contingency Fee paid to HCC for that month, based upon the
number of days in the month following Participation Readiness (or the
Activation Date, if later). HCC may, at its sole discretion, change the
Transaction Fees charged to Participant as provided above, upon ninety (90)
days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant is responsible for collection and payment to HCC of all
such fees that are attributable to Participant and all of Participant's
affiliates and franchises that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to make payment to
HCC by wire transfer within seventy two (72) hours of receipt of a billing
statement all Subscriber Commissions, Transfer Fees and other fees, costs, and
expenses shown on billing statements as provided in Section 3.5. Participant
is responsible for collection and payment to HCC of all such fees and
Subscriber Commissions that are attributable to Participant and all of
Participant's affiliates and franchisees that utilize the HCC System under this
Agreement. Payments to Subscribers will be made in appropriate local currency.
*Confidential Treatment Requested
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3.3 Other Fees, Costs and Expenses. Participant also agrees to
pay HCC at its standard consulting rate of $75 per hour plus all expenses
incurred for set up, handling, conversion and other services required for
processing of information transmitted to HCC to satisfy the requirements of
Section 2.2, above, unless a different fee arrangement with respect to such
services is indicated on Exhibit "B". All of such fees must be approved by the
Board of Directors of HCC. Participant is responsible for collection and
payment to HCC of all such fees, costs and other expenses that are attributable
to Participant and all of Participant's affiliates and franchisees that utilize
the HCC System under this Agreement.
3.4 [deleted by amendment]
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2, above, HCC will
provide periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and (iv) [*] to be paid to [*]
for the most recent quarterly period preceding such billing statement, which
[*] will be [*] included in billing statements only on a quarterly basis.
Items (i) through (iv) may be included on separate billing statements.
*Confidential Treatment Requested
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3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify and all Subscribers of
such default and suspension, whether through the UltraSwitch system, central
reservation systems, or otherwise. Upon notification by
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Participant to HCC of any default in payment by any affiliate or franchisee of
Participant of payments due under this Agreement and until notification by
Participant of the cure of such default, HCC shall have the right to suspend
the status of such affiliate or franchise as a Participating Entity and to
notify all subscribers of such default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The failure to maintain the system in operable condition;
(iv) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said Chapter 11 or 7, or any jurisdiction relating to the
liquidation or reorganization of debtors or the modification of the rights of
creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its property, or its making an
assignment for the benefit of, or entering into a composition with, its
creditors;
(v) The deferral [*] of payment of all [*] as provided in Section
3.4, for more than two (2) consecutive calendar quarters;
(vi) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date;
*Confidential Treatment Requested
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(vii) The failure by HCC to activate the system by September 30,
1992.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use UltraSwitch software or related property by reason
of this Agreement, and that use of such UltraSwitch services by Participant
would be permitted only under a separate agreement with THISCO. Participant
acknowledges that it will have no access to and will not use the
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HCC System or related property, other than as specifically provided for in this
Agreement, and that such system and related property is confidential and
proprietary property of HCC. HCC acknowledges that the specific information
concerning Participant's reservations, whether processed through the
UltraSwitch system or otherwise provided by Participant to HCC outside of the
UltraSwitch system, is the property of Participant, although Participant
acknowledges HCC may use such information (i) as provided in the procedures
described in Exhibit "F" and (ii) as otherwise approved in writing by the Board
of Directors of HCC, as long as HCC removes any information that indicates the
customer is a customer of Participant. The aggregate data from the HCC System
will become the property of HCC. Any use of HCC service Marks or trade names
by Participant is subject to prior written approval of HCC, provided, that
Participant may describe the HCC System contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions of this Section 7.1 will remain binding and in force and
effect as long as such information remains confidential (other than by breach
of this Agreement), notwithstanding the expiration or termination of this
Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring as a result of
or arising out of a material breach of this Agreement on account of HCC's fault
to the extent not caused by the fault of Participant. Promptly after receipt
by an indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the
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indemnifying party will be entitled to participate therein or, to the extent
that it wishes, assume the defense thereof with its own counsel. If the
indemnifying party elects to assume the defense of any such action or claim,
the indemnifying party shall not be liable to the indemnified party for any
fees of other counsel or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and
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judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. There shall be a panel of three arbitrators.
Each party will select one arbitrator with thirty (30) days of notice of the
dispute, and the two (2) arbitrators selected shall select a third neutral
arbitrator within thirty (30) days after the second arbitrator is chosen. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration will be borne by the losing party or assessed
in the award as otherwise deemed appropriate by the arbitrators. If the demand
for arbitration is initiated by Participant, venue of the arbitration
proceedings will be determined by HCC. If the demand for arbitration is
initiated by HCC, venue of the arbitration proceedings will be determined by
Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other
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commissions (except in the case of electronically transmitted data) shall be
addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 500 Plaza Drive, 2nd Floor
Dallas, TX 75219 Secaucus, NJ 07096
Attention: John F. Davis, III
(if by telecopy to:
(214) 528-5675)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether
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<PAGE> 16
resulting from merger, acquisition, reorganization or assignment pursuant to
the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION UTELL INTERNATIONAL, LTD.
By: /s/ JOHN F. DAVIS, III By: /s/ MIKE HOPE
----------------------- --------------------------
John F. Davis, III, Title: President
President -----------------------
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<PAGE> 17
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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<PAGE> 18
EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base
Transactions, or Monthly Base Transactions of [*] Base Transactions
divided by 12).
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement will be paid by Participant by wire transfer from
Participant's bank listed below:
Bank Name:
-------------------------------------------------
Officer Contact:
--------------------------------------------
Other Appropriate Information:
------------------------------
------------------------------------------------------------
------------------------------------------------------------
3. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement will be paid by
Participant to HCC by wire transfer not later than seventy two (72) hours
following receipt of such billing statements. The Contingency Fee will be paid
by Participant to HCC by wire transfer not later than the first business day of
each month during which the Contingency Fee is payable.
*Confidential Treatment Requested
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EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be paid by Participant to HCC by
wire transfer from Participant's bank listed below:
[Bank Name]
[Bank Officer]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement will
be paid by Participant to HCC by wire transfer not less than seventy-two (72)
hours following receipt of such billing statements.
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<PAGE> 20
EXHIBIT "D"
[deleted by amendment]
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<PAGE> 21
EXHIBIT "E"
DELETED INTENTIONALLY
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<PAGE> 22
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
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<PAGE> 1
EXHIBIT 10.29
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and ANASAZI SERVICE
CORPORATION, ("Participant"), to be effective the 31st day of December, 1992.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Subscribers and Participating Entities.
(iii) [*] are the [*] paid by [*] for [*] from Participant
processed [*].
(iv) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC Participant
Agreement.
(v) Subscriber. A Subscriber is any person or entity
who has executed an HCC Subscriber Agreement and makes reservations with a
Participating Entity. A list of current Subscribers will be periodically
provided by HCC to Participant.
(vi) Subscriber Commissions. Subscriber Commissions are
the commissions paid by or through Participant to Subscribers for reservations
made with Participant or hotel properties utilizing Participant's reservation
system. Subscriber Commissions will be based on commission rates provided to
HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common ownership with
HCC, to provide an interface between Subscribers and hotel reservation systems
with the capability to provide immediate room confirmation numbers for each
hotel property participating in UltraSwitch.
* Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the
HCC System for the use and benefit of Participant and other Participating
Entities. HCC will provide all reasonable and necessary technical support,
hardware and software, and modifications to the HCC System to provide
clearinghouse services to Participant as described below. Upon compliance with
the terms of this Agreement by Participant, HCC will provide the following
clearinghouse services to Participant:
(i) identify Participant and/or hotel properties
utilizing Participant's reservation system (at Participant's option) to
Subscribers as being a HCC System Participant through the use of UltraSwitch or
other central reservation system services (and, at the discretion of HCC, by
distribution of other promotional materials), subject to the provisions of
Section 5.2;
(ii) provide billing statements for Subscriber
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant on a regular (normally monthly) basis as provided in
Section 3 below;
(iii) distribute collected Subscriber Commissions to the
appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(iv) provide periodic (normally monthly) reports to
Participant and Subscribers reflecting Commissionable Reservations and
exceptions to Subscriber Commissions based upon the data provided to HCC by
Participant;
(v) provide telephone customer support services from
8:00 a.m. to 5:00 p.m., Central time, Monday through Friday, exclusive of legal
holidays;
(vi) except with respect to the Transaction Fee and
Participant Commission as as set forth herein, provide the services set forth
herein to Participant on the same basis as the services are provided to HCC
Shareholder Participating Entities with similar volumes; and
(vii) list Participant and/or its participating hotel
properties utilizing the HCC System through Participant (at Participant's
option) in its marketing materials as "members" or "participating" hotels.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "E" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with
HCC personnel with respect to the implementation of the HCC System between the
Subscribers and
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<PAGE> 3
Participant. Participant specifically authorizes HCC to obtain information
concerning reservations made through Participant's reservation system from the
UltraSwitch system and any other central reservation system service and to use
such information (i) as provided in the procedures described in Exhibit "E" and
(ii) as otherwise approved in writing by the Board of Directors of HCC for the
purpose of performing the services provided herein or as otherwise approved in
writing by Participant. Participant agrees to use its best efforts to provide
HCC all appropriate reservation information it receives from participating
hotel properties (including all reservations made electronically or by voice,
whether directly to the property or through the use of a central reservation
"800" phone number) on a timely basis. All information provided by Participant
with respect to reservations, Subscribers and Subscriber Commissions must be
complete and accurate to the best of Participant's ability, and must be
inclusive of all the information necessary to permit HCC to provide the
clearinghouse services described in Section 2.1. The initial information that
Participant must provide to HCC is indicated on Exhibit "A". Participant is
under no obligation to obtain or provide the transaction data from any
particular source.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC and will be applicable to all Participants who elect to accept
such enhancements or modifications. If HCC determines that such modification
or enhancement is likely to require Participant to make significant
modifications to its central reservation system (any such modifications to be
at Participant's sole expense), HCC will provide at least ninety (90) days'
prior notice to Participant of such modification or enhancement. In the event
Participant elects to not accept and pay for such modifications or
enhancements, Participant may terminate this Agreement or elect to not receive
the modification or enhancement (if permitted by HCC) by giving notice of such
termination or election within 60 days of receipt of notice. If Participant
modifies its central reservation system after making a connection with HCC and
such modification requires HCC to modify the HCC System, or to provide
additional services to utilize information supplied by Participant as required
by Section 2.2, Participant will pay HCC such additional amount agreed to by
the parties based on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. Participant shall pay monthly a Transaction Fee of U.S.
[*] for each Commissionable Reservation processed prior to the date that
certain Convertible Note from HCC to Participant dated December 31, 1992 is
paid. Thereafter, HCC may, at its sole discretion, change the Transaction Fees
charged to Participant as provided above, upon ninety (90) days notice to
Participant. However under no circumstances shall the Transaction Fee exceed
U.S. [*] over the highest Transaction Fee paid by an HCC Shareholder with
comparable volume. Solely for verification purposes and not to be used or
dissiminated otherwise, HCC will provide, upon request, a list of the
Transaction Fee per Commissionable Reservation paid by each HCC Shareholder.
No participant, other than an HCC Shareholder, with comparable volumes
* Confidential Treatment Requested
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<PAGE> 4
shall pay a lower Transaction Fee or, in such event, Participant's Transaction
Fee shall be reducted to an amount equal to such lower fee.
Participant hereby agrees to wire transfer all such fees into HCC's
bank account as provided in Exhibit "B" or permit a debit from Participant's
account as provided in Exhibits "B" and "F" . Participant shall elect prior to
the first month's commissions being processed (and such election shall have
effect for the term of this Agreement) to have funds wired or debited as
provided herein. Participant shall use its best efforts to collect and pay to
HCC all such fees that are attributable to Participant and all of Participant's
affiliates, franchises, or hotel properties utilizing Participant's reservation
system who utilize the HCC System through Participant.
3.2 Subscriber Commissions. Participant agrees to wire transfer
to HCC or permit a debit by HCC as provided herein of all Subscriber
Commissions shown on billing statements as provided in Section 3.5. and as
provided in Exhibit "C" attached. Participant is responsible for collection
and payment to HCC of all such Subscriber Commissions received by Participant
that are attributable to Participant and all of Participant's affiliates,
franchisees and hotel properties utilizing Participant's reservation system
that utilize the HCC System under this Agreement. Payments to Subscribers will
be made in appropriate local currency.
3.3 [*]. In consideration of [*] from [*] processed [*] agrees to
[*] during the term of this Agreement or any extension hereof [*] for each [*]
(as hereinafter defined). A [*] is AN INDIVIDUAL [*] OR AFFILIATED WITH [*] OR
[*] utilizing [*] who has [*] of its properties [*] of its commissions to [*]
through the [*] at any time prior to the date that certain [*] to [*] dated
[*]. The [*] paid to [*] for those transactions will be [*] on the same
basis, [*], and at the [*] as [*] paid to [*] as, if and when such [*] are
paid. Subject to the immediately preceding sentence, such [*] will be paid by
[*] on a quarterly basis in arrears, [*] of all or part of any calendar
quarter's [*] to the [*] determines that projected [*] requires such deferral.
HCC will have the [*] against any [*] the amount of any fees, costs, expenses
and/or other amounts owing [*]. In the event of a breach of this Agreement [*]
to timely cure and the resultant termination of [*] by [*] to the extent [*]
has processed transactions for which [*] may be [*] Section [*] shall survive
such termination.
3.4 Billing Statements. Based upon the information provided HCC
by Participant pursuant to Section 2.2, above, HCC will provide periodic
(normally monthly) billing
*Confidential Treatment Requested
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<PAGE> 5
statements detailing (i) Subscriber Commissions to be paid by Participant or
hotel properties utilizing Participant's reservation system who utilize the HCC
System through Participant for the period covered by such billing statement;
(ii) Transaction Fees to be paid by or through Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and (iv) [*] to be paid to [*]
for the most recent quarterly period preceding such billing statement, which
[*] will be [*] included in billing statements only on a quarterly basis.
Items (i) through (iv) may be included on separate billing statements.
3.5 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch or any other central reservation system
service. With respect to all exceptions as to which Participant provides
supporting documentation, HCC will forward such documentation to the
appropriate Subscriber(s), and the Subscribers involved may pursue such dispute
directly with Participant or Participant's participating hotels, but HCC will
not have any liability to either Participant, its participating hotels or such
Subscriber with respect to the resolution of any disputed commission. No
dispute concerning any Subscriber Commissions it receives or has control of
will in any way affect or reduce the obligations of Participant to (i) timely
pay all other Subscriber Commissions and (ii) timely pay to HCC all Transaction
Fees and other fees, costs and additional expenses it receives or has control
of owed by Participant or its participating hotels under this Agreement.
3.6 Additional Authorizations. Participant agrees to execute and
deliver to HCC or such bank(s) or other appropriate persons any and all
documents, give to such bank(s) or other persons any and all directions, and to
take all other actions that are necessary or appropriate to wire transfer or
debit the funds to be paid hereunder by Participant.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
4.2 Option to Terminate. Participant may terminate this Agreement
effective on the first anniversary date hereof by giving notice of such
termination to HCC at least thirty (30) days prior to the first anniversary
date.
*Confidential Treatment Requested
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<PAGE> 6
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of the defaulting hotel property or Participant, if the default is caused by
Participant and not one or more of Participant's hotel properties, as a
Participating Entity and to notify and all Subscribers of such default and
suspension, whether through the UltraSwitch system, other central reservation
systems, or otherwise. Upon notification by Participant to HCC of any default
in payment by any affiliate, franchisee or participating hotel of Participant
of payments due under this Agreement and until notification by Participant of
the cure of such default, HCC shall have the right to suspend the status of
such affiliate, or franchise, or hotel property as a Participating Entity and
to notify all subscribers of such default and suspension by each defaulting
affiliate, franchise, or hotel property.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7 that has not been dismissed within 60 days of its existence,
either party seeking relief as a debtor under any applicable law, other than
said Chapter 11 or 7, or any jurisdiction relating to the liquidation or
reorganization of debtors or the modification of the rights of creditors, the
entry of a court order adjudging the party bankrupt or insolvent, ordering its
liquidation or reorganization or assuming custody or appointing a receiver or
other custodian of its property, or its making an assignment for the benefit
of, or entering into a composition with, its creditors;
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
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<PAGE> 7
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each will receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use UltraSwitch software or related property by reason
of this Agreement, and that use of such UltraSwitch services by Participant
would be permitted only under a separate agreement with THISCO. Participant
acknowledges that it will have no access to and will not use the HCC System or
related property, other than as specifically provided for in this Agreement,
and that such system and related property is confidential and proprietary of
HCC. HCC acknowledges that the specific information concerning Participant's
reservations, whether processed through the UltraSwitch system or otherwise
provided by Participant to HCC outside of the UltraSwitch system, is the
property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "E" and (ii)
as otherwise approved in writing by the Board of Directors of HCC for purposes
of providing the services set forth in this Agreement or with the prior written
consent of Participant, as long as HCC removes any information that indicates
the customer is a customer of Participant. The aggregate data from the HCC
System will become the property of HCC. Any use of HCC service Marks or trade
names by Participant is subject to prior written approval of HCC, provided,
that Participant may describe the HCC System contemplated by this Agreement in
its franchise offering circular and other materials as required by state or
federal law. The provisions of this Section 7.1 will remain binding and in
force and effect as long as such information remains confidential (other than
by breach of this Agreement), notwithstanding the expiration or termination of
this Agreement at any time.
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<PAGE> 8
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring as a result of
or arising out of a material breach of this Agreement on account of HCC's fault
to the extent not caused by the fault of Participant. Promptly after receipt
by an indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising
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out of the performance of this Agreement, and each party hereby expressly
waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed. For purposes of
this Agreement, it shall not constitute an assignment for Participant to enter
into contracts with hotel properties to participate in the HCC System through
Participant's reservation system pursuant to this Agreement nor shall it
constitute an assignment in the event Participant is wholly acquired by a third
party.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other commissions (except in the case of
electronically transmitted data) shall be addressed as follows:
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IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 7500 N. Dreamy Draw Drive
Suite 1100 Suite 120
Dallas, TX 75219 Phoenix, Arizona 85020
Attention: John F. Davis, III Attention: John H. Holdsworth
(if by telecopy to: (if by telecopy to:
(214) 528-5675) (602) 861-7687)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.10 Other Participant Agreements. HCC hereby agrees that in the
event HCC enters into a HCC Participant Agreement with comparable volumes from
and after the date hereof and prior to the expiration or other termination of
this Agreement with any other party who is not a shareholder of HCC or who is
not under contract to acquire one or more
-10-
<PAGE> 11
shares of HCC stock which contains more favorable terms and conditions than
those provided herein, HCC shall notify Participant of such occurrence and
shall permit the amendment of this Agreement to incorporate said terms and
conditions.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION ANASAZI SERVICE CORPORATION
By: /s/ JOHN F. DAVIS, III By: /s/ JOHN H. HOLDSWORTH
--------------------------- --------------------------
John F. Davis, III,
President Title: President
-----------------------
-11-
<PAGE> 12
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
-12-
<PAGE> 13
EXHIBIT "B"
Participant Fees
1. Transaction Fees and other fees, costs and expenses payable
under the Agreement are to be wire transferred by Participant directly into
HCC's bank account, described as follows:
Bank Name:
-----------------------------------------------
Account Number:
------------------------------------------
Other Appropriate Information:
---------------------------
----------------------------------------------------------
----------------------------------------------------------
or debited as otherwise provided in the Agreement.
2. Transaction Fees and other fees, costs and expenses payable
under the Agreement that are listed in the billing statements provided to
Participant by HCC as provided in Section 3.5 of the Agreement and which are
received by or under the control of Participant shall be wire transferred from
Participant to HCC's account designated above or debited as provided herein,
not less than forty-eight (48) hours following receipt of such billing
statements.
-13-
<PAGE> 14
EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be wire transferred or debited
directly from Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements
provided to Participant by HCC as provided in Section 3.5 of the Agreement and
received or under the control of Participant shall be wire transferred or
debited from the account designated above, not less than forty-eight (48) hours
following receipt of such billing statements.
-14-
<PAGE> 15
EXHIBIT "D"
[*]
*Confidential Treatment Requested
-15-
<PAGE> 16
EXHIBIT "E"
PROPOSED PROCEDURES
(attached)
-16-
<PAGE> 17
EXHIBIT "F"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing
Corporation to debit the undersigned's account identified above, and to
transfer sums from such account by wire transfer, debit memo, draft or check,
all without further instruction or verification of such transfer instructions
from the undersigned. This authorization will remain in full force and effect
until written notification of cancellation is given by the undersigned to the
bank or other financial institution identified above.
----------------------------------
By:
-------------------------------
Title:
----------------------------
-17-
<PAGE> 1
EXHIBIT 10.30
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and MARRIOTT
INTERNATIONAL, INC. ("Participant"), to be effective the 18th day of March,
1997.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals
the number of reservations (both voice and
electronic) processed through the HCC System within
such time period that are identified as
"commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC
and for which a travel agent commission is paid
pursuant to this Agreement.
(ii) HCC System. The HCC System is HCC's automated
clearinghouse system to provide for the coordination
of reservation information, transfer of hotel
reservation commissions and ancillary services to
Travel Agents and Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has
executed a HCC Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel
agency who has executed an HCC Subscriber Agreement.
A list of current HCC Travel Agents will be
periodically provided by HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant
to HCC Travel Agents pursuant to this Agreement. HCC
Travel Agent Commissions will be based on commission
rates provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System
for the use and benefit of Participant, its franchisees and
affiliates, and other Participating Entities. HCC will
provide all reasonable and necessary technical support,
hardware and software, except as otherwise provided herein,
and modifications to the HCC System to provide clearinghouse
services to Participant and its franchisees and affiliates as
described below. Upon compliance with the terms of this
Agreement by Participant, its franchisees and affiliates, and
subject to Section 5 hereof, HCC will provide the following
clearinghouse services to Participant and its franchisees and
affiliates:
(i) identify Participant to travel agents as being a HCC
System Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and
other fees, costs and expenses to Participant no
later than the fifteenth (15th) business day after
the end of each month as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions
received from Participant and its affiliates and
franchisees to the appropriate HCC Travel Agents as
set forth in the HCC Travel Agent Commission
information provided by Participant;
(iv) provide no later than the fifteenth (15th) business
day of each month reports to Participant and HCC
Travel Agents reflecting HCC Travel Agents'
reservation transactions with Participant and HCC
Travel Agent Commissions owed based upon the data
provided to HCC by Participant and its affiliates and
franchisees who are participating in the HCC System;
and
(v) provide telephone customer support services from 8:00
a.m. to 5:00 p.m., U.S. Central time, Monday through
Friday, exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently and in
good faith do the following:
(i) Cooperate reasonably with HCC personnel with respect
to the implementation of the HCC System between HCC
Travel Agents and Participant and its affiliates and
franchisees;
(ii) Provide HCC with all that is reasonably required by
HCC to process all reservations (including all
reservations made electronically or by voice, through
the use of a central reservation "800" phone number,
inclusive of no-shows, cancellations and
non-commissionable transactions) made by HCC Travel
Agents with Participant and, subject to 2.2(iv), its
affiliates and franchisees no less often than on a
semi-monthly basis such data being complete and
accurate to the best of Participant's knowledge and
ability and inclusive of all of the information to
permit HCC to provide the clearinghouse services
described in Section 2.1 hereof and, without
limitation, being such information as set forth on
Exhibit A hereof; and permit and authorize HCC to
obtain and use such data concerning such reservations
made with Participant and, subject to 2.2(iv), its
affiliates and franchisees except such data
designated as confidential pursuant to Section 7
hereof. The foregoing shall be subject to receipt by
Participant from HCC of the instructions,
specifications, directions, information, assistance,
and cooperation reasonably required by Participant to
provide the foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant
to this Agreement within two (2) business days of
receipt of the billing statement described in Section
3.5 hereof;
-2-
<PAGE> 3
(iv) Use its reasonable efforts to cause each of its
franchisees and affiliates to fully and timely
participate in the HCC System pursuant to this
Agreement;
(vi) Permit HCC to use its name as an entity participating
in the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation
or enhance the capability of the HCC System, and Participant
agrees to cooperate reasonably with HCC to the extent
reasonably necessary to effectuate modifications and
enhancements of the HCC System. If Participant determines
that such modification or enhancement is likely to require
Participant to make significant modifications to its central
reservation system (any such modifications to be at
Participant's sole expense), HCC will provide at least ninety
(90) days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this
Agreement upon sixty (60) days notice to HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 [*] an [*] of [*] (the [*]) on or before [*] provided [*] has
provided to [*] all of the information necessary for [*] for
all of its [*] for [*] as required by Section [*] of this
Agreement and provided further, in the event [*] shall
[*] the following [*] of [*] pursuant to this [*] shall
[*] the amount indicated.
<TABLE>
<CAPTION>
Average
[*] [*] if [*]
Time Period During the Time Period Not Met
---- ------ ------------ ------ --- ---- ------ ------------ --- ---
<S> <C> <C>
[*] -- [*] [*] [*]
[*] -- [*] [*] [*]
[*] -- [*] [*] [*]
[*] -- [*] [*] [*]
[*] -- [*] [*] [*]
</TABLE>
The [*] may be [*] from any payment due [*] to [*] to [*] payable upon
receipt, at [*] option. In the event the total [*] below [*] the
foregoing [*] shall be void and of no effect with respect to [*] to
be made after the [*] the [*] of [*]
3.2 Fees for Processing HCC Travel Agent Commissions.
(a) For the [*] Commissionable Reservations
processed each month, Participant shall pay HCC a
transaction fee ("HCC Transaction Fee") each month of
*Confidential Treatment Requested
-3-
<PAGE> 4
U.S. [*] for each such Commissionable Reservation
processed. For any month wherein the total of
Commissionable Reservations is greater than [*]
but less than [*] shall be due from either
party for each such Commissionable Reservation over
[*] but less than [*]
(b) For each Commissionable Reservation in excess of
[*] processed each month, [*] (the "Participant
Transaction Fee") as follows:
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but
less than [*] a Participant Transaction Fee of
[*] for each Commissionable Reservation between
[*] and [*]
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but
less than [*] a Participant Transaction Fee of
[*] for each Commissionable Reservation between
[*] and [*]
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] and
less than [*] a Participant Transaction Fee of
[*] for each Commissionable Reservation between
[*] and [*] and
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] a
Participant Transaction Fee of [*] for each
Commissionable Reservation in excess of [*]
Provided however, notwithstanding the preceding provisions of
this 3.2(b), the total Participant Transaction Fee paid per
month shall not exceed an amount equal to [*] per
Commissionable Reservation in the aggregate.
3.3 Commission Payments. HCC shall pay HCC Travel Agent
Commissions in the travel agent's local currency or the
currency requested by the travel agency. HCC shall be
responsible for complying with laws and regulations relating
to the treatment of unclaimed property (sometimes referred to
as "escheatment" laws) resulting from checks issued to travel
agents under this Agreement. The parties will jointly
establish mutually acceptable procedures to be implemented by
HCC in order to comply with such laws and regulations. The
parties will meet to establish such procedures by no later
than thirty (30) days after the effective date, and will
cooperate and work diligently with one another in order to
finalize same as promptly as practical.
3.4 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section
2.1(iv) that will indicate any exceptions to HCC Travel Agent
Commissions, based on discrepancies between information given
HCC by Participant compared to other information available to
HCC. With respect to all exceptions as to which Participant
provides supporting documentation, HCC will forward such
documentation to the appropriate HCC Travel Agent(s), and the
HCC Travel Agents involved may pursue such dispute directly
with Participant('s) franchisees, but HCC will not have any
liability to either
*Confidential Treatment Requested
-4-
<PAGE> 5
Participant or any travel agent (HCC or non-HCC) with respect
to the resolution of any disputed commission. No dispute
concerning any travel agent commissions will in any way affect
or reduce the obligations of Participant to (i) timely pay all
other HCC Travel Agent Commissions reported to HCC for
processing and (ii) timely pay to HCC all Transaction Fees and
other fees, costs and additional expenses owed by Participant
under this Agreement; nor shall any such dispute in any way
affect or reduce the obligations of HCC to timely pay
Participant all Participant Transaction Fees due under this
Agreement.
3.5 Billing Statements. Based upon the information provided HCC
by or with respect to Participant pursuant to Section 2.2,
above, HCC will provide Participant a monthly billing
statement detailing (i) HCC Travel Agent Commissions to be
paid by Participant for the period covered by such billing
statement; (ii) HCC Transaction Fees to be paid by
Participant, based on Commissionable Reservations for the
period covered by such billing statement; (iii) [*] to be paid
[*] based on [*] for the period covered by such billing
statements, (iv) any [*] of the [*] which is due and (v) all
other costs and fees owed by Participant pursuant to this
Agreement. All fees and costs shall be paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall
begin on the effective date set forth at the beginning of this
Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire on the last day of
the sixtieth (60th) month after the date of this Agreement.
However, this Agreement will be automatically renewed and
extended for additional twelve (12) month periods unless, at
least sixty (60) days prior to the expiration of the initial
term of this Agreement or any additional twelve (12) month
period, either party provides written notice to the other of
its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of
such party to cure such default after notice and opportunity
to cure as provided by Section 6.3 below, the nondefaulting
party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure
such default after notice and opportunity to cure as provided
by Section 6.3 below, then, if HCC does not terminate this
Agreement under Section 5.1, until such time as such Event of
Default is cured HCC shall have the right to suspend the
status of Participant as a Participating Entity and to notify
all HCC Travel Agents of such default and suspension through
central reservation systems or otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
*Confidential Treatment Requested
-5-
<PAGE> 6
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material
provision of this Agreement;
(iv) If either HCC or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its
cessation as a going concern, or ceases business
operations for reasons other than a strike and other
than assignment as allowed by this Agreement, then
the other party (the "Insecure Party") may
immediately terminate this Agreement upon written
notice to the other party unless the Defaulting Party
immediately gives the Insecure Party adequate
assurance of the future performance of this
Agreement. If bankruptcy proceedings are commenced
with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the
Insecure Party may suspend all further performance of
this Agreement until the Defaulting Party assumes or
rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor
provision. Any such suspension of further
performance by the Insecure Party pending the
Defaulting Party's assumption or rejection will not
be a breach of this Agreement.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall,
except as provided in this Agreement, be entitled to whatever remedies
at law or in equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or
other events beyond the control of the defaulting party.
However, if any such occurrence results in any of the events
described in Section 6.1, and the same continues for more than
thirty (30) consecutive days, either party may terminate this
Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the
defaulting party specifying the alleged default. In the case
of a monetary default by either party, the defaulting party
will only be allowed to cure such default within two (2)
business days after receipt of such notice, by delivering that
amount owed to HCC in good funds into the non- defaulting
party's bank account. In all other instances, the defaulting
party will be entitled to fifteen (15) days from receipt of
notice within which to cure the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each may
receive confidential and proprietary information that is the
property of the other party. All such confidential and
proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary
subject only to disclosure where required by law. Such
designation may be removed by each party making the
designation. Participant acknowledges that it will have no
access to and will not use the HCC System or related property,
other than as specifically provided for in this Agreement, and
that such system and related property is confidential and
proprietary property of HCC. Any use of HCC service marks or
trade names by Participant is subject to
-6-
<PAGE> 7
prior written approval of HCC, provided, that Participant may
describe the HCC System contemplated by this Agreement in its
franchise offering circular and other materials as required by
state or federal law. Unless otherwise provided herein, any
use of Participant's service marks or trade names by HCC is
subject to prior written approval of Participant. The
provisions of this Section 7.1 will remain binding and in
force and effect as long as such information remains
confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this
Agreement at any time. Except as is necessary in connection
with the performance of this Agreement and HCC's business,
information regarding the reservations and other transactions
of Participant processed by HCC shall be treated as
confidential whether or not so marked or otherwise identified
as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders,
from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a
result of or arising out of a material breach of this
Agreement on account of Participant's (or its affiliates)
fault, to the extent not caused by the fault of HCC ("HCC's
Losses"). HCC agrees to indemnify and hold harmless
Participant, and Participant's affiliates, directors,
officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring
as a result of or arising out of a material breach of this
Agreement on account of HCC's fault to the extent not caused
by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action
or the presentation or other assertion of any claim which
could result in any indemnification claim pursuant to this
Section 8.1, such indemnified party will give prompt notice
thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that
it wishes, assume the defense thereof with its own counsel.
If the indemnifying party elects to assume the defense of any
such action or claim, the indemnifying party shall not be
liable to the indemnified party for any fees of other counsel
or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than
reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. The parties agree to cooperate to the fullest
extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party
shall not be liable for any compromise or settlement of any
such action or claim effected without its consent (which shall
not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY
PARTICIPANT OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE
TO ACT WITH RESPECT TO THE DATA OR THE PAYMENT OF COMMISSIONS
UNLESS EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO
HCC'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ALL WARRANTIES,
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR
-7-
<PAGE> 8
A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE
PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND
WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof,
neither party will be liable to the other for any
consequential damages caused or resulting from any breach of
this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such
damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. There shall
be a panel of three arbitrators. Each party will select one
arbitrator within thirty (30) days of notice of the dispute,
and the two (2) arbitrators selected shall select a third
neutral arbitrator within thirty (30) days after the second
arbitrator is chosen. All reasonable and necessary costs and
fees (including attorney's fees) incurred in connection with
the arbitration will be borne by the losing party or assessed
in the award as otherwise deemed appropriate by the
arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be
determined by HCC. If the demand for arbitration is initiated
by HCC, venue of the arbitration proceedings will be
determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations
commissions clearinghouse services and that each party may
contract with other parties providing same or similar
services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The
parties hereto are separate and distinct entities
independently contracting with each other at arms length. HCC
will not be deemed by this Agreement to be granting a license
to Participant with respect to the HCC System or any software
or service mark related thereto, or otherwise, this being a
contract for the use and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the
non-assigning party, and such consent shall not be
unreasonably withheld or delayed provided that Participant may
assign this Agreement to a wholly-owned subsidiary or in
connection with the sale of its reservation system or
franchise system and either party may assign this Agreement
without consent in the event of a merger, consolidation, or
sale of substantially all of its assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of
electronically transmitted data) and (a) personally delivered,
(b) deposited in the United States mail, first-class,
registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for
next business day delivery), shipping prepaid, (d) sent by
telecopy or facsimile with confirmation of receipt to the
number indicated, or (e) transmitted directly to the recipient
by electronic data transmission pursuant to arrangements made
between the parties. Such notices and other communications
(except in the case of electronically transmitted data) shall
be addressed as
-8-
<PAGE> 9
follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Marriott International
Suite 1100 10400 Fernwood Road
Dallas, TX 75219 Bethesda, MD 20817
Attention: John F. Davis, III Attention: VP, Distribution Sales
If by telecopy/facsimile to: If by telecopy/facsimile to:
528-5675 w/c to: Attn: Law
Department 52/1923
(Information
Technology Mktg.)
or such persons or addresses as any party may request by
notice duly given hereunder. Except as otherwise specified
herein, notices will be deemed given and received when
received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its
conflict of laws principles. Subject to the agreement to
arbitrate and the jurisdiction and venue provisions set forth
in Section 10.1 hereof, any action brought relating to or
arising out of this Agreement must be brought in the state or
federal courts situated in the county and state of the
residence or principal place of business of the party against
whom the action is brought (or any of them, if more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and
Participant with respect to the provision of services under
the HCC System and supersedes and replaces any and all other
agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon
by either party with respect to the subject matter of this
Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives,
successors and duly authorized assigns of each party whether
resulting from merger, acquisition, reorganization or
assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept
confidential and shall be disclosed only to those persons and
entities as required by law or as permitted by the other party
hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.10 Intellectual Property. Each of the parties hereto represents
and warrants to the other that, with respect to all software
and other intellectual property in connection with the
operation of the HCC System furnished or required to be
furnished pursuant to this Agreement (collectively, the
"Intellectual Property"), each either owns the Intellectual
Property furnished by it or is fully authorized to deliver the
Intellectual Property and to allow the Intellectual Property
to be used in connection with the HCC System, as contemplated
by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the
delivery of any of the Intellectual Property in connection
with this Agreement constitutes infringement of any patent,
copyright, license or other property right (a "Claim"),
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<PAGE> 10
the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the
provisions of Section 8.1 of this Agreement. Should either
party be temporarily or permanently enjoined from using any of
the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the
right to continue to use the Intellectual Property free from
any Claim or replace or modify the offending Intellectual
Property so that its use becomes non-infringing, within
fifteen (15) days of the date on which it receives notices of
the claim (either such corrective action being referred to
herein as a "Correction"). If a Correction is not
accomplished, the party who furnished the Intellectual
Proeprty resulting in the Claim shall be deemed to be in
default of this Agreement, and in such event Sections 5 and 6
of this Agreement shall control; provided, however, that the
fifteen (15) day period specified above shall be deemed to be
the applicable cure period under Section 6.3, and once that
fifteen (15) day period has expired without a Correction
having occurred, the applicable cure period under Section 6.3
shall be deemed to have expired. Without limiting Article 8
of this Agreement, the party who furnished the Intellectual
Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses
being HCC's Losses or Participant's Losses, as the case may
be, as defined in Seciton 8.1 hereof) in connection with any
Claim for which a Correction is not made within such fifteen
(15) day period, in accordance with Article 8.
10.11 Favored Nation Status. In the event any other HCC
participating hotel with annual HCC transaction volumes equal
to or less than those of Participant is paid more for
transaction fees than Participant, HCC shall notify
Participant and Participant shall have the right to amend this
Agreement to provide for like payments to Participant. For
the purpose of determining the amount of transaction fees paid
to Participant or any other HCC participating hotel, the
Incentive Fee paid pursuant to this Agreement or any other
incentive fee or similar payment made to any other HCC
participating hotel shall be considered a part of the
transaction fees paid.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION MARRIOTT INTERNATIONAL, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ BRUCE W. WOLFF
------------------------- ----------------------------
Its: Its:
------------------------ ---------------------------
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<PAGE> 11
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
-11-
<PAGE> 1
EXHIBIT 10.31
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by and
between The Hotel Clearing Corporation, hereinafter called "HCC", and CHOICE
HOTELS INTERNATIONAL, INC., hereinafter called "Participant", to be effective
the 11th day August, 1995 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective March 31, 1995 (hereinafter
called the "Participant Agreement").
2. HCC and Participant have mutually agreed to amend certain
provisions of the Participant Agreement as more specifically set
forth herein.
3. HCC and Participant intend for this First Amendment to set forth
in its entirety their agreement made this date with respect to
the amendments to the Participant Agreement as set forth herein.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.1 of the Participant Agreement is hereby deleted in its
entirety and is hereby replaced with the following:
"3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For each of the [*] Commissionable Reservations
processed each calendar year pursuant to this
Agreement, Participant shall pay to HCC each month
a transaction fee of [*] per Commissionable
Reservation ("HCC Travel Agent Transaction Fees").
Participant shall pay no HCC Travel Agent
Transaction Fees for any Commissionable Reservation
transactions in excess of [*] in each calendar year.
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
(b) For Commissionable Reservations between [*] and
[*] processed each calendar year pursuant to this
Agreement, neither HCC nor Participant shall pay
any fee.
(c) For each Commissionable Reservation in excess of
[*] but less than [*] processed in each calendar
year pursuant to this Agreement, HCC shall pay to
Participant each month a fee (a "Participant Fee")
as follows:
(i) For the first [*] Commissionable
Reservations in excess of [*] Commissionable
Reservations [*] per Commissionable
Reservation.
(ii) For each Commissionable Reservation in
excess of [*] Commissionable Reservations -
[*] per Commissionable Reservation."
[*]
The fees set forth in Section 3.1(a)-(c) shall apply until such
time as the fees per Commissionable Reservation are either (i)
determined as standard fees for Pegasus stockholders or (ii) such
fees are generally applicable to Pegasus stockholders. At such
time, HCC shall make such pricing available to Participant and
Participant shall have the right to amend this Agreement
accordingly. In the event such standard or generally applicable
fees are not established by August 15, 1996, HCC shall promptly
provide notice to Participant of any more favorable fees or
pricing offered to any other Pegasus stockholders for HCC
Participant Agreements beginning after August 15, 1995 and
Participant shall have the right to amend this Agreement
accordingly.
2. Section 3.4 of the Participant Agreement is hereby deleted in its
entirety and is hereby replaced with the following:
"3.4 Billing Statements. Based upon the information provided
HCC by or with respect to Participant pursuant to Section
2.2 above, HCC will provide monthly billing statements
detailing (i) HCC Travel Agent Commissions to be paid by
Participant for the period covered by such billing
statement; (ii) HCC Travel Agent Transaction Fees to be
paid by Participant and (iii) [*] , based on [*]
*Confidential Treatment Requested
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<PAGE> 3
[*] processed during the period covered by such
billing statement. All fees and costs shall be paid in
U.S. dollars."
3. Section 3.5 of the Participant Agreement is hereby deleted in its
entirety.
4. Section 4.1 of the Participant Agreement is hereby deleted in its
entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this Agreement,
unless earlier terminated pursuant to the provisions of
this Agreement, shall expire December 31, 2001. This
Agreement will be automatically renewed and extended for
additional twelve (12) month periods unless, at least
thirty (30) days prior to the expiration of the initial
term or any additional twelve (12) month period, either
party provides written notice to the other of its
decision not to renew and extend."
5. Section 5.2 of the Participant Agreement is hereby deleted in its
entirety.
6. This First Amendment shall be and hereby is incorporated into the
Participant Agreement for all intents and purposes and all terms,
provisions and definitions of the Participant Agreement shall
apply.
7. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified and
affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
THE HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
-------------------------
John F. Davis, III
President
Date:
-------------------------
CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ JAMES R. YOAKUM
-------------------------
Its:
-------------------------
Date:
-------------------------
*Confidential Treatment Requested
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<PAGE> 4
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and CHOICE HOTELS
INTERNATIONAL, INC. ("Participant"), to be effective the 31st day of March,
1995.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Commissionable Reservations. Commissionable
Reservations within a particular time period equals the number of reservations
(both voice and electronic) processed through the HCC System within such time
period that are identified as "commissionable" or "partially commissionable" on
the transaction records provided by Participant to HCC and for which a travel
agent commission is paid pursuant to this Agreement.
(ii) HCC System. The HCC System is an automated
clearinghouse system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and ancillary services
to Travel Agents and Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC Participant
Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel
agency who has executed an HCC Subscriber Agreement. A list of current HCC
Travel Agents will be periodically provided by HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant to HCC Travel Agents
pursuant to this Agreement. HCC Travel Agent Commissions will be based on
commission rates provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System
for the use and benefit of Participant, its franchisees and affiliates, and
other Participating Entities. HCC will provide all reasonable and necessary
technical support, hardware and software, except as otherwise provided herein,
and modifications to the HCC System to provide clearinghouse services to
Participant and its franchisees and affiliates as described below. Upon
compliance with the terms of this Agreement by Participant, its franchisees and
affiliates, and subject to Section 5 hereof, HCC will provide the following
clearinghouse services to Participant and its franchisees and affiliates:
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<PAGE> 5
(i) unless earlier authorized by Participant, no earlier
than January 1, 1996, identify Participant to travel agents as being a HCC
System Participating Entity;
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and other fees, costs and
expenses to Participant no later than the fifteenth (15th) business day after
the end of each month as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions
received from Participant and its affiliates and franchisees to the appropriate
HCC Travel Agents as set forth in the HCC Travel Agent Commission information
provided by Participant;
(iv) provide no later than the fifteenth (15th) business
day of each month reports to Participant and HCC Travel Agents reflecting HCC
Travel Agents' reservation transactions with Participant and HCC Travel Agent
Commissions owed based upon the data provided to HCC by Participant and its
affiliates and franchisees who are participating in the HCC System; and
(v) provide telephone customer support services from 8:00
a.m. to 6:00 p.m., U.S. Central time, Monday through Friday, exclusive of legal
holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC.
2.2 Duties of Participant. Participant shall diligently and in
good faith do the following:
(i) Cooperate fully with HCC personnel with respect to
the implementation of the HCC System between HCC Travel Agents and Participant
and its affiliates and franchisees;
(ii) Provide HCC with all that is required by HCC to
process all reservations (including all reservations made electronically or by
voice, through the use of a central reservation "800" phone number, inclusive
of no-shows, cancellations and non-commissionable transactions) made by HCC
Travel Agents with Participant and its affiliates and franchisees no less often
than on a semi-monthly basis such data being complete and accurate to the best
of Participant's knowledge and ability and inclusive of all of the information
to permit HCC to provide the clearinghouse services described in Section 2.1
hereof and, without limitation, being such information as set forth on Exhibit
A hereof; and permit and authorize HCC to obtain and use such data concerning
such reservations made with Participant and its affiliates and franchisees
except such data designated as confidential pursuant to Section 7 hereof;
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to this Agreement;
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<PAGE> 6
(iv) Continually use its best efforts to cause each of its
franchisees and affiliates to fully and timely participate in the HCC System
pursuant to this Agreement;
(vi) Permit HCC to use its name as an entity participating
in the HCC System.
2.3 Implementation of The HCC System. HCC will proceed with the
implementation of the HCC System between HCC Travel Agents and Participant
pursuant to a mutually agreed upon schedule. However, Participant shall not
be obligated to process transactions pursuant to this Agreement until January
1, 1996.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. If Participant
determines that such modification or enhancement is likely to require
Participant to make significant modifications to its central reservation system
(any such modifications to be at Participant's sole expense), HCC will provide
at least ninety (90) days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this Agreement upon
sixty (60) days notice to HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions. Participant
shall pay HCC monthly transaction fees for processing HCC Travel Agent
Commissions ("HCC Travel Agent Transaction Fees") of U.S. Ten Cents ($.10) per
HCC Travel Agent Commissionable Reservation.
3.2 Commission Payments. HCC shall pay HCC Travel Agent
Commissions in the travel agent's local currency.
3.3 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section 2.1(iv) that will
indicate any exceptions to HCC Travel Agent Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC. With respect to all exceptions as to which Participant
provides supporting documentation, HCC will forward such documentation to the
appropriate HCC Travel Agent(s), and the HCC Travel Agents involved may pursue
such dispute directly with Participant('s) franchisees, but HCC will not have
any liability to either Participant or any travel agent (HCC or non- HCC) with
respect to the resolution of any disputed commission. No dispute concerning
any travel agent commissions will in any way affect or reduce the obligations
of Participant to (i) timely pay all other HCC Travel Agent Commissions
reported to HCC for processing and (ii) timely pay to HCC all Transaction Fees
and other fees, costs and additional expenses owed by Participant under this
Agreement.
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<PAGE> 7
3.4 [deleted by amendment]
3.5 [deleted by amendment]
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. However, this Agreement will
be automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of the initial term
of this Agreement or any additional twelve (12) month period, either party
provides written notice to the other of its decision not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Termination Upon Participant Ceasing to be a Shareholder of
HCC. In the event Participant shall cease to be a shareholder of HCC, this
Agreement shall terminate effective that date.
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<PAGE> 8
5.3 Suspension of Status. Upon the occurrence of an Event of
Default by Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3 below, then, if
HCC does not terminate this Agreement under Section 5.1, until such time as
such Event of Default is cured HCC shall have the right to suspend the status
of Participant as a Participating Entity and to notify all HCC Travel Agents of
such default and suspension through central reservation systems or otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of
the following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material provision of this
Agreement;
(iv) The commencement by either party of a voluntary case
under Chapter 11 or 7 of the United States Bankruptcy Code, as from time to
time in effect, the commencement against either party of an involuntary case
under said Chapter 11 or 7, either party seeking relief as a debtor under any
applicable law, other than said Chapter 11 or 7, of any jurisdiction relating
to the liquidation or reorganization of debtors or the modification of the
rights of creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its property, or its making an
assignment for the benefit of, or entering into a composition with, its
creditors.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting
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<PAGE> 9
party will give written notice to the defaulting party specifying the alleged
default. In the case of a monetary default by Participant, Participant will
only be allowed to cure such default within two (2) business days after receipt
of such notice, by delivering that amount owed to HCC in good funds into HCC's
bank account. In all other instances, the defaulting party will be entitled to
fifteen (15) days from receipt of notice within which to cure the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Participant and HCC that each may receive confidential
and proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each
party making the designation. Participant acknowledges that it will have no
access to and will not use the HCC System or related property, other than as
specifically provided for in this Agreement, and that such system and related
property is confidential and proprietary property of HCC. Any use of HCC
service marks or trade names by Participant is subject to prior written
approval of HCC, provided, that Participant may describe the HCC System
contemplated by this Agreement in its franchise offering circular and other
materials as required by state or federal law. Unless otherwise provided
herein, any use of Participant's service marks or trade names by HCC is subject
to prior written approval of Participant. The provisions of this Section 7.1
will remain binding and in force and effect as long as such information remains
confidential (other than by breach of this Agreement), notwithstanding the
expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's affiliates, directors,
officers, employees and stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring as a result of or arising out of a material breach of this Agreement
on account of Participant's (or its affiliates or franchisees) fault, to the
extent not caused by the fault of HCC ("HCC's Losses"). HCC agrees to
indemnify and hold harmless Participant, and Participant's affiliates,
directors, officers, employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
("Participant's Losses") occurring as a result of or arising out of a material
breach of this Agreement on account of HCC's fault to the extent not caused by
the fault of Participant. Promptly after receipt by an indemnified party of
notice of the commencement of any action or the presentation or other assertion
of any claim which could result in any indemnification claim pursuant to this
Section 8.1, such indemnified party will give prompt notice thereof to the
indemnifying party and the indemnifying party will be entitled to participate
therein or, to the extent that it wishes, assume the defense thereof with its
own counsel. If the indemnifying party elects to
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<PAGE> 10
assume the defense of any such action or claim, the indemnifying party shall
not be liable to the indemnified party for any fees of other counsel or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation and preparation,
unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the defense of any such
action or claim, the indemnifying party shall not be liable for any compromise
or settlement of any such action or claim effected without its consent (which
shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY PARTICIPANT OR
THE INFORMATION PROCESSED BY OR THROUGH THE HCC SYSTEM NOR WILL IT HAVE ANY
LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE DATA OR THE PAYMENT
OF COMMISSIONS UNLESS EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO ANY
MISHANDLING OR IMPROPER PAYMENT OF FUNDS PAID TO HCC BY PARTICIPANT AND EXCEPT
TO THE EXTENT RESULTING FROM HCC'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, ALL
WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY,
GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND
WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof, neither party will
be liable to the other for any consequential damages caused or resulting from
any breach of this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
within thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award
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<PAGE> 11
as otherwise deemed appropriate by the arbitrators. If the demand for
arbitration is initiated by Participant, venue of the arbitration proceedings
will be determined by HCC. If the demand for arbitration is initiated by HCC,
venue of the arbitration proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant with respect to the HCC System or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the non-assigning party, and
such consent shall not be unreasonably withheld or delayed provided that
Participant may assign this Agreement in connection with the sale of its
reservation system or franchise system and either party may assign this
Agreement without consent in the event of a merger, consolidation, or sale of
substantially all of its assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first- class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other communications (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 10750 Columbia Pike
Suite 1100 Silver Spring, MD 20901
Dallas, TX 75219
Attention: John F. Davis, III Attention: General Counsel
(if by telecopy to: (if by telecopy to: (301) 905-4007)
(214) 528-5675) cc: James R. Yoakum
10750 Columbia Pike
Silver Spring, MD 20901
or such persons or addresses as any party may request by notice duly given
hereunder.
-8-
<PAGE> 12
Except as otherwise specified herein, notices will be deemed given and received
when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in Section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION CHOICE HOTELS INTERNATIONAL, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ GERALD W. ROBERTS
--------------------------- -------------------------------
John F. Davis, III,
President Its:
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<PAGE> 13
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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EXHIBIT 10.32
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and Forte Hotels,
Inc., ("Participant"), to be effective the 30 day of July, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) Commissionable Reservations. Commissionable Reservations
within a particular time period equals the number of reservations (both voice
and electronic) processed through the HCC System within such time period that
are identified as "commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC.
(ii) HCC System. The HCC System is an automated clearinghouse
system to provide for the coordination of reservation information, transfer of
hotel reservation commissions and ancillary services to Subscribers and
Participating Properties.
(iii) [*]
(iv) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC Participant
Agreement.
(v) Subscriber. A Subscriber is any person or entity who has
executed an HCC Subscriber Agreement and makes reservations with a
Participating Entity. A list of current Subscribers will be provided by HCC to
Participant by the twenty-fifth (25th) of each month.
(vi) Subscriber Commissions. Subscriber Commissions are the
commissions paid by Participant to Subscribers for reservations made with
Participant. Subscriber Commissions will be based on commission rates provided
to HCC by the Participant.
(vii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common
* Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
ownership with HCC, to provide an interface between Subscribers and hotel
reservation systems with the capability to provide immediate room confirmation
numbers for each hotel property participating in UltraSwitch.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for
the use and benefit of Participant and other Participating Entities. HCC will
provide all reasonable and necessary technical support, hardware and software,
and modifications to the HCC System to provide clearinghouse services to
Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated affiliates and
franchisees of Participant) to Subscribers as being a HCC System Participant
through the use of UltraSwitch or other central reservation system services
(and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber Commissions,
Transaction Fees (as defined below) and other fees, costs and expenses to
Participant on a regular (normally monthly) basis as provided in Section 3
below;
(iii) debit Participant's designated bank account for such
Subscriber Commissions, transaction fees and other fees, costs and expense, no
sooner than forty-eight (48) hours after providing billing statements for such
Subscriber Commissions, Transaction Fees and other fees, costs and expenses as
provided in Section 3 below;
(iv) distribute collected Subscriber Commissions to the
appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(v) provide periodic (normally monthly) reports to Participant
and Subscribers reflecting exceptions to Subscriber Commissions based upon the
data available to HCC through UltraSwitch; and
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(vi) provide telephone customer support services from 8:00 a.m.
to 8:00 p.m., Eastern time, Monday through Friday, exclusive of legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2 Duties of Participant. Participant will cooperate fully with HCC
personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate
reservation information (including all reservations made electronically or by
voice, whether directly to the property or through the use of a central
reservation "800" phone number) no loss often than on a weekly basis. All
information provided by Participant with respect to reservations, Subscribers
and Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement.
2.3 Schedule of Implementation of HCC System. HCC will proceed with
the implementation of the HCC System, with a proposed HCC System activation
date of April 1, 1992, but not later than September 30, 1992. For the purposes
of this Agreement, the actual activation date (the "Activation Date") will be
the date that HCC notifies Subscriber that the HCC Board of Directors has
determined that the HCC System is operational and capable of processing
sufficient aggregate transaction volume of the Participating Entities. HCC
will provide Participants with at least thirty (30)
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days' prior notice of activation of the HCC System. HCC will provide
Participant with appropriate specifications to assist Participant in preparing
for utilization of the HCC System at least one hundred twenty (120) days prior
to the Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing to permit the
development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first day of each month for a six (6) month period beginning on the later
of April 1, 1992, or the Activation Date. Provided that the Activation Date
has occurred, Participant's obligation to pay the Contingency Fee is absolute
and shall continue until Participant is capable of and ready to deliver to the
HCC System reservation commission data from at least seventy-five percent (75%)
of its properties in the United States (calculated based on total number of
rooms rather than number of individual hotels) in a regular and timely manner
as contemplated by this Agreement ("Participant Readiness") and continues and
delivers to HCC the volume of reservation commissions required for Participant
Readiness after the Activation Date. At such time, Participant will begin
paying transaction fees ("Transaction Fees") of [*] per Commissionable
Reservation, and upon payment of such Transaction Fees, will be
* Confidential Treatment Requested
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<PAGE> 5
relieved of its obligations to pay any further Contingency Fees under this
section. For the remainder, if any, of the six (6) month period referred to
above, the Transaction Fees payable by Participant will be subject to a minimum
monthly Transaction Fee of [*] multiplied by the Monthly Base Transactions
indicated on Exhibit "B". If Participant Readiness (or the Activation Date, if
later) occurs other than at the beginning of a month, Participant will receive
a credit against the fees otherwise payable by Participant under this
Agreement, in the amount of a pro rata portion of the Contingency Fee paid to
HCC for that month, based upon the number of days in the month following
Participation Readiness (or the Activation Date, if later). HCC may, at its
sole discretion, change the Transaction Fees charged to Participant as provided
above, upon ninety (90) days notice to Participant.
The Board of Directors of HCC will have the right to verify Participant
Readiness (whether through HCC personnel or independent third parties) and will
have the right to modify or adjust the requirements for Participant Readiness,
as long as it makes such determination in a uniform manner among other
Participating Entities. Participant has been informed that HCC is reliant
upon, and the obtaining by HCC of certain critical financing is dependent upon,
Participant's agreement to and performance of Participant's obligations under
this section. Participant acknowledges that the failure of Participant to meet
its payment obligations under this section would substantially and materially
damage the business of HCC and waives any and all defenses that it may have to
the performance of such obligations. Participant hereby irrevocably consents
to having the provisions of this Section 3.1 immediately and fully enforced in
a court of law or equity and waives any and all defenses thereto.
Participant hereby authorizes HCC to debit all such fees from
Participant's designated bank account as provided in Exhibit "B". Participant
is responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchises
that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to make available for
debit by HCC all Subscriber Commissions shown on billing statements as provided
in Section 3.5. Participant hereby authorizes HCC to debit such Subscriber
Commissions from Participant's designated bank account as provided in Exhibit
"C". Participant is responsible for collection and payment to HCC of all
* Confidential Treatment Requested
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<PAGE> 6
such Subscriber Commissions that are attributable to Participant and all of
Participant's affiliates and franchisees that utilize the HCC System under this
Agreement. Payments to Subscribers will be made in appropriate local currency.
3.3 Other Fees, Costs and Expenses. Participant also agrees to pay
HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved by the Board of Directors of HCC.
Participant hereby authorizes HCC to debit such fees from Participant's
designated bank account as provided in Exhibit "B". HCC will give Participant
prior notice of debits made under the terms of this Section 3.3. Participant
is responsible for collection and payment to HCC of all such fees, costs and
other expenses that are attributable to Participant and all of Participant's
affiliates and franchisees that utilize the HCC System under this Agreement.
3.4 [*] In consideration of the benefits that [*] from [*] by the [*]
agrees to pay to Participant certain Participant Commissions as described on
[*]. Such [*] will be paid by [*] quarterly basis in arrears, although [*]
payment of all or part of any calendar quarter's [*] to the following calendar
quarter if [*] that projected [*] flow requires such deferral; provided,
however, that [*] defer payment of all [*] for more than [*]. [*] have the
right to set off against any [*] the amount of any fees, costs, expenses
and/or other amounts owing [*].
3.5 Billing Statements. Based upon the information provided HCC by
or with respect to Participant pursuant to Section 2.2, above, HCC will provide
periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and
* Confidential Treatment Requested
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(iv) [*] to be paid to [*] for the most recent quarterly period preceding such
billing statement, which [*] will be [*] only on a quarterly basis. Items (i)
through (iv) may be included on separate billing statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.1(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
3.7 Additional Authorizations. Participant agrees to execute and
deliver to Participant's bank(s) debit authorization(s) in the form of Exhibit
"E" attached hereto, and to execute and deliver to such bank(s) or other
appropriate persons any and all documents, give to such bank(s) or other
persons any and all directions, and to take all other actions that are
necessary or appropriate to permit HCC to debit amounts to be paid hereunder by
Participant directly from Participant's designated bank account(s).
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of any additional
twelve (12) month period, either party provides written notice to the other of
its decision not to renew and extend.
SECTION 5. TERMINATION
* Confidential Treatment Requested
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5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default
by Participant and the failure of Participant to cure such default after notice
and opportunity to cure as provided by Section 6.3 below, then, if HCC does not
terminate this Agreement under Section 5.1, until such time as such Event of
Default is cured HCC shall have the right to suspend the status of Participant
as a Participating Entity and to notify and all Subscribers of such default and
suspension, whether through the UltraSwitch system, central reservation
systems, or otherwise. Upon notification by Participant to HCC of any default
in payment by any affiliate or franchisee of Participant of payments due under
this Agreement and until notification by Participant of the cure of such
default, HCC shall have the right to suspend the status of such affiliate or
franchise as a Participating Entity and to notify all subscribers of such
default and suspension.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform diligently and
in good faith each and every material provision of this Agreement;
(iii) The commencement by either party of a voluntary case under
Chapter 11 or 7 of the United States Bankruptcy Code, as from time to time in
effect, the commencement against either party of an involuntary case under said
Chapter 11 or 7, either party seeking relief as a debtor under any applicable
law, other than said Chapter 11 or 7, or any jurisdiction relating to the
liquidation or reorganization of debtors or the modification of the rights of
creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its
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<PAGE> 9
property, or its making an assignment for the benefit of, or entering into a
composition with, its creditors;
(iv) The deferral [*] of payment of all [*], as provided in
Section 3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber Agreements
with respect to at least twelve thousand (12,000) travel agent/reservation
provider locations within thirty-six (36) months following the Activation Date.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it
is acknowledged by Participant and HCC that each will receive confidential and
proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will
*Confidential Treatment Requested
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be treated as confidential and proprietary subject only to disclosure where
required by law. Such designation may be removed by each party making the
designation. Participant acknowledges that it will have no access to and will
not use UltraSwitch software or related property by reason of this Agreement,
and that use of such UltraSwitch services by Participant would be permitted
only under a separate agreement with THISCO. Participant acknowledges that it
will have no access to and will not use the HCC System or related property,
other than as specifically provided for in this Agreement, and that such system
and related property is confidential and proprietary property of HCC. HCC
acknowledges that the specific information concerning Participant's
reservations, whether processed through the UltraSwitch system or otherwise
provided by Participant to HCC outside of the UltraSwitch system, is the
property of Participant, although Participant acknowledges HCC may use such
information (i) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. The aggregate data from the HCC System will become the property
of HCC. Any use of HCC service Marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may describe the
HCC System contemplated by this Agreement in its franchise offering circular
and other materials as required by state or federal law. The provisions of
this Section 7.1 will remain binding and in force and effect as long as such
information remains confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this Agreement at any time.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable
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attorney's fees) ("Participant's Losses") occurring as a result of or arising
out of a material breach of this Agreement on account of HCC's fault to the
extent not caused by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE FOR
ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
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SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
with thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC.
If the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first-class, registered or certified mail, return receipt requested, with
postage prepaid, (c)
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sent by overnight courier service (for next business day delivery), shipping
prepaid, (d) sent by telecopy with confirmation of receipt of telecopy to the
number indicated, or (e) transmitted directly to the recipient by electronic
data transmission pursuant to arrangements made between the parties. Such
notices and other commissions (except in the case of electronically transmitted
data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd.
Dallas, TX 75219
Attention: John F. Davis, III
(if by telecopy to:
(214) 528-5675)
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. Mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
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10.8 Successors and Assigns. This Agreement will be binding upon and
will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION FORTE HOTELS, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ WILLIAM J. HANLEY
------------------------------ ------------------------------
John F. Davis, III, Title:
President ---------------------------
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EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
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EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base Transactions,
or Monthly Base Transactions of [*] (Annual Base Transactions divided by 12).
2. Transaction Fees and other fees, costs and expenses payable under
the Agreement are to be debited directly from Participant's bank account,
described as follows:
Bank Name:
-------------------------------------------------
Account Number:
---------------------------------------------
Other Appropriate Information:
------------------------------
------------------------------------------------------------
3. Transaction Fees and other fees, costs and expenses payable under
the Agreement that are listed in the billing statements provided to Participant
by HCC as provided in Section 3.5 of the Agreement will automatically be
debited from the account designated above, not less than forty-eight (48) hours
following receipt of such billing statements. The Contingency Fee will
automatically be debited from the account designated above on the first
business day of each month during which the Contingency Fee is payable.
* Confidential Treatment Requested
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EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
2. Subscriber Commissions are to be debited directly from
Participant's bank account, described as follows:
[Bank Name]
[Account Number]
[Other Appropriate Information]
3. Subscriber Commissions listed in the billing statements provided
to Participant by HCC as provided in Section 3.5 of the Agreement will
automatically be debited from the account designated above, not less than
forty-eight (48) hours following receipt of such billing statements.
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<PAGE> 18
EXHIBIT "D"
[*]
1. [*] are to be paid on [*] for each period, calculated according
to the following table based upon the percentage of [*] volume of transactions
[*]:
<TABLE>
<CAPTION>
Percentage of Base
------------------
Transactions for Quarter [*]
- ------------------------ ----------------
<S> <C>
[*] [*] to [*] per [*]
[*] [*] to [*] per [*]
[*] [*] to [*] per [*]
[*] [*] to [*] per [*]
[*] or more [*] to [*] per [*]
</TABLE>
The initial [*] for [*] will be that indicated under [*], and thereafter will
be adjusted annually based upon [*]. The calculation of quarterly commissions
will be based upon [*] for such period.
[*] listed above will apply during the first year of the term of this
Agreement; [*] for subsequent years will be determined [*], but in no event
will drop below the [*] listed above. [*] within the indicated [*] will
be determined annually in advance by [*].
* Confidential Treatment Requested
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<PAGE> 19
EXHIBIT "E"
DEBIT AUTHORIZATION
TO: [Bank]
RE: [Account Number and identification]
DATE:
The undersigned hereby authorizes The Hotel Clearing Corporation
to debit the undersigned's account identified above, and to transfer sums from
such account by wire transfer, debit memo, draft or check, all without further
instruction or verification of such transfer instructions from the undersigned.
This authorization will remain in full force and effect until written
notification of cancellation is given by the undersigned to the bank or other
financial institution identified above.
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
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<PAGE> 20
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
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<PAGE> 1
EXHIBIT 10.33
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by
and between the HOTEL CLEARING CORPORATION, hereinafter called "HCC", and
PROMUS HOTELS, INC., hereinafter called "Participant", to be effective the 27th
day of August, 1993 (the "First Amendment").
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC
Participant Agreement dated effective ____________________
(hereinafter called the "Participant Agreement").
2. HCC and Participant have mutually agreed to amend the term of
the Participant Agreement and the provisions of the Participant
Agreement relating to the amount and payment of Participant
Commissions (as defined in the Participant Agreement).
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the term of the
Participant Agreement and the provisions relating to the amount
and payment of Participant Commissions.
AGREEMENT
FOR AND IN CONSIDERATION of the above stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 3.4 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"3.4 [*] . In consideration of the benefits that [*] will
obtain from [*] processed by [*] through the HCC
System, [*] agrees to [*] certain [*] as hereinafter
provided. Such Participant [*] will be [*] at such
times and in such total amounts as [*] may determine to
be appropriate provided that [*] shall be [*] the
Participant Commission Amount (as hereinafter defined).
The [*] payable to [*] shall be determined by dividing
the total number of [*] for all stockholder [*] for the
applicable time period (as determined by [*]) into the
total amount of funds available [*] (as determined by
[*] and after making allowance for [*], as
hereinafter defined) and
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
[*] by the number of [*] transactions [*] by
[*] for the applicable period. [*] are those amounts
due to [*] pursuant to agreements which require
payments [*] the [*] as [*] including, but not limited
to, amounts due to [*] and key [*] of [*]."
2. Section 4.1 of the Participant Agreement is hereby deleted in
its entirety and is replaced with the following:
"4.1 Term of Agreement. The initial term of this Agreement,
unless earlier terminated pursuant to the provisions of
this Agreement, shall expire December 31, 1998. This
Agreement will be automatically renewed and extended
for additional twelve (12) month periods unless, at
least thirty (30) days prior to the expiration of the
initial term or any additional twelve (12) month
period, either party provides written notice to the
other of its decision not to renew and extend."
3. Exhibit D to the Participant Agreement is deleted.
4. This First Amendment shall be and hereby is incorporated into
the Participant Agreement for all intents and purposes and all
terms, provisions and definitions of the Participant Agreement
shall apply.
5. Except for the provisions inconsistent with the terms of this
First Amendment, the Participant Agreement is hereby ratified
and affirmed in all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
HOTEL CLEARING CORPORATION
By: /s/ JOHN F. DAVIS, III
-----------------------------
John F. Davis, III
President
Date:
---------------------------
PROMUS HOTELS, INC.
By: /s/ JOHN M. BOUSHY
-----------------------------
Its:
-----------------------------
Date:
----------------------------
*Confidential Treatment Requested
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<PAGE> 3
EXHIBIT 10.33
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE HOTEL
CLEARING CORPORATION, a Delaware corporation ("HCC"), and Embassy Suites, Inc.,
____________corporation ("Participant"), to be effective the 27th day of
October, 1991.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) Business Day. Business days shall be any day other
than Saturday, Sunday or other days that national banking associations in
Dallas, Texas are required or permitted to be closed.
(ii) Commissionable Reservations. Commissionable Reservations
within a particular time period equals the number of reservations (both voice
and electronic) processed through the HCC System within such time period that
are identified as "commissionable" or partially "commissionable" on the
transaction records provided by Participant to HCC.
(iii) HCC System. The HCC System is an automated clearinghouse
system to provide for the coordination of reservation information, transfer of
hotel reservation commissions and ancillary services to Subscribers and
Participating Properties.
(iv) [*]. [*] are the [*] paid by [*] for [*] processed [*].
(v) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a HCC
Participant Agreement.
(vi) Subscriber. A Subscriber is any person or entity who has
executed an HCC Subscriber Agreement and makes reservations with a
Participating Entity. A list of current Subscribers will be provided by HCC to
Participant by the twenty-fifth (25th) of each month.
(vii) Subscriber Commissions. Subscriber Commissions are the
commissions paid by Participant to Subscribers for reservations made with
Participant. Subscriber Commissions will be based on commission rates provided
to HCC by the Participant.
(viii) UltraSwitch. UltraSwitch is a service of The Hotel
Industry Switch Company ("THISCO"), which has certain common ownership with
HCC, to provide an interface between Subscribers and hotel reservation systems
with the capability to provide immediate room confirmation numbers for each
hotel property participating in UltraSwitch.
*Confidential Treatment Requested
<PAGE> 4
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for
the use and benefit of Participant and other Participating Entities. HCC will
provide all reasonable and necessary technical support, hardware and software,
and modifications to the HCC System to provide clearinghouse services to
Participant as described below. Upon compliance with the terms of this
Agreement by Participant, HCC will provide the following clearinghouse services
to Participant:
(i) identify Participant (and designated affiliates and
franchisees of Participant) to Subscribers as being a HCC System Participant
through the use of UltraSwitch or other central reservation system services
(and, at the discretion of HCC, by distribution of other promotional
materials), subject to the provisions of Section 5.2;
(ii) provide billing statements for Subscriber Commissions,
[*] (as defined below) and other fees, costs and expenses to [*] on a regular
(normally monthly) basis as provided in Section 3 below;
(iii) distribute collected Subscriber Commissions to the
appropriate Subscribers based upon HCC Subscriber Agreements with such
Subscribers;
(iv) provide periodic (normally monthly) reports to
Participant and Subscribers reflecting exceptions to Subscriber Commissions
based upon the data available to HCC through UltraSwitch; and
(v) provide telephone customer support services from
8:00 a.m. to 8:00 p.m., Eastern time, Monday through Friday, exclusive of
legal holidays.
A description of the currently anticipated procedures to be followed in the
payment process is given on Exhibit "F" attached, although the timing and exact
details of such procedures as implemented by HCC in operation of the HCC system
may be different due to computer-related and other operational constraints.
Such procedures are subject to change from time to time as circumstances
require or as otherwise determined by HCC.
2.2. Duties of Participant. Participant will cooperate fully with HCC
personnel with respect to the implementation of the HCC System between the
Subscribers and Participant. Participant specifically authorizes HCC to obtain
information concerning reservations made with Participant from the UltraSwitch
system and to use such information (i) as provided in the procedures described
in Exhibit "F" and (ii) as otherwise approved in writing by the Board of
Directors of HCC. Participant agrees to provide HCC all appropriate reservation
information (including all reservations made electronically or by voice,
whether directly to the property or through the use of a central reservation
"800" phone number) no less often than on a weekly basis. All information
provided by Participant with respect to reservations, Subscribers and
Subscriber Commissions must be complete and accurate to the best of
Participant's ability, and must be inclusive of all the information necessary
to permit HCC to provide the clearinghouse services described in Section 2.1.
The initial information that Participant must provide to HCC is indicated on
Exhibit "A". Because efficient and reliable operation of the clearinghouse
*Confidential Treatment Requested
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<PAGE> 5
services offered by the HCC System is dependent on the use of data from
transactions carried by UltraSwitch, Participant agrees to run all of its
electronic reservation transactions through the UltraSwitch system so long as
it is a party to this Agreement, unless marketing or operational reasons cause
Participant to use additional distribution channels.
2.3 Schedule of Implementation of HCC System. HCC will proceed with
the implementation of the HCC System, with a proposed HCC System activation
date of April 1, 1992, but not later than September 30, 1992. For the purposes
of this Agreement, the actual activation date (the "Activation Date") will be
the date that HCC notifies Subscriber that the HCC Board of Directors has
determined that the HCC System is operational and capable of processing
sufficient aggregate transaction volume of the Participating Entities. HCC will
provide Participants with at least thirty (30) days' prior notice of activation
of the HCC System. HCC will provide Participant with appropriate specifications
to assist Participant in preparing for utilization of the HCC System at least
one hundred twenty (120) days prior to the Activation Date.
2.4 Modification or Enhancement of the HCC System or Participant
System. HCC may in it sole discretion modify the operation or enhance the
capability of the HCC System, and Participant agrees to cooperate with HCC in
all modifications and enhancements of the HCC System. All significant
modifications or enhancements will require the approval of the Board of
Directors of HCC. If HCC determines that such modification or enhancement is
likely to require Participant to make significant modifications to its central
reservation system (any such modifications to be at Participant's sole
expense), HCC will provide at least ninety (90) days' prior notice to
Participant of such modification or enhancement. If Participant modifies its
central reservation system after the Activation Date and such modification
requires HCC to modify the HCC System, or to provide additional services to
utilize information supplied by Participant as required by Section 2.2,
Participant will pay HCC such additional amount agreed to by the parties based
on HCC's standard consulting rate and all expenses incurred.
2.5 Audit by Participant. Participant shall have the right, upon ten
(10) days' written notice to HCC, to audit the subscriber participation
process.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees. In order to permit HCC to obtain financing, to permit the
development of the HCC System, Participant agrees to pay the monthly
contingency fee (the "Contingency Fee") of [*] multiplied by the Monthly Base
Transactions indicated on Exhibit "B". The Contingency Fee will be payable on
the first business day of each month for a six (6) month period beginning on
the later of April 1, 1992, or the Activation Date, and will be paid by wire
transfer of good funds to HCC's account on such dates, without invoice or
notice from HCC to Participant. Provided that the Activation Date has occurred,
Participant's obligation to pay the Contingency Fee is absolute and shall
continue until Participant is capable of and ready to deliver to the HCC System
reservation commission data from at least seventy-five percent (75%) of its
properties in the United States (calculated based on total number of rooms
rather than number of individual hotels) in a regular and timely manner as
contemplated by this Agreement ("Participant Readiness") and continues and
delivers to HCC the volume of reservation commissions required for Participant
Readiness after the Activation Date. At such time,
*Confidential Treatment Requested
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<PAGE> 6
Participant will begin paying transaction fees ("Transaction Fees") of [*] per
Commissionable Reservation, and upon payment of such Transaction Fees, will be
relieved of its obligations to pay any further Contingency Fees under this
section. For the remainder, if any, of the six (6) month period referred to
above, the Transaction Fees payable by Participant will be subject to a minimum
monthly Transaction Fee of [*] multiplied by the Monthly Base Transactions
indicated on Exhibit "B". If Participant Readiness (or the Activation Date, if
later) occurs other than at the beginning of a month, Participant will receive
a credit against the fees otherwise payable by Participant under this
Agreement, in the amount of a pro rata portion of the Contingency Fee paid to
HCC for that month, based upon the number of days in the month following
Participation Readiness (or the Activation Date, if later). HCC may, at its
sole discretion, change the Transaction Fees charged to Participant as provided
above, upon ninety (90) days notice to Participant.
The Board of Directors of HCC will have the right to verify
Participant Readiness (whether through HCC personnel or independent third
parties) and will have the right to modify or adjust the requirements for
Participant Readiness, as long as it makes such determination in a uniform
manner among, other Participating Entities. Participant has been informed that
HCC is reliant upon, and the obtaining by HCC of certain critical financing is
dependent upon, Participant's agreement to and performance of Participant's
obligations under this section. Participant acknowledges that the failure of
Participant to meet its payment obligations under this section would
substantially and materially damage the business of HCC and waives any and all
defenses that it may have to the performance of such obligations. Participant
hereby irrevocably consents to having the provisions of this Section 3.1
immediately and fully enforced in a court of law or equity and waives any and
all defenses thereto.
Participant agrees to pay all such fees by wire transfer of good funds
to HCC's account within two (2) business days after receipt by Participant of
the billing statements described in Section 3.5, below. Participant is
responsible for collection and payment to HCC of all such fees that are
attributable to Participant and all of Participant's affiliates and franchisees
that utilize the HCC System under this Agreement.
3.2 Subscriber Commissions. Participant agrees to pay to HCC all
Subscriber Commissions (as provided in Exhibit "C") shown on the billing
statements described in Section 3.5, by wire transfer of good funds to HCC's
account within two (2) business days after receipt by Participant of such
billing statements. Participant is responsible for collection and payment to
HCC of all such Subscriber Commissions that are attributable to Participant and
all of Participant's affiliates and franchisees that utilize the HCC System
under this Agreement. Payments to Subscribers will be made in appropriate local
currency.
3.3 Other Fees, Costs and Expenses. Participant also agrees to pay
HCC at its standard consulting rate plus all expenses incurred for set up,
handling, conversion and other services required for processing of information
transmitted to HCC to satisfy the requirements of Section 2.2, above, unless a
different fee arrangement with respect to such services is indicated on Exhibit
"B". All of such fees must be approved in writing, in advance by Participant.
Participant agrees to pay all such fees by wire transfer of good funds to HCC's
account within two (2) business days after receipt by Participant of the
billing statements described in Section 3.5, below. Participant is responsible
for collection and payment to HCC
*Confidential Treatment Requested
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<PAGE> 7
of all such fees, costs and other expenses that are attributable to Participant
and all of Participant's affiliates and franchisees that utilize the HCC System
under this Agreement.
3.4 [deleted by amendment]
3.5 Billing Statements. Based upon the information provided HCC by
or with respect to Participant pursuant to Section 2.2, above, HCC will provide
periodic (normally monthly) billing statements detailing (i) Subscriber
Commissions to be paid by Participant for the period covered by such billing
statement; (ii) Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such billing statement;
(iii) other fees, costs and additional expenses to be paid by Participant for
the period covered by such billing statement; and (iv) [*] to be paid to [*]
for the most recent quarterly period preceding such billing statement, which
[*] will be calculated and included in billing statements only on a quarterly
basis. Items (i) through (iv) may be included on separate billing statements.
3.6 Disputed Commissions. HCC will provide Participant and
Subscribers with periodic reports indicated under Section 2.l(v) that will
indicate any exceptions to Subscriber Commissions, based on discrepancies
between information given HCC by Participant compared to other information
available to HCC through UltraSwitch. With respect to all exceptions as to
which Participant provides supporting documentation, HCC will forward such
documentation to the appropriate Subscriber(s), and the Subscribers involved
may pursue such dispute directly with Participant, but HCC will not have any
liability to either Participant or such Subscriber with respect to the
resolution of any disputed commission. No dispute concerning any Subscriber
Commissions will in any way affect or reduce the obligations of Participant to
(i) timely pay all other Subscriber Commissions and (ii) timely pay to HCC all
Transaction Fees and other fees, costs and additional expenses owed by
Participant under this Agreement.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall expire
five (5) years after the date of this Agreement. This Agreement will be
automatically renewed and extended for additional twelve (12) month periods
unless, at least thirty (30) days prior to the expiration of the initial term or
at least thirty (30) days prior to the expiration of any additional twelve (12)
month period, either party provides written notice to the other of its decision
not to renew and extend.
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SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such party to
cure such default after notice and opportunity to cure as provided by Section
6.3 below, the nondefaulting party may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default
by Participant and the failure of Participant to cure such default after notice
and opportunity to cure as provided by Section 6.3 below, then, if HCC does not
terminate this Agreement under Section 5.1, until such time as such Event of
Default is cured HCC shall have the right to suspend the status of Participant
as a Participating Entity and to notify any and all Subscribers of such default
and suspension, whether through the UltraSwitch system, central reservation
systems, or otherwise. Upon notification by Participant to HCC of any default
in payment by any affiliate or franchisee of Participant of payments due under
this Agreement and until notification by Participant of the cure of such
default, HCC shall have the right to suspend the status of such affiliate or
franchisee as a Participating Entity and to notify all Subscribers of such
default and suspension.
Section 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The refusal or failure of either party to perform
diligently and in good faith each and every material provision of this
Agreement;
(iii) The commencement by either party of a voluntary case
under Chapter 11 or 7 of the United States Bankruptcy Code, as from time to
time in effect, the commencement against either party of an involuntary case
under said Chapter 11 or 7, either party seeking relief as a debtor under any
applicable law, other than said Chapter 11 or 7, of any jurisdiction relating
to the liquidation or reorganization of debtors or the modification of the
rights of creditors, the entry of a court order adjudging the party bankrupt or
insolvent, ordering its liquidation or reorganization or assuming custody or
appointing a receiver or other custodian of its property, or its making an
assignment for the benefit of, or entering into a composition with, its
creditors;
(iv) The deferral [*] of payment of all [*] provided in Section
3.4, for more than two (2) consecutive calendar quarters; or
(v) The failure by HCC to have obtained HCC Subscriber
Agreements with respect to at least twelve thousand (12,000) travel
agent/reservation provider locations within thirty-six (36) months following
the Activation Date.
*Confidential Treatment Requested
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<PAGE> 9
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from acts of God,
fire, war, civil unrest, accident, power fluctuations or outages,
telecommunication fluctuations, outages or delays, utility failures, mechanical
defects, or other events beyond the control of the defaulting party. However,
if any such occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive days, either party
may terminate this Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting party
specifying the alleged default. The defaulting party will then be entitled to
thirty (30) days from receipt of such notice within which to cure such default;
provided, that in the case of a monetary default by Participant, Participant
will only be allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in good funds
into HCC's bank account.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it
is acknowledged by Participant and HCC that each will receive confidential and
proprietary information that is the property of the other party. All such
confidential and proprietary information will be marked or otherwise identified
as such and will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be removed by each party
making the designation. Participant acknowledges that it will have no access to
and will not use UltraSwitch software or related property by reason of this
Agreement, and that use of such UltraSwitch services by Participant would be
permitted only under a separate agreement with THISCO. Participant acknowledges
that it will have no access to and will not use the HCC System or related
property, other than as specifically provided for in this Agreement, and that
such system and related property is confidential and proprietary property of
HCC. HCC acknowledges that the specific information concerning Participant's
reservations, whether processed through the UltraSwitch system or otherwise
provided by Participant to HCC outside of the UltraSwitch system, is the
property of Participant, although Participant acknowledges HCC may use such
information (1) as provided in the procedures described in Exhibit "F" and (ii)
as otherwise approved in writing by the Board of Directors of HCC, as long as
HCC removes any information that indicates the customer is a customer of
Participant. The aggregate data from the HCC System will become the property of
HCC. Any use of HCC service marks or tradenames by Participant is subject to
prior written approval of HCC, provided, that Participant may describe the HCC
System contemplated by this Agreement in its franchise offering circular and
other materials as required by state or federal law. The provisions of this
Section 7.1 will remain binding and in force and effect as long as such
information remains confidential (other than by breach of this Agreement),
notwithstanding the expiration or termination of this Agreement at any time.
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SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Subject to
Section 9.2, Participant agrees to indemnify and hold harmless HCC and HCC's
affiliates, directors, officers, employees and stockholders (other than
Participant), from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorneys' fees) occurring as a result of or
arising out of a material breach of this Agreement on account of Participant's
fault, to the extent not caused by the fault of HCC ("HCC's Losses"). Subject
to Section 9.2, HCC agrees to indemnify and hold harmless Participant, and
Participant's affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("Participant's Losses") occurring as a result of
or arising out of a material breach of this Agreement on account of HCC's
fault, to the extent not caused by the fault of Participant. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party will
give prompt notice thereof to the indemnifying party and the indemnifying party
will be entitled to participate therein or, to the extent that it wishes,
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement. Whether or not the indemnifying party elects to
assume the defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action or claim
effected without its consent (which shall not be unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE
FOR ANY INACCURACIES IN THE DATA OR THE INFORMATION PROCESSED BY OR THROUGH THE
HCC SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT UNLESS
EXPRESSLY SET FORTH HEREIN, EXCEPT TO THE EXTENT RESULTING FROM HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Neither party will be liable to the
other for any consequential damages caused or resulting from any breach of this
Agreement or arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
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SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, will be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party will select one arbitrator
within thirty (30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30) days after
the second arbitrator is chosen. All reasonable and necessary costs and fees
(including attorneys' fees) incurred in connection with the arbitration will be
borne by the losing party or assessed in the award as otherwise deemed
appropriate by the arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be determined by HCC. If
the demand for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other parties
providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. HCC will not be deemed by this Agreement to be granting a license
to Participant, with respect to UltraSwitch, the HCC System or any software or
service mark related thereto, or otherwise, this being, a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the nonassigning party, and
such consent shall not be unreasonably withheld or delayed.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically transmitted
data) and (a) personally delivered, (b) deposited in the United States mail,
first-class, registered or certified mail, return receipt requested, with
postage prepaid, (c) sent by overnight courier service (for next business day
delivery), shipping prepaid, (d) sent by telecopy with confirmation of receipt
of telecopy to the number indicated, or (e) transmitted directly to the
recipient by electronic data transmission pursuant to arrangements made between
the parties. Such notices and other commissions (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. Embassy Suites, Inc.
Suite 1910 1023 Cherry Rd.
Dallas, TX 75219 Attention: Chris Gibbons
Attention: John F. Davis, III (if by telecopy to: (901) 762-8637)
(if by telecopy to: (214) 528-5675)
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<PAGE> 12
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices will be deemed given
and received (i) at the time of personal delivery, (ii) if sent by U.S. mail,
three (3) business days after mailing, (iii) if sent by overnight courier, one
(1) business day after such sending, (iv) if sent by telecopy, upon receiving
of confirmation of receipt of the telecopy at the number indicated, or (v) in
the case of electronically transmitted data, when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles. Subject to the agreement to arbitrate and the jurisdiction and
venue provisions set forth in section 10.1 hereof, any action brought relating
to or arising out of this Agreement must be brought in the state or federal
courts situated in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any of them, if
more than one).
10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and Participant with respect
to the provision of services under the HCC System, and supersedes and replaces
any and all other agreements and representations, verbal or written, with
respect to the subject matter of this Agreement. There are no representations,
warranties or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon
and will inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION EMBASSY SUITES, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ CHRIS GIBBONS
----------------------------- -------------------------------
John F. Davis, III, President Title: V.P. Information Technology
----------------------------
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<PAGE> 13
EXHIBIT "A"
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- - Record identifier required validated
- - Chain record number required check for duplicates
- - Chain/Brand code required validated
- - Booking source required validated
- - Property ID required validated
- - PNR Number optional no checks
- - Confirmation number required validated presence
- - Cancellation number optional no checks
- - Corporate ID number optional no checks
- - Subscriber IATA number required validated HCC user
- - Group/Guest last name required validated presence
- - Group/Guest first name optional no checks
- - Status code required validated
- - Reason code optional if present, validate
- - Arrival date required validated, no future
- - Departure date required validated, no future
- - Number of nights required validated presence
- - Number of rooms required validated presence
- - Commissionable revenue required validated, no neg.
- - Gross Commission required validated, no neg.
- - Adjustment amount required validated presence
- - Net Commission due required validate computation
- - Currency code required validated
- - Comments optional no checks
</TABLE>
<PAGE> 14
EXHIBIT "B"
Participant Fees
1. Contingency Fees and minimum Transaction Fees as provided in
Section 3.1 of the Agreement will be based upon [*] Annual Base Transactions,
or Monthly Base Transactions of [*] (Annual Base Transactions divided by 12).
*Confidential Treatment Requested
<PAGE> 15
EXHIBIT "C"
Subscriber Commissions
1. Subscriber Commissions are specified in the record field "Net
Commission Due" as described on Exhibit "A".
<PAGE> 16
EXHIBIT "D"
[deleted by amendment]
<PAGE> 17
EXHIBIT "E"
[INTENTIONALLY DELETED]
<PAGE> 18
EXHIBIT "F"
PROPOSED PROCEDURES
(attached)
<PAGE> 1
EXHIBIT 10.34
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and WESTIN
HOTELS & RESORTS (hereinafter "HOTEL"), to be effective the 17th day of
November, 1995 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici-
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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<PAGE> 3
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the
UltraSwitch Interface, HOTEL shall pay THISCO as follows:
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<PAGE> 4
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*]
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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<PAGE> 5
3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this
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<PAGE> 6
Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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<PAGE> 7
caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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<PAGE> 8
and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
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<PAGE> 9
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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<PAGE> 10
software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company Westin Hotels & Resorts
3811 Turtle Creek Blvd., Suite 1100 2001 6th Avenue, 13th Floor
Dallas, Texas 75219 Seattle, Washington 98121
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (206) 443-8997
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles.
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<PAGE> 11
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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<PAGE> 12
this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 17th day of November, 1995.
THE HOTEL INDUSTRY SWITCH WESTIN HOTELS & RESORTS
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ TIMOTHY M. COLEMAN
------------------------------ -----------------------------------
John F. Davis, III (name) Timothy M. Coleman
President --------------------------------
(title) Vice President Distribution
-------------------------------
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<PAGE> 1
EXHIBIT 10.35
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and BEST WESTERN
INTERNATIONAL (hereinafter "HOTEL"), to be effective the 23rd day of February,
1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the
UltraSwitch Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar year
[*] per Net Reservation;
For the next [*] Net Reservations during each calendar year,
[*] per Net Reservation;
For the next [*] Net Reservations during each calendar year,
[*] per Net Reservation;
For all Net Reservations in excess of [*] Net Reservations
during each calendar year, [*] per Net Reservation;
For the first [*] Status Changes during each calendar year,
[*] for each Status Change;
For the next [*] Status Changes during each calendar year,
[*] for each Status Change;
For all Status Changes in excess of [*] during each calendar
year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall be
no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for addition al 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within
the time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
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9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company BEST WESTERN INTERNATIONAL
3811 Turtle Creek Blvd., Suite 1100 6201 N. 24th Parkway
Dallas, Texas 75219 Phoenix, Arizona 85016
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (602) 957-59662
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 23rd day of February, 1996.
THE HOTEL INDUSTRY SWITCH BEST WESTERN INTERNATIONAL
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ WILLIAM S. WATSON
----------------------------- ---------------------------------
John F. Davis, III (name) William S. Watson
President ------------------------------
(title) Executive Vice President
-----------------------------
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<PAGE> 1
EXHIBIT 10.36
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and
INTER-CONTINENTAL HOTELS CORPORATION, a Delaware corporation, (hereinafter
"HOTEL"), to be effective the 13th day of February, 1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
reservation confirmation numbers for each hotel property
participating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or, if bulk data transfer is
done via UltraSwitch, the rate of a room type has changed for
a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide reservation confirmation numbers for each
booking at an UltraSwitch User's property made through a Reservation Provider
within an average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subparts (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations at
least 99% of the time each calendar month. Subject to Section 6.2 hereof,
THISCO agrees to correct all failures or interruptions of the UltraSwitch and
repair or replace all UltraSwitch parts causing or
*Confidential Treatment Requested
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contributing to failure or interruption within 72 hours of the failure or
interruption at THISCO's sole cost and expense.
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. THISCO shall provide to
HOTEL prior to accomplishing any such modification a good faith estimate of the
expenses likely to be incurred in connection therewith. In the event THISCO
modifies or enhances the UltraSwitch and, as a result, it becomes necessary for
HOTEL to modify its reservation system, HOTEL shall have the option to
terminate this Agreement by notice to THISCO within thirty (30) days after
receipt of the notice provided in Section 2.3 if the resulting cost
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to HOTEL for the particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*]
THISCO may increase as of the first day of January of each calendar year the
Reservation and Status Change Fees by an amount equal to the annual increase
during the
*Confidential Treatment Requested
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immediately preceding calendar year in the U.S. Consumer Price Index to offset
cost increases of THISCO's operations provided that such increase shall not
take effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
HOTEL shall receive a credit for all Reservation Fees paid pursuant to Section
3.1 above.
3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of receipt, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
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5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this Agreement at any time within 30 days after the expiration of
the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within
the time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
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performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law.
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Such designation may be removed by each party making the designation. HOTEL
acknowledges that it shall have no access to and shall not use the UltraSwitch
software or related property, other than as specifically provided for in this
Agreement, and that such information is confidential and proprietary property
of THISCO. Any use of the UltraSwitch name by HOTEL is subject to prior written
approval of THISCO provided HOTEL may describe the Interface contemplated by
this Agreement in its franchise offering circular and other materials as
required by state or federal law. The provisions hereof shall remain binding
and in force and effect forever, notwithstanding the expiration or termination
of this Agreement at any time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify and hold harmless THISCO and THISCO's affiliates and their directors,
officers, employees and other stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
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9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the
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arbitration shall be borne by the losing party or assessed in the award as
otherwise deemed appropriate except travel, food and lodging expenses shall be
borne by the party incurring the same. If the demand for arbitration is
initiated by HOTEL, venue of the arbitration proceedings shall be determined by
THISCO. If the demand for arbitration is initiated by THISCO, venue of the
arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
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If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company Inter-Continental Hotels Corporation
3811 Turtle Creek Blvd., Suite 1100 1120 Avenue of the Americas
Dallas, Texas 75219 New York, NY 10036
ATTN: John F. Davis, III ATTN: General Counsel
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675)
------------------------------------
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
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10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of this Agreement
shall control; provided, however, that the 15 day period specified above shall
be deemed to be the applicable cure period under Section 6.3, and once that 15
day period has expired without a Correction having occurred, the applicable
cure period under Section 6.3 shall be deemed to have expired. Without limiting
Article 8 of this Agreement, the party who furnished the Intellectual Property
resulting in the Claim shall also be obligated to indemnify the other party for
any of its losses (such losses being THISCO's Losses or HOTEL's Losses, as the
case may be, as defined in section 8.1 hereof) in connection with any Claim for
which a Correction is not made within such 15 day period, in accordance with
Article 8.
AGREED to this 13th day of February, 1996.
THE HOTEL INDUSTRY SWITCH INTER-CONTINENTAL HOTELS CORPORATION
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ PAUL J. TRAVERS
----------------------------- ----------------------------------
John F. Davis, III Paul J. Travers (printed name)
President --------------------
Its: Senior Vice President (title)
Property Management
---------------------------
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EXHIBIT 10.37
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and HFS
INCORPORATED, formerly known as Hospitality Franchise Systems, Inc.
(hereinafter "HFS"), to be effective the 4th day of January, 1996 (the
"Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type
has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HFS and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HFS set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HFS. Subject to Section 6.2 hereof, delays caused by
Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HFS's customer reservations 99% of
the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees to
correct all failures or interruptions of the
*Confidential Treatment Requested
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UltraSwitch and repair or replace all UltraSwitch parts causing or contributing
to failure or interruption within 72 hours of the failure or interruption at
THISCO's sole cost and expense.
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HFS. Through the UltraSwitch Interface, HFS will permit
access to all Reservation Providers utilizing the UltraSwitch and will permit
all such Reservation Providers the full and complete right, subject to any
agreement between HFS and the Reservation Providers, to reserve and cancel
rooms authorized for sale by HFS and receive a confirmation acknowledgment of
any such transaction. All information provided by HFS with respect to rooms and
facilities shall be complete and accurate and shall be consistent with and
inclusive of all the information provided and rates available to a direct
caller of HFS reservation system to the fullest extent each Reservation
Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HFS of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HFS. HFS agrees to
cooperate with THISCO in modifying and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HFS modifies
its central reservation system, or modification of its central reservation
system is required for the implementation, operation, modification or
enhancement of the UltraSwitch, HFS shall pay all necessary costs associated
with such modification to its system. In the event HFS modifies its central
reservation system and such modification requires THISCO to modify the
Interface, HFS shall pay THISCO its standard consulting rate and all expenses
incurred as a result of the modification. In the event THISCO modifies or
enhances the UltraSwitch and, as a result, it becomes necessary for HFS to
modify its reservation system, HFS shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HFS for the particular
modification exceeds $10,000.00.
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3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HFS shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*]
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
*Confidential Treatment Requested
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3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HFS shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
3.3 Payment of Fees and Costs. THISCO will invoice HFS monthly for all
fees, costs, and additional costs incurred by THISCO that are to be paid by HFS
pursuant to this Agreement. HFS shall pay each invoice upon receipt and, in any
event, within 30 days of each invoice date. In the event an invoice (all or a
portion of which has not been materially disputed) is not paid within 30 days
of mailing, HFS agrees to pay interest on all undisputed amounts over 30 days
old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HFS shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HFS shall provide all necessary modems to
specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless earlier
terminated pursuant to the provisions of this Agreement, shall be effective on
the date first stated above and shall expire on the last day of the seventy
second (72nd) month after the effective date. This Agreement shall be
automatically renewed and extended for additional 12 month periods unless, at
least 30 days prior to the expiration of the initial term or at least 30 days
prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HFS. Upon the occurrence of an Event of Default (as
hereinafter defined) by THISCO and the failure of THISCO to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, HFS may
terminate this Agreement at any time within 30 days after the expiration of the
cure period provided in Section 6.3.
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5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HFS and the failure of HFS to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this Agreement at any time within 30 days after the expiration of
the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HFS (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation
as a going concern, or ceases business operations for
reasons other than a strike and other than assignment as
allowed by this Agreement, then the other party (the
"Insecure Party") may immediately terminate this Agreement
upon written notice to the other party unless the
Defaulting Party immediately gives the Insecure Party
adequate assurance of the future performance of this
Agreement. If bankruptcy proceedings are commenced with
respect to the Defaulting Party, and if this Agreement has
not otherwise terminated, then the Insecure Party may
suspend all further performance of this Agreement until the
Defaulting Party assumes or rejects this Agreement pursuant
to Section 365 of the Bankruptcy Code or any similar or
successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
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Party's assumption or rejection will not be a breach of
this Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HFS and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HFS acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HFS is subject to prior written approval of THISCO
provided HFS may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding
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and in force and effect forever, notwithstanding the expiration or termination
of this Agreement at any time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HFS agrees to
indemnify and hold harmless THISCO and THISCO's affiliates and their directors,
officers, employees and other stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HFS's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HFS, and HFS's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HFS's Losses") occurring on account of THISCO's
fault and through no fault of HFS. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indem nified party shall give prompt notice thereof
to the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
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9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HFS requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HFS of such provision(s) and HFS shall
have the right to amend this Agreement to include the effected provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HFS, venue of the arbitration proceedings shall be
determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HFS.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
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10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HFS, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HFS
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HFS may assign this
Agreement in connection with the sale of its reservation system or franchise
system and either party may assign this Agreement without consent in the event
of a merger, consolidation, or sale of substantially all of its assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO:
The Hotel Industry Switch Company HFS Incorporated
3811 Turtle Creek Blvd., Suite 1100 3838 E. Van Buren
Dallas, Texas 75219 Phoenix, Arizona 85008
Attention: John F. Davis, III Attention: Doug Patterson
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (602) 389-3909
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
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10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HFS with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
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<PAGE> 12
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of this Agreement
shall control; provided, however, that the 15 day period specified above shall
be deemed to be the applicable cure period under Section 6.3, and once that 15
day period has expired without a Correction having occurred, the applicable
cure period under Section 6.3 shall be deemed to have expired. Without limiting
Article 8 of this Agreement, the party who furnished the Intellectual Property
resulting in the Claim shall also be obligated to indemnify the other party for
any of its losses (such losses being THISCO's Losses or HFS's Losses, as the
case may be, as defined in section 8.1 hereof) in connection with any Claim for
which a Correction is not made within such 15 day period, in accordance with
Article 8.
AGREED to this 4th day of January, 1996.
THE HOTEL INDUSTRY SWITCH HFS INCORPORATED
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ MICHAEL H. KISTNER
------------------------------ ----------------------------------
John F. Davis, III (name) Michael H. Kistner
President -------------------------------
(title) Vice President MIS
-------------------------------
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<PAGE> 1
EXHIBIT 10.38
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and HYATT HOTELS
CORPORATION (hereinafter "HOTEL"), to be effective the 1st day of February,
1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type
has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*]
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless earlier
terminated pursuant to the provisions of this Agreement, shall be effective on
the date first stated above and shall expire on the last day of the seventy
second (72nd) month after the effective date. This Agreement shall be
automatically renewed and extended for additional 12 month periods unless, at
least 30 days prior to the expiration of the initial term or at least 30 days
prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
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9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company HYATT HOTELS CORPORATION
3811 Turtle Creek Blvd., Suite 1100 200 W. Madison Avenue, Suite 39
Dallas, Texas 75219 Chicago, Illinois 60606
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (708) 990-6357
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 1st day of February, 1996.
THE HOTEL INDUSTRY SWITCH HYATT CORPORATION
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ PETER D. CONNOLY
------------------------------ ---------------------------------
John F. Davis, III (name)
President -------------------------------
(title)
------------------------------
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EXHIBIT 10.39
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and PROMUS
HOTELS, INC. (hereinafter "HOTEL"), to be effective the 15th day of December,
1995 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type has
changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
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9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company PROMUS HOTELS, INC.
3811 Turtle Creek Blvd., Suite 1100 3239 Players Club Parkway
Dallas, Texas 75219 Memphis, Tennessee 38125
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (901) 748-8102
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 15th day of December, 1995.
THE HOTEL INDUSTRY SWITCH PROMUS HOTELS, INC.
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ DONALD M. KOLODZ
---------------------------- ---------------------------------
John F. Davis, III (name) Donald M. Kolodz
President ------------------------------
(title) Vice President - Reservations
-----------------------------
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<PAGE> 1
EXHIBIT 10.40
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and LA QUINTA
INNS, INC. (hereinafter "HOTEL"), to be effective the 23rd day of February,
1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case sub sequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
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9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company LA QUINTA INNS, INC.
3811 Turtle Creek Blvd., Suite 1100 112 E. Pecan Street
Dallas, Texas 75219 Post Office Box 2636
Attention: John F. Davis, III San Antonio, Texas 78299
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (210) 302-6016
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 23rd day of February, 1996.
THE HOTEL INDUSTRY SWITCH LA QUINTA INNS, INC.
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ W.C. HAMMETT, JR.
------------------------------ ----------------------------------
John F. Davis, III (name) W.C. Hammett, Jr.
President -------------------------------
(title) SR VP Accounting & Admin
------------------------------
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<PAGE> 1
EXHIBIT 10.41
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and ITT SHERATON
CORPORATION (hereinafter "HOTEL"), to be effective the 8th day of January, 1997
(the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions
*Confidential Treatment Requested
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of the UltraSwitch and repair or replace all UltraSwitch parts causing or
contributing to failure or interruption within 72 hours of the failure or
interruption at THISCO's sole cost and expense.
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modify ing and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
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3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
*Confidential Treatment Requested
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3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the thirty sixth (36th) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this Agreement at any time within 30 days after the expiration of
the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
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pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may
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describe the Interface contemplated by this Agreement in its franchise offering
circular and other materials as required by state or federal law. The
provisions hereof shall remain binding and in force and effect forever,
notwithstanding the expiration or termination of this Agreement at any time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify and hold harmless THISCO and THISCO's affiliates and their directors,
officers, employees and other stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including
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without limitation, any warranty of fitness for a particular purpose,
merchantability, good and workmanlike product or service or otherwise, are
disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
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10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company ITT Sheraton Corporation
3811 Turtle Creek Blvd., Suite 1100 Sixty State Street
Dallas, Texas 75219 World Headquarters
Attention: Joseph W. Nicholson Boston, Massachusetts 02109
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (617) 367-5182
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or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license
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or other property right (a "Claim"), the party furnishing such Intellectual
Property shall, at its expense, defend any such Claim in accordance with the
provisions of Section 8.1 of this Agreement. Should either party be temporarily
or permanently enjoined from using any of the Intellectual Property as a result
of any Claim, the other party, at its option and own expense, shall either
procure the right to continue to use the Intellectual Property free from any
Claim or replace or modify the offending Intellectual Property so that its use
becomes non-infringing, within 15 days of the date on which it receives notice
of the claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of this Agreement
shall control; provided, however, that the 15 day period specified above shall
be deemed to be the applicable cure period under Section 6.3, and once that 15
day period has expired without a Correction having occurred, the applicable
cure period under Section 6.3 shall be deemed to have expired. Without limiting
Article 8 of this Agreement, the party who furnished the Intellectual Property
resulting in the Claim shall also be obligated to indemnify the other party for
any of its losses (such losses being THISCO's Losses or HOTEL's Losses, as the
case may be, as defined in section 8.1 hereof) in connection with any Claim for
which a Correction is not made within such 15 day period, in accordance with
Article 8.
AGREED to this 8th day of January, 1997.
THE HOTEL INDUSTRY SWITCH ITT SHERATON CORPORATION
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ DAVID VAN KALSBEEK
------------------------------- -----------------------------------
John F. Davis, III (name)
President ---------------------------------
(title)
--------------------------------
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<PAGE> 1
EXHIBIT 10.42
ULTRASWITCH(R) USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and HILTON
HOTELS CORPORATION (hereinafter "HOTEL"), to be effective the 25th day of
April, 1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) UltraSwitch(R). The UltraSwitch is a service of THISCO
to provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch. UltraSwitch(R) is a registered
trademark of THISCO.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type
has changed for a single date in a single property.
(vii) UltraSwitch Specifications. THISCO's UltraSwitch(R)
Ultra Connect Interface Specifications Revision 1.2.6 dated
April 26, 1995.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, (delays caused
by Reservation Providers, UltraSwitch Users or other third parties), the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
*Confidential Treatment Requested
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Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, provided
there exists an appropriate agreement between HOTEL and the Reservation
Providers and subject to the terms thereof at HOTEL'S option, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. HOTEL shall use reasonable efforts to
ensure that information provided by HOTEL with respect to rooms and facilities
shall be complete and accurate and shall be consistent with and inclusive of
all the information provided and rates available to a direct caller of HOTEL
reservation system to the fullest extent each Reservation Provider data base
will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL and to comply
with THISCO'S obligations under Section 2.1 above. HOTEL agrees to cooperate
with THISCO, at THISCO'S expense, in modifying and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
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<PAGE> 4
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the UltraSwitch
Interface, HOTEL shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
In the event the ratio of Status Changes to Net Reservations exceeds [*]
during a billing period, all Status Changes in excess of the [*] ratio
shall be [*]
*Confidential Treatment Requested
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THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. For each twelve (12)
month period (expiring on each anniversary date) during which this Agreement is
in effect, if HOTEL has paid to THISCO less than [*] pursuant to Section 3.1
hereof, for such period, HOTEL shall, within 30 days of the expiration of the
12-month period, make an additional payment to THISCO equal to the difference
between the amounts paid during the 12-month period and [*]
3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
60 days of mailing, HOTEL agrees to pay interest on all undisputed amounts over
60 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL's share of communications costs
shall not exceed $1,500.00 per month. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at
*Confidential Treatment Requested
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<PAGE> 6
least 30 days prior to the expiration of any additional 12 month period, either
party provides written notice to the other of its decision not to renew and
extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
HOTEL may terminate this Agreement at any time following the expiration of the
cure period provided in Section 6.3. In addition, after the first year of this
Agreement, HOTEL may terminate this Agreement at any time, regardless of
default, upon payment to THISCO of a termination fee of $50,000.00 and the
payment of any other amounts owing pursuant to this Agreement.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by HOTEL and the failure of HOTEL to cure such default
after notice and opportunity to cure as provided by Section 6.3 hereof, THISCO
may terminate this Agreement at any time within 30 days after the expiration of
the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with UltraSwitch Specifications.;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
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<PAGE> 7
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 45 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
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<PAGE> 8
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law or where such
information becomes part of the public domain through no fault of the receiving
party, is independently developed by the receiving party, or obtained by the
receiving party from a third party free to disclose such information. Such
designation may be removed by each party making the designation. HOTEL
acknowledges that it shall have no access to and shall not use the UltraSwitch
software or related property, other than as specifically provided for in this
Agreement, and that such information is confidential and proprietary property
of THISCO. THISCO acknowledges that information concerning HOTEL'S internal
operations should be deemed confidential hereunder. Any use of the UltraSwitch
name by HOTEL is subject to prior written approval of THISCO provided HOTEL may
describe the Interface contemplated by this Agreement in its franchise offering
circular and other materials as required by state or federal law. The
provisions hereof shall remain binding and in force and effect forever,
notwithstanding the expiration or termination of this Agreement at any time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify and hold harmless THISCO and THISCO's affiliates and their directors,
officers, employees and other stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim pursuant
to this Section 8.1, such indemnified party shall give prompt notice thereof to
the indemnifying party and the indemnifying party shall be entitled to
participate therein or, to the extent that it shall wish,
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<PAGE> 9
assume the defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the indemnifying
party shall not be liable to the indemnified party for any fees of other
counsel or other expenses, in each case sub sequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions
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<PAGE> 10
contained herein, THISCO shall promptly provide notice to HOTEL of such
provision(s) and HOTEL shall have the right to amend this Agreement to include
the effected provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b)
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deposited in the United States mail, first-class, registered or certified mail,
return receipt requested, with postage prepaid, (c) sent by overnight courier
service (for next business day delivery), shipping prepaid, or (d) transmitted
by facsimile/telecopy in combination with any other permitted form of notice as
follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company HILTON HOTELS CORPORATION
3811 Turtle Creek Blvd., Suite 1100 9336 Civic Center Drive
Dallas, Texas 75219 Beverly Hills, California 90210
Attention: Joseph W. Nicholson
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (310) 859-2513
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
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<PAGE> 12
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of this Agreement
shall control; provided, however, that the 15 day period specified above shall
be deemed to be the applicable cure period under Section 6.3, and once that 15
day period has expired without a Correction having occurred, the applicable
cure period under Section 6.3 shall be deemed to have expired. Without limiting
Article 8 of this Agreement, the party who furnished the Intellectual Property
resulting in the Claim shall also be obligated to indemnify the other party for
any of its losses (such losses being THISCO's Losses or HOTEL's Losses, as the
case may be, as defined in section 8.1 hereof) in connection with any Claim for
which a Correction is not made within such 15 day period, in accordance with
Article 8.
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AGREED to this 25th day of April, 1996.
THE HOTEL INDUSTRY SWITCH HILTON HOTELS CORPORATION
COMPANY
By: /s/ JOSEPH W. NICHOLSON By: /s/ ROBERT E. DIRKS
------------------------------ -----------------------------------
Joseph W. Nicholson (name) Robert E. Dirks
President --------------------------------
(title) Senior Vice President Marketing
-------------------------------
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EXHIBIT 10.43
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and CHOICE
HOTELS INTERNATIONAL, INC., a Delaware corporation (hereinafter "CHOICE"), to
be effective the 16th day of August, 1995 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property partici
pating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type
has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of CHOICE HOTELS INTERNATIONAL
and other Ultra Switch Users meeting or exceeding the UltraSwitch
Specifications. Subject to the duties of CHOICE set forth in Section 2.2 below,
THISCO will provide all reasonable and necessary technical support, hardware
and software, and modifications to the UltraSwitch system to maintain an
Interface between Reservation Providers and CHOICE. Subject to Section 6.2
hereof, delays caused by Reservation Providers, UltraSwitch Users or other
third parties, the UltraSwitch Interface will provide room confirmation numbers
for each booking at an UltraSwitch User's property made through a Reservation
Provider within an average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process CHOICE's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of CHOICE. CHOICE has cooperated fully with THISCO
personnel with respect to the operation of the UltraSwitch Interface between
the Reservation Providers and CHOICE. CHOICE has provided technical support as
necessary and agrees to undertake such reasonable and necessary programming and
modification of its system as required to operate a dependable UltraSwitch
Interface with its reservation system. Through the UltraSwitch Interface,
CHOICE will permit access to all Reservation Providers utilizing the
UltraSwitch and will permit all such Reservation Providers the full and
complete right, subject to any agreement between CHOICE and the Reservation
Providers, to reserve and cancel rooms authorized for sale by CHOICE and
receive a confirmation acknowledgment of any such transaction. All information
provided by CHOICE with respect to rooms and facilities shall be complete and
accurate and shall be consistent with and inclusive of all the information
provided and rates available to a direct caller of CHOICE reservation system to
the fullest extent each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to CHOICE of such enhancement at
least 60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with CHOICE. CHOICE
agrees to cooperate with THISCO in modifying and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event CHOICE
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, CHOICE shall pay all necessary costs
associated with such modification to its system. In the event CHOICE modifies
its central reservation system and such modification requires THISCO to modify
the Interface, CHOICE shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for CHOICE
to modify its reservation system, CHOICE shall have the option to terminate
this Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.4 if the resulting cost to CHOICE for the
particular modification exceeds $10,000.00.
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3.0 FEES AND COSTS
3.1 Reservation and Status Change and Transaction Fees. For the use of
the UltraSwitch Interface, CHOICE shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes, [*] for each Status
Change;
For the next [*] Status Changes, [*] for each Status
Change;
For all Status Changes in excess of [*] , [*] for each
Status Change.
In the event the ratio of Status Changes to Net Reservations exceeds [*]
during a billing period, all Status Changes in excess of the [*] ratio
shall be [*]
No other UltraSwitch User Agreement shall contain provisions regarding fees and
costs which are more favorable than those contained herein. [*]
*Confidential Treatment Requested
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THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Payment of Fees and Costs. THISCO will invoice CHOICE monthly for
all fees, costs, and additional costs incurred by THISCO that are to be paid by
CHOICE pursuant to this Agreement. CHOICE shall pay each invoice upon receipt
and, in any event, within 30 days of each invoice date. In the event an invoice
(all or a portion of which has not been materially disputed) is not paid within
30 days of mailing, CHOICE agrees to pay interest on all undisputed amounts
over 30 days old at an annual rate of 15% or 1 1/4% per month.
3.3 Additional Costs. CHOICE shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. CHOICE shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by CHOICE. Upon the occurrence of an Event of Default
(as hereinafter defined) by THISCO and the failure of THISCO to cure such
default after
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notice and opportunity to cure as provided by Section 6.3 hereof, CHOICE may
terminate this Agreement at any time within 30 days after the expiration of the
cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of Default
(as hereinafter defined) by CHOICE and the failure of CHOICE to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
THISCO may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or CHOICE (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or
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rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor provision. Any
such suspension of further performance by the Insecure
Party pending the Defaulting Party's assumption or
rejection will not be a breach of this Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by CHOICE and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confiden tial and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. CHOICE acknowledges that
it shall have no access to and shall not use the UltraSwitch software or
related property, other than as specifically provided for in this Agreement,
and that such information is confidential and proprietary property of THISCO.
Any use of the UltraSwitch name by CHOICE is subject to prior written approval
of THISCO provided CHOICE may describe the Interface contemplated by this
Agreement
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in its franchise offering circular and other materials as required by state or
federal law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. CHOICE agrees to
indemnify and hold harmless THISCO and THISCO's affiliates and their directors,
officers, employees and other stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of CHOICE's fault and through no fault of THISCO
("THISCO's Losses"). THISCO agrees to indemnify and hold harmless CHOICE, and
CHOICE's affiliates and their directors, officers, employees and stockholders,
from and against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) ("CHOICE's Losses") occurring on account
of THISCO's fault and through no fault of CHOICE. Promptly after receipt by an
indemnified party of notice of the commencement of any action or the
presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party
shall give prompt notice thereof to the indemnifying party and the indemnifying
party shall be entitled to participate therein or, to the extent that it shall
wish, assume the defense thereof with its own counsel. If the indemnifying
party elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable
for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose,
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<PAGE> 9
merchantability, good and workmanlike product or service or otherwise, are
disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the
other for any consequential damages proximately caused or resulting from any
breach of this Agreement or arising out of the performance of this Agreement,
and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from CHOICE requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to CHOICE of such provision(s) and CHOICE
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by CHOICE, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by CHOICE.
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10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to CHOICE, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or CHOICE
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that CHOICE may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: CHOICE:
3811 Turtle Creek Blvd. #1100 10750 Columbia Pike
Dallas, TX 75219 Silver Spring, MD 20901
Attention: John F. Davis, III Attention: General Counsel
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675)
cc: Mr. James Yoakum
Senior Vice President Inf. Systems
Choice Hotels International
4225 E. Windrose Drive
Phoenix, AZ 85032
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or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and CHOICE with respect
to the implementation and operation of the UltraSwitch system and supersedes
and replaces any and all other agreements and representations, verbal or
written, with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as con templated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent,
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copyright, license or other property right (a "Claim"), the party furnishing
such Intellectual Property shall, at its expense, defend any such Claim in
accordance with the provisions of Section 8.1 of this Agreement. Should either
party be temporarily or permanently enjoined from using any of the Intellectual
Property as a result of any Claim, the other party, at its option and own
expense, shall either procure the right to continue to use the Intellectual
Property free from any Claim or replace or modify the offending Intellectual
Property so that its use becomes non-infringing, within 15 days of the date on
which it receives notice of the claim (either such corrective action being
referred to herein as a "Correction"). If a Correction is not accomplished, the
party who furnished the Intellectual Property resulting in the Claim shall be
deemed to be in default of this Agreement, and in such event, Sections 5.2 and
6.3 of this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or CHOICE's Losses, as the case may be, as defined in section 8.1
hereof) in connection with any Claim for which a Correction is not made within
such 15 day period, in accordance with Article 8.
AGREED to this 16th day of August, 1995.
THE HOTEL INDUSTRY SWITCH CHOICE HOTELS INTERNATIONAL, INC.
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ JAMES R. YOAKUM
------------------------------ -----------------------------------
John F. Davis, III (name) James R. Yoakum
President --------------------------------
(title) Senior Vice President,
Reservations and Information
Systems
-------------------------------
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EXHIBIT 10.44
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and UTELL
INTERNATIONAL LTD. (hereinafter "HOTEL"), to be effective the 10th day of
February, 1996 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property
participating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time perod.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of HOTEL. Through the UltraSwitch Interface, HOTEL
will permit access to all Reservation Providers utilizing the UltraSwitch and
will permit all such Reservation Providers the full and complete right, subject
to any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO
may undertake to modify the operation or enhance the capability of the
UltraSwitch. In such event, THISCO will provide notice to HOTEL of such
enhancement at least 60 days prior to such modification or enhancement and will
make such adjustments and modifications to THISCO's system, at THISCO's sole
expense, as are reasonable and necessary to maintain the Interface with HOTEL.
HOTEL agrees to cooperate with THISCO in modifying and enhancing the
UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO
modifies or enhances the UltraSwitch and, as a result, it becomes necessary for
HOTEL to modify its reservation system, HOTEL shall have the option to
terminate this Agreement by notice to THISCO within thirty (30) days after
receipt of the notice provided in Section 2.3 if the resulting cost to HOTEL
for the particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the
UltraSwitch Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each
calendar year of this Agreement, HOTEL shall pay THISCO a reservation fee for
at least [*] Net Reservations, whether or not such Net Reservations
actually occur.
*Confidential Treatment Requested
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3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly
for all fees, costs, and additional costs incurred by THISCO that are to be
paid by HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon
receipt and, in any event, within 30 days of each invoice date. In the event
an invoice (all or a portion of which has not been materially disputed) is not
paid within 30 days of mailing, HOTEL agrees to pay interest on all undisputed
amounts over 30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at least 30
days prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of
Default (as hereinafter defined) by THISCO and the failure of THISCO to cure
such default after notice and opportunity to cure as provided by Section 6.3
hereof, HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of
Default (as hereinafter defined) by HOTEL and the failure of HOTEL to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
THISCO may terminate this
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of
the following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may immediately terminate this Agreement upon written notice
to the other party unless the Defaulting Party immediately
gives the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
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6.2 Force Majeure. It shall not constitute a default if an Event
of Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of
Default, the non-defaulting party shall give written notice to the defaulting
party specifying the alleged default. The defaulting party shall then be
entitled to 10 days after receipt of such notice within which to cure any
monetary default and 30 days within which to cure any non- monetary default.
If the party entitled to cure the Event of Default does not cure the Event of
Default within the cure period specified above, then such party shall be deemed
to be in default of this Agreement. Any such default shall not relieve the
defaulting party from any of its obligations hereunder, and in the event of a
default, the non-defaulting party hereunder shall, except as provided in this
Agreement, be entitled to whatever remedies at law or in equity are available
to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confidential and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that
it shall have no access to and shall not use the UltraSwitch software or
related property, other than as specifically provided for in this Agreement,
and that such information is confidential and proprietary property of THISCO.
Any use of the UltraSwitch name by HOTEL is subject to prior written approval
of THISCO provided HOTEL may describe the Interface contemplated by this
Agreement in its franchise offering circular and other materials as required by
state or federal law. The provisions hereof shall remain binding and in force
and effect forever, notwithstanding the expiration or termination of this
Agreement at any time.
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8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees
to indemnify and hold harmless THISCO and THISCO's affiliates and their
directors, officers, employees and other stockholders, from and against any
losses, claims, liabilities, damages or expenses (including reasonable
attorney's fees) occurring on account of HOTEL's fault and through no fault of
THISCO ("THISCO's Losses"). THISCO agrees to indemnify and hold harmless
HOTEL, and HOTEL's affiliates and their directors, officers, employees and
stockholders, from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) ("HOTEL's Losses") occurring on
account of THISCO's fault and through no fault of HOTEL. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party
shall give prompt notice thereof to the indemnifying party and the indemnifying
party shall be entitled to participate therein or, to the extent that it shall
wish, assume the defense thereof with its own counsel. If the indemnifying
party elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. The parties agree to cooperate to the fullest extent
possible in connection with any claim for which indemnification is or may be
sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or
liable for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to
the other for any consequential damages proximately caused or resulting from
any breach of this Agreement
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or arising out of the performance of this Agreement, and each party hereby
expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to HOTEL of such provision(s) and HOTEL
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities
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independently contracting with each other at arms length. THISCO shall not be
deemed by this Agreement to be granting a license to HOTEL, with respect to
UltraSwitch or any software or service mark related thereto, or otherwise, this
being a contract for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or
HOTEL without the prior written consent of the non-assigning party, and such
consent shall not be unreasonably withheld or delayed provided that HOTEL may
assign this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company Utell International Ltd.
3811 Turtle Creek Blvd., Suite 1100 2 Kew Bridge Road
Dallas, Texas 75219 Brentford, London TW8 OJF
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) 011 44 81 490 5855
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and HOTEL with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the legal representatives, successors and
duly authorized assigns of each party whether resulting from merger,
acquisition, reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as contemplated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished
the Intellectual Property resulting in the Claim shall be deemed to be in
default of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 10th day of February, 1996.
THE HOTEL INDUSTRY SWITCH UTELL INTERNATIONAL LTD.
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ MIKE HOPE
------------------------------- ------------------------------
John F. Davis, III (name) Mike Hope
President ----------------------------
(title) President
---------------------------
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EXHIBIT 10.46
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY
SWITCH COMPANY, a Delaware corporation (hereinafter "THISCO"), and MARRIOTT
INTERNATIONAL, INC. (hereinafter "Hotel"), to be effective the 31st day of
December, 1995 (the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO
to provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property
participating in UltraSwitch.
(ii) Interface. Interface is the hardware and software
and attendant technical support required to produce computer
to computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator
of a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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(v) Net Reservations. Net Reservations within a
particular time period equals the number of reservations
processed through the UltraSwitch system within such time
period, less the number of reservations as to which notice of
cancellation in the UltraSwitch system is received by the
UltraSwitch system within such time period.
(vi) Status Change. A Status Change is a message
indicating that either the availability or the rate of a room
type has changed for a single date in a single property.
(vii) Hotel. "Hotel" is Marriott International, Inc. and
includes its subsidiaries and affiliates under its effective
ownership or control.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of Hotel and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of Hotel set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and Hotel. Subject to Section 6.2 hereof, delays caused
by Hotel, Reservation Providers, UltraSwitch Users or other third parties
(which delays are not the fault of THISCO), the UltraSwitch Interface will
provide room confirmation numbers for each booking at an UltraSwitch User's
property made through a Reservation Provider within an average determined over
each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
*Confidential Treatment Requested
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Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process Hotel's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2. Duties of Hotel. Through the UltraSwitch Interface, Hotel
will, subject to other agreements Hotel may have with Reservation Providers,
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between Hotel and the Reservation Providers, to reserve and
cancel rooms authorized for sale by Hotel and receive a confirmation
acknowledgment of any such transaction. All information provided by Hotel with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of Hotel reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO
may undertake to modify the operation or enhance the capability of the
UltraSwitch. In such event, THISCO will provide notice to Hotel of such
enhancement at least 60 days prior to such modification or enhancement and will
make such adjustments and modifications to THISCO's system, at THISCO's sole
expense, as are reasonable and necessary to maintain the Interface with Hotel.
Subject to Section 2.4 and 5.1 hereof, Hotel agrees to cooperate with THISCO in
modifying and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event Hotel
modifies its central reservation system or, pursuant to an agreement between
Hotel and a Reservation Provider, there is a modification of Hotel's or the
Reservation Provider's system, and, in either case, such modification requires
THISCO to modify the Interface, Hotel shall pay THISCO its reasonable costs and
reasonable consulting rate consistent with industry standards and all
reasonable expenses incurred as a result of the modification. In the event
THISCO modifies or enhances the UltraSwitch and, as a result, it becomes
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necessary for Hotel to modify its reservation system, Hotel shall have the
option to terminate this Agreement by notice to THISCO within thirty (30) days
after receipt of the notice provided in Section 2.3 if the resulting cost to
Hotel for the particular modification exceeds $10,000.00. In the event of a
termination as provided by the preceding sentence, Hotel shall have no
liability for the Guaranteed Annual Minimum Reservation Fee.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the
UltraSwitch Interface, Hotel shall pay THISCO as follows:
For the first [*] Net Reservations during each calendar
year [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
For all Net Reservations in excess of [*] Net
Reservations during each calendar year, [*] per Net
Reservation;
For the first [*] Status Changes during each calendar
year, [*] for each Status Change;
For the next [*] Status Changes during each calendar
year, [*] for each Status Change;
For all Status Changes in excess of [*] during each
calendar year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations
*Confidential Treatment Requested
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exceeds [*] during a billing period, all Status Changes in excess of the [*]
ratio shall be [*]
No more than once per year, THISCO may increase the Reservation and Status
Change Fees by an amount equal to the annual increase in the U.S. Consumer
Price Index for all Urban Consumers, U.S. City Average, for All Items to offset
cost increases of THISCO's operations provided that such increase shall not
take effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each
calendar year of this Agreement, Hotel shall pay THISCO a reservation fee for
at least [*] Net Reservations, whether or not such Net Reservations actually
occur.
3.3 Payment of Fees and Costs. THISCO will invoice Hotel monthly
for all fees, costs, and additional costs incurred by THISCO that are to be
paid by Hotel pursuant to this Agreement. Hotel shall pay each invoice upon
receipt and, in any event, within 30 days of each invoice date. In the event
an invoice (all or a portion of which has not been materially disputed) is not
paid within 30 days of mailing, Hotel agrees to pay interest on all undisputed
amounts over 30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. Hotel shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) for all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational in an amount which shall not exceed
$1,500.00 per month. Hotel shall provide all necessary modems to
specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) month after the effective date. This Agreement shall
be automatically renewed and extended for additional 12 month periods unless,
at least 30 days prior to the expiration of the initial term or at
*Confidential Treatment Requested
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least 30 days prior to the expiration of any additional 12 month period, either
party provides written notice to the other of its decision not to renew and
extend.
5.0 TERMINATION
5.1 Termination by Hotel. Upon the occurrence of an Event of
Default (as hereinafter defined) by THISCO and the failure of THISCO to cure
such default after notice and opportunity to cure as provided by Section 6.3
hereof, Hotel may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of
Default (as hereinafter defined) by Hotel and the failure of Hotel to cure such
default after notice and opportunity to cure as provided by Section 6.3 hereof,
THISCO may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of
the following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to perform each and every
material provision of this Agreement;
(iii) The failure of the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or Hotel (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as
a going concern, or ceases business operations for reasons
other than a strike and other than assignment as allowed by
this Agreement, then the other party (the "Insecure Party")
may
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immediately terminate this Agreement upon written notice to
the other party unless the Defaulting Party immediately gives
the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event
of Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than 30 consecutive days,
either party may terminate this Agreement by providing notice as required
herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of
Default, the non-defaulting party shall give written notice to the defaulting
party specifying the alleged default. The defaulting party shall then be
entitled to 10 days after receipt of such notice within which to cure any
monetary default and 30 days within which to cure any non- monetary default.
If the party entitled to cure the Event of Default does not cure the Event of
Default within the cure period specified above, then such party shall be deemed
to be in default of this Agreement. Any such default shall not relieve the
defaulting party from any of its obligations hereunder, and in the event of a
default, the non-defaulting party hereunder shall, except as provided in this
Agreement, be entitled to whatever remedies at law or in equity are available
to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement,
it is acknowledged by Hotel and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confidential and proprietary
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information shall be marked or otherwise identified as such and shall be
treated as confidential and proprietary subject only to disclosure where
required by law. Such designation may be removed by each party making the
designation. Except as is necessary in connection with the performance of this
Agreement, information regarding the reservations of Hotel processed through
the UltraSwitch, including any statistics or other information derived from
Hotel reservations, shall be treated as confidential whether or not so marked
or otherwise identified as confidential. Hotel acknowledges that it shall have
no access to and shall not use the UltraSwitch software or related property,
other than as specifically provided for in this Agreement, and that such
information is confidential and proprietary property of THISCO. Any use of the
UltraSwitch name by Hotel is subject to prior written approval of THISCO
provided Hotel may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Hotel agrees
to indemnify and hold harmless THISCO and THISCO's affiliates and their
directors, officers, employees and other stockholders, from and against any
losses, claims, liabilities, damages or expenses (including reasonable
attorney's fees) occurring on account of Hotel's fault and through no fault of
THISCO ("THISCO's Losses"). THISCO agrees to indemnify and hold harmless
Hotel, and Hotel's affiliates and their directors, officers, employees and
stockholders, from and against any losses, claims, liabilities, damages or
expenses (including reasonable attorney's fees) ("Hotel's Losses") occurring on
account of THISCO's fault and through no fault of Hotel. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could result in any
indemnification claim pursuant to this Section 8.1, such indemnified party
shall give prompt notice thereof to the indemnifying party and the indemnifying
party shall be entitled to participate therein or, to the extent that it shall
wish, assume the defense thereof with its own counsel. If the indemnifying
party elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party for any fees of
other counsel or other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation and preparation, unless representation of both
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parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The parties agree to cooperate to the
fullest extent possible in connection with any claim for which indemnification
is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or
liable for any inaccuracies in the data base or the information processed by or
through the UltraSwitch nor shall it have any liability for any act or failure
to act except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to
the other for any consequential damages proximately caused or resulting from
any breach of this Agreement or arising out of the performance of this
Agreement, and each party hereby expressly waives such damages.
9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from Hotel requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein,
THISCO shall promptly provide notice to Hotel of such provision(s) and Hotel
shall have the right to amend this Agreement to include the effected
provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out
of or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon
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the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. There shall be a panel of three arbitrators. Each party
shall select one arbitrator and the two arbitrators selected shall select a
third neutral arbitrator. All reasonable and necessary costs and fees
(including attorney's fees) incurred in connection with the arbitration shall
be borne by the losing party or assessed in the award as otherwise deemed
appropriate except travel, food and lodging expenses shall be borne by the
party incurring the same. If the demand for arbitration is initiated by Hotel,
venue of the arbitration proceedings shall be determined by THISCO. If the
demand for arbitration is initiated by THISCO, venue of the arbitration
proceedings shall be determined by Hotel.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to a direct link interface and that
each party may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to Hotel, with respect to UltraSwitch or any software or service mark
related thereto, or otherwise, this being a contract for the use and rendering
of services only.
10.05 Assignment. Except for the right to assign this Agreement to a
subsidiary or affiliate under the effective control of the assigning party
(with notice of such assignment being promptly given to the other party
hereto), this Agreement is not assignable by THISCO or Hotel without the prior
written consent of the non-assigning party, and such consent shall not be
unreasonably withheld or delayed provided that Hotel may assign this Agreement
in connection with the sale of its reservation system or franchise system and
either party may assign this Agreement without consent in the event of a
merger, consolidation, or sale of substantially all of its assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
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If to If to
THISCO: HOTEL:
The Hotel Industry Switch Company MARRIOTT INTERNATIONAL, INC.
3811 Turtle Creek Blvd., Suite 1100 One Marriott Drive, Dept. 939.07
Dallas, Texas 75219 Washington, D.C. 20058
Attention: John F. Davis, III
If by facsimile/telecopy to: If by facsimile/telecopy to:
(214) 528-5675) (301) 380-6094
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant
to the laws of the State of Texas without reference to its conflict of laws
principles.
10.08 Entire Agreement. This Agreement and the exhibits attached
hereto constitute the entire agreement between THISCO and Hotel with respect to
the implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the legal representatives, successors and
duly authorized assigns of each party whether resulting from merger,
acquisition, reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
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10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as contemplated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished
the Intellectual Property resulting in the Claim shall be deemed to be in
default of this Agreement, and in such event, Sections 5.2 and 6.3 of this
Agreement shall control; provided, however, that the 15 day period specified
above shall be deemed to be the applicable cure period under Section 6.3, and
once that 15 day period has expired without a Correction having occurred, the
applicable cure period under Section 6.3 shall be deemed to have expired.
Without limiting Article 8 of this Agreement, the party who furnished the
Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or Hotel's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
10.12 Good Faith and Due Diligence. Each party to this Agreement
shall perform its obligations in good faith and with due diligence.
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<PAGE> 13
AGREED to this 31st day of December, 1995.
THE HOTEL INDUSTRY SWITCH MARRIOTT INTERNATIONAL, INC.
COMPANY
By: /s/ John F. Davis, III By: /s/ Bruce Wolff
----------------------------- ----------------------------------
John F. Davis, III (name) Bruce Wolff
President --------------------------------
(title) V.P. Distribution Sales and
-------------------------------
Marketing
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<PAGE> 1
EXHIBIT 10.47
ULTRASWITCH USER AGREEMENT
This Agreement is entered into by and between THE HOTEL INDUSTRY SWITCH
COMPANY, a Delaware corporation (hereinafter "THISCO"), and FORTE HOTELS
(hereinafter "HOTEL"), to be effective the 23rd day of February, 1996
(the "Agreement").
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions
shall apply:
(i) UltraSwitch. The UltraSwitch is a service of THISCO to
provide an Interface (as hereinafter defined) between
Reservation Providers (as hereinafter defined) and hotel
reservation systems with the capability to provide immediate
room confirmation numbers for each hotel property
participating in UltraSwitch.
(ii) Interface. Interface is the hardware and software and
attendant technical support required to produce computer to
computer communications between a Reservation Provider (as
hereinafter defined) and an UltraSwitch User (as hereinafter
defined).
(iii) UltraSwitch User. An UltraSwitch User is an operator of
a hotel reservation system that has executed an UltraSwitch
User agreement.
(iv) Reservation Provider. A Reservation Provider is any
person or entity with the present or future capability to
connect with the UltraSwitch for the purpose of making
reservations with an UltraSwitch User.
(v) Net Reservations. Net Reservations within a particular
time period equals the number of reservations processed
through the UltraSwitch system within such time period, less
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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the number of reservations as to which notice of cancellation
in the UltraSwitch system is received by the UltraSwitch
system within such time period.
(vi) Status Change. A Status Change is a message indicating
that either the availability or the rate of a room type has
changed for a single date in a single property.
2.0 THE ULTRASWITCH SYSTEM
2.1 Duties of THISCO. THISCO shall operate and maintain the
UltraSwitch Interface for the use and benefit of HOTEL and other UltraSwitch
Users meeting or exceeding the UltraSwitch Specifications. Subject to the
duties of HOTEL set forth in Section 2.2 below, THISCO will provide all
reasonable and necessary technical support, hardware and software, and
modifications to the UltraSwitch system to maintain an Interface between
Reservation Providers and HOTEL. Subject to Section 6.2 hereof, delays caused
by Reservation Providers, UltraSwitch Users or other third parties, the
UltraSwitch Interface will provide room confirmation numbers for each booking
at an UltraSwitch User's property made through a Reservation Provider within an
average determined over each calendar month of:
a. [*] seconds for UltraSwitch Users located within the
contiguous 48 United States and District of Columbia; and
b. [*] seconds for UltraSwitch Users located elsewhere.
THISCO shall not be responsible for but will use its best efforts to require
UltraSwitch Users to return response messages within the Response Time
Requirements set forth in subpart (a) and (b) above.
Subject to Section 6.2 hereof, the UltraSwitch will be available,
operational and fully functional to process HOTEL's customer reservations 99%
of the time each calendar month. Subject to Section 6.2 hereof, THISCO agrees
to correct all failures or interruptions of the UltraSwitch and repair or
replace all UltraSwitch parts causing or contributing to failure or
interruption within 72 hours of the failure or interruption at THISCO's sole
cost and expense.
*Confidential Treatment Requested
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THISCO will not discriminate among UltraSwitch Users in processing
reservations through the UltraSwitch.
2.2 Duties of HOTEL. Through the UltraSwitch Interface, HOTEL will
permit access to all Reservation Providers utilizing the UltraSwitch and will
permit all such Reservation Providers the full and complete right, subject to
any agreement between HOTEL and the Reservation Providers, to reserve and
cancel rooms authorized for sale by HOTEL and receive a confirmation
acknowledgment of any such transaction. All information provided by HOTEL with
respect to rooms and facilities shall be complete and accurate and shall be
consistent with and inclusive of all the information provided and rates
available to a direct caller of HOTEL reservation system to the fullest extent
each Reservation Provider data base will permit.
2.3 Enhancement or Modification of the UltraSwitch System. THISCO may
undertake to modify the operation or enhance the capability of the UltraSwitch.
In such event, THISCO will provide notice to HOTEL of such enhancement at least
60 days prior to such modification or enhancement and will make such
adjustments and modifications to THISCO's system, at THISCO's sole expense, as
are reasonable and necessary to maintain the Interface with HOTEL. HOTEL agrees
to cooperate with THISCO in modifying and enhancing the UltraSwitch.
2.4 Modification of UltraSwitch User System. In the event HOTEL
modifies its central reservation system, or modification of its central
reservation system is required for the implementation, operation, modification
or enhancement of the UltraSwitch, HOTEL shall pay all necessary costs
associated with such modification to its system. In the event HOTEL modifies
its central reservation system and such modification requires THISCO to modify
the Interface, HOTEL shall pay THISCO its standard consulting rate and all
expenses incurred as a result of the modification. In the event THISCO modifies
or enhances the UltraSwitch and, as a result, it becomes necessary for HOTEL to
modify its reservation system, HOTEL shall have the option to terminate this
Agreement by notice to THISCO within thirty (30) days after receipt of the
notice provided in Section 2.3 if the resulting cost to HOTEL for the
particular modification exceeds $10,000.00.
3.0 FEES AND COSTS
3.1 Reservation and Status Change Fees. For the use of the
UltraSwitch Interface, HOTEL shall pay THISCO as follows:
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For the first [*] Net Reservations during each calendar year [*]
per Net Reservation;
For the next [*] Net Reservations during each calendar year, [*]
per Net Reservation;
For the next [*] Net Reservations during each calendar year, [*]
per Net Reservation;
For all Net Reservations in excess of [*] Net Reservations during
each calendar year, [*] per Net Reservation;
For the first [*] Status Changes during each calendar year, [*]
for each Status Change;
For the first [*] Status Changes during each calendar year, [*] for
each Status Change;
For all Status Changes in excess of [*] during each calendar
year, [*] for each Status Change.
Notwithstanding the above-stated provisions, in the event the ratio of Status
Changes to Net Reservations exceeds [*] during a billing period, there shall
be no charge for Status Changes provided, however, in the event the ratio of
Status Changes to Net Reservations exceeds [*] during a billing period, all
Status Changes in excess of the [*] ratio shall be [*].
THISCO may increase the Reservation and Status Change Fees by an amount equal
to the annual increase in the U.S. Consumer Price Index to offset cost
increases of THISCO's operations provided that such increase shall not take
effect until the expiration of 60 days after notice of the increase.
3.2 Guaranteed Annual Minimum Reservation Fee. During each calendar
year of this Agreement, HOTEL shall pay THISCO a reservation fee for at least
[*] Net Reservations, whether or not such Net Reservations actually occur.
*Confidential Treatment Requested
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<PAGE> 5
3.3 Payment of Fees and Costs. THISCO will invoice HOTEL monthly
for all fees, costs, and additional costs incurred by THISCO that are to be
paid by HOTEL pursuant to this Agreement. HOTEL shall pay each invoice upon
receipt and, in any event, within 30 days of each invoice date. In the event an
invoice (all or a portion of which has not been materially disputed) is not
paid within 30 days of mailing, HOTEL agrees to pay interest on all undisputed
amounts over 30 days old at an annual rate of 15% or 1 1/4% per month.
3.4 Additional Costs. HOTEL shall pay its pro rata share of
communication costs (based upon the number of UltraSwitch Users for that month
for all lease lines, back up and dial up lines between the UltraSwitch User and
the UltraSwitch) or all UltraSwitch Users who are operational and, with
respect to those UltraSwitch Users who are not yet operational, for a 60 day
period prior to becoming operational. HOTEL shall provide all necessary modems
to specifications established by THISCO for connection with the UltraSwitch.
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall be
effective on the date first stated above and shall expire on the last day of
the seventy second (72nd) after the effective date. This Agreement shall be
automatically renewed and extended for additional 12 month periods unless, at
least 30 days prior to the expiration of the initial term or at least 30 days
prior to the expiration of any additional 12 month period, either party
provides written notice to the other of its decision not to renew and extend.
5.0 TERMINATION
5.1 Termination by HOTEL. Upon the occurrence of an Event of
Default (as hereinafter defined) by THISCO and the failure of THISCO to cure
such default after notice and opportunity to cure as provided by Section 6.3
hereof, HOTEL may terminate this Agreement at any time within 30 days after the
expiration of the cure period provided in Section 6.3.
5.2 Termination by THISCO. Upon the occurrence of an Event of
Default (as hereinafter defined) by HOTEL and the failure of HOTEL to cure
such default after notice and opportunity to cure as provided by Section 6.3
hereof, THISCO may terminated this
*Confidential Treatment Requested
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Agreement at any time within 30 days after the expiration of the cure period
provided in Section 6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the
time required;
(ii) The refusal or failure to diligently and in good faith
perform each and every material provision of this Agreement;
(iii) The failure to the UltraSwitch to perform materially in
accordance with its technical requirements;
(iv) If either THISCO or HOTEL (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation as a
going concern, or ceases business operations for reasons other
than a strike and other than assignment as allowed by this
Agreement, then the other party (the "Insecure Party") may
immediately terminate this Agreement upon written notice to the
other party unless the Defaulting Party immediately gives the
Insecure Party adequate assurance of the future performance of
this Agreement. If bankruptcy proceedings are commenced with
respect to the Defaulting Party, and if this Agreement has not
otherwise terminated, then the Insecure Party may suspend all
further performance of this Agreement until the Defaulting Party
assumes or rejects this Agreement pursuant to Section 365 of the
Bankruptcy Code or any similar or successor provision. Any such
suspension of further performance by the Insecure Party pending
the Defaulting Party's assumption or rejection will not be a
breach of this Agreement.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is
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caused by or results from acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages or delays,
utility failures, mechanical defects, or other events beyond the control of the
defaulting party. However, if an Event of Default results from any such
occurrence and continues for more than 30 consecutive days, either party may
terminate this Agreement by providing notice as required herein.
6.3 Occurrence of Default. Upon the occurrence of an Event of Default, the
non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
10 days after receipt of such notice within which to cure any monetary default
and 30 days within which to cure any non-monetary default. If the party
entitled to cure the Event of Default does not cure the Event of Default within
the cure period specified above, then such party shall be deemed to be in
default of this Agreement. Any such default shall not relieve the defaulting
party from any of its obligations hereunder, and in the event of a default, the
non-defaulting party hereunder shall, except as provided in this Agreement, be
entitled to whatever remedies at law or in equity are available to it.
7.0 CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by HOTEL and THISCO that each will receive confidential and
proprietary information which is the sole and exclusive property of the other
party. All such confidential and proprietary information shall be marked or
otherwise identified as such and shall be treated as confidential and
proprietary subject only to disclosure where required by law. Such designation
may be removed by each party making the designation. HOTEL acknowledges that it
shall have no access to and shall not use the UltraSwitch software or related
property, other than as specifically provided for in this Agreement, and that
such information is confidential and proprietary property of THISCO. Any use of
the UltraSwitch name by HOTEL is subject to prior written approval of THISCO
provided HOTEL may describe the Interface contemplated by this Agreement in its
franchise offering circular and other materials as required by state or federal
law. The provisions hereof shall remain binding and in force and effect
forever, notwithstanding the expiration or termination of this Agreement at any
time.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. HOTEL agrees to
indemnify
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and hold harmless THISCO and THISCO's affiliates and their directors, officers,
employees and other stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's fees)
occurring on account of HOTEL's fault and through no fault of THISCO ("THISCO's
Losses"). THISCO agrees to indemnify and hold harmless HOTEL, and HOTEL's
affiliates and their directors, officers, employees and stockholders, from and
against any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) ("HOTEL's Losses") occurring on account of THISCO's
fault and through no fault of HOTEL. Promptly after receipt by an indemnified
party of notice of the commencement of any action or the presentation or other
assertion of any claim which could result in any indemnification claim
pursuant to this Section 8.1, such indemnified party shall give prompt notice
thereof to the indemnifying party and the indemnifying party shall be entitled
to participate therein or, to the extent that it shall wish, assume the defense
thereof with its own counsel. If the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall not be liable
to the indemnified party for any fees of other counsel or other expenses, in
each case subsequently incurred by such indemnified party in connection with
the defense thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
parties agree to cooperate to the fullest extent possible in connection with
any claim for which indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. THISCO shall not be responsible or liable for
any inaccuracies in the data base or the information processed by or through
the UltraSwitch nor shall it have any liability for any act or failure to act
except as expressly set forth herein, except gross negligence or willful
misconduct. All warranties express or implied, including without limitation,
any warranty of fitness for a particular purpose, merchantability, good and
workmanlike product or service or otherwise, are disclaimed and waived.
9.2 No Consequential Damages. Neither party shall be liable to the other
for any consequential damages proximately caused or resulting from any breach
of this Agreement or arising out of the performance of this Agreement, and each
party hereby expressly waives such damages.
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9.3 Right to Repair. Notwithstanding any other provision of this
Agreement, the only obligation of THISCO in the event of a material failure in
the operation or performance of the UltraSwitch shall be to repair the system
within 24 hours of notice from HOTEL requesting such repair.
10. MISCELLANEOUS
10.01 Other UltraSwitch User Agreements. In the event any other
UltraSwitch User Agreement shall contain provisions regarding Fees and Costs
(Article 3 hereof), Term (Article 4 hereof), Termination (Article 5 hereof),
Indemnification (Article 8 hereof), or Disclaimer of Warranties (Article 9
hereof) more favorable than those referenced provisions contained herein, THISCO
shall promptly provide notice to HOTEL of such provision(s) and HOTEL shall
have the right to amend this Agreement to include the effected provisions.
10.02 Arbitration of Disputes. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate except travel, food and lodging
expenses shall be borne by the party incurring the same. If the demand for
arbitration is initiated by HOTEL, venue of the arbitration proceedings shall
be determined by THISCO. If the demand for arbitration is initiated by THISCO,
venue of the arbitration proceedings shall be determined by HOTEL.
10.03 Non-Exclusive Agreement. Each party acknowledges that this is not an
exclusive agreement with respect to a direct link interface and that each party
may contract with other parties providing same or similar services.
10.04 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length. THISCO shall not be deemed by this Agreement to be granting a
license to HOTEL, with respect to UltraSwitch or any
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software or service mark related thereto, or otherwise, this being a contract
for the use and rendering of services only.
10.05 Assignment. This Agreement is not assignable by THISCO or HOTEL
without the prior written consent of the non-assigning party, and such consent
shall not be unreasonably withheld or delayed provided that HOTEL may assign
this Agreement in connection with the sale of its reservation system or
franchise system and either party may assign this Agreement without consent in
the event of a merger, consolidation, or sale of substantially all of its
assets.
10.06 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to
THISCO:
The Hotel Industry Switch Company
3811 Turtle Creek Blvd., Suite 1100
Dallas, Texas 75219
Attention: John F. Davis, III
If by facsimile/telecopy to: (214) 528-5675)
If to
HOTEL:
Forte Hotels
1973 Friendship Drive
El Cajon, California 92020
If by facsimile/telecopy to: (619) 562-0901
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
10.07 Controlling Law. This Agreement shall be interpreted pursuant to the
laws of the State of Texas without reference to its conflict of laws principles.
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10.08 Entire Agreement. This Agreement and the exhibits attached hereto
constitute the entire agreement between THISCO and HOTEL with respect to the
implementation and operation of the UltraSwitch system and supersedes and
replaces any and all other agreements and representations, verbal or written,
with respect to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by either party
with respect to the subject matter of this Agreement which are not contained in
this Agreement.
10.09 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the terms
and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those persons and entities as required by law or as permitted
by the other party hereto. The parties may, however, disclose the existence of
this Agreement to any person or entity.
10.11 Software and Intellectual Property. Each of the parties hereto
represents and warrants to the other that, with respect to all software and
other intellectual property in connection with the operation of the Interface
furnished or required to be furnished pursuant to this Agreement (collectively,
the "Intellectual Property"), each either owns the Intellectual Property
furnished by it or is fully authorized to deliver the Intellectual Property and
to allow the Intellectual Property to be used in connection with the Interface,
as contemplated by this Agreement. Should any claim be raised by any third
party that the use of any of the Intellectual Property or the delivery of any
of the Intellectual Property in connection with this agreement constitutes
infringement of any patent, copyright, license or other property right (a
"Claim"), the party furnishing such Intellectual Property shall, at its
expense, defend any such Claim in accordance with the provisions of Section 8.1
of this Agreement. Should either party be temporarily or permanently enjoined
from using any of the Intellectual Property as a result of any Claim, the other
party, at its option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or replace or
modify the offending Intellectual Property so that its use becomes
non-infringing, within 15 days of the date on which it receives notice of the
claim (either such corrective action being referred to herein as a
"Correction"). If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to be in default
of this Agreement, and in such event, Sections 5.2 and 6.3 of
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this Agreement shall control; provided, however, that the 15 day period
specified above shall be deemed to be the applicable cure period under Section
6.3, and once that 15 day period has expired without a Correction having
occurred, the applicable cure period under Section 6.3 shall be deemed to have
expired. Without limiting Article 8 of this Agreement, the party who furnished
the Intellectual Property resulting in the Claim shall also be obligated to
indemnify the other party for any of its losses (such losses being THISCO's
Losses or HOTEL's Losses, as the case may be, as defined in section 8.1 hereof)
in connection with any Claim for which a Correction is not made within such 15
day period, in accordance with Article 8.
AGREED to this 23rd day of February, 1996
THE HOTEL INDUSTRY SWITCH FORTE HOTELS
COMPANY
By: /s/ JOHN F. DAVIS, III By: /s/ WILLIAM J. HANLEY
---------------------------------- ---------------------------
John F. Davis, III (name) William J. Hanley
President ---------------------------
(title) Exec Vice President
---------------------------
Sales & Marketing
-12-
<PAGE> 1
EXHIBIT 10.48
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc. and
the below named Participant on the following terms and conditions:
1. Property Information Database. Pegasus will provide Participant with
the ability to create a digital database of Participant's properties which is
(i) capable of being accessed by distribution systems with whom Pegasus
contracts and (ii) where functionality exists, capable of permitting the
accessor of the database to make, amend and cancel reservations with
Participant. Participant shall be solely responsible for the creation and
editing of the property database pursuant to Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and develop
interfaces with distribution systems to access Participant's database.
Participant may elect to exclude certain distribution systems access to its
database.
3. Distribution Systems Interface. For each distribution system, Pegasus
will create an operable interface providing access to Participant's database
and maintain the interface during the term of the Distribution Agreement. All
updates and edits of the database shall be accessible by the distribution
systems within two (2) business days of receipt by Pegasus.
4. Fees.
(a) For the services provided by Pegasus as set forth herein,
Participant shall pay to Pegasus the fees set forth on Schedule
A.
(b) For each hypertext link from Participant's database to a site
with whom Pegasus has not contracted to receive Participant's
database, Participant shall pay Pegasus a fee of [*] per year
(c) For each Net Reservation originating with a distribution system
with whom Pegasus contracts, Participant shall pay to Pegasus a
fee of [*]. Net Reservations within a particular time period
equal the number of reservations made by an accessor of a
distribution system exhibiting Participant's database within
such time period less the number of reservations to which notice
of cancellation is received by the distribution system within
such time period.
(d) Pegasus will invoice Participant for all fees as set forth
herein and as provided on Schedule A including any taxes
applicable to such fees and Participant agrees to pay each
invoice upon receipt. Each invoice shall be past due and it
shall be a breach of this Agreement if it is not paid within
thirty (30) days after the date of the invoice. All payments to
Pegasus shall be made in U.S. Dollars. Pegasus may, once each
year, increase the fees set forth in (a), (b) and (c) above up
to 10% of the then-existing fee. Any fee changes resulting from
an increase in the services or number of properties in the
database will be invoiced upon notice of such increase or at the
next scheduled invoice, at Pegasus' option.
5. Term. The initial term of this Agreement shall be for three (3) years
from the date hereof provided that the Agreement shall be automatically renewed
and extended for additional one (1) year terms thereafter unless, at least
sixty (60) days prior to expiration of the initial three (3) year term or the
expiration of any additional one (1) year term, either party hereto shall give
notice of its intent not to renew and extend this Agreement.
6. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus may not
distribute or allow access to any of the information in any manner other than
pursuant to this Agreement. Participant shall be solely and exclusively
responsible for the protection of any and all of its intellectual property
including, but not limited to, the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service marks
or copyrights.
7. Disclaimer, Limitation of Liabilities and Risk of Internet Usage.
PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION, (ii) ANY ACT OR FAILURE TO ACT WITH
RESPECT TO THE PUBLICATION OF THE INFORMATION ON THE INTERNET OR CREATION OR
FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN,
(iii)
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
OP
Page 2
ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF A COMPUTER
OPERATOR'$ OR DISTRIBUTION SYSTEM'S ACCESS TO PARTICIPANTS RESERVATION SYSTEM
AND/OR THE MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A
CREDIT CARD OR OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM
RESULTING FROM ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE
INTERNET OR A DISTRIBUTION SYSTEM, EXCEPT TO THE EXTENT RESULTING FROM
PEGASUS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT
OR SERVICE OR OTHER WISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY PARTICIPANT.
PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS TO ITS DATABASE AND
RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA ANY DISTRIBUTION
SYSTEM IS AT PARTICIPANT'S OWN RISK. Pegasus shall not be responsible for the
order, completeness or format of Participants database being published by
distribution systems. Participant acknowledges and agrees that the Internet is
a communication medium over which Pegasus has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if
at any time during the term of this Agreement the cost of access to the
Internet increases or there is imposed a fee or cost for access to or use of
the Internet communication lines, or there is imposed any law, governmental
ruling, or regulation the result of which increases the cost of access to or
usage of the Internet or otherwise makes it impractical, in Pegasus' sole
discretion, to continue to perform this Agreement, Pegasus may, upon notice to
Participant, immediately terminate this Agreement without such action
constituting an event of default Pegasus shall not be liable for any breach of
this Agreement resulting from an act of God, accidents, power or
telecommunication outages or delays, mechanical defects or other events beyond
its control.
8. Breach. In the event of a breach of this Agreement, the non-breaching
party may terminate this Agreement after providing notice to the other party of
such breach and the failure of the breaching party to cure the breach within
ten (10) days of receipt of the notice. Upon breach by Participant and failure
to timely cure Pegasus may immediately cease the distribution and/or
publication of Participants database on distribution systems.
9. Miscellaneous. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and any legal proceeding arising out of this
Agreement shall have venue in Dallas County, Texas. This Agreement shall be
binding upon and inure to the benefit of the legal representatives, successors
and assigns of the parties hereto. This Agreement contains all the provisions
of any agreement between Pegasus and Participant with respect to the creation,
maintenance and distribution of Participants database and Participant has not
relied upon any promises or representations by Pegasus with respect to the
subject matter except as set forth herein. This Agreement shall terminate and
replace any existing agreement between Participant and TravelWeb, Inc.
PEGASUS SYSTEMS, INC. PARTICIPANT: ANASAZI INC.
By: /s/ JOHN F. DAVIS, III By: /s/ VERN L. SNIDER
------------------------------- -------------------------------
John F. Davis, III Vern L. Snider
-------------------------------
President Its: Executive Vice President & CFO
-------------------------------
Date: 3/7/97 Date: 2/21/97
----------------------------- -------------------------------
<PAGE> 3
SCHEDULE A
1. Fees. Participant shall pay to Pegasus the following fees:
(i) For 1 to 25 Participant properties in the database, [*] per
Participant property per month;
(ii) For 26 to 100 Participant properties in the database, [*]
per Participant property per month;
(iii) For 101 to 200 Participant properties in the database, [*]
per Participant property per month;
(iv) For 201 to 500 Participant properties in the database, [*]
per Participant property per month;
(v) For 501 to 1,000 Participant properties in the database,
[*] per Participant property per month;
(vi) For 1,001 to 2,000 Participant properties in the database,
[*] per Participant property per month; and
(vii) For in excess of 2,000 Participant properties in the database,
[*] per Participant property per month.
The fees for this service shall be paid quarterly in advance.
April 21, 1997
*Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.49
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc. and
the below named Participant on the following terms and conditions:
1. Property Information Database. Pegasus will provide
Participant with the ability to create a digital database of Participant's
properties which is (i) capable of being accessed by distribution systems with
whom Pegasus contracts and (ii) where functionality exists, capable of
permitting the accessor of the database to make, amend and cancel reservations
with Participant. Participant shall be solely responsible for the creation and
editing of the property database pursuant to Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and develop
interfaces with distribution systems to access Participant's database.
Participant may elect to exclude certain distribution systems access to its
database.
3. Distribution Systems Interface. For each distribution system,
Pegasus will create an operable interface providing access to Participant's
database and maintain the interface during the term of the Distribution
Agreement. All updates and edits of the database shall be accessible by the
distribution systems within two (2) business days of receipt by Pegasus.
4. Fees. *With each invoice Pegasus will provide La Quinta a
breakdown of bookings per property.
(a) For the services provided by Pegasus as set forth
herein, Participant shall pay to Pegasus the fees set
forth on Schedule A.
(b) For each hypertext link from Participant's database to
a site with whom Pegasus has not contracted to receive
Participant's database, Participant shall pay Pegasus a
fee of [*] per month.
(c) For each Net Reservation originating with a distribution
system with whom Pegasus contracts, Participant shall
pay to Pegasus a fee of [*]. The term "Net
Reservations" is defined as the number of reservations
made by an accessor of a distribution system exhibiting
Participant's database within a given period less the
number of reservations to which notice of cancellation
is received by the distribution system within such time
period.
(d) Pegasus will invoice Participant for all fees as set
forth herein and as provided on Schedule A including
any taxes applicable to such fees and Participant
agrees to pay each invoice upon receipt. Each invoice
shall be past due and it shall be a breach of this
Agreement if it is not paid within thirty (30) days
after the date of the invoice. All payments to
Pegasus shall be made in U.S. Dollars. Pegasus may,
once each year after the initial year increase the fees
set forth in (a), (b) and (c) above up to 8% of the
then-existing fee. Any fee changes resulting from an
increase in the services or number of properties in the
database will be invoiced upon notice of such increase
or at the next scheduled invoice, at Pegasus' option.
5. Term. The initial term of this Agreement shall be for two (2)
years from the date hereof provided that the Agreement shall be renewed and
extended on a month to month basis, year terms thereafter unless, at least
sixty (60) days prior to expiration of the initial two (2) years or the
expiration of any additional term.
6. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus may not
distribute or allow access to any of the information in any manner other than
pursuant to this Agreement. Participant shall be solely and exclusively
responsible for the protection of any and all of its intellectual property
including, but not limited to, the inclusion of any and statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service
marks or copyrights.
7. Disclaimer, Limitation of liabilities and Risk of Internet
Usage. PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION, (ii) ANY ACT OR FAILURE TO ACT WITH
RESPECT TO THE PUBLICATION OF THE INFORMATION ON THE INTERNET OR CREATION OR
FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN,
(iii)
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF A COMPUTER
OPERATOR'S OR DISTRIBUTION SYSTEM'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM
AND/OR THE MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A
CREDIT CARD OR OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM
RESULTING FROM ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE
INTERNET OR A DISTRIBUTION SYSTEM, EXCEPT TO THE EXTENT RESULTING FROM PEGASUS'
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY PARTICIPANT.
PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS TO ITS DATABASE AND
RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA ANY DISTRIBUTION
SYSTEM IS AT PARTICIPANT'S OWN RISK. Pegasus shall not be responsible for the
order, completeness or format of Participant's database being published by
distribution systems. Participant acknowledges and agrees that the Internet is
a communication medium over which Pegasus has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if at
any time during the term of this Agreement, the cost of access to the Internet
increases or there is imposed a fee or cost for access to or use of the
Internet communication lines, or there is imposed any law, governmental ruling,
or regulation the result of which increases the cost of access to or usage of
the internet or otherwise makes it impractical, in Pegasus' sole discretion, to
continue to perform this Agreement, Pegasus may, upon notice to Participant,
immediately terminate this Agreement without such action constituting an event
of default. Pegasus shall not be liable for any breach of this Agreement
resulting from an act of God, accidents, power or telecommunication outages or
delays, mechanical defects or other events beyond its control.
8. Breach. In the event of a breach of this Agreement, the
non-breaching party may terminate this Agreement after providing notice to the
other party of such breach and the failure of the breaching party to cure the
breach within ten (10) days of receipt of the notice. Upon breach by
Participant and failure to timely cure Pegasus may immediately cease the
distribution and/or publication of Participant's database on distribution
systems.
9. Miscellaneous. This Agreement shall be interpreted in
accordance with the laws of the State of Texas and any legal proceeding arising
out of this Agreement shall have venue in Dallas County, Texas. This Agreement
shall be binding upon and inure to the benefit of the legal representatives,
successors and assigns of the parties hereto. This Agreement contains all the
provisions of any agreement between pegasus and Participant with respect to the
creation, maintenance and distribution of Participant's database and
Participant has not relied upon any promises or representations by Pegasus with
respect to the subject matter except as set forth herein. This Agreement shall
terminate and replace any existing agreement between Participant and TravelWeb,
Inc.
PEGASUS SYSTEMS, INC. PARTICIPANT: LA QUINTA INNS, INC.
By: /s/ NICHOLAS JENT By: /s/ JACKIE BURKE
--------------------------- -------------------------------
Its: V. P. Sales Its: V.P. Reservation Services
--------------------------- -------------------------------
Date: 3/4/97 Date: 3/4/97
--------------------------- -------------------------------
<PAGE> 3
SCHEDULE A
1. Fees. Participant shall pay to Pegasus the following fees:
(i) For 1 to 25 Participant properties in the database, [*] per
Participant property per month;
(ii) For 26 to 100 Participant properties in the database, [*]
per Participant property per month;
(iii) For 101 to 200 Participant properties in the database, [*]
per Participant property per month;
(iv) For 201 to 500 Participant properties in the database, [*]
per Participant property per month;
(v) For 501 to 1000 Participant properties in the database, [*]
per Participant property per month;
(vi) For 1001 to 2000 Participant properties in the database,
[*] per Participant property per month; and
(vii) For in excess of 2000 Participant properties in the database,
[*] per Participant property per month.
The fees for this service shall be paid quarterly in advance.
*Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.50
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc. and
the below named Participant on the following terms and conditions:
1. Property Information Database. Pegasus will provide Participant with
the ability to create a digital database of Participant's properties which is
(i) capable of being accessed by distribution systems with whom Pegasus
contracts and (ii) where functionality exists, capable of permitting the
accessor of the database to make, amend and cancel reservations with
Participant. Participant shall be solely responsible for the creation and
editing of the property database pursuant to Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and develop
interfaces with distribution systems to access Participant's database.
Participant may elect to exclude certain distribution systems access to its
database.
3. Distribution Systems Interface. For each distribution system, Pegasus
will create an operable interface providing access to Participant's database and
maintain the interface during the term of the Distribution Agreement. All
updates and edits of the database shall be accessible by the distribution
systems within two (2) business days of receipt by Pegasus.
4. Fees.
(a) For the services provided by Pegasus as set forth herein,
Participant shall pay to Pegasus the fees set forth on Schedule A.
(b) For each hypertext link from Participant's database to a site
with whom Pegasus has not contracted to receive Participant's database,
Participant shall pay Pegasus a fee of [*] per month.
(c) For each Net Reservation originating with a distribution system
with whom Pegasus contracts, Participant shall pay to Pegasus a fee of [*].
Net Reservations within a particular time period equal the number of
reservations made by an accessor of a distribution system exhibiting
Participant's database within such time period less the number of reservations
to which notice of cancellation is received by the distribution system within
such time period.
(d) Pegasus will invoice Participant for all fees as set forth
herein and as provided on Schedule A including any taxes applicable to such
fees and Participant agrees to pay each invoice upon receipt. Each invoice
shall be past due and it shall be a breach of this Agreement if it is not paid
within thirty (30) days after the date of the invoice. All payments to Pegasus
shall be made in U.S. Dollars. Pegasus may, once each year, increase the fees
set forth in (a), (b) and (c) above up to 10% of the then-existing fee. Any fee
changes resulting from an increase in the services or number of properties in
the database will be invoiced upon notice of such increase or at the next
scheduled invoice, at Pegasus' option.
5. Term. The initial term of this Agreement shall be for three (3) years
from the date hereof provided that the Agreement shall be automatically renewed
and extended for additional one (1) year terms thereafter unless, at least sixty
(60) days prior to expiration of the initial three (3) year term or the
expiration of any additional one (1) year term, either party hereto shall give
notice of its intent not to renew and extend this Agreement.
6. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus may not
distribute or allow access to any of the information in any manner other than
pursuant to this Agreement. Participant shall be solely and exclusively
responsible for the protection of any and all of its intellectual property
including, but not limited to, the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service marks
or copyrights.
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
7. Disclaimer, Limitation of Liabilities and Risk of Internet Usage.
PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION, (ii) ANY ACT OR FAILURE TO ACT WITH
RESPECT TO THE PUBLICATION OF THE INFORMATION ON THE INTERNET OR CREATION OR
FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN,
(iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF A COMPUTER
OPERATOR'S OR DISTRIBUTION SYSTEM'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM
AND/OR THE MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A
CREDIT CARD OR OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM
RESULTING FROM ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE
INTERNET OR A DISTRIBUTION SYSTEM, EXCEPT TO THE EXTENT RESULTING FROM PEGASUS'
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY PARTICIPANT.
PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS TO ITS DATABASE AND
RESERVATION SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA ANY DISTRIBUTION
SYSTEM IS AT PARTICIPANTS OWN RISK. Pegasus shall not be responsible for the
order, completeness or format of Participant's database being published by
distribution systems. Participant acknowledges and agrees that the Internet is
a communication medium over which Pegasus has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if at
any time during the term of this Agreement, the cost of access to the Internet
increases or there is imposed a fee or cost for access to or use of the
Internet communication lines, or there is imposed any law, governmental ruling,
or regulation the result of which increases the cost of access to or usage of
the Internet or otherwise makes it impractical, in Pegasus' sole discretion, to
continue to perform this Agreement, Pegasus may, upon notice to Participant,
immediately terminate this Agreement without such action constituting an event
of default. Pegasus shall not be liable for any breach of this Agreement
resulting from an act of God, accidents, power or telecommunication outages or
delays, mechanical defects or other events beyond its control.
8. Breach. In the event of a breach of this Agreement, the non-breaching
party may terminate this Agreement after providing notice to the other party of
such breach and the failure of the breaching party to cure the breach within
ten (10) days of receipt of the notice. Upon breach by Participant and failure
to timely cure Pegasus may immediately cease the distribution and/or
publication of Participants database on distribution systems.
9. Miscellaneous. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and any legal proceeding arising out of this
Agreement shall have venue in Dallas County, Texas. This Agreement shall be
binding upon and inure to the benefit of the legal representatives, successors
and assigns of the parties hereto. This Agreement contains all the provisions
of any agreement between Pegasus and Participant with respect to the creation,
maintenance and distribution of Participant's database and Participant has not
relied upon any promises or representations by Pegasus with respect to the
subject matter except as set forth herein. This Agreement shall terminate and
replace any existing agreement between Participant and TravelWeb, Inc.
PEGASUS SYSTEMS, INC. PARTICIPANT: HFS INCORPORATED
By: /s/ NICK JENT By: /s/ DOUGLAS L. PATTERSON
--------------------------- -------------------------------
Vice President Douglas L. Patterson
--------------------------- -------------------------------
Its: Senior Vice President
-------------------------------
Date: 4/2/97 Date: 4/2/97
--------------------------- -------------------------------
-2-
<PAGE> 3
SCHEDULE A
1. Fees. Participant shall pay to Pegasus the following fees:
(i) For 1 to 25 Participant properties in the database, [*] per
Participant property per month;
(ii) For 26 to 100 Participant properties in the database, [*] per
Participant property per month;
(iii) For 101 to 200 Participant properties in the database, [*] per
Participant property per month;
(iv) For 201 to 500 Participant properties in the database, [*] per
Participant property per month;
(v) For 501 to 1,000 Participant properties in the database, [*] per
Participant property per month;
(vi) For 1,001 to 2,000 Participant properties in the database, [*] per
Participant property per month;
(vii) For 2,001 to 4,899 Participant properties in the database, [*] per
Participant property per month; and
(viii) For in excess of 4,899 Participant properties in the database,
[*] per Participant property per month.
The fees for this service shall be paid monthly in advance.
2. Fees for additional services if requested:
Manual Page Building [*] set up fee per property
Manual Edits (text or graphics) [*] per edit
The fees for these additional services shall be payable upon receipt of invoice.
3. Minimum data for each property in the database:
Chain Code
Property Name
Property ID
Address
City
State/Province
Zip/Postal Code
Country
Phone
Fax
Reservations Phone
Areas Served
Currency
Check-In Time
Check-Out Time
*Confidential Treatment Requested
-3-
<PAGE> 4
AMENDMENT TO PROPERTY INFORMATION DISTRIBUTION AGREEMENT
The parties hereby mutually agree to the following amendments to the
Property Information Distribution Agreement (the "Agreement):
1. As a condition to the effectiveness of this Agreement, the parties
hereto shall have executed and fully performed that certain Agreement
Terminating TravelWeb Participant Agreement to be executed
concurrently herewith.
2. Section 2 of the Agreement is hereby amended to add the following:
"Pegasus will notify Participant at least fourteen (14) days before
an interface with a new distribution system becomes active."
3. Section 4.(b) of the Agreement is hereby deleted in its entirety and
is hereby replaced with the following:
"For each hypertext link from Participant's database to a site with
whom Pegasus has not contracted to receive Participant's database,
Participant shall pay Pegasus a fee of [*] per year."
4. Section 4.(e) of the Agreement is hereby amended to add the following:
"Federal, state or local sales tax or other tax or assessment
applicable to the fees set forth herein shall be paid by Participant."
5. Section 5 of the Agreement is hereby deleted in its entirety and is
hereby replaced with the following:
"5. Term. This Agreement shall be effective April 1, 1997 and the
initial term shall be for one (1) year provided that this Agreement
shall be automatically renewed and extended for additional one (1)
year terms thereafter unless, at least thirty (30) days prior to
expiration of the initial one (1) year term or the expiration of any
additional one (1) year term, either party hereto shall give notice
of its intent not to renew and extend this Agreement."
6. Notwithstanding the fees set forth in Section 1 of Schedule A, for a
period from March 1, 1997 through April 30, 1997, Participant shall
pay to Pegasus a fee of [*] per Participant property in the database
during that time.
7. Notwithstanding the fees set forth in Section 1 of Schedule A, in the
event Participant shall have provided to Pegasus the data listed in
Section 2 of Schedule A with respect to a property, the property
shall be considered a property within the database for purposes of
the fees to be paid.
8. For the fee set forth in Section 1 of Schedule A, Pegasus will
provide Participant the following: Inclusion of Participant's database
in other distribution systems who contract with Pegasus for the
database, remote authoring or batch processing of property
information, remote authoring training, the ability to supply
unlimited information and pictures with respect to Participant's
properties through remote authoring or batch processing, unlimited
edits by remote authoring or batch processing, interactive maps
within the database, weather information within the database and
maintenance of the interface with Participant and distribution
systems.
9. The information provided by Participant is acknowledged to be the
sole property of the Participant and Pegasus may not distribute or
allow access to any of the information in any manner other than
pursuant to this Agreement. Participant shall be solely and
exclusively responsible for the protection of any and all of its
intellectual property including, but not limited to, the inclusion of
any and all statutory or other notices customarily used or required
for the purposes of providing notice of ownership or protection of
Participant's trademarks, trade names, service marks or copyrights.
*Confidential Treatment Requested
-4-
<PAGE> 5
10. Pegasus agrees to provide Participant, on or before the expiration or
termination of this Agreement, all property information received from
Participant during the term of this Agreement in a useable industry
accepted database format and/or generated in formatted HTML pages
including graphics.
11. At all times during the term of this Agreement, persons who access
Participant's data via TravelWeb shall have seamless and unimpeded
access to and from the TravelWeb site.
12. Pegasus agrees to protect and keep confidential the information
regarding accessors of Participant's database to the extent such
information would identify Participant or any of its brands or its
customers.
PEGASUS SYSTEMS, INC. HFS INCORPORATED
By: /s/ NICK JENT By: /s/ DOUGLAS L. PATTERSON
--------------------------- ------------------------------
Vice President Its: Senior Vice President
--------------------------- ------------------------------
Date: 4/2/97 Date: 4/2/97
--------------------------- ------------------------------
-5-
<PAGE> 1
EXHIBIT 10.51
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc. and
Promus Hotels, Inc. (Participant) on the following terms and conditions:
1. Property Information Database. Pegasus will provide Participant
with the ability to create a digital database of Participant's
properties which is (i) capable of being accessed by
distribution systems with whom Pegasus contracts and (ii) where
functionality exists, capable of permitting the accessor of the
database to make, amend and cancel reservations with
Participant. Participant shall be solely responsible for the
creation and editing of the property database pursuant to
Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and develop
interfaces with distribution systems to access Participant's
database.
3. Distribution Systems Interface. For each distribution system,
Pegasus will create an operable interface providing access to
Participant's database and maintain the interface during the
term of the Distribution Agreement. All updates and edits of the
database shall be accessible by the distribution systems within
two (2) business days of receipt by Pegasus.
4. Fees.
(a) For the services provided by Pegasus as set forth
herein, Participant shall pay to Pegasus the fees set
forth in Schedule A.
(b) For providing reservation functionality to accessors of
the database, Participant agrees to pay Pegasus the
following:
(i) For each Net Reservation processed through the
on-line reservation functionality developed by
Pegasus, Participant shall pay to Pegasus a fee
of [*]. For each Net Reservation originating
with a distribution system with whom Pegasus
contracts, Participant shall pay to Pegasus a
fee of [*] in addition to the [*] Net
Reservation fee. Net Reservations within a
particular time period equal the number of
reservations made by an accessor of a
distribution system exhibiting Participant's
database within such time period less the number
of reservations to which notice of cancellation
is received by the distribution system within
such time period.
(ii) In the event the reservation processing
originating with distribution systems is done
via E-mail, Participant shall pay Pegasus a
monthly fee of [*] per property in the database.
(c) Pegasus will invoice Participant for all fees as set
forth herein and as provided on Schedule A including any
taxes applicable to such fees and Participant agrees to
pay each invoice upon receipt. Each invoice shall be
past due and it shall be a breach of this Agreement if
it is not paid within thirty (30) days after the date of
the invoice. All payments to Pegasus shall be made in
U.S. Dollars. Pegasus may, once each year, increase the
fees set forth in (b) above up to 10% of the
then-existing fee. Any fee changes resulting from an
increase in the services or number of properties in the
database will be invoiced upon notice of such increase
or at the next scheduled invoice, at Pegasus' option.
5. Term. The initial term of this Agreement shall be for four (4)
years from the date hereof provided that the Agreement shall be
automatically renewed and extended for additional one (1) year
terms thereafter unless, at least sixty (60) days prior to
expiration of the initial four (4) year term or the expiration
of any additional one (1) year term, either party hereto shall
give notice of its intent not to renew and extend this
Agreement.
6. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus
may not distribute or allow access to any of the information in
any manner other than pursuant to this Agreement. Participant
shall be solely and exclusively responsible for the protection
of any and all if its intellectual property including, but not
limited to, the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing
notice of ownership or protection of Participant's trademarks,
trade names, service marks or copyrights.
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
7. Disclaimer, Limitation of Liabilities and Risk of Internet Usage.
PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION, (ii) ANY ACT OR FAILURE TO ACT
WITH RESPECT TO THE PUBLICATION OF THE INFORMATION ON THE INTERNET OR
CREATION OR FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY
SET FORTH HEREIN, (iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE
ARISING OUT OF A COMPUTER OPERATOR'S OR DISTRIBUTION SYSTEM'S ACCESS TO
PARTICIPANT'S RESERVATION SYSTEM AND/OR THE MAKING, CHANGING OR
CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD OR OTHER DEBIT
DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM ANY
INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET OR A
DISTRIBUTION SYSTEM, EXCEPT TO THE EXTENT RESULTING FROM PEGASUS' GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE
PRODUCT OR SERVICE OR OTHERWISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY
PARTICIPANT. PARTICIPANT ACKNOWLEDGES AND AGREES THAT ALLOWING ACCESS
TO ITS DATABASE AND RESERVATION SYSTEM TO COMPUTERS ACCESSING THE
INTERNET VIA ANY DISTRIBUTION SYSTEM IS AT PARTICIPANT'S OWN RISK.
Pegasus shall not be responsible for the order, completeness or format
of Participant's database being published by distribution systems.
Participant acknowledges and agrees that the Internet is a
communication medium over which Pegasus has no control and that its
continued utilization in its present form at current costs is
uncertain. Therefore, if at any time during the term of this Agreement,
the cost of access to the Internet increases or there is imposed a fee
or cost for access to or use of the Internet communication lines, or
there is imposed any law, governmental ruling, or regulation the result
of which increases the cost of access to or usage of the Internet or
otherwise makes it impractical, in Pegasus' sole discretion, to
continue to perform this Agreement, Pegasus may, upon notice to
Participant, immediately terminate this Agreement without such action
constituting an event of default. Pegasus shall not be liable for any
breach of this Agreement resulting from an act of God, accidents, power
or telecommunication outages or delays, mechanical defects or other
events beyond its control.
8. Breach. In the event of a breach of this Agreement, the non-breaching
party may terminate this Agreement after providing notice to the other
party of such breach and the failure of the breaching party to cure the
breach within ten (10) days of receipt of the notice. Upon breach by
Participant and failure to timely cure Pegasus may immediately cease
the distribution and/or publication of Participant's database on
distribution systems.
9. Miscellaneous. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and any legal proceeding arising out of
this Agreement shall have venue in Dallas County, Texas. This Agreement
shall be binding upon the inure to the benefit of the legal
representatives, successors and assigns of the parties hereto. This
Agreement contains all the provisions of any agreement between Pegasus
and Participant with respect to the creation, maintenance and
distribution of Participant's database and Participant has not relied
upon any promises or representations by Pegasus with respect to the
subject matter except as set forth herein. This Agreement shall
terminate and replace any existing agreement between Participant and
TravelWeb, Inc.
PEGASUS SYSTEMS, INC. PARTICIPANT: PROMUS HOTELS, INC.
3811 Turtle Creek Blvd. #1100
Dallas, TX 75219
By: /s/ M. NICHOLAS JENT By: /s/ MARK C. WELLS
------------------------- ------------------------------
M. Nicholas Jent
Its: Vice President, Sales Its: Senior Vice President
------------------------ -----------------------------
Date: 6/2/97 Date: 5-30-97
----------------------- ----------------------------
<PAGE> 3
SCHEDULE A
1. Fees. During the period commencing on the effective date hereof and
through [*], Participant shall pay to Pegasus the
following fees:
(i) For 1 to 25 Participant properties in the database, [*] per
Participant property per month;
(ii) For 26 to 100 Participant properties in the database, [*] per
Participant property per month;
(iii) For 101 to 200 Participant properties in the database, [*] per
Participant property per month;
(iv) For 201 to 500 Participant properties in the database, [*] per
Participant property per month;
(v) For 501 to 900 Participant properties in the database, [*] per
Participant property per month;
(vi) For 901 to 2,000 Participant properties in the database, [*] per
Participant property per month; and
(vii) For in excess of 2,000 Participant properties in the database,
[*] per Participant property per month.
The fees for this service shall be paid quarterly in advance. Based upon
Participant's notification to Pegasus of the number of hotels it anticipates
being in the database for the following calendar quarter.
The parties hereto agree that during the term of this agreement, Pegasus shall
not charge any initial set-up fee.
*Confidential Treatment Requested
<PAGE> 4
RIDER TO PROPERTY INFORMATION DISTRIBUTION
AGREEMENT BETWEEN PEGASUS SYSTEMS, INC. AND
PROMUS HOTELS, INC.
1. The following sentences are added to the end of Section 1. Property
Information Database:
a. "As a condition to the continued effectiveness of this Agreement,
Pegasus agrees that the TravelWeb distribution system will provide
information and reservation capability for air travel (a minimum of
three (3) major carriers covering primary city payers) and car rental
(a minimum of one(l) major car rental firm covering all major
markets) operational no later than December 31, 1997.
b. Participant will be capable of including, at a minimum, the following
information in the database: address, areas served, reservation
information, telephone, fax, telex, hotel type, number of rooms,
number of floors, meeting space, credit cards, currency,
cancellation, guarantee, check-in, check-out, time zone, airport,
courtesy van, services/facilities, amenities (brochure copy), quick
description (brochure copy), area information (including brochure
copy on area served and listing of selected points of interest with
brochure copy with hotel address reinforced with quick recap
referencing distance from major points of Interest), rooms (including
brochure copy of overall hotel followed by brochure copy on various
rooms/suite types available), rates (including information on rates,
packages, promotions, family rates, government rates, etc.)
restaurants (including information on area restaurants), recreation
(including information on recreational activities available such as
nearby golf, tennis, bike rentals, outdoor pool, exercise facilities,
etc.), meetings (including information on meeting facilities),
weather (including information on local weather), and pictures
(including pictures of hotels, rooms and various points of
interest)." It is agreed that there shall be no limit on the quantity
of data in the database or the number of views of the data.
c. Pegasus agrees to provide Participant with the following statistics
as it pertains to total Travel/Web volume as well as to Participant's
volume by specific hotel brand:
Report Subject Timing
-------------- ------
o Hits - Total and Average Hour, Day, Week, Month
o Unique Visits - Total and Average Hour, Day, Week, Month
o Page Views - Total and Average Hour, Day, Week, Month
Number Per Visit
o Page View Rankings - Top 50 Hour, Day, Week, Month, Year to
Date (YTD)
o Availability Checks - Total Number* Hour, Day, Week, Month, YTD
o Reservation Retrievals - Total Number* Hour, Day, Week, Month, YTD
o Reservation Cancels - Total Number Hour, Day, Week, Month, YTD
o Reservation Confirmation - Total Number Hour, Day, Week, Month, YTD
o Alternate Property Checks - Total Number* Hour, Day, Week, Month, YTD
o Gross Bookings Hour, Day, Week, Month, YTD
o Unsuccessful Reservations* Hour, Day, Week, Month, YTD
-4
<PAGE> 5
o Volume by Domain, Subdomain, Hour, Day, Week, Month, YTD
Country, U S Regions
o Click Stream Analysis* Hour, Day, Week, Month, YTD
* Denotes reports which as of the date hereof are unavailable. Pegasus
agrees however, that such reports shall be made available to Participant
within a period of six (6) months from the date of this Agreement.
d. Pegasus agrees to provide all reasonable and necessary technical support,
hardware and software, and modifications to all of Participant's views to
maintain the following system availability and response times. For
purposes hereof, views shall mean any templates or pages on the world wide
web which are served from the data in the Travel Web DAD database.
a. Participant's views will be available for page serving (as
hereinafter defined); and hotel booking 99.5% of the time each
calendar month.
b. Participant's views page response times will average 12 seconds or
less for standard pages (as hereinafter defined) over each calendar
month.
* Available for page serving shall mean responding to any Internet
request successfully reaching the Pegasus network that serves
Participant's site. Pegasus will not be accountable for any Internet
requests that do not reach the Pegasus network serving Participant or
any Internet requests that are successfully responded to and exit the
Pegasus network and fail before reaching the client.
* Standard pages are defined as the following:
- HTML 'static' page 65,000 bytes in size; or
- Database driven 'dynamic' page 35,000 bytes in size
Pegasus and Participant will evaluate the performance criteria and
measurement tools periodically and adjust or modify upon mutual agreement
of both parties".
2. The following language is inserted after the first sentence of 4(e):
"Federal, state or local sales tax or other tax or assessment applicable
to the fees set forth herein shall be paid by Participant".
3. Section 4(c) of the Agreement is hereby amended by deleting the fourth
sentence and replacing it with the following:
"After the second anniversary of this Agreement, Pegasus may once each
calendar year increase the fees as set forth in 4(b) above up to ten
percent (10%) of the then existing fee. Pegasus shall provide Participant
written notice of the increased rate 60 days prior to the date of such
rate's effectiveness. Upon receipt of such notice, Participant shall have
15 days in which it may provide Pegasus written notice of its intent to
terminate the Agreement without penalty. Failure to provide notice during
such 15 day period shall constitute acceptance of the revised rate."
-5-
<PAGE> 6
4. Section 5 of the Agreement is hereby deleted in its entirety and is hereby
replaced with the following:
"5. Term. This Agreement shall be effective beginning June 4, 1997, and
the initial term shall be for four (4) years unless sooner terminated
as provided
herein. The Agreement shall be automatically renewed and extended for
additional one (1) year terms thereafter unless either party provides the
other written notice of its intention not to renew and extend the term of
this Agreement at least sixty (60) days prior to the expiration of the
term of the Agreement."
5. Section 7. Disclaims Limitation of Liabilities and Risk of Internet Usage
is hereby amended by adding the phrase "SUPPLIED BY PARTICIPANT" at the end
of the first sentence.
6. Section 8. Breach is hereby amended by adding the following language:
The following acts shall constitute an Event of Default under the terms of
this Agreement.
a. failure by Participant to pay its monetary obligations hereunder
within 15 days after receipt of notice from Pegasus as to non-receipt
of payment
b. failure of Pegasus to establish the requirements of the distribution
system set forth in Section l.a. hereof;
c. breach of performance criteria by Pegasus as set forth in Section
l.d. hereof; or
d. declaration of bankruptcy or insolvency or the inability of Pegasus
to pay its debts as they become due.
7. The following new provision is hereby added:
"10. Update of Information Supplied by Participant. It is hereby agreed
that Participant may update any or all of its information as frequently as
daily. The update process shall be an automated process utilizing either
batch feeds from Participant to Pegasus which conform to Pegasus'
interface format or the remote authoring browser supplied to Participant
by Pegasus. Pegasus agrees to process these updates from both the remote
authoring too[ and Participant's batch feed promptly and make them
available to all views within two (2) business days. However, the parties
agree to use the most efficient technology as such becomes available."
PEGASUS SYSTEMS, INC. PROMUS HOTELS, INC.
By: /s/ M. NICHOLAS JENT By: /s/ MARK C. WELLS
------------------------------ ------------------------------
Name: M. Nicholas Jent Name: Mark C. Wells
---------------------------- ----------------------------
Title: V. P. Sales Title: Senior Vice President
--------------------------- ---------------------------
6/2/97
*Confidential Treatment Requested
-6-
<PAGE> 1
EXHIBIT 10.52
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc.
(hereinafter called "Pegasus") and Best Western International, Inc.
(hereinafter called "Participant") on the following terms and conditions:
1. Property Information Database. Pegasus will provide Participant
with the ability to create a digital database of Participant's
properties which is (i) capable of being accessed by
distribution systems with whom Pegasus contracts, Best Western
will be given thirty (30) days prior notification of any
distribution system that Pegasus contracts with and Best
Western may elect not to participate in said distribution
system and (ii) where functionality exists, capable of
permitting the accessor of the database to make, amend and
cancel reservations with Participant. Participant shall be
solely responsible for the creation and editing of the property
database pursuant to Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and
develop interfaces with distribution systems to access
Participant's database per the terms of this Agreement.
3. TravelWeb. Pegasus agrees during the term hereof to distribute
Participant's database and provide the capability to make,
amend and cancel reservations with Participant via its
TravelWeb Internet site. In the event an update in the
functionality or the creation of new functionality for
TravelWeb results in any material failure of the TravelWeb site
to permit accessors of the site to view Participant's database
and make, amend and cancel reservations with Participant, it
shall constitute a breach of this Agreement.
4. Distribution Systems Interface. For each distribution system,
Pegasus will create an operable interface providing access to
Participant's database and maintain the interface during the
term of the Distribution Agreement. All updates and edits of
the database shall be accessible by the distribution systems
within two (2) business days of receipt by Pegasus.
5. Fees.
(a) For the services provided by Pegasus as set forth
herein, Participant shall pay to Pegasus the fees set
forth on Schedule A.
(b) For providing reservation functionality to accessors of
the database, Participant agrees to pay Pegasus the
following:
(i) For each Net Reservation processed through the
on-line reservation functionality developed by
Pegasus and originating with a distribution
system with whom Pegasus contracts, Participant
shall pay to Pegasus a fee of [*]. Net
Reservations within a particular time period
equal the number of reservations made by an
accessor of a distribution system exhibiting
Participant's database within such time period
less the number of reservations to which notice
of cancellation is received by the distribution
system within such time period.
(ii) In the event a distribution system with whom
Pegasus contracts charges a fee for Net
Reservations originating with their system and
there is no commission or other fee charged to
Participant by the distribution system for the
Net Reservation, Participant agrees to pay to
Pegasus the fee charged, provided the fee to
Participant shall not exceed [*] per Net
Reservation.
(c) Pegasus will invoice Participant for all fees as set
forth herein and as provided on Schedule A including
any taxes applicable to such fees and Participant
agrees to pay each invoice upon receipt. Each invoice
shall be past due and it shall be a breach of this
Agreement if it is not paid within forty five (45) days
after the date of the invoice. All payments to Pegasus
shall be made in U.S. Dollars. Pegasus may, once each
anniversary date of the contract, increase the fees set
forth in (a) and (b) above up to 10% of the
then-existing fee within thirty (30) days prior notice.
Any fee changes resulting from an increase in the
services or number of properties in the database will
be invoiced upon notice of such increase or at the next
scheduled invoice, at Pegasus' option.
6. Term. The initial term of this Agreement shall be for one (1)
year from the date hereof provided that the Agreement shall be
automatically renewed and extended for additional one (1) year
terms thereafter. After the initial one (1) year, this contract
may be terminated at any time by either party within ninety
(90) days notice.
7. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus
may not distribute or allow access to any of the information in
any manner other than pursuant to this Agreement. Participant
shall be solely and exclusively responsible for the protection
of any and all of its intellectual property including, but not
limited to, the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing
notice of ownership or protection of Participant's trademarks,
trade names, service marks or copyrights.
8. Disclaimer, Limitation of Liabilities and Risk of Internet
Usage. PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY
FALSIFICATIONS OR INACCURACIES IN ANY OF THE INFORMATION, (ii)
ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE PUBLICATION OF
THE INFORMATION ON THE INTERNET OR CREATION OR FUNCTIONALITY OF
RESERVATION CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN,
(iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT
OF A COMPUTER OPERATOR'S OR DISTRIBUTION SYSTEM'S ACCESS TO
PARTICIPANT'S RESERVATION SYSTEM AND/OR THE MAKING, CHANGING OR
CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD OR
OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM
RESULTING FROM ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE
USE OF THE INTERNET OR A DISTRIBUTION SYSTEM, EXCEPT TO THE
EXTENT RESULTING FROM PEGASUS' GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND
WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE ARE DISCLAIMED BY
PEGASUS AND WAIVED BY PARTICIPANT. PARTICIPANT ACKNOWLEDGES AND
AGREES THAT ALLOWING ACCESS TO ITS DATABASE AND RESERVATION
SYSTEM TO COMPUTERS ACCESSING THE INTERNET VIA ANY DISTRIBUTION
SYSTEM IS AT PARTICIPANT'S OWN RISK. Pegasus shall not be
responsible for the order, completeness or format of
participant's database being
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
published by distribution systems. Participant acknowledges and agrees that
the Internet is a communication medium over which Pegasus has no control
and that its continued utilization in its present form at current costs
is uncertain. Therefore, if at any time during the term of this Agreement,
the cost of access to the Internet increases or there is imposed a fee or
cost for access to or use of the Internet communication lines, or there is
imposed any law, governmental ruling, or regulation the result of which
increases the cost of access to or usage of the Internet or otherwise makes
it impractical, in Pegasus' sole discretion, to continue to perform this
Agreement, Pegasus may, upon notice to Participant, immediately terminate
this Agreement without such action constituting an event of default.
Pegasus or Participant shall not be liable for any breach of this Agreement
resulting from an act of God, accidents, power or telecommunication outages
or delays, mechanical defects or other events beyond its control.
9. Breach; Limitation of Liability. In the event of a breach of this
Agreement, the non-breaching party may terminate this Agreement after
providing notice to the other party of such breach and the failure of the
breaching party to cure the breach within ten (10) days of receipt of the
notice. Upon breach by Participant and failure to timely cure Pegasus may
immediately cease the distribution and/or publication of Participant's
database on distribution systems. Notwithstanding and without waiving any
other provision hereof, the parties hereto acknowledge and agree that a
determination of the damages to be suffered by a breach of this Agreement
by either party (other than a breach resulting from non-payment by
Participant) would be difficult, if not impossible, to determine and,
therefor, the parties hereto agree that the full extent of any liability of
Pegasus for a breach hereof and failure to cure shall not exceed an amount
equal to twenty five percent (25%) of the fee paid by Participant to
Pegasus for the immediately preceding month.
10. Miscellaneous. This Agreement shall be interpreted in accordance with
the laws of the State of Texas and any legal proceeding arising out of this
Agreement shall have venue in Dallas County, Texas. This Agreement shall be
binding upon and inure to the benefit of the legal representatives,
successors and assigns of the parties hereto. This Agreement contains all
the provisions of any agreement between Pegasus and Participant with
respect to the creation, maintenance and distribution of Participant's
database and Participant has not relied upon any promises or
representations by Pegasus with respect to the subject matter except as set
forth herein. This Agreement shall terminate and replace any existing
agreement between Participant and TravelWeb, Inc.
<TABLE>
<S> <C>
PEGASUS SYSTEMS, INC. PARTICIPANT: BEST WESTERN INTERNATIONAL, INC.
3811 Turtle Creek Blvd. #1100
Dallas, Texas 75219
By: /s/ M. NICHOLAS JENT By: /s/ WAYNE W. WILGUS
--------------------------- ------------------------------------------
M. Nicholas Jent
Vice President, Sales ------------------------------------------
Its: Best Western International
-----------------------------------------
Date: 5/2/97 Date: 5/2/97
-------------------------- -----------------------------------------
</TABLE>
-2-
<PAGE> 3
SCHEDULE A
1. Fees. Participant shall pay to Pegasus the following fees:
(i) During 1997, [*] per property per month for each property in
the database; and
(ii) From January 1, 1998 to the date of termination of this
Agreement, [*] per property per month for each property
in the database.
The fees for this service shall be paid quarterly in advance.
*Confidential Treatment Requested
-3-
<PAGE> 1
EXHIBIT 10.53
PROPERTY INFORMATION DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Pegasus Systems, Inc. and
the below named Participant on the following terms and conditions:
1. Property Information Database. Pegasus will provide
Participant with the ability to create a digital database of Participant's
properties which is (i) capable of being accessed by distribution systems with
whom Pegasus contract and (ii) where functionality exists, capable of permitting
the accessor of the database to make, amend and cancel reservations with
Participant. Participant shall be solely responsible for the creation and
editing of the property database pursuant to Pegasus' prescribed methods.
2. Distribution of the Database. Pegasus will contract and
develop interfaces with distribution systems to access Participant's database.
Participant may elect to exclude certain distribution systems access to its
database.
3. Distribution Systems Interface. For each distribution system,
Pegasus will create an operable interface providing access to Participant's
database and maintain the interface during the term of the Distribution
Agreement. All updates and edits of the database shall be accessible by the
distribution systems within two (2) business days of receipt by Pegasus.
4. Fees.
(a) For the services provided by Pegasus as set forth
herein, Participant shall pay to Pegasus the fees set
forth on Schedule A.
(b) For each Net Reservation originating with a
distribution system with whom Pegasus contracts,
Participant shall pay to Pegasus a fee of [*]. Net
Reservations within a particular time period equal the
number of reservations made by an accessor of a
distribution system exhibiting Participant's database
within such time period less the number of reservations
to which notice of cancellation is received by the
distribution system within such time period.
(c) Pegasus will invoice Participant for all fees as set
forth herein and as provided on Schedule A including any
taxes applicable to such fees and Participant agrees to
pay each invoice upon receipt. Each invoice shall be
past due and it shall be a breach of this Agreement if
it is not paid within thirty (30) days after the date of
the invoice. All payments to Pegasus shall be made in
U.S. Dollars. Pegasus may, once each year, increase the
fees set forth in (a), (b) and (c) above up to 10% of
the then-existing fee. Any fee changes resulting from an
increase in the services or number of properties in the
database will be invoiced upon notice of such increase
or at the next scheduled invoice, at Pegasus' option.
Any notice must be provided at least 60 days in advance
of any fee increase being incorporated.
5. Term. The initial term of this Agreement shall be for one (1)
year from the date hereof provided that the Agreement shall be automatically
renewed and extended for additional one (1) year terms thereafter unless, at
least thirty (30) days prior to expiration of the initial one (1) year term or
the expiration of any additional one (1) year term, either party hereto shall
give notice of its intent not to renew and extend this Agreement.
6. Property Rights. The information provided by Participant is
acknowledged to be the sole property of Participant and Pegasus may not
distributed or allow access to any of the information in any manner other than
pursuant to this Agreement. Participant shall be solely and exclusively
responsible for the protection of any and all of its intellectual property
including, but not limited to, the inclusion of any and all statutory or other
notices customarily used or required for purposes of providing notice of
ownership or protection of Participant's trademarks, trade names, service marks
or copyrights.
7. Disclaimer, Limitation of Liabilities and Risk of Internet
Usage. PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION, (ii) ANY ACT OR FAILURE TO ACT WITH
RESPECT TO THE PUBLICATION OF THE INFORMATION ON THE INTERNET OR CREATION OR
FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN,
(iii) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF A COMPUTER
OPERATOR'S OR DISTRIBUTION SYSTEM'S ACCESS TO PARTICIPANT'S RESERVATION SYSTEM
AND/OR THE MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A
CREDIT CARD OR OTHER DEBIT DEVICE IN
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM ANY INTERRUPTION,
MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET OR A DISTRIBUTION SYSTEM,
EXCEPT TO THE EXTENT RESULTING FROM PEGASUS' GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR OTHERWISE
ARE DISCLAIMED BY PEGASUS AND WAIVED BY PARTICIPANT. PARTICIPANT ACKNOWLEDGES
AND AGREES THAT ALLOWING ACCESS TO ITS DATABASE AND RESERVATION SYSTEM TO
COMPUTERS ACCESSING THE INTERNET VIA ANY DISTRIBUTION SYSTEM IS AT
PARTICIPANT'S OWN RISK. Pegasus shall not be responsible for the order,
completeness or format of Participant's database being published by
distribution systems. Participant acknowledges and agrees that the Internet is
a communication medium over which Pegasus has no control and that its continued
utilization in its present form at current costs is uncertain. Therefore, if at
any time during the term of this Agreement, the cost of access to the Internet
increases or there is imposed a fee or cost for access to or use of the
Internet communication lines, or there is imposed any law, governmental ruling,
or regulation the result of which increases the cost of access to or usage of
the Internet or otherwise makes it impractical, in Pegasus' sole discretion, to
continue to perform this Agreement, Pegasus may, upon notice to Participant,
immediately terminate this Agreement without such action constituting an event
of default. Pegasus shall not be liable for any breach of this Agreement
resulting from an act of God, accidents, power or telecommunication outages or
delays, mechanical defects or other events beyond its control.
8. Breach. In the event of a breach of this Agreement, the
non-breaching party may terminate this Agreement after providing notice to the
other party of such breach and the failure of the breaching party to cure the
breach within ten (10) days of receipt of the notice. Upon breach by
Participant and failure to timely cure Pegasus may immediately cease the
distribution and/or publication of Participant's database on distribution
systems.
9. Miscellaneous. This Agreement shall be interpreted in
accordance with the laws of the State of Texas and any legal proceeding arising
out of this Agreement shall have venue in Dallas County, Texas. This Agreement
shall be binding upon and inure to the benefit of the legal representatives,
successors and assigns of the parties hereto. This Agreement contains all the
provisions of any agreement between Pegasus and Participant with respect to the
creation, maintenance and distribution of Participant's database and
Participant has not relied upon any promises or representations by Pegasus with
respect to the subject matter except as set forth herein. This Agreement shall
terminate and replace any existing agreement between Participant and TravelWeb,
Inc. The parties hereby agree to accept a facsimile signature as evidence of
acceptance of these terms Hyatt Hotels Corporation, on behalf of its
Hotels, owned, operated, leased and/or franchised by Hyatt Corporation, its
affiliates, or subsidiaries.
PEGASUS SYSTEMS, INC. PARTICIPANT: Hyatt Hotels Corporation
BY: /s/ NICHOLAS JENT BY: /s/ MARY CATHERINE SEXTON
---------------------------- ------------------------------
John F. Davis III
President ITS: Associate General Counsel
-----------------------------
DATE: 3-11-97 DATE: 3-11-97
-------------------------- ----------------------------
<PAGE> 3
SCHEDULE A
1. Fees. Participant shall pay to Pegasus the following fees:
(i) For 1 to 25 Participant properties in the database, [*] per
Participant properly per month;
(ii) For 26 to 100 Participant properties in the database, [*]
per Participant property per month;
(iii) For 101 to 200 Participant properties in the database, [*]
per Participant property per month;
(iv) For 201 to 500 Participant properties in the database, [*]
per Participant property per month;
(v) For 501 to 1000 Participant properties in the database, [*]
per Participant property per month;
(vi) For 1001 to 2000 Participant properties in the database, [*]
per Participant property per month;
(vii) For in excess of 2000 Participant properties in the database,
[*] per Participant property per month.
The fees for this service shall be paid quarterly in advance.
*Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.54
HOTEL CLEARING CORPORATION
UNITED STATES SUBSCRIBER AGREEMENT
SUBSCRIBER hereby contracts with HOTEL CLEARING CORPORATION ("HCC") to
provide records of hotel reservation bookings and to process hotel reservation
commissions on the following terms and conditions:
DEFINITIONS:
"SUBSCRIBER" is the travel agency and all of its participating travel
agent locations.
"CASH SYSTEM" is a service mark of HCC for a clearing house system of
accounting for reservations made by travel agents with HCC Hotels and
processing commissions payable to those travel agents for the reservations.
"HCC Hotel" is a hotel property who is a participant in the HCC System.
"CASH Reservation" is a reservation at an HCC Hotel originated by
SUBSCRIBER for which the HCC Hotel has been paid for all or a part of the
reserved stay, including non-refundable deposits for reservations originated
by SUBSCRIBER, for which SUBSCRIBER is entitled to a commission. CASH
Reservations include reservations made by telephone or electronically.
"HCC Management Report" is a record of all CASH Reservations for a
specified month and a computation of the commission due SUBSCRIBER for those
reservations.
"HCC Fee" is the amount paid by SUBSCRIBER to HCC for the services set
forth herein which shall be [*] of the total monthly commission paid by HCC
Hotels to SUBSCRIBER as set forth on the HCC Management Report plus costs
associated with tapes or diskettes, if any, requested by SUBSCRIBER.
1. The CASH System. During the term of this agreement, beginning with the
implementation of the CASH System, HCC shall within fifteen (15) business days
after the end of each calendar month (the "Month"), (i) submit a HCC Management
Report to each HCC Hotel for payment to HCC of all commissions the HCC Hotel
owes to SUBSCRIBER for CASH Reservations for the Month, (ii) transmit to
SUBSCRIBER, by mail or electronically by modem (at the option of SUBSCRIBER),
the monthly HCC Management Report and (iii) pay to SUBSCRIBER, by check or
automated clearing house transfer (at the option of SUBSCRIBER), an amount in
the local currency of SUBSCRIBER equal to the total commission paid by the HCC
Hotel pursuant to the HCC Management Report for the Month (converted to U.S.
dollars if necessary), less the HCC Fee.
2. Term and Termination. The initial term of this agreement shall be six
(6) months but it shall continue in effect thereafter unless terminated upon
seven (7) days prior written notice by either party.
3. Acknowledgment and Disclaimer. SUBSCRIBER acknowledges that the services
rendered by HCC are those of a clearing house and, except as expressly set
forth herein, under no circumstances shall HCC be responsible for collection of
commissions owing SUBSCRIBER. HCC shall not be responsible or liable for any
inaccuracy in the information provided to SUBSCRIBER in the HCC Management
Report. HCC shall only be liable to SUBSCRIBER for the amount of commissions
actually collected by HCC, less the HCC Fee described herein. In the event HCC
shall fail in any respect to perform the services set forth herein, it shall,
under no circumstances, be liable for uncollected commissions to SUBSCRIBER or
any other liability resulting therefrom including, without limitation,
consequential damages. SUBSCRIBER'S SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH OF
THIS AGREEMENT BY HCC SHALL BE TERMINATION OF THIS AGREEMENT AND THE AMOUNT OF
COMMISSIONS ACTUALLY COLLECTED BY HCC LESS THE HCC FEE. ALL WARRANTIES EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE,
OR OTHERWISE, ARE DISCLAIMED AND WAIVED. In the event a failure or delay in
the performance of this agreement, except for the payment of money, results
from an act of God, labor strike or other events beyond the control of the
party obligated to perform, such failure or delay shall not constitute a breach
of this agreement nor shall the parties hereto be liable for damages resulting
from such event.
4. Dispute Resolution. In the event SUBSCRIBER shall initiate any action
against HCC arising out of this agreement, governing law shall be that of Texas,
without regard to choice of laws, and venue shall be Dallas, Texas. In the
event HCC shall initiate any action against SUBSCRIBER arising out of this
agreement, governing law shall be that of New York, without regard to choice of
laws, and venue shall be New York, New York. In the event a dispute arises
between SUBSCRIBER and a HCC Hotel with respect to a HCC Management Report, HCC
shall have no obligation or liability with respect to such dispute and
SUBSCRIBER agrees that SUBSCRIBER shall be solely responsible for any action to
resolve the dispute and/or to collect its commission.
5. Miscellaneous.
a) Any notice to be provided with respect to any matter arising out
of this agreement shall be in writing and shall be delivered by
certified mail.
b) HCC and SUBSCRIBER may disclose the existence of this agreement
in a press release to be issued at its inception and may verbally
disclose that SUBSCRIBER has signed this agreement and endorses
the CASH System.
c) Any proprietary information disclosed to SUBSCRIBER by HCC or its
representatives shall be so designated and shall be treated
as confidential.
d) This agreement contains all of the provisions of any agreement
between HCC and SUBSCRIBER with respect to the subject matter set
forth herein and SUBSCRIBER has not relied upon any promises or
representations by HCC except as set forth herein.
e) This agreement shall be binding upon and shall inure to the
benefit of the heirs, successors and assigns of the parties
hereto.
THE HOTEL CLEARING CORPORATION SUBSCRIBER,
3811 Turtle Creek Blvd., #1100 AMERICAN EXPRESS TRAVEL RELATED SERVICES
Dallas, TX, 75219 COMPANY, INC.
BY:/s/ M. NICHOLAS JENT BY: /s/ PRIYAN FERNANDO
------------------------------- --------------------------------------
(signature) (signature)
PRIYAN FERNANDO
-----------------------------------------
(printed name)
VICE PRESIDENT & CONTROLLER
-----------------------------------------
(title)
-----------------------------------------
ARC/IATA#
* Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 1
EXHIBIT 10.55
DISTRIBUTION SERVICES AGREEMENT FOR
HOLIDAY INN WORLDWIDE
This Distribution Services Agreement is entered into by and between
HOLIDAY HOSPITALITY CORPORATION (all of the rights, duties and interests of
Holiday Inns, Inc. related to this Agreement having been assigned to and
assumed by Holiday Hospitality Corporation on April 28, 1997) doing business as
Holiday Inn Worldwide ("HIW"), hereinafter referred to as "HHC", and PEGASUS
SYSTEMS, INC., hereinafter referred to as "Pegasus", to be effective as set
forth herein.
1. General Purpose. It is intended by this Agreement to set forth the
mutually agreed terms of an agreement pursuant to which Pegasus is to provide
HHC services for the processing of transactions and distribution of information
in connection with the reservation of HHC hotel rooms as more specifically set
forth herein.
2. Definitions. In connection with this Agreement, the following
definitions shall apply:
(i) Corporate Travel Coordinators. Those persons or entities
responsible for the coordination of travel arrangements for corporate
travel departments who utilize UltraDirect.
(ii) Effective Date. The Effective Date of this Agreement shall be
the date both parties have executed this Agreement.
(iii) GDS. One or more of the following Global Distribution Systems:
Sabre, Galileo, System One, Worldspan or Amadeus or any other Global
Distribution System created in the future resulting from a merger or
acquisition of any of the GDS's named herein or newly formed at any
time during the term of this Agreement with whom HHC has an agreement
and with whom Pegasus or its affiliate has an interface.
(iv) HCC Agreements. Those certain agreements between HCC and Rescom
Services, Inc. and HCC and Holiday Inns, Inc. dated December 21,
1994. All of HII's rights, duties and interests under those
agreements were assigned to, and assumed by HHC on April 28, 1997.
(v) HHC Reservation System. HHC's central reservation system.
(vi) HIW Hotels. HIW Hotels shall mean all Holiday Inn(R) Hotels and,
Crowne Plaza(R) Hotels and Resorts Worldwide, and all other
properties currently participating in the HHC Reservations System,
and at HCC's option, other hotel brands or individual hotels which
HCC may develop or acquire during the term of this Agreement.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
(vii) Housing Reservation Provider. A Housing Reservation Provider is
any person or entity who has entered into an agreement with Pegasus
whereby Pegasus provides an Interface providing the Housing
Reservation Provider with the ability to make reservations in the HHC
Reservation System.
(viii) Interface. An Interface is the hardware, software and
attendant technical support required to produce computer to computer
communications between the HII Reservation System and any one of the
following: (i) Reservation Providers, (ii) Housing Reservation
Providers, (iii) Third Party Distribution Systems, (iv) TravelWeb or
(v) Corporate Travel Coordinators.
(ix) Lodging Connect. A service of Pegasus providing a connection
with hotel or other lodging entity reservation systems which enables
accessors to make, modify and cancel reservations.
(x) Lodging Select. A service of Pegasus providing a connection with
hotel or other lodging entity reservation systems which enables
accessors to obtain information, including, without limitation,
availability and rates, on hotel and other lodging properties in
response to selected search criteria.
(xi) Net Reservations. Net Reservations within a particular time
period equals the number of reservations processed through one of the
Services within such time period, less the number of reservations as
to which notice of cancellation in one of the Services is received
electronically by one of the Services within such time period and
includes Type A & B reservations and cancellations.
(xii) Pegasus. Pegasus shall mean Pegasus Systems, Inc. and, to the
extent the Services provided pursuant to this Agreement are provided
by any subsidiary of Pegasus, its subsidiary companies The Hotel
Industry Switch Company, The Hotel Clearing Corporation and
TravelWeb, Inc.
(xiii) Private Label Web Site. An Internet site on the World Wide Web
initially developed and subsequently maintained by Pegasus in the
name of and for the use and benefit of HHC and HIW Hotels with an
Interface to Pegasus' Reservation Functionality and HHC's Property
Information Database.
(xiv) Property Information Database. A digital database of HIW Hotels
which is (i) capable of being accessed by Third Party Distribution
Systems and (ii) where functionality exists, capable of permitting
the accessor of the Third Party Distribution System to make, amend
and cancel reservations in the HHC Reservation System.
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<PAGE> 3
(xv) Property Information Distribution Service. A service of Pegasus
to provide access to the Property Information Database to Third Party
Distribution Systems and, where available, to provide accessors of
Third Party Distribution Systems the capability to make and cancel
reservations at participating hotels.
(xvi) Reservation Functionality. The capability to determine room
availability for specific dates and to make, change and cancel
reservations at a hotel participating in the Reservation
Functionality.
(xvii) Reservation Provider. A Reservation Provider is any person or
entity with the present or future capability to connect directly with
the UltraSwitch(R) or via a GDS, a Third Party Distribution System,
the UltraRes Service, the UltraDirect Service, TravelWeb or HII's
Private Label Web Site for the purpose of making reservations with
hotels participating in UltraSwitch.
(xviii) Services. The Services shall mean those services to be
provided by Pegasus as set forth herein and specifically identified
on Exhibits A, B, C, D, E and F hereof.
(xix) Status Messages. A Status Message is a message indicating the
availability of a room type has changed for a single date in a single
property.
(xx) Third Party Distribution Systems. Internet sites or providers of
content to Internet sites with whom Pegasus contracts to provide the
Property Information Database and/or Reservation Functionality.
(xxi) Transactions. For purposes of Sections 7, 12(ii)(c) and 15 of
this Agreement, Transactions shall mean a reservation processed
through UltraSwitch for an HIW Property received via a GDS or from a
person or entity providing Housing Reservation services for meetings
and conventions or from a travel agent or Corporate Travel
Coordinator or from an accessor of the Internet. Notwithstanding the
above, any reservations made by third parties with whom HHC has
created a direct UltraRes or UltraDirect interface shall not
constitute Transactions for purposes of this definition.
(xxii) TravelWeb. The registered trade name and service mark of
Pegasus for its service to provide Internet access to information on
hotels, resorts, airlines and other travel and lodging subjects with
the interactive capability to permit an accessor of TravelWeb to make
a reservation at an HIW Hotel.
(xxiii) UltraDirect. A service of Pegasus to provide Corporate Travel
Coordinators access to Lodging Select and Lodging Connect
capabilities
-3-
<PAGE> 4
and direct access by travel agents to a participating hotel
reservation system by-passing the GDSs.
(xxiv) UltraRes(SM). UltraRes(SM) is a service of Pegasus to provide
an Interface between Housing Reservation Providers and the HHC
Reservation System with the capability to provide convention or
meeting group room confirmation numbers.
(xxv) UltraSwitch(R). The UltraSwitch(R) is a service of Pegasus to
provide an Interface between Reservation Providers and hotel
reservation systems with the capability to provide immediate room
confirmation numbers for each hotel property participating in
UltraSwitch(R).
(xxvi) Warrant. The Warrant shall mean that certain Pegasus Systems,
Inc. Common Stock Purchase Warrant substantially in the form attached
hereto and marked Exhibit G.
3. Distribution Services Provided by Pegasus. Pegasus hereby agrees to
provide to HHC the following distribution services:
(i) UltraSwitch services as more specifically set forth on Exhibit A
attached hereto;
(ii) UltraDirect services as more specifically set forth on Exhibit B
attached hereto;
(iii) UltraRes services as more specifically set forth on Exhibit C
attached hereto;
(iv) Property Information Distribution Services as more specifically
set forth on Exhibit D attached hereto;
(v) Subject to the provisions of Exhibit E hereto, Private Label Web
Site services as more specifically set forth on Exhibit E
attached hereto; and
(vi) TravelWeb service as more specifically set forth on Exhibit F
attached hereto.
4. Schedule of Implementation. The parties hereto shall diligently and in
good faith mutually agree upon a schedule of implementation with respect to the
provision of the Services and, upon completion, such schedule shall be attached
hereto as Schedule I (the
-4-
<PAGE> 5
"Schedule of Implementation"). The Schedule of Implementation may be modified
or amended by written agreement of both parties and shall be subject to the
terms and conditions set forth herein.
5. Modifications to HHC Reservation System. HHC agrees to diligently and
in good faith cooperate with Pegasus to create an operable and dependable
Interface as reasonable and necessary for Pegasus to provide the Services. HHC
agrees to modify the HHC Reservation System as required for the Interface as
reasonable and necessary to implement the Services.
6. Designation of Representative. HHC shall designate one person as the
primary point of contact with respect to the coordination, implementation and
provision of the Services as set forth herein. Pegasus shall designate one
person as the primary point of contact with respect to the coordination,
implementation and provision of the Services as set forth herein.
7. GDS Transactions. HHC agrees to process all of the HIW Hotels' GDS
Transactions via UltraSwitch and to use its best efforts to migrate one hundred
percent (100%) of its GDS Transactions to the UltraSwitch by December 31, 1997
but in no event later than March 31, 1998.
8. UltraRes and UltraDirect Specifications. Pegasus hereby grants to HHC
a royalty free right for ten (10) years from the effective date hereof to use
its UltraRes and UltraDirect specifications solely for the purpose of HHC
entering into agreements with third parties with whom Pegasus has not
contracted to create a direct interface between the HHC Reservation System and
providers of meeting and convention reservation services for UltraRes and
Corporate Travel Coordinators or travel agents for UltraDirect, as more
specifically provided on Exhibits B and C hereto.
9. Reports. Pegasus shall provide HHC monthly reports providing the
information set forth on the reports attached hereto as Schedule 2 and
statistical reports of page accesses and reservation transactions on HHC's
Private Label Web Site. HHC may request other reports or customized reports
which Pegasus, if possible, shall provide to HHC for a mutually agreed fee.
10. Term of Agreement. Unless earlier terminated as provided herein, the
term of this Agreement shall begin upon the Effective Date and shall terminate
on the last day of the sixtieth (60th) month after the Effective Date.
-5-
<PAGE> 6
11. GDS Fees. Pegasus will use commercially reasonable efforts to prevent
GDSs from charging HHC any fee or cost for the transfer of HHC's transactions
to UltraSwitch. In the event and to the extent HHC is charged any incremental
transaction fees by a GDS solely as a result of HHC processing transactions
pursuant to this Agreement, Pegasus agrees that it will pay all such fees and
agrees to indemnify HHC from and against the payment of such fees as provided
in Section 23 hereof.
12. Fees and Costs. HHC shall pay to Pegasus a fee for each of the
Services as follows:
i. For Net Reservations processed via the UltraSwitch service --
a. For the first [*] Net Reservations during each calendar
year, [*] per Net Reservation;
b. For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
c. For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation;
d. For the next [*] Net Reservations during each calendar
year, [*] per Net Reservation; and
e. For all Net Reservations in excess of [*] during each
calendar year, [*] per Net Reservation.
For purposes of determining the number of Net Reservations processed
via the UltraSwitch service, all Transactions shall be counted.
ii. For Status Messages processed via the UltraSwitch service --
a. For the first [*] Status Messages during each calendar
year, [*] for each Status Message;
b. For the next [*] Status Messages during each calendar
year, [*] for each Status Message; and
c. For all Status Messages in excess of [*] during each
calendar year, [*] for each Status Message provided
however, in the event the ratio of Status Messages to Net
Reservations exceeds [*] during a billing period, there
shall be [*] for Status Messages provided, however,
in the event the ratio of Status Messages to Net
Reservations exceeds [*] during a billing period, all
Status Messages in excess of the [*] ratio shall be
[*]. Notwithstanding the above and foregoing set forth in
this Section 12(ii), subject to HHC's rights of termination
set forth herein, for so long as HHC fully performs this
contract with respect to all of the Services
*Confidential Treatment Requested
-6-
<PAGE> 7
and includes all HIW Hotels and Transactions in the
Services, the total fee for all Status Messages during each
month shall be [*].
iii. For each Net Reservation processed via TravelWeb or a Third
Party Distribution System -- [*].
iv. For each Net Reservation originated by a Corporate Travel
Coordinator processed via the UltraDirect service -- [*].
v. For each Net Reservation originated by a travel agent processed
via the UltraDirect service -- the lesser of [*] or an amount
equal to [*] the Average GDS Fee (as hereinafter defined) but in
no event less than [*]. The Average GDS Fee is defined as the
average per transaction fee charged during the immediately
preceding month to HII by the three largest volume GDSs for
processing a Net Reservation.
vi. For each Net Reservation processed via the UltraRes service --
[*] during the period from the Effective Date to December 31,
1997, [*] during 1998 and [*] from January 1, 1999 to the date
of termination of this Agreement.
vii. For the inclusion of up to [*] properties in the Property
Information Distribution Service -- [*] per property per month
plus [*] per month for each property in excess of [*] included
in the Property Information Distribution Service; provided
however, in the event HHC elects to not utilize the Private
Label Web Site service as provided in Exhibit E the fee for the
Property Information Distribution Service shall be [*] per
property included in the service per month.
viii. Subject to the provisions of Exhibit E hereto, for the Private
Label Web Site Services -- the total fee for all Private Label
Web Site services shall be [*] per month.
13. HHC Internal Development Costs. Pegasus hereby agrees to pay HHC [*]
for HHC's internal development costs associated with the provision of the
Services. Such payment shall be made upon the date HHC begins processing one
hundred percent (100%) of its GDS transactions via the UltraSwitch Service.
14. Waiver of Certain UltraRes and UltraDirect Fees. Notwithstanding the
above, Pegasus shall not charge HHC any fee for Net Reservations or any other
fee arising out of Net Reservations or other transactions made by third parties
with whom HHC contracts direct for UltraRes and UltraDirect service pursuant to
and during the term of the License Agreement attached hereto.
*Confidential Treatment Requested
-7-
<PAGE> 8
15. Fee Contingency. Except as otherwise specifically permitted hereby,
HHC acknowledges and agrees that the fees set forth herein above for the
Services are premised upon and expressly contingent upon HHC fully performing
this contract with respect to each and all of the Services and the continued
performance by HHC of the HCC Agreements and HHC acknowledges and agrees that
in the event HHC shall fail to comply with its obligations to include all HIW
Hotels and Transactions in the Services provided hereby or fail to continue to
perform HCC's obligations under the HCC Agreements, that such failure shall
constitute a breach of the entirety of this Agreement and that HHC shall not be
entitled to the benefit of any of the Services for the fees set forth herein.
16. Billing Statements. Pegasus will provide HHC a monthly billing
statement setting forth the following: (i) the number of Net Reservations
processed via the UltraSwitch Service and the total fee therefor; (ii) the
number of Net Reservations processed via TravelWeb and Third Party Distribution
Systems and the total fee therefor; (iii) the monthly fee for Status Messages;
(iv) the number of Net Reservations originated by a Corporate Travel
Coordinator processed via the UltraDirect Service and the fee therefor; (v) the
number of Net Reservations originated by a travel agent processed via the
UltraDirect Service and the fee therefor (including the calculation of the
Average GDS Fee) and the fee therefor; (vi) the number of Net Reservations
processed via the UltraRes Service and the fee therefor; (vii) the number of
properties included in the Property Information Database and the fee therefor;
(viii) the monthly fee for the Private Label Web Site Services; and (ix) any
costs, credits or debits otherwise due pursuant to this Agreement. All fees and
costs shall be paid in U.S. dollars.
17. Payment of Fees and Costs. Pegasus will invoice HHC monthly for all
fees, and costs owed by HHC to Pegasus pursuant to this Agreement. HHC shall
pay each invoice upon receipt and, in any event, within thirty (30) days of
receipt of each invoice.
18. Pricing Guarantee. Pegasus hereby guarantees that the pricing offered
to any other hotel company for any of the Services shall not be any more
favorable than the pricing set forth herein for the Services provided to HHC.
In the event Pegasus enters into an agreement with any other hotel company with
more favorable pricing than as set forth in this Agreement, either for the
individual services specified herein or for the package, or for any similar or
comparable package of services, Pegasus shall notify of such pricing within
thirty (30) days of any agreement for such more favorable pricing and shall
make such pricing available to HHC and, if accepted by HHC, this Agreement
shall be amended to include such pricing.
19. Right to Audit. HHC shall have the right, upon reasonable notice and
exercisable no more than once each calendar year, to audit the records of
Pegasus as reasonable and necessary to determine that the transactions reported
and the fees paid pursuant to this Agreement are accurate. This right of audit
shall be conducted by a reputable independent certified public accounting firm
on behalf of HHC. The accounting firm shall execute a Confidentiality
Agreement which shall preclude the dissemination of any information to HHC or
any other person or entity except (i) confirmation that the transactions
reported and fees paid are accurate or (ii) a statement that the transactions
reported or the fees paid are inaccurate and a statement of the correct number
of transactions and fees to be paid or (iii) any information consisting of, or
based on, HHC's own data, transactions, or other information. Nothing in this
Agreement shall preclude
-8-
<PAGE> 9
HHC from examining its own data transactions or other information during
business hours and on reasonable notice. All costs incurred with respect to the
audit shall be paid by HHC except in the event the audit reveals overpayment by
HHC in excess of three percent (3%) of the fees payable during the preceding
twelve (12) months or, in the event there has not been transaction processing
for at least twelve (12) months during the term of this Agreement, such lesser
term for which transaction processing has occurred Pegasus shall pay. Pegasus
shall maintain and preserve for at least two (2) years following the end of
this Agreement or any renewals complete and accurate records of transactions
and fees related to the Services under this Agreement. The exercise of the
right to audit by HHC or the acceptance by HHC of any audit reports,
statements, credits, or refunds shall be without prejudice to any rights or
remedies of HHC and shall not prevent HHC from thereafter disputing the
accuracy of any such reports, statements, credits or refunds.
20. Confidential Information and Proprietary Rights. During the term of
this Agreement, it is acknowledged by HHC and Pegasus that each may receive or
have access to confidential and proprietary information of the other party
including, but not limited to, software, codes, specifications, database and
trade secrets ("Confidential Information"). Except as is necessary in
connection with the performance of this Agreement and Pegasus' business,
information regarding the reservations and other transactions of HHC processed
by Pegasus shall be treated as confidential whether or not so marked or
otherwise identified as confidential. Each party acknowledges that it shall not
acquire any ownership or other rights in or to Confidential Information of the
other, and shall use the Confidential Information only for the purposes of the
performance of this Agreement, and shall keep confidential and not disclose the
Confidential Information to any other person, firm or corporation without the
prior written consent of the other party. Each party acknowledges that it will
have no access to and will not use any of the confidential or proprietary
information or related property of the other party, other than as specifically
provided for in this Agreement. The provisions of this section will remain
binding and in force and effect as long as such information remains
confidential (other than by breach of this Agreement), notwithstanding the
expiration or termination of this Agreement at any time. Any Confidential
Information transmitted in writing or by other tangible media shall remain the
property of the owner and all originals of such confidential information shall
be returned to the owner at its request at the conclusion of this Agreement.
Confidential Information shall not include any information which (i) was
publicly known and made generally available in the public domain prior to the
time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party's obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party's Information, as shown by
documents and other competent evidence in the receiving party's possession; or
(vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.
21. Use of Trademarks and Tradenames. HHC acknowledges and agrees that
UltraSwitch, TravelWeb, UltraSelect, UltraRes, UltraDirect, Lodging Select,
Lodging
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<PAGE> 10
Connect, NetBooker and Click-it! Weekends are the service marks of Pegasus and
those and any other trademarks owned by Pegasus may not be used by HHC without
the prior written consent of Pegasus. Pegasus acknowledges and agrees that
Holiday Inn(R), Crowne Plaza(R) and Holidex(R) are service marks of HHC and
those and any other service marks owned by HHC may not be used by Pegasus
without the prior written consent of HHC. HHC shall be solely and exclusively
responsible for the inclusion of its trademark and other intellectual property
notices on all information provided to Pegasus in connection with the Services.
Pegasus agrees to take reasonable and necessary actions to prevent the deletion
of such trademark and other intellectual property notices from the information
provided by HHC. Neither party shall have the right to use any intellectual
property rights, including without limitation, copyright, trademarks, service
marks of the other party or any of its subsidiaries or affiliates except with
prior written approval. Neither party acquires any rights in any intellectual
property, including without limitation, any trademarks, service marks or
copyrights of the other, its subsidiaries or affiliates.
22. Software and Intellectual Property.
(i) Each of the parties hereto represents and warrants to the other
that, with respect to all software and other intellectual
property in connection with the Services or otherwise required
to be furnished pursuant to this Agreement (collectively, the
"Intellectual Property"), each either owns the Intellectual
Property furnished by it or is fully authorized to deliver the
Intellectual Property and to allow the Intellectual Property to
be used in connection with the Interface, as contemplated by
this Agreement. Should any claim be raised by any third party
that the use of any of the Intellectual Property or the delivery
of any of the Intellectual Property in connection with this
agreement constitutes infringement of any patent, copyright,
license or other property right (a "Claim"), the party
furnishing such Intellectual Property shall, at its expense,
defend any such Claim in accordance with the provisions of
Section 23 of this Agreement. Should either party be temporarily
or permanently enjoined from using any of the Intellectual
Property as a result of any Claim, the other party, at its
option and own expense, shall either procure the right to
continue to use the Intellectual Property free from any Claim or
replace or modify the offending Intellectual Property so that
its use becomes non-infringing, within fifteen (15) days of the
date on which it receives notice of the claim (either such
corrective action being referred to herein as a "Correction").
If a Correction is not accomplished, the party who furnished the
Intellectual Property resulting in the Claim shall be deemed to
be in default of this Agreement, and in such event, Sections 25,
27 and 28 of this Agreement shall control; provided, however,
that the fifteen (15) day period specified above shall be
deemed to be the applicable cure period under Section 25, and
once that fifteen (15) day period has expired without a
Correction having occurred, the applicable cure period under
Section 25 shall be deemed to have expired. Without limiting
Article 23 of this Agreement, the party who furnished the
Intellectual Property resulting in the Claim shall also be
obligated to indemnify the other party for any of its losses
(such losses being Pegasus' Losses or HHC's Losses, as the case
may be, as defined in Section 23 hereof) in connection with any
Claim for which a Correction is not made within such fifteen
(15) day period, in accordance with this Article 22(i).
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<PAGE> 11
(ii) All reservation transactions and HIW Hotel information and all
other data collected by Pegasus pursuant to this Agreement shall
remain the sole and exclusive property of HHC and such
information and data may not be used in any manner other than in
accordance with this Agreement.
23. Indemnification in the Event of Certain Losses. HHC agrees to
indemnify and hold harmless Pegasus, its parents, subsidiaries, franchisees,
affiliates and their directors, officers, employees and other stockholders,
from and against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) occurring on account of HHC's fault and
through no fault of Pegasus ("Pegasus' Losses"). Pegasus agrees to indemnify
and hold harmless HHC, its parents, subsidiaries, franchisees, affiliates and
their directors, officers, employees and stockholders, from and against any
losses, claims, liabilities, damages or expenses (including reasonable
attorney's fees) (" HHC's Losses") occurring on account of Pegasus' fault and
through no fault of HHC. Promptly after receipt by an indemnified party of
notice of the commencement of any action or the presentation or other assertion
of any claim which could result in any indemnification claim pursuant to this
section, such indemnified party shall give prompt notice thereof to the
indemnifying party and the indemnifying party shall be entitled to participate
therein or, to the extent that it shall wish, assume the defense thereof with
its own counsel. If the indemnifying party elects to assume the defense of any
such action or claim, the indemnifying party shall not be liable to the
indemnified party for any fees of other counsel or other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The parties agree to
cooperate to the fullest extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
24. Events of Default. Subject to Section 25 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the time
required;
(ii) The refusal or failure to diligently and in good faith perform
each and every material provision of this Agreement;
(iii) The failure of Pegasus to provide the Services on a continual
dependable basis; or
(iv) If either Pegasus or HHC (the "Defaulting Party") becomes
insolvent, takes any step leading to its cessation as a going
concern, or ceases business operations for reasons other than a
strike and other than assignment as allowed by this Agreement, then
the other party (the "Insecure Party") may immediately terminate this
Agreement upon written notice to the other party unless the
Defaulting Party immediately gives the Insecure Party adequate
assurance of the future performance of this Agreement. If bankruptcy
proceedings are commenced with respect to the Defaulting Party, and
if this Agreement has not otherwise terminated, then the Insecure
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<PAGE> 12
Party may suspend all further performance of this Agreement until the
Defaulting Party assumes or rejects this Agreement pursuant to
Section 365 of the Bankruptcy Code or any similar or successor
provision. Any such suspension of further performance by the Insecure
Party pending the Defaulting Party's assumption or rejection will not
be a breach of this Agreement.
25. Occurrence of Default; Notice and Opportunity to Cure. Upon the
occurrence of an Event of Default, the non-defaulting party shall give written
notice to the defaulting party specifying the alleged default. Except as
otherwise specifically set forth herein, the defaulting party shall then be
entitled to ten (10) days after receipt of such notice within which to cure any
monetary default and thirty (30) days within which to cure any non-monetary
default. If the party entitled to cure the Event of Default does not cure the
Event of Default within the cure period specified above, then such party shall
be deemed to be in default of this Agreement. Any such default shall not
relieve the defaulting party from any of its obligations hereunder, and in the
event of a default, the non-defaulting party hereunder shall, except as
provided in this Agreement, be entitled to whatever remedies at law or in
equity are available to it.
26. Licensee Acknowledgment. Pegasus understands and agrees that most
participating hotels are independently owned and operated by licensees, that
HHC does not control the day to day operations of licensed hotels, that HHC
assumes no liability for the acts or omissions of a licensed hotel. HHC, its
parents, subsidiaries, or affiliated companies shall not be liable for any
activities of a licensed hotel or for any special, incidental, indirect or
consequential damages even if it has been advised of the possibility of such
damage.
27. Termination by HHC. Upon the occurrence of an Event of Default (as
defined in paragraph 24 herein-above) by Pegasus and the failure of Pegasus to
cure such default after notice and opportunity to cure as provided by Section
25 hereof, HHC may terminate this Agreement at any time within thirty (30) days
after the expiration of the cure period provided in Section 25. Notwithstanding
any other provision hereof, HII may terminate this Agreement without cause
during any Additional Term upon one hundred eighty (180) days prior notice.
28. Termination by Pegasus. Upon the occurrence of an Event of Default (as
defined in paragraph 24 herein-above) by HHC and the failure of HHC to cure
such default after notice and opportunity to cure as provided by Section 25
hereof, Pegasus may terminate this Agreement at any time within thirty (30)
days after the expiration of the cure period provided in Section 25.
Notwithstanding any other provision hereof, Pegasus may terminate this
Agreement without cause during any Additional Term upon one hundred eighty
(180) days prior notice.
29. Termination of TravelWeb Service. Notwithstanding any other provision
hereof, after the expiration of [*] from the date the TravelWeb service becomes
operable, HHC may terminate the TravelWeb service upon at least sixty (60) days
prior written notice to Pegasus.
30. Termination of UltraSwitch Service. Notwithstanding any other
provision hereof, after the expiration of [*] after the date the UltraSwitch
service
*Confidential Treatment Requested
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<PAGE> 13
described herein becomes operable, HHC may terminate the UltraSwitch Service
upon at least ninety (90) days prior written notice to Pegasus provided that
HHC has received a bona fide contract offer from a Commercially Viable Entity
(as hereinafter defined) to provide services similar to the UltraSwitch Service
with a per transaction fee of less than [*] per transaction and with guaranteed
levels of performance exceeding those set forth in this Agreement and further
provided HHC has provided the proposed third party agreement to Pegasus and
Pegasus has failed and refused within sixty (60) days of receipt of such
contract to agree to amend the terms of this Agreement to meet or exceed the
terms of the third party contract. A Commercially Viable Entity is defined as a
solvent entity which has, or whose parents, subsidiaries, affiliates,
predecessors or principals have, at least three (3) years experience in
providing substantially the same services as the UltraSwitch Service to the
hotel industry and who has processed at least two million (2,000,000) Net
Reservations during the previous twelve (12) month period.
31. Force Majeure. Except with respect to the payment obligations set
forth herein, it will not constitute an Event of Default if such event listed
in Section 24 hereof is caused by or results from acts of God; fire; war; civil
unrest; power fluctuations or outages; telecommunication fluctuations; outages
or delays; utility failures; or governmental action or other events beyond the
control of the defaulting party. However, if any such occurrence results in any
of the events described in Section 24, and the same continues for more than
thirty (30) consecutive days, either party may terminate this Agreement by
providing notice as required herein.
32. Disclaimer, Limitation of Liabilities and Risk of Internet Usage.
EXCEPT TO THE EXTENT RESULTING FROM PEGASUS' GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY
FALSIFICATIONS OR INACCURACIES IN ANY OF THE INFORMATION PROCESSED OR
DISTRIBUTED PURSUANT TO THIS AGREEMENT, (ii) ANY CLAIMS OF LIABILITY OF ANY
NATURE ARISING OUT OF ANY RESERVATION TRANSACTION PROCESSED PURSUANT TO THIS
AGREEMENT (iii) ANY ACT OR FAILURE TO ACT WITH RESPECT TO SUCH INFORMATION OR
THE CREATION OR FUNCTIONALITY OF RESERVATION CAPABILITIES UNLESS EXPRESSLY SET
FORTH HEREIN, (iv) ANY CLAIM, DAMAGE, OR LIABILITY OF ANY NATURE ARISING OUT OF
ACCESS TO HHC'S PRIVATE LABEL WEB SITE AND/OR THE MAKING, CHANGING OR CANCELING
OF A RESERVATION AND THE USE OF A CREDIT CARD OR OTHER DEBIT DEVICE IN
CONNECTION THEREWITH, OR (v) ANY CLAIM RESULTING FROM ANY INTERRUPTION,
MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET OR A THIRD PARTY DISTRIBUTION
SYSTEM. EXCEPT AS SET FORTH IN SECTION 33 BELOW, ALL WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT
OR SERVICE OR OTHERWISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY PEGASUS. HHC
ACKNOWLEDGES AND AGREES THAT THE OPERATION OF A SITE ON THE INTERNET IS AT
PEGASUS' OWN RISK.
33. Limited Warranty. Pegasus warrants that the purchased services will be
fit for their intended purpose, will be free from defects, will conform to
stated specifications, will comply with descriptions of the Services set forth
herein and will conform to all applicable codes and standards. Pegasus warrants
that it has obtained appropriate releases granting HHC complete and
unrestricted rights during the term of this Agreement
*Confidential Treatment Requested
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<PAGE> 14
to use the services provided. The above warranty shall be for the benefit of
HHC, its affiliates, franchisees, successors and assigns. The inspection or
acceptance of the Services shall not be a waiver of rights under this warranty.
This warranty shall survive delivery and acceptance of the purchased Services.
Pegasus further warrants that it has, and shall maintain during the term of
this Agreement, a commercially reasonable back-up disaster recovery system.
Pegasus further warrants that it will provide reasonable and customary security
procedures to protect the integrity of the Web sites and Web pages contemplated
by this Agreement.
34. Right to Repair. Notwithstanding any other provision of this
Agreement, in the event Pegasus repairs any material failure in the operation
or performance of the Services within twelve (12) hours of notice from HHC
requesting such repair or actual knowledge of Pegasus of need of the repair
Pegasus shall not be in default of this Agreement and shall not be liable for
any damage resulting from such failure, unless resulting from Pegasus' gross
negligence or willful misconduct.
35. No Consequential Damages. Except with respect to the indemnification
provisions set forth herein, neither party will be liable to the other for any
consequential damages caused or resulting from any breach of this Agreement or
arising out of the performance of this Agreement, and each party hereby
expressly waives such damages.
36. Management Consultation. Pegasus agrees that it will periodically meet
with and provide HHC representatives information regarding service and
financial developments of Pegasus to the extent permitted by applicable law.
37. Warrants. Upon full execution hereof, Pegasus shall execute and
deliver to HHC the Warrants (see Exhibit G).
38. HCC Agreements with Holiday Inns, Inc. and Rescom Services, Inc. It is
acknowledged and agreed that there currently exists between HCC and Holiday
Inns, Inc. on the one hand and HCC and Rescom Services, Inc. on the other hand
two (2) separate agreements relating to Pegasus providing processing services
for payment of travel agent commissions. It is also acknowledged and agreed
that Rescom Services, Inc. has been issued an option to purchase stock in HCC
(the "Option"). With respect to such agreements and the Option, the parties
hereby agree:
(a) upon execution hereof, HHC will execute as assignee of Holiday Inns,
Inc. and Pegasus will cause HCC to execute the First Amendment to HCC
Participant Agreement attached hereto as Exhibit H and HCC will cause
Rescom Services, Inc. to execute and Pegasus will cause HCC to execute the
First Amendment to Agreement Between Rescom Services, Inc. and The Hotel
Clearing Corporation attached hereto as Exhibit I; and
(b) HHC will cause Rescom Services, Inc. and Pegasus will cause HCC to
execute the Termination of Option and Cancellation of Note agreement
attached hereto as Exhibit K at the time of execution of this Agreement.
39. Insurance Certificates. Pegasus shall forward to the Risk Management
Department of HHC at 3 Ravinia Drive, Suite 2900, Atlanta, Georgia 30346,
certificates
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<PAGE> 15
of general comprehensive liability insurance coverage issued by the insuring
carrier or carriers for the benefit of Pegasus with limits of not less than
those set forth on Exhibit L attached hereto. HHC shall be given thirty (30)
days prior written notice of cancellation or adverse material change of the
insurance to which the certificates relate. The fulfillment of these insurance
obligations shall not relieve Pegasus of any liability assumed by Pegasus in
this Agreement or in any way modify Pegasus' contractual or common law
obligations to indemnify HHC.
40. Compliance With Law. Each party shall, at its own expense, comply with
all applicable federal, state, county and local laws, ordinances, regulations
and orders in the performance of this Agreement. Pegasus represents that the
fees set forth herein include all applicable sales, use or other similar taxes
and warrants that it is registered and will file and pay all such taxes which
may arise as a result of this Agreement.
41. Equal Opportunity Company. Each party represents and warrants that it
will not discriminate against any employee or applicant for employment because
of race, color, religion, sex, national origin, age or any other unlawful
criterion, and it shall comply with all applicable laws against discrimination
and all applicable rules, regulations and orders issued thereunder or in
implementation thereof. The Equal Opportunity clauses set forth in 41 C.F.R.
Sections 60-1.4(a), 60-250.5(a) and 60-741.5(a) are incorporated by reference
herein.
42. Severability. If any provision of this Agreement or the application of
any provision hereof is held invalid, the remainder of this Agreement and the
application of such provision shall not be affected unless the provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
43. Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery), shipping prepaid,
or (d) transmitted by facsimile/telecopy in combination with any other
permitted form of notice as follows:
If to If to
PEGASUS: HHC:
3811 Turtle Creek Blvd. #1100 Three Ravinia Drive, Suite 2900
Dallas, TX 75219 Atlanta, GA 30346
Attention: John F. Davis, III Attention: Laurie Donachy
If by facsimile/telecopy to: If by facsimile/telecopy to:
214-528-5675 770-604-5940
cc: Ric L. Floyd cc: D. Franklin Moore, Jr.
3811 Turtle Creek Boulevard Three Ravinia Drive, Suite 2900
1100 Turtle Creek Centre Atlanta, GA 30346
Dallas, Texas 75219 770-604-5052 (phone)
214-522-3888 (phone) 770-604-8442 (facsimile)
214-522-8488 (facsimile)
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<PAGE> 16
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending or, if sent by facsimile or telecopy, upon
verified receipt of same.
44. Non-Exclusive Arrangement. Except as otherwise provided herein,
nothing in this Agreement shall be construed as requiring HHC to work with
Pegasus exclusively with respect to the subject matter of this Agreement.
45. Assignment. This Agreement is not assignable by Pegasus or HHC without
the prior written consent of the non-assigning party, and such consent shall
not be unreasonably withheld or delayed provided that Pegasus or HHC may assign
this Agreement to a parent, subsidiary or affiliate without consent and either
party may assign this Agreement without consent in the event of a merger,
consolidation, or sale of substantially all of its assets.
46. Controlling Law. This Agreement shall be interpreted pursuant to the
laws of the State of Texas without reference to its conflict of laws
principles. In the event litigation is initiated by HHC, venue for such action
shall be in the state or federal courts located in Dallas County, Texas. In the
event Pegasus initiates the litigation, venue for such litigation shall be in
the state or federal courts located in Dekalb County, Georgia.
47. Entire Agreement. This Agreement and the exhibits attached hereto
constitute the entire agreement between Pegasus and HHC with respect to the
provision of the Services and supersedes and replaces any and all other
agreements and representations, verbal or written, with respect to the subject
matter of this Agreement. There are no representations, warranties or
agreements made or relied upon by either party with respect to the subject
matter of this Agreement which are not contained in this Agreement. Headings
are for reference only and are not intended to affect the meaning of any terms.
48. Confidentiality of the Agreement. The parties agree that the terms and
provisions of this Agreement shall be kept confidential and shall be disclosed
only to those persons and entities as required by law or as permitted by the
other party hereto. The parties may, however, disclose the existence of this
Agreement to any person or entity. The Mutual Non-Disclosure Agreement to
Protect Release of Confidential Information, executed by Pegasus on May 1, 1997
and by HHC on May 6, 1997, is incorporated herein and attached hereto as
Exhibit J.
49. Status of Parties. This Agreement shall not constitute a partnership,
joint venture or similar arrangement. The parties hereto are separate and
distinct entities independently contracting with each other at arms length.
Pegasus shall not be deemed by this Agreement to be granting a license to HHC,
with respect to UltraSwitch(R) or any software or service mark related thereto,
or otherwise, this being a contract for the use and rendering of services only.
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<PAGE> 17
50. No Waiver. A party's failure at any time to enforce any of the
provisions of this Agreement or any right with respect thereto, will not be
construed to be a waiver of such provision or rights, not to affect the
validity of this Agreement. The exercise by a party of any rights provided by
this Agreement shall not preclude or prejudice the exercise thereafter of the
same or other rights under this Agreement.
51. Amendments/Modifications. This Agreement may not be amended or
modified except in a writing signed by an officer of both parties. Any
attempted amendment or modification not in writing and signed by an officer of
both parties shall be null and void.
AGREED to this 13th day of May, 1997.
PEGASUS SYSTEMS, INC. HOLIDAY HOSPITALITY CORPORATION
By: /s/ JOHN F. DAVIS, III By: /s/ JOHN T. SWEETWOOD
----------------------------- -----------------------------
John F. Davis, III (name) John T. Sweetwood
President -------------------------
(title) Executive Vice President
-------------------------
May 12, 1997
By:
-----------------------------
(name)
-------------------------
(title)
-------------------------
APPROVED
BUSINESS TERMS ________________
LEGAL FORM ____________________
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<PAGE> 18
TABLE OF EXHIBITS
Exhibit A UltraSwitch Service
Exhibit B UltraDirect Service
Exhibit C UltraRes Service
Exhibit D Property Information Distribution Services
Exhibit E Private Label Web Site Service
Exhibit F TravelWeb Service
Exhibit G Common Stock Purchase Warrant
Exhibit H First Amendment to HCC Participant Agreement
Exhibit I First Amendment to Agreement Between Rescom
Services, Inc. and The Hotel Clearing Corporation
Exhibit J Mutual Non-Disclosure Agreement to Protect Release
of Confidential Information
Exhibit K Termination of Option and Cancellation of Note
Exhibit L Schedule of Insurance
Schedule I Schedule of Implementation
Schedule II Reports
<PAGE> 19
EXHIBIT "A"
ULTRASWITCH SERVICE
Pegasus shall create, operate and maintain an Interface between the HHC
Reservations System and all major GDSs. Subject to the duties of HHC set forth
in this Exhibit A below, Pegasus shall provide all reasonable and necessary
technical support, hardware and software and modifications to the UltraSwitch
to maintain the Interface between HHC and all major GDSs. Subject to Section 31
hereof, delays caused by GDSs, HHC or other third parties, the UltraSwitch
Interface will provide room confirmation numbers for each booking at an HIW
Hotel made through a Reservation Provider within an average determined over
each rolling ninety (90) day period of [ * ] within the contiguous forty eight
(48) United States and District of Columbia and [ * ] elsewhere. Pegasus will
provide host to host or bulk data transfer processes for the purposes of
updating room rates in each of the GDSs. This will include, but not be limited
to, adds, deletes, and total refresh application.
Pegasus shall not be responsible for, but will use reasonable and
necessary efforts to require, UltraSwitch users to return response messages
within the response time requirements set forth in the immediately preceding
sentence.
Subject to Section 31 hereof, the UltraSwitch service will be available,
operational and fully functional to process HIW Hotel's customer reservations
ninety nine percent (99%) of the time each calendar month. Pegasus will not
discriminate among hotel participants in processing reservations through the
UltraSwitch.
Through the UltraSwitch Interface, HHC will permit all Reservation
Providers utilizing the UltraSwitch the full and complete right to check
availability, reserve and cancel rooms authorized for sale by HIW Hotels and
receive a confirmation acknowledgment of any such transaction. All information
provided by HII Hotels with respect to rooms and facilities shall be complete
and accurate and shall be consistent with and inclusive of all of the
information provided and rates available to a direct caller to HII's
(Central) Reservation System to the fullest extent each Reservation Provider
database will permit. HHC is not responsible for information provided by HIW
Hotels.
HHC shall use all reasonable and necessary efforts and shall cooperate
fully with and provide support for Pegasus' personnel with respect to the
creation of the Interface with Pegasus UltraSwitch Service including, but not
limited to, undertaking all reasonable and necessary modifications to the HHC
Reservation System to cause it to be compatible with the UltraSwitch Interface.
HHC shall use its best efforts to cause all of its GDS transactions to be
processed via the UltraSwitch Service no later than December 31, 1997.
*Confidential Treatment Requested
<PAGE> 20
EXHIBIT "B"
ULTRADIRECT SERVICE
Pegasus shall create, operate and maintain on a continual basis a
dependable and operative Interface between HHC's Reservation System and
Corporate Travel Coordinators, travel agents and other entities utilizing
UltraDirect and will provide access to Lodging Select and Lodging Connect
capabilities. Pegasus will provide all reasonable and necessary technical
support, hardware and software, without cost to HHC, so as to enable Corporate
Travel Coordinators to access HHC's Reservation System and perform the
capabilities of Lodging Select and Lodging Connect.
Pegasus will provide to HHC specifications for its UltraDirect service
and, for a period of ten (10) years from the effective date hereof, shall
permit HHC to utilize the UltraDirect specifications to create a direct
interface between HHC and any Corporate Travel Coordinator or travel agent with
whom Pegasus is not under contract to provide the UltraDirect service. HHC
shall be solely responsible for the creation and implementation of each
UltraDirect interface it elects to create with any third party and, in
connection with the utilization of the UltraDirect specifications to create the
interface, HHC agrees to cause each third party to whom the UltraDirect
specifications are disclosed to execute a Non-Disclosure Agreement to Protect
Release of Confidential Information in form and substance identical to Exhibit
L attached hereto. HHC shall be solely and exclusively responsible for the
installation and operation of the UltraDirect interface and all maintenance in
connection therewith provided however Pegasus shall, without incurring any
cost, provide telephonic technical advice with respect to the initial
installation of an UltraDirect interface by HHC. HHC hereby indemnifies and
holds harmless Pegasus of and from any and all claims or liability of any
nature arising out of the UltraDirect specifications and the creation of an
UltraDirect interface by HHC, if caused by the negligent or intentional acts or
omissions of HHC. In no event shall Pegasus be liable to HHC or any other
person or entity for any damages, including any incidental or consequential
damages, expenses, lost profits, lost savings, or other damages or any other
form of liability arising out of the use of the UltraDirect specifications by
HHC or any third party or any UltraDirect interface created by HHC unless
caused by the negligent or intentional acts or omissions of Pegasus.
<PAGE> 21
EXHIBIT "C"
ULTRARES SERVICE
Pegasus shall create, operate and maintain an Interface between HHC's
Reservation System and Housing Reservation Providers utilizing Pegasus'
UltraRes service. Pegasus will provide all reasonable and necessary technical
support, hardware and software, at no cost to HHC, to maintain the Interface
between HHC's Reservation System and a Housing Reservation Provider utilizing
Pegasus' UltraRes service.
Pegasus will provide to HHC specifications for its UltraRes service and
shall, for a period of ten (10) years from the effective date hereof, permit
HHC to utilize the UltraRes specifications to create a direct interface between
HHC and any person or entity providing housing reservation services for
meetings and conventions with whom Pegasus is not under contract to provide the
UltraRes service. HHC shall be solely responsible for the creation and
implementation of each UltraRes interface it elects to create with any third
party and, in connection with the utilization of the UltraRes specifications to
create the interface, HHC agrees to cause each third party to whom the UltraRes
specifications are disclosed to execute a Non-Disclosure Agreement to Protect
Release of Confidential Information in form and substance identical to Exhibit
L attached hereto. HHC shall be solely and exclusively responsible for the
installation and operation of the UltraRes interface and all maintenance in
connection therewith provided however Pegasus shall, without incurring any
cost, provide telephonic technical advice with respect to the initial
installation of an UltraRes interface by HHC. HHC hereby indemnifies and holds
harmless Pegasus of and from any and all claims or liability of any nature
arising out of the UltraRes specifications and the creation of an UltraRes
interface by HHC, if caused by the negligent or intentional acts or omissions
of HHC. In no event shall Pegasus be liable to HHC or any other person or
entity for any damages, including any incidental or consequential damages,
expenses, lost profits, lost savings, or other damages or any other form of
liability arising out of the use of the UltraRes specifications by HHC or any
third party or any UltraRes interface created by HHC unless caused by negligent
or intentional acts or omissions of Pegasus.
<PAGE> 22
EXHIBIT "D"
PROPERTY INFORMATION DISTRIBUTION SERVICES
Pegasus will provide HHC with the ability to create a digital database of
HIW Hotels which is (i) capable of being accessed by Third Party Distribution
Systems with whom Pegasus contracts and (ii) where functionality exists,
capable of permitting the accessors of the database to make, amend and cancel
reservations with HIW Hotels. Pegasus will contract with Third Party
Distribution Systems and develop Interfaces with Third Party Distribution
Systems which will permit accessors of Third Party Distribution Systems to view
HHC's HIW Hotels database and make, amend and cancel reservations for HIW
Hotels. Pegasus shall maintain a continual operable Interface with those Third
Party Distribution Systems with whom it contracts during the term of such
contract, subject to the termination rights contained therein. All updates and
edits of HHC's Property Information Database shall be accessible by Third Party
Distribution Systems within two business days of receipt by Pegasus of such
update or edit.
HHC is solely responsible for providing to Pegasus the HHC Property
Information Database pursuant to Pegasus' prescribed methods. HHC shall
maintain an accurate and current Property Information Database. HHC is not
responsible for information provided by HIW Hotels.
<PAGE> 23
EXHIBIT "E"
PRIVATE LABEL WEB SITE SERVICE
Pursuant to mutually agreed commercially reasonable requirements, Pegasus
shall create and maintain a Private Label Web Site for HII. Pegasus shall
provide all reasonable and necessary technical support, hardware and software
to provide a continually operable Private Label Web Site. The Private Label Web
Site shall provide HHC and HIW Hotels with the capability to create multiple
site views, make unlimited changes or modifications to the proprietary views,
update HHC's Property Information Database using the remote authoring or batch
processing and make changes to the Property Information Database to include
additional property information as mutually agreed. The Private Label Web Site
shall also include information and reservation functionality for other travel
suppliers, weather information, mapping capability and an ad banner management
system all of which may be accepted or rejected by HHC. No later than December
31, 1997, the Private Label Web Site shall have city availability search and
alternate property display functionality. Pegasus shall conduct a semi-annual
security audit and shall provide for commercially reasonable disaster recovery
procedures. Subject to Sections 31 and 32 hereof, interruptions in the
operation of the Internet and delays caused by HHC, accessors to the Private
Label Web Site or other third parties, HHC's Private Label Web Site shall be
available, operational and fully functional to process reservations by
accessors to HHC's Private Label Web Site ninety nine point five percent
(99.5%) of the time over a rolling one hundred eighty (180) day period and
accessors shall receive a room confirmation for each reservation within an
average determined over each calendar month of twelve (12) seconds or less.
The Private Label Web Site shall contain the HHC Property Information
Database created by HHC and Reservation Functionality. Pegasus will provide HHC
with the ability to create a digital database of HIW Hotels (the HHC Property
Information Database) which is capable of being accessed via the Private Label
Web Site and capable of permitting accessors of the Private Label Web Site to
make, amend and cancel reservations in the HHC Reservation System.
Notwithstanding the above, HHC shall have a period of [*] from the date
hereof to analyze and consider whether or not to utilize the Private Label Web
Site service and HHC may, prior to the expiration of [*] from the date hereof,
give written notice to Pegasus to not utilize the Private Label Web Site
service and, in such event, Pegasus shall have no obligation to provide the
Private Label Web Site service and HHC shall incur no fees for this service.
*Confidential Treatment Requested
<PAGE> 24
EXHIBIT "F"
TRAVELWEB SERVICE
Pegasus shall create, operate and maintain on a continual basis a
dependable and operative Interface between HHC's Reservation System and
Pegasus' TravelWeb Internet Site. Pegasus will provide all reasonable and
necessary technical support, hardware and software so as to enable all
accessors of Pegasus' TravelWeb site to access HHC's Reservation System and
Property Information Database.
<PAGE> 25
EXHIBIT G
No.1 PEGASUS SYSTEMS, INC.
For the purchase of
259,292 Shares
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES that HOLIDAY HOSPITALITY CORPORATION
(hereinafter called the "Holder") is entitled to purchase from PEGASUS SYSTEMS,
INC., a Delaware corporation (hereinafter called the "Company"), upon the
surrender of this Warrant to the Company at the principal office in Dallas,
Texas, at any time on and after May 13, 1997 (the "Detachment Date"), and
before the close of business on May 12, 1999 (the"Termination Date"), the
number of fully paid and nonassessable shares of Common Stock, par value $.01
per share ("Common Stock"), set forth above, evidenced by a certificate
therefor, upon payment of the lesser of $9.60 per share or 85% of the initial
public offering price per share of the Company's Common Stock (the "Warrant
Price") for the number of shares set forth herein above; provided, however,
that under certain conditions set forth hereinafter, the number of shares of
Common Stock purchasable upon the exercise of this Warrant may be increased or
reduced and the Warrant Price may be adjusted. The Warrant Price shall be
payable in cash, or by certified or official bank check, in United States
dollars, to the order of the Company. No adjustment shall be made for any cash
dividends on any shares of stock issuable upon exercise of this Warrant. The
right of purchase represented by this Warrant is exercisable by Holder, its
parent, subsidiary, affiliate or any other successor to all or substantially all
of its business by sale of stock, sale of assets, merger or otherwise only, in
its entirety only and only in respect of all of such shares. In the event this
Warrant has not been exercised as required herein before the close of business
on the Termination Date, it shall automatically terminate and be of no force
and effect.
Subject to the provisions hereof, Holder shall have the right
to purchase from the Company (and the Company shall issue and sell to Holder)
the number of fully paid and nonassessable shares of Common Stock specified in
this Warrant, upon surrender of this Warrant to the Company at its office in
Dallas, Texas and upon payment to the Company of the Warrant Price for the
number of shares of Common Stock for which this Warrant is issued and any
applicable taxes. Upon surrender of this Warrant, and payment of the Warrant
Price as aforesaid, the Company shall issue and cause to be delivered with all
reasonable dispatch to Holder a certificate for the number of full shares of
Common Stock so purchased upon the exercise of this Warrant. Such certificate
shall be deemed to have been issued and Holder shall be deemed to have become a
holder of record of such shares as of the date of the surrender of this Warrant
and payment of the Warrant Price as aforesaid. The rights of purchase
represented by this Warrant shall be exercisable, at the election of Holder,
once only for all and not less than all of the shares specified herein and, in
the event this Warrant is exercised in respect of less than all of the shares
specified therein such exercise shall be invalid and of no force or effect.
There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and issued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by this Warrant, and the transfer Agent for the Common Stock and
every subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid are
hereby irrevocably
-1-
<PAGE> 26
authorized and directed at all times to reserve such number of authorized and
unissued shares as shall be requisite for such purpose.
The Warrant Price and number of shares subject to this Warrant shall
be subject to adjustment from time to time as follows:
a. In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of shares, the Warrant
Price in effect immediately prior to such subdivision shall be proportionately
reduced and, in case the outstanding shares of the Common Stock of the Company
shall be combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased.
b. Upon each adjustment of the Warrant Price pursuant to
the provisions hereof, the number of shares issuable upon the exercise of this
Warrant shall be adjusted by multiplying the Warrant Price in effect prior to
the adjustment by the number of shares of Common Stock covered by the Warrant
and dividing the product so obtained by the adjusted Warrant Price.
c. Except upon consolidation or reclassification of the shares of
Common Stock of the Company as provided for in subsections (a) or (f) hereof,
the Warrant Price in effect at any time may not be adjusted upward or increased
in any manner whatsoever.
d. Irrespective of any adjustment or change in the Warrant Price
or the number of shares of Common Stock actually purchasable under this
Warrant, this Warrant shall continue to express the Warrant Price per share and
the number of shares purchasable hereunder as the Warrant Price per share and
the number of shares purchasable were expressed in this Warrant when initially
issued with the adjustment or change reflected as set forth in subsection (g)
hereof.
e. If any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company with
another corporation or the sale of all or substantially all of its assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby Holder shall have the right to
purchase and receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by each such Warrant, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of shares
of such Common Stock purchasable upon the exercise of the rights represented by
this Warrant had such reorganization, reclassification, consolidation, merger
or sale not taken place, and in any such case appropriate provisions shall be
made with respect the rights and interests of Holder to the end that the
provisions hereof (including without limitation provisions for adjustment of
the Warrant Price and of the number of shares purchasable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may be in relation
to the shares of stock thereafter deliverable upon the exercise of this
Warrant.
-2-
<PAGE> 27
f. No adjustment of the Warrant Price shall be made in connection
with the issuance or sale of Common Stock issuable pursuant to any stock option
plan or incentive compensation arrangements now or hereafter granted to
employees of the Company or any of its subsidiaries in connection with their
employment or the issuance or sale of shares of Preferred Stock.
g. Whenever the Warrant Price is adjusted as herein provided,
the Company shall provide a written statement to Holder showing in detail the
facts requiring such adjustment and the Warrant Price and the number of shares
of Common Stock purchasable upon exercise of this Warrant after such
adjustment.
h. The Company may retain a firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) selected by the Board of
Directors of the Company or the Executive Committee of said Board to make any
computation required hereunder and a certificate signed by such firm shall be
conclusive evidence of the correctness of any such computation. If Holder does
not agree as to the correctness of such computation. Holder at their own
expense may retain a firm of independent certified public accountants of
recognized standings to develop a second computation. Such accounting firms
shall attempt to resolve any differences of opinion with respect to such
computations, but in the absence of such resolution, the matter shall be
submitted to binding arbitration in Dallas, Texas in accordance with the then
applicable rules of the American Arbitration Association.
Notwithstanding any other provision hereof, to the extent permitted
by applicable law, the Company shall provide written notice to Holder at least
ten (10) days prior to the record date or other effective date for any of the
following actions: dividends, mergers, liquidations, consolidations,
reclassifications of stock, sale of substantially all of the assets or any
other action for which stockholder approval is required by Delaware law.
The Company shall issue a new warrant to be issued in place of this
Warrant in the event this Warrant has been lost, stolen, defaced, worn-out,
or destroyed, upon the making of an affidavit of that fact by Holder. When
issuing a new warrant, the Company may, as a condition precedent thereto, (a)
require the Holder of a defaced or worn out warrant to deliver such warrant to
the Company and order the cancellation of the same, and (b) require the Holder
of any lost, stolen or destroyed warrant or its legal representative, to
advertise the same in such manner as the Company shall require and to give the
Company a bond in such sum as it may direct as indemnity against any claim that
may be made against the Company with respect to the warrant alleged to have
been lost, stolen or destroyed. Thereupon, the Company may cause to be issued to
Holder a new warrant in replacement for the warrant alleged to have been lost,
stolen, defaced, worn out or destroyed. Upon the new warrant so issued shall be
noted the fact of such issue and the number, date, and name of the registered
Holder of the lost, stolen, defaced, worn out, or destroyed warrant in lieu of
which the new warrant is issued. Every warrant issued hereunder shall be issued
without payment to the Company for such warrant, provided that, there shall be
paid to the Company a sum equal to any exceptional expenses incurred by the
Company in providing for or obtaining any such indemnity and security as is
referred to herein.
-3-
<PAGE> 28
Notwithstanding any other provision hereof, in the event this
Warrant is exercised in connection with an initial public offering of the
Company's stock or the sale of the Company, such exercise may be conditioned
upon and subject to the consummation of such initial public offering or sale.
The Company shall not be required to issue fractions of shares
of Common Stock on the exercise or conversion of this Warrant. If any fraction
of a share of Common Stock would, except for the provisions of this paragraph,
be issuable on the exercise or conversion of this Warrant, the Company shall
purchase such fraction for an amount in cash equal to the current fair market
value of such fraction.
The right to exercise this Warrant and purchase the stock as
provided herein is expressly contingent upon and conditioned upon Holder being
in material compliance with all of the material terms of that certain
Distribution Services Agreement for Holiday Inn Worldwide between the Company
and Holder and further provided that Holder has not terminated any of the
Services (as defined therein), unless as a result of a breach of the Agreement
by the Company, as of the exercise of this Warrant.
Except as otherwise provided herein, nothing contained in this
Warrant shall be construed as conferring upon Holder the right to vote or to
consent or to receive notice as a stockholder in respect of the meetings of
stockholders for the election of directors of the Company or any other matters,
or any rights whatsoever as a stockholder of the Company.
Any notice pursuant to this Warrant to be given or made by Holder or
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, or by next day delivery service for personal delivery,
addressed (until another address is provided in writing by the Company or
Holder) as follows with a copy to the Company's or Holder's legal departments:
President Senior Vice President, Worldwide Reservations
Pegasus Systems, Inc. Holiday Hospitality Corporation
3811 Turtle Creek Boulevard Three Ravinia Drive
Suite 1100 Suite 2900
Dallas, Texas 75219 Atlanta, Georgia 30346
All the covenants and provisions of this Warrant by or for the benefit
of the Company or Holder shall bind and inure to the benefit of their respect
successors and assigns hereunder.
This Warrant shall be deemed to be a contract made under the laws of
the State of Texas and for all purposes shall be construed in accordance with
the laws of said State.
Nothing herein shall be construed to give to any person or
corporation other than the Company and Holder any legal or equitable right,
remedy or claim hereunder, but the terms of this Warrant shall be for the sole
and exclusive benefit of Holder and the Company.
Except as otherwise provided herein, this Warrant is not transferable.
-4-
<PAGE> 29
In connection with the exercise of this Warrant, Holder agrees to
execute the Investment Representative Statement (or a substantially similar
document) attached hereto as Exhibit A.
IN WITNESS WHEREOF, this Warrant is hereby executed by the President
and Secretary of Pegasus Systems, Inc. as the act of the Company.
Date: May 27, 1997
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III
----------------------------------
John F. Davis, III, President
ATTEST:
By: /s/ RIC L. FLOYD
----------------------------------
Ric L. Floyd, Secretary
-5-
<PAGE> 30
INVESTMENT REPRESENTATION STATEMENT
In connection with the exercise of Warrant Number 1 of Pegasus
Systems, Inc. and the purchase of the Securities described therein, the
undersigned Holder represents to the Company the following:
(a) Holder is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Holder is acquiring these Securities for investment for Holder's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Holder acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Holder's investment intent as expressed herein. Holder further
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Holder further acknowledges and understands that the
Company is under no obligation to register the Securities. Holder understands
that the certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are registered or
such registration is not required in the opinion of counsel satisfactory to the
Company and any other legend required under then applicable state or federal
securities laws.
(c) Holder is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the issuance of the Warrant to the
Holder, the exercise will be exempt from registration under the Securities Act.
In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the Securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a broker in
an unsolicited "brokers transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act); and, in the case of an
affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
-6-
<PAGE> 31
EXHIBIT "A"
TO
COMMON STOCK PURCHASE WARRANT
In the event that the Company does not qualify under Rule 701
at the time of issuance of the Warrant, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one year after the later of the date
the Securities were sold by the Company or the date the Securities were sold by
an affiliate of the Company, within the meaning of Rule 144; and, in the case
of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Holder further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A under the Securities Act
or some other registration exemption will be required; and that, notwithstanding
the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities
and Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Holder understands
that no assurances can be given that any such other registration exemption will
be available in such event.
HOLIDAY HOSPITALITY CORPORATION, HOLDER
By:
-------------------------------------
Its:
-------------------------------
Date:
-------------------------
-7-
<PAGE> 32
EXHIBIT "H"
FIRST AMENDMENT TO HCC PARTICIPANT AGREEMENT
This First Amendment to HCC Participant Agreement is entered into by and
between THE HOTEL CLEARING CORPORATION, hereinafter called "HCC", and HOLIDAY
HOSPITALITY CORPORATION, Assignee of Holiday Inns, Inc. hereinafter called
"Participant", to be effective the __ day of ___, 1997.
AGREED FACTS
1. HCC and Participant have heretofore entered into an HCC Participant
Agreement dated effective December 21, 1994 (hereinafter called the
"Participant Agreement").
2. HCC and Participant have mutually agreed to amend the term of the
Participant Agreement.
3. HCC and Participant intend for this First Amendment to set forth in
its entirety their agreement to amend the term of the Participant
Agreement.
AGREEMENT
FOR AND IN CONSIDERATION of the above-stated facts, which are hereby
acknowledged as true and correct, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, HCC and
Participant hereby agree as follows:
1. Section 5.1 of the Participant Agreement is hereby deleted in its
entirety and is replaced with the following:
"5.1 Term of Agreement. Unless earlier terminated as provided herein,
the term of this Agreement shall begin upon the Effective Date
and shall terminate on the last day of the [*] after the
Effective Date."
2. This First Amendment shall be and hereby is incorporated into the
Participant Agreement for all intents and purposes and all terms,
provisions and definitions of the Participant Agreement shall apply.
3. Except for the provisions inconsistent with the terms of this First
Amendment, the Participant Agreement is hereby ratified and affirmed
in all respects.
This First Amendment is effective as of the date stated above and executed
on the dates indicated below.
THE HOTEL CLEARING CORPORATION
By:
----------------------------
John F. Davis, III
President
Date:
--------------------------
*Confidential Treatment Requested
<PAGE> 33
HOLIDAY HOSPITALITY CORPORATION
By: /s/ JOHN T. SWEETWOOD
----------------------------------------------
Its: John T. Sweetwood - Executive Vice President
---------------------------------------------
Date: May 12, 1997
--------------------------------------------
APPROVED
BUSINESS TERMS ________________
LEGAL FORM ____________________
<PAGE> 34
EXHIBIT "I"
FIRST AMENDMENT TO
AGREEMENT BETWEEN RESCOM SERVICES, INC. AND
THE HOTEL CLEARING CORPORATION
This First Amendment to AGREEMENT BETWEEN RESCOM SERVICES, INC.
AND THE HOTEL CLEARING CORPORATION is entered into by and between THE
HOTEL CLEARING CORPORATION, hereinafter called "HCC", and RESCOM
SERVICES, INC., hereinafter called "Participant", to be effective the
day of 1997.
- ---- ------------,
AGREED FACTS
------------
1. HCC and Participant have heretofore entered into an
Agreement Between Rescom Services, Inc. and The Hotel
Clearing Corporation dated effective December 21, 1994
(hereinafter called the "Rescom Agreement").
2. HCC and Participant have mutually agreed to amend the
Rescom Agreement as specifically set forth herein.
3. HCC and Participant intend for this First Amendment to set
forth in its entirety their agreement to amend the Rescom
Agreement with respect to the matters set forth herein.
AGREEMENT
---------
FOR AND IN CONSIDERATION of the above-stated facts, which are hereby
acknowledged as true and correct and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, HCC and Participant
hereby agree as follows:
1. On the first day of the month following the first month Holiday
Hospitality Corporation processes all of its properties' GDS
transactions via Pegasus Systems, Inc.'s UltraSwitch service, section
4.1 of the Rescom Agreement shall be deleted in its entirety and is
hereby replaced with the following:
"4.1 [*] For each [*] processed by a [*] pursuant to [*] a [*] (the
[*]) as follows (based upon an [*] and hereinafter defined, of between
[*] and [*]
For any month wherein the [*] of [*] is greater than [*] of [*]
each [*];
For any month wherein the [*] of [*] is greater than [*] a
[*] of [*] each [*];
For any month wherein the [*] of [*] is greater than [*] of [*]
each [*];
For any month wherein the [*] of [*] is greater than [*] a
[*] of [*] each [*]; and
For any month wherein the [*] of [*] processed each month in
excess [*] each [*]
*Confidential Treatment Requested
<PAGE> 35
2. Section [*] of the Rescom Agreement is hereby amended to delete the
[*] contained in the first line below [*] and replace it with [*]
The following is also added to Section 4.2:
<TABLE>
<CAPTION>
Average [*] Effect on [*]
<S> <C>
[*] to [*] reduced by $[*]
[*] to [*] reduced by $[*]
[*] to [*] reduced by $[*]
[*] to [*] reduced by $[*]
[*] to [*] reduced by $[*]
[*] or less reduced by $[*]
</TABLE>
3. Notwithstanding any other provision hereof, in the event Pegasus
Systems, Inc. does not undertake an initial public offering of its
stock within twenty four (24) months of the effective date of this
First Amendment, Section 2 of this First Amendment shall be deleted
as of the expiration of twenty four (24) months after the effective
date of this First Amendment and the provisions contained within the
original Rescom Agreement with respect to Section 4.2 shall be in
force and effect as of that date forward.
4. Section 4.4 of the Rescom Agreement is hereby deleted in its entirety.
5. Section 5.1 of the Rescom Agreement is hereby deleted in its entirety.
6. This First Amendment shall be and hereby is incorporated into the
Rescom Agreement for all intents and purposes and all terms,
provisions and definitions of the Rescom Agreement shall apply.
7. Except for the provisions inconsistent with the terms of this First
Amendment, the Rescom Agreement is hereby ratified and affirmed in
all respects.
This First Amendment is effective as of the date stated above and
executed on the dates indicated below.
THE HOTEL CLEARING CORPORATION
By:
------------------------------------
John F. Davis, III
President
Date:
-----------------------
RESCOM SERVICES, INC.
By:
------------------------------------
Its:
------------------------------------
By:
------------------------------------
Its:
------------------------------------
Date:
------------------------------------
*Confidential Treatment Requested
<PAGE> 36
MUTUAL NON-DISCLOSURE AGREEMENT TO PROTECT
RELEASE OF CONFIDENTIAL INFORMATION
In the course of our past, presently ongoing, and forthcoming
discussions and negotiations involving Pegasus Systems, Inc. (including its
affiliates and subsidiaries The Hotel Industry Switch Company, The Hotel
Clearing Corporation and TravelWeb. Inc.), hereinafter collectively called
"Pegasus," and Holiday Hospitality Corporation ("HHC") (all of the rights and
interests of Holiday Inns, Inc. related to this Agreement having been assigned
to, and assumed by, HHC on April 28, 1997), doing business as Holiday Inn
Worldwide, and our respective company's products and/or services and relating
to the consideration of a business transaction or the purchase of one or more
products and/or services, we may reveal to each other certain confidential or
proprietary information with respect to corporate existence, ownership and
governance and/or produce and/or services, financial condition or otherwise.
The confidential and proprietary information in this context includes but is
not limited to all information relative to our respective businesses, business
plans, strategies or affiliations, corporate existence, ownership and
governance and products and services (now existing or proposed), and any and
all information generated by such products or services. Furthermore, we may
have prior to the date of this Agreement, disclosed to each other certain
confidential and proprietary information with respect to products and/or
services and our respective businesses. in the interest of avoiding any
misunderstandings about the basis on which this information ("Information") has
been or will be disclosed, we mutually agree to the following:
We mutually agree to not disclose to any person, except our own
respective employees on a need-to-know basis, any information disclosed
except as may be specifically authorized in writing by an officer or
authorized representative of the disclosing party or as otherwise
permitted by this Agreement. We mutually agree to require each of our
employees, representatives and agents to agree to comply with our
obligations under this Agreement before authorizing them to have access
to such Information and to obtain the prior approval of the disclosing
party for any such further dissemination of the Information to persons
other than our own employees. We also mutually agree to do all things
reasonably necessary to prevent any of our employees, representatives
and agents from disclosing any such Information to any third parties.
Additionally, we mutually agree that we will disclose such Information
solely to those additional persons to whom it is absolutely necessary
to disclose such Information and only on a need-to-know-basis.
We further agree to use any Information disclosed solely for the
purpose of determining whether or not to enter into a business
transaction with each other and/or to purchase each other's products
and/or services. On termination or expiration of our discussions and
the failure to enter into a business transaction or to purchase
products and/or services, we agree to return all originals of all such
Information to the disclosing party.
Such Information shall not include any information which (i) was
publicly known and made generally available in the public domain prior to the
time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
he disclosing party as shown by the receiving party's files and records
immediately prior to the time of disclosure and is not subject to another
confidentiality agreement (iv) is obtained by the receiving party from a third
party without a breach of such third party's obligations of confidentiality;
(v) is independently acquired or developed by the receiving party without use
of or reference to the disclosing party's Information, as shown by documents
and other competent evidence in the receiving party's possession; or (vi) is
required by law to be disclosed by the receiving party, provided that the
receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the Information from public disclosure.
-1-
<PAGE> 37
We mutually acknowledge that we would not enter into or continue
discussions without mutual agreement to the terms hereof and we each confirm
that it is not our intent to use the specific Information disclosed under this
agreement except for the purposes stated herein.
HHC may assign this Agreement to a parent, subsidiary, or affiliate
without consent.
A facsimile transmittal of signatures to this Agreement shall be
sufficient for all purposes.
ACCEPTED AND AGREED: HOLIDAY HOSPITALITY CORPORATION
PEGASUS SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ LAURA DONACHY
------------------------- -------------------------
Its: Its:
------------------------ ------------------------
Date: 5/1/97 Date: 5/6/97
----------------------- -----------------------
-2-
<PAGE> 38
EXHIBIT "K"
TERMINATION OF OPTION AND CANCELLATION OF NOTE
RESCOM SERVICES, INC. (hereinafter called "Rescom") and THE HOTEL CLEARING
CORPORATION (hereinafter called "HCC") hereby agree as follows:
AGREED FACTS
1. HCC granted to Rescom the option to purchase one share of HCC stock
as specifically set forth in that certain Stock Purchase Option with
an effective date of December 22, 1994 (the "Stock Purchase Option").
2. As partial consideration for the Stock Purchase Option, Rescom
executed and tendered to HCC a note in the principal amount of One
Hundred Thousand Dollars ($100,000.00) dated December 21, 1994
payable to HCC (the "Note").
3. For their mutual benefit, Rescom and HCC are desirous of terminating
the Stock Purchase Option and canceling the Note and intend for this
document to set forth their agreement in that regard.
AGREEMENT
In consideration of the above-stated agreed facts which are hereby
acknowledged and confessed as true and correct by Rescom and HCC and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is hereby mutually agreed as follows:
1. The Stock Purchase Option is hereby terminated as of the effective
date hereof and is declared to be void and of no further force and
effect.
2. The Note is hereby canceled as of the effective date hereof and is
declared to be void and of no further force and effect.
3. Any and all rights and/or obligations arising out of the Stock
Purchase Option and/or the Note are hereby terminated effective as of
the effective date hereof and declared to be void and of no further
force and effect.
4. The effective date of this Agreement shall be the Effective Date as
defined in that certain Distribution Services Agreement for Holiday
Inn Worldwide entered into of even date herewith by and between
Holiday Hospitality Corporation and Pegasus Systems, Inc.
<PAGE> 39
REPRESENTATIONS
The parties hereto represent as follows:
1. Rescom hereby represents and warrants to HCC that as of the effective
date hereof it is the sole and exclusive holder and owner of the
Stock Purchase Option, that no other person or entity has any other
rights with respect to the Stock Purchase Option and that Rescom has
the full and complete right and authority to enter into this
Agreement and to effectuate the provisions hereof.
2. HCC hereby represents and warrants to Rescom that as of the effective
date hereof it is the sole and exclusive holder and owner of the
Note, that no other person or entity has any other rights with
respect to the Note and that HCC has the full and complete right and
authority to enter into this Agreement and to effectuate the
provisions hereof.
This Termination of Option and Cancellation of Note agreement is entered
into this 13th day of May, 1997 with an effective date as provided herein.
THE HOTEL CLEARING CORPORATION RESCOM SERVICES, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ MICHAEL L. GOODSON
-------------------------- ---------------------------
John F. Davis, III Michael L. Goodson
President
Its: Vice President
--------------------------
May 12, 1997
--------------------
APPROVED
BUSINESS TERMS /s/ LS
-----------
LEGAL FORM /s/ DM
--------------
-2-
<PAGE> 40
EXHIBIT "L"
SCHEDULE OF INSURANCE [RAGLAND
STROTHER
& LAFITTE
PEGASUS SYSTEMS, INC.; THISCO & HOTEL LOGO]
CLEARING CORP.; TRAVELWEB, INC.
Two Turtle Creek Village
3838 Oak Lawn Ave., Suite 500
Dallas, Texas 75219-4506
(214)522-4880*FAX(214)520-3856
DATE: February 20, 1997
<TABLE>
<CAPTION>
COVERAGE LIMITS EXPIRES COMPANY POLICY # PREMIUM COMMENT
<S> <C> <C> <C> <C> <C> <C>
Commercial Package:
Contents: $ 700,000 01/01/98 Kemper Insurance TKP76473903 $10,567.00 $1,000 Ded
Extra Expense 200,000 Included $1,000 Ded
General Liability
Occurrence 1,000,000 Included
Aggregate 2,000,000
Fire Damage 50,000
Medical Exp. 5,000
Electronic Equipment (Texas) 600,000 Included $1,000 Ded
Transit/Temp. Loc. 25,000
Commercial Crime: 01/01/98 Kemper Insurance 3F78976604 $ 1,054.00 $5,000 Ded
Employee Dishonesty $ 250,000
Forgery/Alteration $ 250,000
Workers Compensation 500/500/500 01/01/98 Kemper Insurance 3BG04035804 $11,624.00
Auto: Hired/Non Owned Liab. $1,000,000 01/01/98 Kemper Insurance E3H00650003 $ 675.00
Hired/Non Owned Phy. Damage ACV or $25,000 whichever less
Umbrella $5,000,000 01/01/98 Kemper Insurance 3SB04723204 $ 2,250.00 $10,000 Retained Limit
Electronic Equipment (Arizona) $1,500,000 01/01/98 Kemper Insurance 3AT62283804 $ 5,000.00 $1,000 Ded
Business Interruption 500,000 Included $1,000 Ded
</TABLE>
THIS SCHEDULE LISTS THE INSURANCE POLICIES WE PROVIDE FOR YOU. IF YOU HAVE
POLICIES FROM OTHER INSURANCE OFFICES, WE SUGGEST YOU ADD THEM TO THIS LIST.
REMEMBER THIS SCHEDULE IS ONLY A SUMMARY. REFER TO THE ACTUAL POLICIES FOR
SPECIFIC DETAILS.
<PAGE> 41
SCHEDULE I
SCHEDULE OF IMPLEMENTATION
<PAGE> 42
SCHEDULE II
REPORTS
<PAGE> 43
ULTRASWITCH SYSTEM DOWNTIME REPORT
HOTELS
Saturday, 01 March, 1997 through Monday, 31 March, 1997
<TABLE>
<CAPTION>
LOG NUMBER RFC DATE TIME PARTICIPANT REASON MINUTES
<S> <C> <C> <C> <C> <C> <C>
8302 0 24-Mar-97 14:29 -B UltraSwitch Software 9
PCD card link level software malfunction
8602 0 27-Mar-97 02:57 -A S/W Maintenance 18
Mike K. stopped kivanet to tpe1 to remount drives
under the fallover program*********JEFF B.
CHECK ON THIS WITH MIKE K.
8602 0 27-Mar-97 02:57 -B S/W Maintenance 18
Mike K. sopped kivanet to tpe1 to remount drives
under this fallover program*********JEFF B.
CHECK ON THIS WITH MIKE K.
8604 0 27-Mar-97 03:29 -A UltraSwitch Software 31
TPE1 panicked and went into kernal debugger.
8604 0 27-Mar-97 03:29 B UltraSwitch Software 31
TPE1 panicked and went into kernal debugger.
8605 0 27-Mar-97 03:03 -A S/W Maintenance 12
Software install-Adding hotels type A&B for
all GDS's
8605 0 27-Mar-97 03:03 -B S/W Maintenance 12
Software install-Adding hotels type A&B for
all GDS's
</TABLE>
<PAGE> 44
GRAPHICAL STATISTICS REPORT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
HOTELS CORPORATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET BOOKINGS
- ------------
MAR '96 APR'96 MAY'96 JUN'96 JUL'96 AUG'96 SEP'96 OCT'96 NOV'96 DEC'96 JAN'97 FEB'97 MAR'97
- ----------------------------------------------------------------------------------------------------------------------------------
Type A Net Bookings
52,847 46,229 45,534 41,484 34,114 6,697 8,127 10,742 8,588 6,460 10,472 9,997 8,901
- ----------------------------------------------------------------------------------------------------------------------------------
Type B Net Bookings
-22,321 -19,435 -20,958 -20,155 -12,872 -149 -112 -119 -247 -170 -304 -237 -688
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Bookings
30,526 26,794 24,576 21,329 21,242 6,548 8,015 10,623 8,341 6,290 10,168 9,760 8,213
- ----------------------------------------------------------------------------------------------------------------------------------
STATUS MESSAGES:
- ----------------------------------------------------------------------------------------------------------------------------------
Status Message Segments
1,196,924 2,891,098 5,306,908 4,819,517 4,319,454 2,024,576 1,992,662 2,181,671 1,735,110 1,302,636 1,869,098 2,128,449 2,147,646
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Status Messages
to Net Bookings
39.21 107.90 215.94 225.96 203.34 309.19 248.62 205.37 208.02 207.10 183.82 218.08 261.49
- ----------------------------------------------------------------------------------------------------------------------------------
UltraSwitch(R) Ratio
30.78 32.37 33.06 40.10 39.39 37.73 41.63 40.33 37.36 45.27 34.71 43.04 47.50
- ----------------------------------------------------------------------------------------------------------------------------------
TYPE A RESPONSE TIME:
2.69 3.28 3.59 3.49 3.56 3.19 3.37 3.72 2.76 2.65 2.64 2.70 2.82
- ----------------------------------------------------------------------------------------------------------------------------------
All Others
2.36 2.24 2.31 2.48 2.47 2.17 2.34 2.01 1.85 1.71 1.93 2.03 1.98
- ----------------------------------------------------------------------------------------------------------------------------------
UltraSwitch(R)
0.22 0.21 0.21 0.22 0.22 0.22 0.25 0.21 0.22 0.23 0.23 0.23 0.23
- ----------------------------------------------------------------------------------------------------------------------------------
TYPE B DWELL TIME IN ULTRASWITCH(R):
- ----------------------------------------------------------------------------------------------------------------------------------
Type B Bookings
- ----------------------------------------------------------------------------------------------------------------------------------
All Others
- ----------------------------------------------------------------------------------------------------------------------------------
Status Messages
- ----------------------------------------------------------------------------------------------------------------------------------
All Others
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPH] [GRAPH] [GRAPH]
[GRAPH] [GRAPH] [GRAPH]
<PAGE> 45
ULTRASWITCH SYSTEM DOWNTIME REPORT
HOTELS
Saturday, 01 March, 1997 through Monday, 31 March, 1997
<TABLE>
<CAPTION>
LOG NUMBER RFC DATE TIME PARTICIPANT REASON MINUTES
<S> <C> <C> <C> <C> <C> <C>
6203 0 03-Mar-97 13:00 -B UltraSwitch Software 1
1A-KSF reported full. 1A-KSF had a stuck message.
6403 0 05-Mar-97 08:25 -A UltraSwitch Software 1
Kivanet Shared memory kill kivanet on tpe2.
6403 0 05-Mar-97 08:25 -B UltraSwitch Software 1
Kivanet Shared memory kill kivanet on tpe2.
7208 0 13-Mar-97 02:58 -A S/W Maintenance 3
Software install-RFC#3367 Remove ksf from
statsub, increase max-outstanding on ksf for 1A to 8.
7208 0 13-Mar-97 02:58 -B S/W Maintenance 4
Software install-RFC#3367 Remove ksf from
statsub, increase max-outstanding on ksf for 1A to 8.
7708 0 18-Mar-97 03:11 A S/W Maintenance 3
Software install-Poll test with sabre DCA and
southern Pacific (sp), update statsub comm engines
production comm engines will have letters, test
comm engines will have numbers. New covia ip for
rate changes.
7708 0 18-Mar-97 03:11 -B S/W Maintenance 3
Software install-Poll test with sabre DCA and
southern Pacific (sp), update statsub comm engines
production comm engines will have letters, test
comm engines will have numbers. New covia ip for
rate changes.
7807 0 19-Mar-97 20:18 -A Transaction Processing Engine Outage 61
Out of swap space.
7807 0 19-Mar-97 20:18 B Transaction Processing Engine Outage 61
Out of swap space.
7812 0 19-Mar-97 03:48 -A S/W Maintenance 9
Software install-RFC#3367.
7812 0 19-Mar-97 03:48 -B S/W Maintenance 9
Software install-RFC#3367
7904 0 20-Mar-97 02:44 -A S/W Maintenance 3
Software install-moving type A to comm
engine CEF.
7904 0 20-Mar-97 02:44 -B S/W Maintenance 3
Software install-moving type A to comm
engine CEF.
</TABLE>
<PAGE> 46
ULTRASWITCH PARTICIPANT DOWNTIME REPORT
HOTELS
Saturday, 01 March, 1997 through Monday, 31 March, 1997
<TABLE>
<CAPTION>
LOG NUMBER RFC DATE TIME PARTICIPANT REASON MINUTES
<S> <C> <C> <C> <C> <C> <C>
0 0 11-Mar-97 14:05 -B Participant Related Downtime 1
Participant
0 0 13-Mar-97 -A Participant Related Downtime 4
Participant
0 0 17-Mar-97 14:14 -A Participant Related Downtime 4
Participant
0 0 17-Mar-97 14:14 -B Participant Related Downtime 4
Participant
0 0 25-Mar-97 02:00 -A Participant Related Downtime 1
Participant
0 0 26-Mar-97 14:23 -B Participant Related Downtime 1
Participant
</TABLE>
<PAGE> 47
UltraSwitch(R) Billing Summary
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
TYPE-A TRANSACTION SUMMARY
Booking Requests
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ET 0 HK 380 IG 0 IN 0
IS 0 IX 0 NN 0 SS 7590
XX 2346 ZZ 0 Other 0
</TABLE>
Booking Responses
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
EK 0 HK 7849 HX 2088 IK 0
NN 0 NO 0 UC 353 UX 26
XK 0 Other 0
</TABLE>
TYPE-B TRANSACTION SUMMARY
Booking Requests from Global Distribution Systems
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 ET 0 FS 0
HK 0 0 HN 0 HQ 0
HS 0 IG 0 IN 0 IS 0
IX 0 KK 0 LK 0 LL 0
LQ 0 NA 0 NN 0 NO 0
NS 0 OX 0 PN 0 RL 0
SK 0 SQ 0 SS 0 TL 0
UC 0 XL 0 XR 0 XX 0
Other 0
</TABLE>
Booking Responses from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 CC 0 EK 0
HK 980 HS 0 HX 0 IK 0
KK 0 KL 0 LL 0 NN 0
NO 283 SK 0 TK 0 TL 0
UC 174 UN 0 US 0 UU 0
UX 0 XR 0 XX 0 Other 0
</TABLE>
Status/Rate Update Requests from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
HCV 0 HHU 0 HUM 0 HUR 0
HVA 90925 HVC 121135 HVM 0 HVN 0
HVO 74956 HVQ 0 HVR 0 HVS 0
Other 0
</TABLE>
Status Responses from Global Distribution Systems
<TABLE>
<S> <C>
AVH 7249
</TABLE>
Unknown Type B messages to HRS: 0
Unknown Type B messages to GDS: 0
Other: Messages with action/status codes not on the list.
<PAGE> 48
UltraSwitch(R) Transaction Report
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
TYPE-A TRANSACTION SUMMARY
Booking Requests
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ET 0 HK 1250 IG 0 IN 0
IS 0 IX 0 NN 0 SS 16532
XX 4417 ZZ 0 Other 0
</TABLE>
Booking Responses
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
EK 0 HK 15352 HX 1722 IK 0
NN 1 NO 0 UC 4842 UX 282
XK 0 Other 0
</TABLE>
TYPE-B TRANSACTION SUMMARY
Booking Requests from Global Distribution Systems
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 ET 0 FS 0
HK 0 0 HN 0 HQ 0
HS 0 IG 0 IN 0 IS 0
IX 0 KK 0 LK 0 LL 0
LQ 0 NA 0 NN 0 NO 0
NS 0 OX 0 PN 0 RL 0
SK 0 SQ 0 SS 0 TL 0
UC 0 XL 0 XR 0 XX 0
Other 0
</TABLE>
Booking Responses from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 CC 0 EK 0
HK 272 HS 0 HX 0 IK 0
KK 0 KL 0 LL 0 NN 0
NO 150 SK 0 TK 0 TL 0
UC 81 UN 0 US 0 UU 0
UX 0 XR 0 XX 0 Other 0
</TABLE>
Status/Rate Update Requests from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
HCV 0 HHU 0 HUM 0 HUR 0
HVA 647657 HVC 956346 HVM 0 HVN 0
HVO 256627 HVQ 0 HVR 0 HVS 0
Other 0
</TABLE>
Status Responses from Global Distribution Systems
<TABLE>
<S> <C>
AVH 9331
</TABLE>
Unknown Type B messages to HRS: 0
Unknown Type B messages to GDS: 0
Other: Messages with action/status codes not on the list.
<PAGE> 49
UltraSwitch(R) Transaction Report
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
TYPE-A TRANSACTION SUMMARY
Booking Requests
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
ET 0 HK 1630 IG 0 IN 0
IS 0 IX 0 NN 0 SS 24122
XX 6763 ZZ 0 Other 0
</TABLE>
Booking Responses
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
EK 0 HK 23201 HX 3810 IK 0
NN 0 NO 0 UC 5195 UX 308
XK 0 Other 0
</TABLE>
TYPE-B TRANSACTION SUMMARY
Booking Requests from Global Distribution Systems
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 ET 0 FS 0
HK 0 0 HN 0 HQ 0
HS 0 IG 0 IN 0 IS 0
IX 0 KK 0 LK 0 LL 0
LQ 0 NA 0 NN 0 NO 0
NS 0 OX 0 PN 0 RL 0
SK 0 SQ 0 SS 0 TL 0
UC 0 XL 0 XR 0 XX 0
Other 0
</TABLE>
Booking Responses from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
AS 0 CA 0 CC 0 EK 0
HK 1252 HS 0 HX 0 IK 0
KK 0 KL 0 LL 0 NN 0
NO 433 SK 0 TK 0 TL 0
UC 255 UN 0 US 0 UU 0
UX 0 XR 0 XX 0 Other 0
</TABLE>
Status/Rate Update Requests from Hotels
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
HCV 0 HHU 0 HUM 0 HUR 0
HVA 738582 HVC 1077481 HVM 0 HVN 0
HVO 331583 HVQ 0 HVR 0 HVS 0
Other 0
</TABLE>
Status Responses from Global Distribution Systems
<TABLE>
<S> <C>
AVH 16580
</TABLE>
Unknown Type B messages to HRS: 0
Unknown Type B messages to GDS: 0
Other: Messages with action/status codes not on the list.
<PAGE> 50
UltraSwitch(R) Billing Summary
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
<TABLE>
<S> <C> <C>
BILLING FORMULA FOR TYPE A TRANSACTIONS
Confirmed Booking Requests 5217
Cancellation Responses (-) 2320
- ---------------------------------------------------------------------------------------------------------
Total Type A Net Bookings 2897
BILLING FORMULA FOR TYPE B TRANSACTIONS
Reservations
IS to HRS (sell) 0
SS to HRS (sell) (+) 0
NN to HRS (Need, reply required) (+) 0
IN to HRS (sell, possible dup) (+) 0
UX from HRS (no cancel) (+) 0
- ---------------------------------------------------------------------------------------------------------
Total Type B Reservations 0
Cancellations
XX to HRS (cancel) 0
IX to HRS (cancel) (+) 0
NO from HRS (+) 283
NN from HRS (denial of booking) (+) 0
UC from HRS (could not sell) (+) 174
- ---------------------------------------------------------------------------------------------------------
Total Type B Cancellations 457
Type B Net Booking Summary
Reservations 0
Cancellations (-) 457
- ---------------------------------------------------------------------------------------------------------
Total Type B Net Bookings -457
NET BOOKING SUMMARY
Type A Net Bookings 2897
Type B Net Bookings (+) -457
- ---------------------------------------------------------------------------------------------------------
Total Net Bookings 2440
BILLING FORMULA FOR STATUS MODIFICATIONS
HVC (from HRS) 121135
HVO (from HRS) (+) 74956
HVA (from HRS) (+) 90925
HVR (from HRS) (+) 0
HVN (from HRS) (+) 0
HVS (from HRS) (+) 0
HVQ (from HRS) (+) 0
HVM (from HRS) (+) 0
- ---------------------------------------------------------------------------------------------------------
Total Status Modifications 287016
</TABLE>
<PAGE> 51
UltraSwitch(R) Billing Summary
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
<TABLE>
<S> <C> <C>
BILLING FORMULA FOR TYPE A TRANSACTIONS
Confirmed Booking Requests 10138
Cancellation Responses (-) 4134
- ---------------------------------------------------------------------------------------------------------
Total Type A Net Bookings 6004
BILLING FORMULA FOR TYPE B TRANSACTIONS
Reservations
IS to HRS (sell) 0
SS to HRS (sell) (+) 0
NN to HRS (Need, reply required) (+) 0
IN to HRS (sell, possible dup) (+) 0
UX from HRS (no cancel) (+) 0
- ---------------------------------------------------------------------------------------------------------
Total Type B Reservations 0
Cancellations
XX to HRS (cancel) 0
IX to HRS (cancel) (+) 0
NO from HRS (+) 150
NN from HRS (denial of booking) (+) 0
UC from HRS (could not sell) (+) 81
- ---------------------------------------------------------------------------------------------------------
Total Type B Cancellations 231
Type B Net Booking Summary
Reservations 0
Cancellations (-) 231
- ---------------------------------------------------------------------------------------------------------
Total Type B Net Bookings -231
NET BOOKING SUMMARY
Type A Net Bookings 6004
Type B Net Bookings (+) -231
- ---------------------------------------------------------------------------------------------------------
Total Net Bookings 5773
BILLING FORMULA FOR STATUS MODIFICATIONS
HVC (from HRS) 956346
HVO (from HRS) (+) 256627
HVA (from HRS) (+) 647657
HVR (from HRS) (+) 0
HVN (from HRS) (+) 0
HVS (from HRS) (+) 0
HVQ (from HRS) (+) 0
HVM (from HRS) (+) 0
- ---------------------------------------------------------------------------------------------------------
Total Status Modifications 1860630
</TABLE>
<PAGE> 52
UltraSwitch(R) Billing Summary
03/01/97 through 03/31/97
Global Distribution System: ALL
Hotel Reservation System:
<TABLE>
<S> <C> <C>
BILLING FORMULA FOR TYPE A TRANSACTIONS
Confirmed Booking Requests 15355
Cancellation Responses (-) 6454
- -------------------------------------------------------------------------
Total Type A Net Bookings 8901
BILLING FORMULA FOR TYPE B TRANSACTIONS
Reservations
IS to HRS (sell) 0
SS to HRS (sell) (+) 0
NN to HRS (Need, reply required) (+) 0
IN to HRS (sell, possible dup) (+) 0
UX from HRS (no cancel) (+) 0
- -------------------------------------------------------------------------
Total Type B Reservations 0
Cancellations
XX to HRS (cancel) 0
IX to HRS (cancel) (+) 0
NO from HRS (+) 433
NN from HRS (denial of booking) (+) 0
UC from HRS (could not sell) (+) 255
- -------------------------------------------------------------------------
Total Type B Cancellations 688
Type B Net Booking Summary
Reservations 0
Cancellations (-) 688
- -------------------------------------------------------------------------
Total Type B Net Bookings -688
NET BOOKING SUMMARY
Type A Net Bookings 8901
Type B Net Bookings (+) -688
- -------------------------------------------------------------------------
Total Net Bookings 8213
BILLING FORMULA FOR STATUS MODIFICATIONS
HVC (from HRS) 1077481
HVO (from HRS) (+) 331583
HVA (from HRS) (+) 738582
HVR (from HRS) (+) 0
HVV (from HRS) (+) 0
HVS (from HRS) (+) 0
HVQ (from HRS) (+) 0
HVM (from HRS) (+) 0
- -------------------------------------------------------------------------
Total Status Modifications 2147646
</TABLE>
<PAGE> 53
SUB-CHAIN STATISTICS REPORT
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
MAR '96 APR '96 MAY '96 JUN '96 JUL '96 AUG '96 SEP '96 OCT '96 NOV '96 DEC '96 JAN '97 FEB '97 MAR'97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET BOOKINGS:
- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Type A Net
Bookings 5,876 5,852 6,292 5,952 5,245 2,788 3,437 3,899 3,416 2,344 3,904 3,667 2,897
- ------------------------------------------------------------------------------------------------------------------------------------
Type B Net
Bookings -2,021 -1,932 -2,314 -2,031 -1,428 -114 -71 -62 -174 -119 -198 -152 -457
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net
Bookings 3,855 3,920 3,978 3,921 3,817 2,674 3,366 3,837 3,242 2,225 3,706 3,515 2,440
- ------------------------------------------------------------------------------------------------------------------------------------
STATUS
MESSAGES:
- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Status Message
Segments 65,041 279,476 588,223 652,903 624,085 262,016 316,791 261,590 235,216 158,968 304,652 419,970 287,016
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Status
Messages to
Net Bookings 16.87 71.29 142.84 166.51 163.50 97.99 94.11 68.18 72.55 70.55 82.21 119.48 117.63
- ------------------------------------------------------------------------------------------------------------------------------------
UltraSwitch(R)
Ratio 30.78 32.37 33.06 40.10 39.39 37.73 41.63 40.33 37.36 45.27 34.71 43.04 47.50
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.56
OFFICE LEASE
This Lease is made and executed as of this 1st day of
October, 1995, by the parties hereinafter identified as Landlord and Tenant and
upon the following terms and conditions:
ARTICLE 1.
BASIC LEASE PROVISIONS
For purposes of this Lease, the following terms shall have the meanings
ascribed to them in this Article 1:
1.01 LANDLORD AND ADDRESS:
The Utah State Retirement Investment Fund
c/o CB Commercial Realty Advisors
533 S. Fremont Avenue
Los Angeles, CA 90071
Attn: Director of Asset Management
1.02 TENANT AND CURRENT ADDRESS:
The Hotel Industry Switch Company
3811 Turtle Creek Blvd., Suite 1100
Dallas, Texas 75219
1.03 GUARANTOR(S) AND CURRENT ADDRESS(ES):
N/A
1.04 BUILDING: That certain property, building and other improvements
located on the land described in EXHIBIT A, attached hereto and
incorporated herein by this reference, with the street address of 3811
Turtle Creek Boulevard, Dallas, Texas 75219, and commonly referred to
as Turtle Creek Centre.
1.05 PREMISES: Suites No. 1100 and 1200, Floors 11 and 12 of the Building
as shown on the floor plan attached hereto as EXHIBIT 1.
1.06 AREA OF PREMISES: approximately 29,750 square feet, which number is
the final agreement of the parties and not subject to adjustment.
1.07 TERM: 7 years and 1 month
1.08 COMMENCEMENT DATE: The later of December 1, 1995 or the date Tenant
first occupies any portion of Floor 12, but in no event later than
February 1, 1996.
1.09 EXPIRATION DATE: December 31, 2002
1.10 MONTHLY BASE RENT:
Dates Monthly Base Rent
----- -----------------
Commencement Date - June 30, 1996 $29,964.00 ($20,453.13 as
to Floor 11 and $9,510.87
as to Floor 12)
July 1, 1996 - December 31, 1996 $35,435.13
January 1, 1997 - September 30, 1998 $40,906.25
October 1, 1998 - December 31, 2002 $45,864.58
The foregoing Monthly Base Rent amounts have been calculated based
upon an annual Monthly Base Rent of $16.50 per rentable square foot
for years 1 through 3 and $18.50 per rentable square foot for years 4
through the remainder of the Term, provided that the foregoing
Monthly Base Rent has been reduced by $16.50 per rentable square foot
for 7,958 square feet from Commencement Date through June 30, 1996,
and by $16.50 per rentable square foot for 3,979 square feet from
July 1, 1996 through December 31, 1996. Commencing January 1, 1997,
Tenant will pay $16.50 per rentable square foot for all 29,750 square
feet.
1.11 TOTAL MONTHLY BASE RENT FOR THE TERM: $3,620,483.61
1.12 TENANT'S SHARE: 10.038%, which is calculated by dividing the number of
rentable square feet contained in the Premises, which is 29,750, by
the number of rentable square feet contained in the Building, which is
296,378.
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1.13 BASE OPERATING YEAR: 1996
1.14 BASE EXPENSES: The total amount of Operating Expenses for the Base
Operating Year
1.15 SECURITY DEPOSIT: $1,528.58
1.16 LEASING BROKER(S) (IF ANY) AND ADDRESS(ES): Fults Associates
1.17 LANDLORD'S MANAGEMENT AGENT AND ADDRESS:
Compass Management, Inc.
3811 Turtle Creek Boulevard, Suite 240
Dallas, Texas 75219
or such other Management Agent as Landlord may designate from time to
time.
1.18 RENT PAYMENT ADDRESS:
The Utah State Retirement Investment Fund
P.O. Box 910517
Dallas, Texas 75391-0517
1.19 PARKING SPACES: the sum of (a) 89 parking spaces located in the
parking facilities located inside the Building's adjacent parking
garage ("Adjacent Garage Parking Spaces") all of which shall be
designated non-reserved parking spaces ("Non-Reserved Parking
Spaces"), provided that up to 12 Non-Reserved Parking Spaces may be
converted to executive non-reserved parking spaces ("Executive
Non-Reserved Parking Spaces"), plus (b) 2 parking spaces ("Reserved
Executive Parking Spaces") located in the parking facilities located
inside the Building's executive parking garage beneath the Building
("Executive Garage"). In addition, upon Tenant's request, Landlord
will temporarily make additional Non-Reserved Parking Spaces
("Additional Non-Reserved Parking Spaces") available to Tenant if and
to the extent available for an amount equal to the number of employees
of Tenant in excess of 89, Additional Non-Reserved Parking Spaces shall
be deemed available to Tenant only to the extent such spaces have not
been leased or committed to other tenants or potential tenants of the
Building. Landlord may terminate Tenant's right to use any Additional
Non-Reserved Parking Spaces that Landlord determines to lease or make
available to other tenants of the Building, provided that Landlord
shall be permitted to terminate Tenant's right to use spaces only to
the extent necessary to provide another tenant of the Building up to
but no more than one (1) parking space for every three hundred
thirty-three (333) rentable square feet contained in such other
tenant's premises.
ARTICLE 2.
DEMISE
2.01 INITIAL PREMISES. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the Premises for the Term and upon the terms,
covenants and conditions set forth in this Lease. Subject to the
provisions of Section 30.15 below, this Lease shall be in full force
and effect from the date it is fully executed by both parties. Tenant
covenants as a material part of the consideration for this Lease to
keep and perform each and all of the terms, covenants and conditions
by it to be kept and performed. This Lease is made upon the condition
of such performance.
2.02 RIGHT OF FIRST REFUSAL. If the Lease is then in full force and effect
and there is no Default hereunder, Tenant shall have the right of
first refusal to lease an additional 6,917 square feet of rentable
area located on the third (3rd) floor identified as such on Exhibit 2
attached hereto and incorporated herein for all purposes and all of
the rentable area on the tenth (10th) and thirteenth (13th) floors of
the Building ("ROFR Area").Such right of first refusal shall be
exercisable at the following times and upon the following conditions:
(a) If Landlord receives a bona fide offer from a
prospective tenant (the "Prospective Tenant") to lease premises (the
"Offered Premises") in the Building containing all or any part of the
ROFR Area (other than an offer to renew the term of or expand the
premises demised under an existing lease, as Tenant's right of first
refusal shall be subordinate to any renewal of the term of and any
expansion of premises demised under an existing lease) and Landlord
desires to accept such offer, then Landlord shall notify Tenant of
such fact. Tenant shall have a period of five (5) business days from
the date of delivery of such notice to notify Landlord whether Tenant
elects to exercise the right granted hereby to lease the Offered
Premises. If Tenant fails to give any notice to Landlord within the
required five (5) business day period, Tenant shall be deemed to have
refused its right to lease all or any portion of the ROFR Area.
(b) If Tenant refuses its right to lease the Offered
Premises, either by giving written notice thereof or by failing to
give any notice, Landlord shall thereafter have the right to lease the
Offered Premises to the Prospective Tenant on such terms and
provisions as may be acceptable to Landlord, provided such terms and
provisions are not materially more favorable to the Prospective Tenant
than the terms and provision set forth in the notice from Landlord to
Tenant. If Landlord and the Prospective Tenant fail to enter into a
lease, Tenant shall have the right of first refusal described herein
with respect to any subsequent bona fide offers from other prospective
tenants.
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<PAGE> 3
(c) If Tenant exercises its right to lease the Offered
Premises, Landlord and Tenant shall, within thirty (30) days after
Tenant delivers to Landlord notice of its election, enter into a lease
agreement with respect to the Offered Premises on the same terms,
covenants, and conditions as are contained in this Lease, except as
follows:
(i) The rentable area of the Offered Premises
shall be equal to the area offered to be leased by the
Prospective Tenant.
(ii) The Monthly Base Rent rate to be paid for the
Offered Premises shall be equal to the Monthly Base Rent
offered to be paid by the Prospective Tenant, including any
offered increases from time to time in such rental rate.
(iii) The additional rental relating the Operating
Expenses for the Offered Premises shall be equal to the
additional rental relating Operating Expenses offered to be
paid by the Prospective Tenant, including any offered
increases from time to time in such rate.
(iv) The payment of monthly installments of
Monthly Base Rent with respect to the Offered Premises shall
continence on the effective date of the lease of the Offered
Premises as offered to the Prospective Tenant, or in the event
no specific effective date was so offered on the date mutually
acceptable to Landlord and Tenant, and rent for any partial
month shall be prorated.
(v) Possession of such portion of the Offered
Premises shall be delivered to Tenant on the basis offered to
the Prospective Tenant, subject to paragraph (vii) below.
Landlord will use reasonable diligence to make the Offered
Premises available to Tenant as soon after the effective date
stated above as it can, Landlord shall not be liable for the
failure to give possession of the Offered Premises on said
date by reason of the holding over or retention of possession
of any tenant, tenants, or occupants, nor shall such failure
impair the validity of this Lease, nor extend the term hereof,
but the rent for the Offered Premises shall be abated until
possession is delivered to Tenant and such abatement shall
constitute full settlement of all claims that Tenant might
otherwise have against Landlord by reason of said failure to
give possession of the Offered Premises to Tenant on the
scheduled effective date.
(vi) The term of the lease of the Offered Premises
shall commence on the date determined pursuant to subparagraph
(c)(iv) above, and shall continue thereafter until the date
on which the initial Term terminates.
(vii) If the term of the lease offered to the
Prospective Tenant exceeds the remainder of the then current
Term, any and all allowances and credits offered to the
Prospective Tenant (including, without limitation, any
leasehold improvement allowances and expenses) shall be
multiplied by a fraction, the numerator of which shall be the
total number of months remaining in the then current Term, and
the denominator of which shall be equal to the number of
months in the term offered to the Prospective Tenant.
(d) Any assignment or subletting of the Premises by
Tenant, or any termination of the Lease, shall terminate the refusal
right of Tenant hereby granted.
2.03 TERMINATION OF EXISTING LEASE. Tenant leases the eleventh floor and a
portion of the third floor pursuant to an existing lease entered into by
Landlord's predecessor in interest as previously amended. Effective upon the
Commencement Date, the existing lease shall automatically terminate, except for
Tenant's obligations thereunder that expressly survive such termination or
Tenant's obligations thereunder that have not been, but should have been,
performed prior to the Commencement Date.
ARTICLE 3.
TERM
3.01 INITIAL TERM. The term of this Lease shall commence on the
Commencement Date and expire on the Expiration Date unless sooner terminated as
provided in this Lease. If Landlord shall be unable to deliver possession of
the Premises to Tenant on the Commencement Date for any reason whatsoever, this
Lease shall not be void or voidable and Landlord shall not be subject to any
liability for the failure to deliver possession on said date nor shall such
failure to deliver possession on the Commencement Date affect the validity of
this Lease or the obligations of Tenant hereunder, provided that Tenant shall
be entitled to an abatement of rent applicable to Floor 12 if and to the extent
Landlord delivers Floor 12 to Tenant after December 1, 1995.
3.02 RENEWAL OPTION. Provided this Lease is then in full force and effect
and if there is no Default by Tenant under this Lease, Tenant shall have the
right to renew the Term, for an (1) additional period of five (5) years upon
the same terms, conditions and provisions applicable to the preceding Term of
this Lease (unless otherwise expressly provided herein), except that the
Monthly Base Rent for the additional term of five (5) year shall be the product
of (i) the number of rentable square feet then contained in the Premises
multiplied by (ii) an amount equal to the then prevailing market base rental
rate per rentable square foot per annum, as reasonably determined by Landlord,
charged for comparable office space in comparable buildings located north of
Woodall Rogers Freeway, south of Fitzhugh, west of McKinney Avenue and east of
Oak Lawn Avenue. Tenant shall exercise its right of renewal by delivering to
Landlord written notice ("Tenant's Notice") of Tenant's desire to renew the
term of this Lease as aforesaid at least nine (9) months (but not more than
twelve (12)
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<PAGE> 4
Landlord shall deliver to Tenant a written notice ("Landlord's Notice")
specifying the Monthly Base Rent rate per square foot per annum for the
additional term of five (5) years. Tenant shall have until thirty (30) days
following delivery of Landlord's Notice in which to notify Landlord of Tenant's
continued exercise of its rights to renew the Term. Failure to notify Landlord
within such period or to timely deliver Tenant's Notice shall automatically
extinguish Tenant's rights to renew.
ARTICLE 4.
RENT
4.01 DEFINITIONS. For purposes of this Lease, the following terms shall
have the meanings ascribed to them in this Section 4.01:
(a) "ADJUSTMENT YEAR" shall mean each calendar year or
part thereof during the Term exclusive of the Base Year.
(b) "OPERATING EXPENSES" shall mean and include all
amounts, expenses and costs of whatever nature that Landlord incurs or
pays because of or in connection with the ownership, control,
operation, repair, management, replacement or maintenance of the
Building, all related improvements thereto or thereon and all
machinery equipment, landscaping, fixtures and other facilities,
including personal property, as may now or hereafter exist in or on
the Building. Except as otherwise provided below, Operating Expenses
shall be determined in accordance with generally accepted accounting
principles consistently applied and shall include, but shall not be
limited to, the following:
(1) Wages, salaries, fees, related taxes,
insurance costs, benefits (including amounts payable under
medical, pension and welfare plans and any amounts payable
under collective bargaining agreements) and reimbursement of
expenses of and relating to all personnel engaged in
operating, repairing, managing, replacing and maintaining the
Property;
(2) All supplies and materials for the Building,
including sales tax imposed in connection with the purchase
thereof;
(3) Legal and accounting fees and expenses
(except for legal fees incurred in connection with the
negotiation of, or the collection of amounts due under,
leases);
(4) Cost of all utilities for the Building,
including, without limitation, water, sewer, and fuel,
exclusive of electrical service;
(5) Fees and other charges payable under or in
respect of all maintenance, repair, janitorial and other
service agreements for or pertaining to the Building;
(6) Cost of all insurance, including all
deductibles thereunder, relating to the Building, or the
ownership, its occupancy or operations thereof;
(7) Cost of repairs and maintenance of the
Building, excluding only such costs which are paid by the
proceeds of insurance, by Tenant or by other third parties
(other than payment by Tenant or other tenants of the
Operating Expenses);
(8) Amortization of the cost (plus interest at
the then current market rate on the unamortized portion of
such cost from time to time) of purchasing and installing
capital investment items (including "retrofitting" or capital
replacements) that are for the purpose of reducing costs
includable in the definition of Operating Expenses or that may
be required by governmental authority, including but not
limited to, pursuant to the Americans with Disabilities Act.
All such costs shall be amortized over the reasonable life of
the capital investment items, with the reasonable life and
amortization schedule being determined in accordance with
sound management accounting principles;
(9) Management fees and reimbursed expenses of
Landlord's Management Agent (not to exceed a market management
fee for comparable buildings in the Dallas metropolitan area)
and administrative expenses not borne by the Landlord's
Management Agent;
(10) Fees and charges under any declaration of
covenants, easements or restrictions affecting the Building;
and
(11) All federal, state and local government
taxes, assessments and charges of any kind or nature, whether
general, special, ordinary or extraordinary, paid by Landlord
in a calendar year with respect to the Building ("Taxes");
provided, real estate taxes and special assessments (except as
provided below) shall be included in Operating Expenses for a
calendar year only to the extent such taxes and assessments
are paid during such calendar year, regardless of when
assessed. In addition, "Taxes" shall include, without
limitation, real estate and transit district taxes and
assessments, sales and use taxes, ad valorem taxes, personal
property taxes, any lease or lease transaction tax and all
taxes, assessments and charges in lieu of, substituted for, or
in addition to, any or all of the foregoing taxes, assessments
and charges. Taxes shall not include any federal, state or
local government income, franchise, capital stock, inheritance
or estate taxes, except to the extent such taxes are in lieu
of or a substitute for any of the taxes,
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<PAGE> 5
assessments and charges previously described in this Section
4.01 (b). "Taxes" shall also include the amount of all fees,
costs and expenses (including, without limitation, attorneys'
fees and court costs) paid or incurred by Landlord each
calendar year in seeking or obtaining any refund or reduction
of Taxes or for contesting or protesting any imposition of
Taxes, whether or not successful and whether or not
attributable to Taxes assessed, paid or incurred in such
calendar year. If any special assessment payable in
installments is levied against all or any part of the Property,
then at the Landlord's discretion, Taxes for the calendar year
in which such assessment is levied and for each calendar year
thereafter shall include only the amount of any installments of
such assessment plus interest thereon paid or payable during
such calendar year (without regard to any right to pay, or
payment of, such assessment in a single payment).
Notwithstanding the foregoing, Operating Expenses shall not include:
(1) Principal or interest payments with respect
to mortgages against the Building;
(2) Ground lease payments;
(3) Depreciation;
(4) The cost of replacement of capital investment
items (except as provided in Section 4.01(b)(8));
(5) Charges for special items or services billed
separately to (and in addition to Expense Adjustment
Statements) and paid by tenants of the Building;
(6) Leasing commissions or other expenses solely
related to marketing space in the Building;
(7) The cost of electrical service; or
(8) For purposes of determining the Base Expenses
only, any Operating Expense incurred during the Base Year
which is not an ordinary, typical year-to-year Operating
Expense for the Building.
If at any time the Building is less than ninety-five percent (95%) occupied or
Landlord is not supplying services to ninety-five percent (95%) of all rentable
areas of the Building during an entire calendar year, then Landlord may adjust
that portion of each element of actual Operating Expenses that vary with
occupancy of the Building to Landlord's estimate of that amount which would
have been paid or incurred by the Landlord as Operating Expenses had the
Building been ninety-five percent (95%) occupied or serviced, and the Operating
Expenses as so adjusted shall be deemed to be the actual Operating Expenses for
such calendar year. If Landlord does not furnish during any Adjustment Year any
particular work or service (the cost of which, if performed by Landlord, would
constitute an Operating Expense) to a tenant which has undertaken to perform
such work or service in lieu of the performance thereof by Landlord, then
Operating Expenses shall be deemed to be increased by an amount equal to the
additional expense which would reasonably have been incurred during such
Adjustment Year by Landlord if it had, at its cost, furnished such work or
service to such tenant. The provisions of the preceding sentences will apply
only to those Operating Expenses that either vary with occupancy or by reason of
one or more tenants not receiving goods or services the cost of which
constitutes all or part or such Operating Expenses. If the Property is not
assessed as fully improved for any calendar year or part thereof, Landlord may
make an adjustment to the amount of Taxes for each such calendar year to reflect
the amount of Taxes which would have been assessed if the Property had been
assessed as fully improved, and the amount of any such adjustment shall be
included in the amount of Taxes for such calendar year. If the Building is not
fully leased and occupied by tenants during all or any portion of a calendar
year, then Landlord may make an adjustment to the amount of Taxes for such
calendar year to reflect the amount of Taxes which would have been assessed if
the Building had been fully leased and occupied by tenants during such calendar
year, and the amount of any such adjustment shall be included in the amount of
Taxes for such calendar year. Landlord shall calculate Operating Expenses (and
any adjustment thereto as provided above) during 1996 in the same manner as, and
consistent with, calculations to be made during subsequent years.
4.02 PAYMENT OF RENT. Tenant shall pay to Landlord's Management Agent, at
the address set forth in Article I above as the Rent Payment Address or to such
other person or entity and/or at such other place as Landlord may from time to
time direct in writing, all amounts due Landlord from Tenant hereunder,
including, without limitation, Monthly Base Rent, Expense Adjustment and
Electrical Cost (all amounts due hereunder being referred to collectively as
"Rent"). Except as specifically provided in this Lease, Rent shall be paid
without abatement, deduction or setoff of any kind, it being the intention of
the parties that, to the full extent permitted by law, Tenant's covenant to pay
Rent shall be independent of all other covenants contained in this Lease,
including Tenant's continued occupancy of the Premises. Tenant's obligation
hereunder to pay Rent accruing during the Term (whether or not the amount
thereof is determined or determinable as of the date of termination or
expiration of this Lease) shall survive the termination of this Lease, except
as otherwise provided herein.
4.03 PAYMENT OF MONTHLY BASE RENT. Monthly Base Rent shall be payable
monthly, in advance, on the first day of each calendar month during the Term,
except that Monthly Base Rent for the first full calendar month of the Term for
which Monthly Base Rent is due shall be paid concurrently with the execution of
this Lease by Tenant. If the Term commences on a day other than the first day
of a calendar month, then Monthly Base Rent for such month will be prorated on
a per diem basis based on a 30 day month and the excess of the installment or
Monthly Base Rent paid concurrently with the execution of this Lease by Tenant
over such prorated amount for the first calendar month of the Term shall be
applied against Monthly Base Rent for the first full calendar month of the
Term.
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4.04 EXPENSE ADJUSTMENT. In addition to Monthly Base Rent, Tenant shall pay
with respect to each Adjustment Year an amount equal to Tenant's Share of
Operating Expenses for the Adjustment Year in excess of the Base Expenses
("Expense Adjustment"). As to any Adjustment Year during the Term which does not
begin on January 1st or does not end on December 31st, Expense Adjustment with
respect to such Adjustment Year shall be prorated on a per diem basis.
Notwithstanding anything contained herein to the contrary, Operating Expenses
shall be deemed not to increase more than $.50 per rentable square foot per
calendar year (determined on a cumulative basis throughout the Term of the
Lease); provided that the foregoing cap on Operating Expenses shall not apply
to the following components of Operating Expenses: taxes, insurance, and
utilities.
4.05 PAYMENT OF ADJUSTMENTS. The Expense Adjustment with respect to each
Adjustment Year shall be paid in monthly installments in advance on the first
day of each calendar month during such Adjustment Year in amounts sufficient to
satisfy payment of the Expense Adjustment for such Adjustment Year as
reasonably estimated by Landlord from time to time prior to or during any
Adjustment Year and communicated to Tenant by written notice ("Estimated
Expense Adjustment"). If Landlord does not deliver such a notice ("Estimate")
prior to commencement of any Adjustment Year, Tenant shall continue to pay
Estimated Expense Adjustment as provided in the most recently received Estimate
(or Updated Estimate, as defined below) or the latest determined Expense
Adjustment, whichever is greater, until the Estimate for such Adjustment Year
is delivered to Tenant. If, during any Adjustment Year, Landlord reasonably
determines that Operating Expenses for such Adjustment Year have increased or
will increase, Landlord may deliver to Tenant an updated Estimate ("Updated
Estimate") for such Adjustment Year. Monthly installments of Estimated Expense
Adjustment paid subsequent to Tenant's receipt of the Estimate or Updated
Estimate for any Adjustment Year shall be in the amounts provided in such
Estimate or Updated Estimate, as the case may be. In addition, Tenant shall pay
to Landlord within thirty (30) days after receipt of such Estimate or Updated
Estimate, the amount, if any, by which the aggregate installments or the
Estimated Expense Adjustment provided in such Estimate or Updated Estimate, as
the case may be, with respect to prior months in such Adjustment Year exceed
the aggregate installments of the Estimated Expense Adjustment paid by Tenant
with respect to such prior months. Within one hundred twenty (120) days after
the end of each Adjustment Year, or as soon thereafter as practicable, Landlord
shall send to Tenant a statement ("Final Adjustment Statement") showing (i) the
calculation of the Expense Adjustment for such Adjustment Year, (it) the
aggregate amount of the Estimated Expense Adjustment previously paid by Tenant
for such Adjustment Year, and (iii) the amount, if any, by which the aggregate
amount of the installments of Estimated Expense Adjustment paid by Tenant with
respect to such Adjustment Year exceeds or is less than the Expense Adjustment
for such Adjustment Year. Tenant shall pay the amount of any deficiency to
Landlord within thirty (30) days after the date of such statement. Any excess
shall be refunded by Landlord, provided Tenant is not then in default under
this Lease, within thirty (30) days after the delivery of the Final Adjustment
Statement to Tenant. In addition, Tenant shall have the right, within three (3)
months after Tenant's receipt of the Final Adjustment Statement, on written
notice to Landlord, to have Landlord's books and records relating to
Operating Expenses audited by a qualified professional selected by Tenant and
approved by Landlord. Landlord shall have an opportunity to verify the findings
of the audit. If such audit, as verified by Landlord, reveals any errors,
Tenant's payments of its share of Operating Expenses shall be adjusted, and
appropriate payments shall be made by Landlord or Tenant, as the case may be,
within forty-five (45) days after completion of such audit. If the audit reveals
that Operating Expenses reflected in the Final Adjustment Statement were
overstated by more than five percent (5%), then Landlord shall pay the costs of
such audit. Otherwise all costs incurred by Tenant in connection with such audit
shall be paid by Tenant.
4.06 ELECTRICAL SERVICE. In addition to Monthly Base Rent and Tenant's
Share of Operating Expenses, Tenant shall pay with respect to the Base Year and
each Adjustment Year, as additional rental, (i) Tenant's Share of all
electrical service to the common areas of the Building ("Common Area Electrical
Service") and (ii) the cost of electrical service to the Premises ("Premises
Electrical Service") (the cost of the Common Area Electrical Service and the
Premises Electrical Service, the "Electrical Cost"). In the event the
electrical service to the Premises is submetered or otherwise measured in
accordance with the provisions of Section 8.03, Tenant shall pay to Landlord
the cost of such electrical service based upon rates determined by Landlord
from time to time (which shall not exceed the amount Tenant would have been
charged for such service by the local utility company furnishing such service).
In the event electrical service to the Premises is not measured by a submeter
or periodic determination by Landlord's engineers or other competent
consultants selected by Landlord (or a combination of such methods), then
Tenant shall pay to Landlord Tenant's Share of the cost of all electrical
service to tenants in the Building which does not exceed Building standard
consumption as established from time to time by Landlord. Tenant's Share shall
be based upon the statements therefor received by Landlord from the electrical
utility company providing such service, adjusted as Landlord determines
appropriate to eliminate over-standard consumption. In the event that other
tenants of the Building pay directly either to Landlord or third parties for
electricity supplied to their respective premises (e.g. separately metered
electricity), then Landlord shall adjust Tenant's Share by excluding from its
calculation the rentable area of all tenants making such payments. The cost of
electrical service shall include without limitation all fuel adjustment
charges, demand charges, and taxes. If, during any period of time, the area of
the Building is not ninety-five percent (95%) occupied, then, for purposes of
this Section 4.06, Landlord may adjust the actual costs of electrical service
that vary with the occupancy of the Building to Landlord's estimate of that
amount which would have been paid or incurred by Landlord for electrical
service had the Building been ninety-five percent (95%) occupied, and the costs
of electrical service as so adjusted shall be deemed to be actual electrical
costs for such calendar year. Landlord shall calculate the costs of electrical
service (and any adjustment thereto as provided above) during 1996 in the same
manner as, and consistent with, calculations to be made during subsequent
years.
4.07 ESTIMATED PAYMENTS. Tenant's Share of Electrical Costs with respect to
the Base Year and each Adjustment Year shall be paid in monthly installments in
advance on the first day of each calendar month during the Base Year and each
such Adjustment Year in amounts sufficient to satisfy payment of Tenant's Share
of Electrical Costs for the Base Year and each such Adjustment Year as
reasonably estimated by Landlord from time to time prior to or during the Base
Year and any
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<PAGE> 7
Adjustment Year and communicated to Tenant by written notice ("Estimated
Electrical Cost Payments"). If Landlord does not deliver such a notice
("Electrical Estimate") prior to the commencement of any Adjustment Year,
Tenant shall continue to pay Estimated Electrical Cost Payments as provided in
the most recently received Electrical Estimate (or Updated Electrical Estimate,
as defined below) or the latest determined Estimated Electrical Cost Payment,
whichever is greater, until the Electrical Estimate for such Adjustment Year is
delivered to Tenant. If, during the Base Year or any Adjustment Year, Landlord
reasonably determines that the Electrical Costs for such Adjustment Year have
increased or will increase, Landlord may deliver to Tenant an updated Electrical
Estimate ("Updated Electrical Estimate") for the Base Year or such Adjustment
Year. Monthly installments of Estimated Electrical Cost Payments paid
subsequent to Tenant's receipt of the Electrical Estimate or Updated Electrical
Estimate for the Base Year or any Adjustment Year shall be in amounts provided
in such Electrical Estimate or Updated Electrical Estimate, as the case may be.
In addition, Tenant shall pay to landlord within thirty (30) days after receipt
of such Electrical Estimate or Updated Electrical Estimate, the amount, if any,
by which the aggregate installments of the Estimated Electrical Cost Payments
provided in such Electrical Estimate or Updated Electrical Estimate, as the
case may be,with respect to prior months in the Base Year or such Adjustment
Year exceed the aggregate installments of the Estimated Electrical Cost
Payments paid by Tenant with respect to such prior months. Within one hundred
twenty (120) days after the end of each Adjustment year, or as soon thereafter
as practicable, Landlord shall send to Tenant a statement ("Final Electrical
Cost Statement") showing (i) the calculation of Tenant's Share of Electrical
Cost for the Base Year or such Adjustment Year, (ii) the aggregate amount of
the Estimated Electrical Cost Payments previously paid by Tenant with respect
to such Adjustment Year, and (iii) the amount, if any, by which the aggregate
amount of the installments of the Estimated Electrical Cost Payments paid by
Tenant with respect to such Adjustment Year exceeds or is less than Tenant's
share of the Electrical Costs for the Base Year or such Adjustment Year. Tenant
shall pay the amount of any deficiency to Landlord within thirty (30) days
after the date of such statement. Any excess shall be refunded by Landlord,
provided Tenant is not then in default under this lease within thirty (30) days
after the delivery of the final Adjustment Statement to Tenant.
ARTICLE 5.
SECURITY DEPOSIT
As security for the performance of its obligations under this Lease,
Tenant, on execution of this Lease, shall deposit with Landlord a security
deposit in the amount set forth in Article I hereof ("Security Deposit"), and
agrees from time to time to pay Landlord within three (3) business days
following receipt of a request therefor, any sum or sums of money paid or
deducted therefrom by Landlord pursuant to the provisions of this Lease, in
order that at all times during the Term there shall be continually deposited
with the Landlord, a sum which shall never be less than the amount originally
deposited. The Security Deposit shall not be deemed an advance payment of Rent,
nor a measure of damages for any default by Tenant under this Lease, nor shall
the Security Deposit be a bar or a defense to any action that Landlord may
commence against Tenant. In the event of any default by Tenant hereunder,
Landlord shall have the right, but shall not be obligated, to apply or retain
all or any portion of the Security Deposit in payment of Tenant's obligations
hereunder, but any such application or retention shall not be obligated to hold
the Security Deposit as a separate fund, but may commingle the same with its
other funds. Upon expiration of the Term hereof, the Security Deposit (or the
balance thereof remaining after payment out of the same or deductions therefrom
as provided above) shall be returned to the Tenant within a reasonable period
of time following such expiration. No interest shall be payable with respect to
the Security Deposit. Landlord may commingle the Security Deposit with other
monies of Landlord. Landlord or any owner of the Building may transfer or
assign the Security Deposit to any new owner of the Building or to any assignee
or transferee of this Lease or may credit the Security Deposit against the
purchase price of the Building and upon such transfer or credit all liability
of the transferor or assignor of such security shall cease and come to an end.
No Mortgagee (as hereinafter defined) or person or entity who acquires legal or
beneficial title to the Building from such Mortgagee shall be liable for the
return of the Security Deposit unless such funds are actually received by such
Mortgagee or purchaser.
ARTICLE 6.
USE OF PREMISES; PARKING
6.01 PERMITTED USE. Tenant shall use and occupy the Premises solely for
general office purposes and for no other use or purpose. Notwithstanding
anything to the contrary in this Lease, the Premises shall not be used for any
purpose which would (i) adversely affect the appearance of the Building, (ii)
be visible from the exterior of, or the public areas of, the Building, (iii)
adversely affect ventilation in other areas of the Building (including without
limitation, the creation of offensive odors), (iv) create unreasonable elevator
loads, (v) cause structural loads to be exceeded, (vi) create unreasonable
noise levels, (vii) otherwise unreasonable interfere with Building operations
or other tenants of the Building, or (viii) violate legal requirements. In all
events, Tenant shall not engage in any activity which is not in keeping with
the first-class standards of the Building. Without limiting the foregoing,
Tenant will not use any part of the Premises for the following uses: health care
services, telephone or telegraph agency, radio, television or other
communication station, employment agency, public restaurant or bar, retail,
wholesale or discount shop for the sale of merchandise, retail service shop,
school or classroom (except as incidental to office uses but not as the
principal use thereof), or governmental or quasi-governmental bureau,
department or agency.
6.02 NO NUISANCE. Tenant shall not commit, or suffer to be committed, any
annoyance, waste, nuisance,act or thing against public policy, or which may
disturb the quiet enjoyment of Landlord or any other tenant or occupant of the
building. Tenant agrees not to deface or damage the Building in any manner.
6.03 PARKING. Landlord shall provide and Tenant shall lease and pay for,
from the commencement Date until expiration of the Term, the Parking Spaces.
Tenant does not have the right to use any specific parking spaces but only has
the right to use the number of Parking Spaces located in the parking facilities
generally. Tenant may not use additional
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parking spaces without the prior written consent of Landlord, in its sole
discretion. Tenant and its agents, employees, contractors, invitees or
licensees shall not interfere with the rights of Landlord or others entitled to
similar use of the parking facilities. All parking facilities furnished by
Landlord shall be subject to the reasonable control and management of Landlord,
who may, from time to time, establish, modify and enforce reasonable rules and
regulations with respect thereto. Landlord further reserves the right to
change, reconfigure, or rearrange the parking areas, to construct or repair
any portion thereof, and to restrict or eliminate the use of any parking areas
and do such other acts in and to such areas as Landlord deems necessary or
desirable without such actions being deemed an eviction of Tenant or a
disturbance of Tenant's use of the Premises and without Landlord being deemed
in default hereunder. Landlord may, in its sole discretion, convert the parking
facilities to a reserved and/or controlled parking facility. If specific
parking spaces are not assigned pursuant to the terms of this Lease, Landlord
reserves the right at any time to assign specific parking spaces and Tenant
shall thereafter be responsible to insure that its employees park in the
specifically designated parking spaces. Tenant shall, if requested by Landlord,
furnish to Landlord a complete list of the license plate numbers of all
vehicles operated by Tenant, Tenant's employees and agents. Landlord shall not
be liable for any damage of any nature to, or any theft of, vehicles, or
contents thereof, in or about such parking facility. At Landlord's request,
Tenant shall cause its employees and agents using Tenant's parking spaces to
execute an agreement confirming the foregoing. Excessive use of the parking
facilities by another tenant shall not be a default or breach of this Lease by
Landlord, and shall not suspend or terminate any of Tenant's obligations under
this Lease, and shall not entitle Tenant to exercise any other right or remedy
it may be afforded hereunder or at law or in equity. For the Parking Spaces,
Tenant shall pay Landlord during the term additional rental hereunder (a) the
sum of $0 per month during the first five years of the Term of this Lease and
thereafter $40.00 per month (plus any applicable sales tax) for each
Non-Reserved Parking Space, (b) if Tenant elects to convert a Non-Reserved
Parking Space to an Executive Non-Reserved Parking Space, then the sum of
$60.00 per month (plus any applicable sales tax) for each Executive
Non-Reserved Parking Space, (c) the sum of $100.00 per month (plus any
applicable sales tax) for each Reserved Executive Parking Space, and (d) the
sum of $40.00 per month (plus any applicable sales tax) for each Additional
Non-Reserved Parking Space, such sums to be payable monthly in advance on the
first day of each and every month during the Term, and a pro rata portion of
such sum shall be payable for any partial calendar month in the event this
Lease commences or ends on a date other than the first or last day of a
calendar month. Tenant's obligation to pay the above described parking rental
shall be considered an obligation to pay Rent for all purposes hereunder and
shall be secured in a like manner as is Tenant's obligation to pay any other
Rent. If the Parking Spaces are not available to Tenant during any portion of
the term of this Lease due to causes beyond the control of Landlord (including
casualty or condemnation), this Lease shall continue without abatement of Rent
and Landlord shall use reasonable efforts to make available to Tenant
sufficient substitute parking spaces within a one-half (.5) mile radius of the
Building until the Parking Spaces are again made available to Tenant at a
rental rate not to exceed the above described rental rate. Tenant shall have
the right at any time to convert up to twelve (12) Non-Reserved Parking Spaces
to twelve (12) Executive Non-Reserved Parking Spaces, provided Tenant provides
Landlord fifteen (15) days prior written notice. The sums described above
payable for each Executive Non-Reserved Parking Space shall be prorated for any
partial month.
ARTICLE 7.
RULES AND REGULATIONS
Tenant agrees to observe the reservations and rights reserved to
Landlord in this Lease. Tenant shall comply, and shall cause its employees,
agents, clients, customers, guests and invitees to comply, with the rules and
regulations attached hereto as EXHIBIT 3, and such revised or additional rules
and regulations adopted by Landlord during the Term and applied generally to
all office tenants of the Building. Any violation by Tenant or any of its
employees, agents, clients, customers, guests or invitees of any of the rules
and regulations so adopted by Landlord shall be a default by Tenant under this
Lease and may be restrained by court injunction; but whether or not so
restrained, Tenant acknowledges and agrees that it shall be and remain liable
for all damages, loss, costs and expense resulting from any violation by Tenant
or such other persons of any of said rules and regulations. Landlord shall use
reasonable efforts to cause tenants to comply with said rules and regulations
on a non-discriminatory basis, provided nothing in this Lease contained shall
be construed to impose upon Landlord any duty or obligation to enforce said
rules and regulations or the terms, covenants and conditions of any other lease
against any other tenant or any other persons, and Landlord shall not be liable
to Tenant for violation of the same by any other tenant, its employees, agents,
guests, invitees, licensees, customers, clients, family members, or by any
other person.
ARTICLE 8.
SERVICES PROVIDED
8.01 LANDLORD'S SERVICES. Landlord shall furnish:
(a) Cooled or heated air in season to provide a temperature
condition required, in Landlord's reasonable judgment, for comfortable
occupancy of the Premises under normal business operations and in the absence
of the use of equipment which affects the temperature or humidity which would
otherwise be maintained in the Premises, daily from 7:00 A.M. to 6:00 P.M.
(Saturdays 8:00 A.M. to 1:00 P.M.), Sundays and Holidays (as defined below)
excepted. If Tenant shall request, at least one (1) business day in advance,
Landlord shall provide after hours cooled or heated air for the Premises;
provided, that the Tenant shall pay Landlord's charges for such service
currently in the amount of Landlord's cost (including reasonable overhead) per
hour with a two (2) hour minimum charge (which hourly or minimum charges are
subject to change from time to time without notice) within ten (10) days after
receipt of Landlord's invoices therefor. Further, if the use of heat generating
equipment in the Premises different from that already maintained in the Premises
already occupied by Tenant as of the date hereof, affects the temperatures
otherwise maintained by the air conditioning system for normal business
operations, and thereby requires, in the sole judgment of Landlord, the
modification of the air conditioning or ventilation systems (including
installation of supplementary air conditioning units in the Premises) Landlord
may elect to perform such modification, and the cost thereof shall be paid by
Tenant to Landlord at the time of completion of such modification, or Landlord
may elect to require Tenant to perform such modification, at Tenant's sole cost
and expense. Any increased
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expense in maintaining or operating the system resulting, in Landlord's sole
opinion, from such modification shall be paid by Tenant. In addition, Tenant
shall, at Tenant's expense, perform all maintenance on any supplementary air
conditioning units installed in accordance with this Section 8.01(a) unless, in
the exercise of its right hereby expressly reserved, Landlord elects to perform
part or all of such maintenance at Tenant's expense. Tenant agrees to keep and
cause to be kept closed all windows in the Premises and at all times to
cooperate fully with Landlord in the operation of said system and to abide by
all reasonable regulations and requirements which Landlord may prescribe to
permit the proper functioning and protection of said heating, ventilation and
air conditioning systems. For purposes of this Lease, "Holidays" means those
federal or state holidays or such other days which Landlord, in its reasonable
discretion, designates to Tenant as "Holidays" for purposes of this Lease, such
designation being subject to change from time to time;
(b) Washroom facilities, not within the Premises (unless Tenant
leases an entire floor), for use by Tenant in common with other tenants in the
Building;
(c) Janitor service in and about the Premises as customarily
provided in similar office buildings in the submarket area that the Building is
located within;
(d) Passenger elevator service in common with other tenants and
occupants, daily from 8:00 A.M. to 6:00 P.M., Saturdays, Sundays and Holidays
excepted. Such normal passenger elevator service, if furnished at other times,
shall be optional with Landlord and shall never be deemed a continuing
obligation. Landlord, however, shall provide limited passenger service daily at
all times such normal passenger service is not furnished. Landlord shall
provide limited freight elevator service at such times as Landlord shall
determine; and
(e) Replacement of fluorescent lamps, bulbs, ballasts, and starters
in the building with standard ceiling mounted fixtures installed by Landlord
and incandescent bulb replacements in all public areas.
8.02 GOVERNMENT RESTRICTIONS. Tenant agrees that compliance with any
mandatory or voluntary energy conservation measures or other legal requirements
instituted by any appropriate governmental authority shall not be considered a
violation of any terms of this Lease and shall not entitle Tenant to terminate
this Lease or require abatement or reduction of Rent hereunder.
8.03 ELECTRICAL CONSUMPTION. Landlord shall provide or cause to be provided
to the Premises all electrical current required by Tenant in the normal use and
occupancy of the Premises. Without Landlord's prior written consent, Tenant
shall not install any equipment which would result in Tenant's connected load
exceeding, either in voltage, rated capacity, or overall load, that which
Landlord deems to be standard for the Building ("Building Standard Load") or
which would generate sufficient heat to affect the temperature otherwise
maintained in the Premises by the normal operation of the Building air
conditioning equipment serving the Premises. The obligation of Landlord to
provide or cause to be provided electrical service shall be subject to the
rules and regulations of the supplier of such electricity and of any municipal
or other governmental authority regulating the business of providing electrical
utility service. Except to the extent of Landlord's gross negligence, Landlord
shall not be liable or responsible to Tenant for any loss, damage or expense
which Tenant may sustain or incur if either the quantity or character of the
electric service is changed or is no longer available or no longer suitable for
Tenant's requirements. At any time when Landlord is furnishing electric current
to the Premises, Landlord may, at its option, upon not less than thirty (30)
days prior written notice to Tenant, discontinue the furnishing of such
electric current. If Landlord gives such notice of discontinuance, Landlord
shall make all reasonably necessary arrangements with the public utilities
supplying the electric current with respect to connecting electric current to
the Premises, but tenant shall contract directly with such public utility with
respect to supplying such service. Landlord shall have the right to measure
electrical usage in the Premises (1) by installing a submeter, (2) by periodic
determinations by Landlord's engineers or other competent consultants selected
by Landlord, or (3) by any combination of such methods. If Tenant's electrical
usage exceeds Building Standard Load, the cost of purchase and installation of
a submeter in the Premises shall be borne by Tenant. If Tenant's connected load
for electrical design exceeds the Building Standard Load, Tenant shall pay as
Additional Rent a surcharge of a proportionate part of all electrical service
costs which are attributable to the aggregate over-standard electrical
consumption by all tenants in the Building. Such proportion shall be equal to
the product of the aggregate cost of all over-standard electrical consumption
in the Building (as determined by Landlord) times a fraction in which the
numerator is Tenant's electrical design load in excess of the Building Standard
Load and the denominator is the aggregate of the total electrical design load
of all tenants in the Building in excess of the Building Standard Load.
Tenant's proportionate share of such sums shall be due within ten (10) days
after the date of receipt of a statement therefor from Landlord setting forth
the amount of the charges involved and calculating Tenant's proportionate share
thereof. If the electrical current consumed relative to the Premises shall be
separately metered, Tenant shall pay for all such electrical current directly
to the utility company supplying said service. Tenant agrees to purchase from
Landlord all replacement lamps, bulbs, ballasts and starters used in the
Premises and to pay Landlord a standard charge for furnishing and replacing
such lamps, bulbs, ballasts and starters. At no time shall Tenant permit the
use of electricity consumed in the Premises to exceed the capacity of feeders
to the Building or the risers or wiring installation. Landlord does not warrant
or represent that such capacity shall be adequate for Tenant's purposes.
8.04 ADDITIONAL SERVICES. Landlord shall in no event be obligated to furnish
any services or utilities, other than those specified in Article 8. Tenant
acknowledges that it shall be responsible for making arrangements for and shall
pay the cost of the installation, repair and maintenance of its own telephone
system. If Landlord elects to furnish services or utilities requested by Tenant
in addition to those specified herein (including utility services at times
other than those specified), Tenant shall pay to Landlord, Landlord's then
prevailing rates for such services and utilities within ten (10) days after
receipt of Landlord's invoices therefor. If Tenant shall fail to make any such
payment, Landlord may, without notice to Tenant, and in addition to Landlord's
other remedies under this Lease, discontinue any or all of the additional
services. Failure by Landlord to any extent to furnish any of the
aforementioned services to Tenant, the Premises or the Building, or any
cessation
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Landlord to any extent to furnish any of the aforementioned services to Tenant,
the Premises or the Building, or any cessation (including any partial
curtailment) thereof, shall not render Landlord liable in any respect for
damages to person, property or otherwise, nor to be construed as an eviction of
Tenant, nor work an abatement of Rent, nor relieve Tenant from fulfillment of
any covenant or agreement hereof. Should any of the equipment or machinery
utilized in supplying the services listed herein break down, or for any cause
cease to function properly, such failure shall not work as an abatement of
Rent, nor be construed as an eviction of Tenant, nor relieve Tenant from
fulfilling any covenant or agreement contained herein, nor render Landlord
liable for damages; however, Landlord shall use reasonable diligence to repair
same promptly. Notwithstanding the foregoing, if Tenant is prevented from
making reasonable use of the Premises for more than fifteen (15) consecutive
days, as its exclusive remedy therefor, Tenant shall be entitled to a
reasonable abatement of rent for each consecutive day (after such fifteen (15)
day period) that Tenant is so prevented from making reasonable use of the
Premises. In addition, and notwithstanding the foregoing, if Tenant is unable
to operate its business in the Premises as a result of such unavailability of
such services, and such unavailability is due to Landlord's gross negligence or
willful misconduct, then, if such unavailability continues for five (5)
consecutive business days, Tenant shall have the right, as its sole and
exclusive remedy, to a reasonable abatement of rent for each consecutive day
(after such five (5) day period) that Tenant is unable to operate its business
in the Premises.
8.05 MONUMENT SIGNAGE. The monument sign currently located on Blackburn
Driveway is encumbered by the rights of another tenant. Landlord also may use
such monument sign for purposes of identifying the Building generally. Tenant
shall be entitled to the non-exclusive use of the Tenant Portion of such sign
as identified on Exhibit 5, provided all uses thereof, including the signage
placed thereon, are approved by Landlord in all respects in Landlord's
reasonable discretion. In addition, to the extent of the portion of the sign
used by Tenant (but in no event less than 50%), Tenant shall pay its
proportionate share (but in no event less than 50%) of all costs in connection
therewith, provided Landlord will pay the costs of causing the monument sign to
comply with applicable law, Tenant acknowledging that such sign or the use
thereof may not currently comply with such laws and may have to be moved or
reconfigured to so comply. Landlord shall have the right to add the names of
other tenants and signage identifying the Building generally to such monument
sign before or after Tenant uses such monument sign and/or causes such monument
sign to comply with applicable laws, provided Tenant shall be entitled to use
at least 50% of the Tenant Portion of the signage surface area. Landlord shall
have the right to use the Landlord Portion of such sign, as identified on
Exhibit 5, to identify the Building generally. Landlord shall have the right to
determine whether the names of Tenant and other tenants are side by side
(horizontal), on top of each other (vertical), and the order of names.
ARTICLE 9.
LEASEHOLD IMPROVEMENTS; ALTERATIONS
9.01 ALTERATIONS. Except as may be otherwise provided in this Lease as to
initial Tenant improvements in accordance with Exhibit 4. Tenant shall not,
without Landlord's prior written consent, permit any alteration, improvement,
addition or installation in or to the Premises (all of which is collectively
referred to as "Work"), including installation of telephone, computer or
internal sound or paging systems or other similar systems, or the performance
of any decorating, painting and other similar work in the Premises. In the
event Landlord consents to any Work, Landlord reserves the right to cause such
Work to be performed by contractors and subcontractors designated by Landlord.
Tenant shall pay the cost of preparation of the plans for the Work, all permit
fees and the fees of said contractors and subcontractors. Except with respect
to Work performed by Landlord's designated contractor as general contractor,
Tenant shall pay to Landlord's then applicable construction supervision fee.
Before commencement of any Work or delivery of any materials into the Premises
or the Building, Tenant shall furnish to Landlord, for its prior written
approval, which approval shall not be unreasonably withheld or delayed,
architectural plans and specifications certified by a licensed architect or
engineer reasonably acceptable to Landlord, and such other documentation as
Landlord shall reasonably request. Tenant agrees to hold Landlord, its
beneficiaries and their respective agents, partners, officers, servants and
employees forever harmless against all claims and liabilities of every kind,
nature and description which may arise out of or in any way be connected with
any such Work, except to the extent caused by Landlord's gross negligence. At
the request of Landlord, Tenant will deliver a written indemnity against claims
or damages to tenants or occupants of any other premises affected by such Work.
Tenant shall pay Landlord's reasonable costs of reviewing plans and materials
submitted to Landlord for approval. Tenant shall pay the cost of all such Work
and the cost of decorating and altering the Premises and the Building
occasioned by any such Work. Landlord shall have the right to require Tenant to
deliver to Landlord cash or other security in an amount and form acceptable to
Landlord be held in escrow by Landlord to assure prompt payment for the cost of
any such Work and to require Tenant's contractors to evidence workman's
compensation, general liability and other insurance coverage, as reasonably
required by Landlord. All alterations, improvements, additions and installations
to or in the Premises shall become part of the Premises at the time of
installation.
9.02 TENANT'S WORK. In the event that Landlord permits Tenant to hire its
own contractors for the performance of any Work, then in addition to the
provisions of Section 9.01, the following shall apply: (i) prior to the
commencement of the Work or the delivery of any materials to the Building,
Tenant shall submit to Landlord for Landlord's approval, the names and
addresses of all contractors, contracts, necessary permits and licenses,
certificates of insurance (including, without limitation, Workmen's
Compensation, comprehensive general liability and adequacy of design insurance)
and instruments of indemnification and waivers of lien against any and all
claims, costs, expenses, damages and liabilities which may arise in connection
with the Work, all in such form and amount as shall be satisfactory to
Landlord; (ii) all such Work shall be done only by contractors or mechanics
approved by Landlord and at such time and in such manner as Landlord may from
time to time designate; (iii) upon completion of any Work, Tenant shall furnish
Landlord with as-built plans, contractors' affidavits, full and final waivers
of lien, receipted bills covering all labor and materials expended and used in
connection with such Work, and (iv) all such Work shall comply with all
insurance requirements, all laws, ordinances, rules and regulations
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good and workmanlike manner and with the use of new, quality grade materials.
9.03 NO MECHANIC'S LIENS. Without limitation of the provisions of Section
9.01, Tenant agrees not to suffer or permit any lien on any mechanic or
materialman to be placed or filed against the Premises or the Building. In case
any such lien shall be filed, Tenant shall immediately satisfy and release such
lien of record. If Tenant shall fail to have such lien satisfied, released of
record, or bonded around within thirty (30) days after its filing, Landlord may,
on behalf of Tenant, without being responsible for making any investigation as
to the validity of such lien and without limiting or affecting any other
remedies Landlord may have, pay the same and Tenant shall pay Landlord on demand
the amount so paid by Landlord.
9.04 REMOVAL OF TENANT'S PROPERTY. Subject to the rules and regulations,
Tenant, at any time Tenant is not in default hereunder, may remove from the
Premises its movable trade fixtures and personal property. Tenant shall
repair any damage to the Premises caused by such removal, failing which Landlord
may remove the same and repair the Premises and Tenant shall pay the cost
thereof to Landlord on demand.
9.05 INITIAL TENANT IMPROVEMENT. Initial Tenant improvements shall be made
to the Premises in accordance with Exhibit 4.
9.06 REFURBISHMENT ALLOWANCE. On December 1, 2000, Landlord shall pay to
Tenant a refurbishment allowance not to exceed $2.00 per rentable square foot
in the Premises of $59,500.00, for use by Tenant to refurbish the Premises,
upon satisfaction of the same conditions as set forth in Section 9.05.
ARTICLE 10.
CONDITION OF PREMISES
10.01 PREMISES CONDITION. No agreements or representations, except such as
are expressly contained herein and in the Work Letter attached hereto, if any,
have been made to Tenant respecting the condition of the Premises. By taking
possession, except as provided in the Work Letter, Tenant conclusively waives
all claims relating to the condition of the Premises and accepts the Premises
as being free from defects and in good, clean and sanitary order, condition and
repair, and agrees to keep the Premises in such condition, ordinary wear and
tear excepted. Landlord shall be responsible to cause restrooms and elevator
lobbies on each floor of the Premises to comply with applicable ADA standards
for handicapped persons, provided Tenant does not make alterations that require
changes to the elevator lobbies or restrooms, in which case Tenant shall then be
responsible for causing compliance.
10.02 CARE OF THE PREMISES. Subject to Article 12, and ordinary wear and tear
excepted, Tenant shall, at its own expense, keep the Premises clean and safe and
in as good repair and condition as when all of the work described in the Work
Letter was completed (or as to subsequent Work, as and when such Work was
completed) and shall promptly and adequately repair all damage to the Premises
and the Building caused by Tenant or any of its employees, agents, guests or
invitees, including replacing or repairing all damaged or broken glass, fixtures
and appurtenances resulting from any such damage, under the supervision and with
the approval of Landlord. If Tenant does not promptly and adequately make such
repairs or replacements, Landlord may, but need not, make such repairs and
replacements and Tenant shall pay Landlord the cost thereof on demand. Tenant,
at its sole expense, shall comply with all laws, orders and regulations of
federal, state, county and municipal authorities and with any directive of any
public officer or officers pursuant to law which shall impose any violation,
order or duty upon Landlord or Tenant with respect to the Premises or the use,
condition, or occupation thereof, including all handicapped access laws. Tenant
shall not do or permit to be done any act or thing in, on or about the Premises
or store anything therein which (i) will in any way conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated, (ii) is not appropriate to the permitted
use of the Premises, or (iii) will in any way increase the existing rate of, or
adversely affect, or cause a cancellation of, any fire or other insurance
policies covering the Building or any of its contents.
10.03 CARE OF THE BUILDING. Landlord, subject to Articles 12 and 14, shall be
obligated only to maintain and make necessary repairs to the structural
elements of the Building, the public corridors, public washrooms and lobby of
the Building, the exterior windows of the Building, and subject to the
provisions of Articles 8, 12 and 14, the electrical, plumbing, heating,
ventilation and air conditioning systems of the Building.
ARTICLE 11.
SURRENDER OF THE PREMISES
11.01 SURRENDER. At the termination of this Lease, by lapse of time or
otherwise, Tenant shall surrender possession of the Premises to Landlord and
deliver all keys to the Premises and all locks therein to Landlord and make
known to the Landlord the combination of all combination locks in the Premises,
and shall, subject to Articles 12 and 13, return the Premises and all equipment
and fixtures of the Landlord therein to Landlord in broom clean condition and
in as good condition as when Tenant originally took possession, ordinary wear
and tear excepted, failing which Landlord may restore the Premises and such
equipment and fixtures to such condition and the Tenant shall pay the cost
thereof to Landlord on demand.
11.02 REMOVAL OF FIXTURES. Upon termination of this Lease or of Tenant's right
to possession of the Premises, by lapse of time or otherwise, all installations,
additions, partitions, hardware, light fixtures, floor coverings, non-trade
fixtures and improvements, temporary or permanent, whether placed there by
Tenant or Landlord, shall be Landlord's property and shall remain upon the
Premises, all without compensation, allowance or credit to Tenant.
11.03 SURVIVAL. All obligations of Tenant under this Article II shall
survive the expiration or earlier termination of this
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Lease.
ARTICLE 12.
DAMAGE OR DESTRUCTION
12.01 DAMAGE BY FIRE OR OTHER CASUALTY. If, during the Term, more than
twenty-five percent (25%) of either of the Premises or the Building is damaged
or made untenantable by fire or other casualty, cause, condition or thing
whatsoever, Landlord may, by written notice to Tenant given within sixty (60)
days after such damage, terminate this Lease. Such termination shall become
effective as of the date of such damage. Unless this Lease is terminated, if the
Premises are made partially or wholly untenantable as aforesaid, Landlord,
subject to the provisions of this Article 12 shall restore the same at
Landlord's expense with reasonable promptness. If, as a result of a fire or
other casualty, the Premises are made partially or wholly untenantable, Tenant
may terminate this Lease if (A) Landlord fails to commence such restoration
within sixty (60) days after Landlord is able to take possession of the damaged
space in the Premises and fails to reasonably diligently complete the
restoration of the Premises, by giving notice thereof to Landlord (i) not later
than seventy (70) days after Landlord is able to take possession if Landlord has
not theretofore commenced such restoration or (ii) prior to the substantial
completion of such restoration, if Landlord commences such restoration within
said sixty (60) day period, but fails to complete the restoration of the
Premises within one hundred eighty (180) days from the date of casualty, and
such termination shall be effective as of the fifth (5) day after receipt of
said notice by Landlord, or (B) the restoration will take more than one hundred
eighty (180) days to complete by giving notice thereof to Landlord prior to
Landlord's commencement of restoration and within twenty (20) days after
Landlord notifies Tenant in writing of the estimated time necessary to complete
such restoration determined by an architect selected by Landlord, provided
Tenant shall have the right to select an architect to make such determination if
Landlord has not done so within thirty (30) days after such casualty, and
Tenant's termination right, if applicable shall be exercised within twenty (20)
days after Tenant's receipt of such architect's estimate. In the event of
termination of this Lease, Monthly Base Rent and Adjustments shall be prorated
on a per diem basis and paid only the effective date of such termination. If all
of the Premises are untenantable but this Lease is not terminated, all Monthly
Base Rent and Adjustments shall abate from the date of the fire or other
casualty until the Premises are ready for occupancy and reasonably accessible to
Tenant; if part of the Premises is untenantable, Monthly Base Rent and
Adjustments shall be prorated on a per diem basis and apportioned in accordance
with the part of the Premises which is usable by Tenant until the damaged part
is ready for Tenant's occupancy. In all cases, with respect to Landlord's
obligations under this Article 12, such obligations shall be adjusted and all
time periods extended by the period on account of delay caused by adjustment or
insurance loss, strikes, governmental approvals, labor difficulties or any cause
beyond Landlord's reasonable control. Notwithstanding anything to the contrary
in this Section 12.01, Tenant shall not have the right to terminate this Lease
and Rent shall in no event abate if such fire or other casualty, cause,
condition or thing was caused by the act or neglect of Tenant, its employees or
agents.
12.02 RENT CONCESSION AND CASUALTY. This following provision shall apply if,
as an economic concession set forth in the Rider hereto, Landlord has granted
Tenant a credit against Monthly Base Rent, Expense Adjustment, or Electrical
Cost, or has granted Tenant an abatement period with respect to Monthly Base
Rent, Expense Adjustment, or Electrical Cost (such credits or the amount of
Monthly Base Rent, Expense Adjustment, or Electrical Cost, which would have
accrued but for such abatement period being hereinafter referred to as "Rent
Concession"): In the event that, pursuant to any provision of this Lease,
Monthly Base Rent, Expense Adjustment, or Electrical Cost abate, in whole or in
part, by reason of the occurrence of a fire or other casualty ("Casualty
Abatement") and this Lease is not terminated, then to the extent that the
period of any Casualty Abatement coincides with any period that a Rent
Concession would otherwise have been applicable, the Rent Concession or such
portion thereof as would otherwise have been applicable if the Casualty
Abatement had not occurred ("Rent Concession Balance") will be deferred until
the Casualty Abatement period expires and the Rent Concession Balance will be
effective and applied at the rate set forth in the Rider during the period
immediately following the expiration of the Casualty Abatement. Notwithstanding
the foregoing, (a) the Rent Concession Balance will not be applicable to the
extent it exceeds the amount of rent loss insurance proceeds recovered by
Landlord with respect to the Casualty Abatement, (b) Tenant will not be
entitled to any cash refund or credit against any other amounts due Landlord by
reason of the foregoing provision and (c) the Term will not be extended by
reason of the applicability of the foregoing provision.
12.03 RESTORATION. If Landlord repairs and restores the Premises as provided
in Section 12.01 above, Landlord shall repair or restore any decorations
(excluding personal property), alterations or improvements to the Premises
installed or approved by Landlord; provided, and to the extent, Landlord's
and/or Tenant's casualty insurance proceeds, as hereinafter provided under
Article 15.02, applicable to such decorations, alterations and improvements are
received by or provided to Landlord for such purposes. Tenant shall be
responsible for repair and replacement of trade fixtures, furnishings,
equipment, personalty property or leasehold improvements belonging to Tenant.
Notwithstanding any provision of this Article 12 to the contrary, Landlord shall
not be obligated to make any restorations or repairs to the Premises, the cost
of which would exceed the proceeds of insurance received by Landlord with
respect thereto.
ARTICLE 13.
EMINENT DOMAIN
13.01 CONDEMNATION OF THE PREMISES. In the event that the whole or a
substantial part of the Building or the Premises shall be condemned or taken in
any manner for any public or quasi-public use (or sold under threat of such
taking), and as a result thereof, the remainder of the Premises cannot be used
for the same purpose as prior to such taking, the Lease shall terminate as of
the date possession is taken.
13.02 PARTIAL CONDEMNATION OF THE PREMISES. If less than a substantial part
of the Premises shall be so condemned or taken (or sold under threat thereof)
and after such taking the Premises can be used for the same purposes as prior
thereto, the Lease shall cease only as to the part so taken as of the date
possession shall be taken by such authority, and Tenant shall
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pay full Rent up to that date (with appropriate refund by Landlord of such Rent
attributable to the part so taken as may have been paid in advance for any
period subsequent to the date possession is taken) and thereafter Monthly Base
Rent, Expense Adjustment, and Electrical Cost shall be equitably adjusted to
reflect the reduction in the Premises by reason of such taking. Landlord shall,
at its expense, make all necessary repairs or alterations to the Building so as
to constitute the remaining Premises a complete architectural unit, provided
that Landlord shall not be obligated to undertake any such repairs or
alterations if the cost thereof exceeds the award actually received by Landlord
resulting from such taking.
13.03 BUILDING CONDEMNATION. If part of the Building shall be so condemned
or taken (or sold under threat thereof), or if any adjacent property or street
shall be condemned or improved by a public or quasi-public authority in such a
manner as to alter the use of any part of the Premises or the Building and, in
the opinion of Landlord, the Building or any part thereof should be altered,
demolished or restored in such a way as to materially alter the Premises,
Landlord may terminate this Lease by notifying Tenant of such termination
within sixty (60) days following the taking of possession by such public or
quasi-public authority, and this Lease shall expire on the date of the taking,
as fully and completely as if such date were the date hereinbefore set forth as
the expiration of the Term, and the Monthly Base Rent and Adjustments hereunder
shall be apportioned as of such date.
13.04 AWARD. Landlord shall be entitled to receive the entire award,
including the damages for the property taken and damages to the remainder, with
respect to any condemnation proceedings affecting the Building. Tenant agrees
not to make any claim against Landlord or the condemning authority for any
portion of such award or compensation, whether attributable to the value of any
unexpired portion of the Term, the loss of profits, goodwill, leasehold
improvements or otherwise, Tenant irrevocably assigning any and all such claims
to Landlord.
ARTICLE 14.
WAIVER OF CERTAIN CLAIMS
14.01 RELEASE. To the extent not expressly prohibited by law, Tenant
releases Landlord, its mortgage, stockholders, agents, partners, officers,
servants and employees, and their respective stockholders, agents, partners,
officers, servants and employees (collectively, "Related Parties"), from and
waives all claims for damages to person or property sustained by Tenant or by
any occupant of the Premises, the Building, or by any other person, resulting
directly or indirectly from fire or other casualty, any existing or future
condition, defect, matter or thing in the Premises, the Building, or any
portions thereof, or from any equipment or appurtenance therein, or from any
accident in or about the Building, or from any act of neglect of any tenant or
other occupant of the Building or of any other person, other than Landlord or
its agents. The foregoing provision shall not limit or reduce Landlord's
maintenance and repair obligations contained herein.
14.02 INDEMNIFICATION. Except as provided otherwise in this Lease, Tenant
agrees to hold harmless and indemnify Landlord and Landlord's Related Parties
against claims and liabilities, including reasonable attorneys' fees, from any
damage to person or property caused by the negligence or intentional torts of
Tenant or its agents. Landlord may, at its option, repair such damage or
replace such loss, and Tenant shall upon demand by Landlord reimburse Landlord
for all costs of such repairs, replacement and damages in excess of amounts, if
any, paid to Landlord under insurance covering such damages. In the event any
action or proceeding is brought against Landlord or Landlord's Related Parties
by reason of any such claims, then, upon notice from Landlord, Tenant covenants
to defend such action or proceeding by counsel reasonably satisfactory to
Landlord. In addition, except as provided otherwise in this Lease, Landlord
agrees to hold harmless and indemnify Tenant against claims and liabilities,
including reasonable attorneys' fees, from any damage to person or property
caused by the negligence or intentional torts of Landlord or its agents.
14.03 TENANT'S FAULT. If any damage to the Building or any equipment or
appurtenance therein, whether belonging to Landlord or to other tenants in the
Building, results from any act or neglect of Tenant, its agents, employees,
guests or invitees, Tenant shall be liable therefor and Landlord may, at
Landlord's option repair such damage, and Tenant shall, upon demand by
Landlord, reimburse Landlord the total cost of such repairs and damages to the
Building. If Landlord elects not to repair such damage, Tenant shall promptly
repair such damages at its own cost and in accordance with the provisions of
Sections 9.02 and 9.03 as if such repair constituted Work under such Sections.
If Tenant occupies space in which there is exterior glass, then Tenant shall be
responsible for the damage, breakage or repair of such glass, except to the
extent such loss or damage is recoverable under Landlord's insurance, if any.
ARTICLE 15.
INSURANCE; WAIVER OF SUBROGATION
15.01 TENANT'S INSURANCE. Tenant shall procure and maintain at its own cost
policies of comprehensive general public liability and property damage
insurance with contractual liability coverage for the agreements of indemnity
provided for under this Lease and a broad form general liability endorsement to
afford protection with such limits as may be reasonably requested by Landlord
from time to time (which as of the date hereof shall be not less than
$3,000,000 under a combined single limit of coverage) insuring Landlord and
Landlord's Related Parties from all claims, demands or actions for injury to or
death of any person or persons and for damage to property made by, or on behalf
of, any person or persons, firm or corporation, arising from, related to or
connected with the Premises. The insurance shall be issued by companies and be
in form and substance satisfactory to Landlord and any mortgagee of the
Building and shall name Landlord and Landlord's Managing Agent (and, if
requested by Landlord or any mortgagee, include any mortgagee) and their
respective agents and employees as additional insureds. The aforesaid insurance
policies shall provide that they shall not be subject to cancellation except
after at least thirty (30) days' prior written notice to Landlord and all such
mortgagees (unless such cancellation is due to non-payment of premiums, in which
event ten (10) days' prior written notice shall be required). The original
insurance policies (or certificates thereof satisfactory to Landlord), together
with satisfactory evidence of payment of the premium thereof, shall be
deposited with Landlord prior to the commencement of the Term and renewals
thereof not less
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than fifteen (15) days prior to the end of the term of each such coverage.
15.02 CASUALTY INSURANCE. Tenant shall carry fire and extended coverage
insurance of the type typically referred to as "all risk" insurance,
including water damage, insuring its interest in the tenant improvements in the
Premises (to the extent not covered by Landlord's property insurance) and its
interest in all its personal property and trade fixtures located on or within
the Building, including, without limitation, its office furniture, equipment
and supplies.
15.03 WAIVER OF SUBROGATION. NOTWITHSTANDING ANY OTHER PROVISION OF THIS
LEASE TO THE CONTRARY, LANDLORD AND TENANT EACH HEREBY WAIVE ALL RIGHTS OF
ACTION AGAINST THE OTHER FOR LOSS OR DAMAGE TO THE PREMISES, OR THE BUILDING
AND PROPERTY OF LANDLORD AND TENANT IN THE BUILDING, WHICH LOSS OR DAMAGE IS
INSURED OR IS REQUIRED PURSUANT TO THIS LEASE TO BE INSURED BY VALID AND
COLLECTIBLE INSURANCE POLICIES TO THE EXTENT OF THE PROCEEDS COLLECTED OR
COLLECTIBLE UNDER SUCH INSURANCE POLICIES, SUBJECT TO THE CONDITION THAT THIS
WAIVER SHALL BE EFFECTIVE ONLY WHEN THE WAIVER IS PERMITTED BY SUCH INSURANCE
POLICIES OR WHEN, BY THE USE OF GOOD FAITH EFFORT, SUCH WAIVER COULD HAVE BEEN
PERMITTED IN THE APPLICABLE INSURANCE POLICIES, EVEN IF CAUSED BY THE
NEGLIGENCE OF SUCH OTHER PARTY. THE POLICIES OF INSURANCE REQUIRED TO BE
MAINTAINED BY TENANT UNDER THE TERMS OF THIS LEASE SHALL CONTAIN WAIVER OF
SUBROGATION CLAUSES IN FORM AND CONTENT SATISFACTORY TO LANDLORD.
15.04 INCREASED COSTS. Tenant shall not conduct or permit to be conducted by
its employees, agents guests or invitees any activity, or place any equipment
in or about the Premises or the Building that will in any way increase the
cost of fire insurance or other Landlord insurance on the Building. If any
increase in the cost of fire insurance or other insurance is stated by any
insurance company or by the applicable Insurance Rating Bureau, if any, to be
due to any activity or equipment of Tenant in or about the Premises or the
Building, such statement shall be conclusive evidence that the increase in such
cost is due to such activity or equipment and, as a result thereof, Tenant
shall be liable for the amount of such increase. Tenant shall reimburse
Landlord for such amount upon written demand from Landlord and any such sum
shall be considered additional Rent payable hereunder. Tenant, at its sole
expense, shall comply with any and all requirements of any insurance
organization or company necessary for the maintenance of reasonable fire and
public liability insurance covering the Premises and the Building.
ARTICLE 16.
LANDLORD'S RIGHT OF ACCESS
16.01 ENTRY INTO PREMISES. Landlord and its contractors and representatives
shall have the right to enter the Premises at all reasonable times to perform
janitorial, cleaning, security, and other services and, after reasonable verbal
notice (except in the case of emergencies), to inspect the same, to make
repairs, alterations and improvements, to maintain the Premises and the
Building, specifically including, but without limiting the generality of the
foregoing, to make repairs, additions or alterations within the Premises to
mechanical, electrical and other facilities serving other premises in the
Building, to post such reasonable notices as Landlord may desire to protect its
rights, to exhibit the Premises to mortgagees and purchasers, and, during the
one hundred eighty (180) days prior to the expiration of the term, to exhibit
the Premises to prospective tenants. In the event the Premises are vacant,
Landlord may place upon the doors or in the windows of the Premises any usual or
ordinary ""To Let,'' "To Lease," or "For Rent" signs. To the extent that
Tenant's conduct of its business from the Premises is not materially interfered
with, Tenant shall permit Landlord to erect, use, maintain and repair pipes,
cables, conduit, plumbing, vents and wires, in, to and through the Premises to
the extent Landlord may now or hereafter deem necessary or appropriate for the
proper operation, maintenance and repair of the Building and any portion of the
Premises.
16.02 LANDLORD'S REPAIRS. Landlord shall also have the right to take all
material into the Premises that may be required for the purposes set forth in
the foregoing Section 16.01 without the same constituting a constructive
eviction of Tenant, in whole or in part, and, except as otherwise provided in
this Lease, Rent shall not abate (except as provided in Article 12) while said
repairs, alterations, improvements or additions are being made, by reason of
loss or interruption of business of Tenant, or otherwise. If Tenant shall not
be personally present to open and permit entry into the Premises, at any time,
when for any reason entry therein shall be reasonably necessary under the
circumstances, such as in an emergency or to make repairs, Landlord or
Landlord's agents may enter the Premises by a master key, or may forcibly enter
the same, without rendering Landlord or such agents liable therefor (if during
such entry Landlord or Landlord's agents shall accord reasonable care to
Tenant's property), and without in any manner affecting the obligations and
covenants of this Lease.
16.03 MINIMIZE INTERFERENCE. In exercising its rights under this Article 16,
Landlord will use reasonable efforts in minimize any interference with Tenant's
use or occupancy of the Premises, provided that Landlord will not be obligated
to provide overtime labor or perform work after regular Building hours.
ARTICLE 17.
RIGHTS RESERVED TO LANDLORD
Landlord shall have the following rights exercisable without notice and
without liability to Tenant for damage or injury to property, person or
business (all claim's for damage being hereby waived and released by Tenant)
and without effecting an eviction or disturbance of Tenant's use or
possession giving rise to any claim for set-offs or abatement of Rent:
(a) To change the name or street address of the Building (but not
the suite number of the Premises);
(b) To install and maintain signs on the exterior and interior of
the Building (without adversely affecting
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<PAGE> 15
Tenant's signage rights granted in this Lease);
(c) To designate all sources furnishing sign painting and lettering,
towels, coffee cart service, vending machines or toilet supplies used or
consumed on the Premises and the Building;
(d) To have pass keys to the Premises;
(e) To grant to anyone the exclusive right to conduct any business or
render any service in the Building, provided such exclusive right
shall not operate, to exclude Tenant from the use expressly permitted
by this Lease;
(f) To make repairs, additions or alterations to the Building which
may change, eliminate or remove common areas, parking areas, if any, or
the method of ingress to or egress from the Building and such areas, to
convert common areas into leasable areas, or otherwise alter, repair or
reconstruct the common areas or change the use thereof, to change the
arrangement or location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, toilets or other public parts of the
Building, and to close entrances, doors, corridors, elevators, plaza or
other facilities, and to perform any acts related to the safety,
protection, preservation, reletting, sale or improvement of the Premises
or the Building;
(g) To have access to all mail chutes or boxes according to the rules
of the United States Postal Service;
(h) To require all persons entering or leaving the Building during
such hours as Landlord may from time to time reasonably determine to
identify themselves to security personnel by registration or otherwise,
and to establish their right to enter or leave and to exclude or expel
any peddler, solicitor or beggar at any time from the Premises or the
Building;
(i) To close the Building at 7:00 p.m. on weekdays, 1:00 p.m. on
Saturdays, and all day on Sundays and Holidays, or at such other
reasonable times as Landlord may determine, subject, however, to
Tenant's right to admittance under such regulations as shall be
prescribed from time to time by Landlord in its sole discretion.
ARTICLE 18.
ABANDONMENT
Tenant shall not abandon the Premises at any time during the Term. Any
re-entry by Landlord following abandonment by Tenant shall not, unless Landlord
so elects in a written notice to Tenant, constitute or be deemed to constitute
acceptance by Landlord of a surrender of this Lease, but rather, upon such
abandonment, Tenant's right to possession of the Premises shall cease, but
Tenant shall remain liable for all of its obligations under this Lease. Without
limitation of the foregoing, upon any such abandonment, Landlord shall have the
remedies provided for in Article 21 below. If Tenant shall abandon or surrender
the Premises or be dispossessed by process of law or otherwise during the Term
or at termination of the Term, any personal property left on the Premises shall
be deemed to be abandoned at the option of Landlord, and title thereto shall
pass to Landlord under this Lease as a bill of sale. For purposes of this Lease,
and at the option of Landlord, the Premises shall be deemed vacated or abandoned
if Tenant, or an agent or employee of Tenant, shall not have conducted Tenant's
ordinary business upon the Premises during any period of fifteen (15)
consecutive days or shall have transferred all or substantially all of its
personnel, furniture and fixtures from the Premises without replacement.
ARTICLE 19.
TRANSFER OF LANDLORD'S INTEREST
As used in this Lease, the term "Landlord" means only the current owner
of the fee title to the Building or the leasehold estate under a ground lease
of the Building at the time in question. Each Landlord is obligated to perform
the obligations of Landlord under this Lease only during the time such Landlord
owns such interest or title. Any Landlord who transfers its title or interest
in the Building is relieved of all liabilities for the obligations of Landlord
under this Lease to be performed on or after the date of transfer. Tenant
agrees to look solely to the transferee with respect to all matters in
connection with this Lease.
ARTICLE 20.
TRANSFER OF TENANT'S INTEREST
20.01 LANDLORD'S CONSENT. Tenant shall not sell, assign, encumber, mortgage
or transfer this Lease or any interest therein, sublet or permit the occupancy
or use by others of the Premises or any part thereof, or allow any transfer
hereof of any lien upon Tenant's interest by operation of law or otherwise
(collectively, a "Transfer") without the prior written consent of Landlord in
its sole discretion. Any Transfer which is not in compliance with the
provisions of this Article 20 shall, at the option of Landlord, be void and of
no force or effect. Tenant shall, by written notice in the form specified in
the following sentence, advise Landlord of Tenant's intention on a stated date
(which shall not be less than sixty (60) days after the date of Tenant's
notice) to sublet, assign, mortgage or otherwise Transfer any part or all of
the Premises or its interest therein for the balance or any part of the Term,
and, in such event, Landlord shall have the right, to be exercised by giving
written notice to Tenant within thirty (30) days after receipt of Tenant's
notice, to recapture the space described in Tenant's notice and such recapture
notice shall, if given, cancel and terminate this Lease with respect to the
space therein described as of the date stated in Tenant's notice. Tenant's
notice shall state the name and address of the proposed subtenant, assignee,
pledgee, mortgage or transferee, and a true and complete copy of the proposed
sublease, assignment, pledge, mortgage or other conveyance and all related
documentation, executed by both parties, shall be delivered to Landlord with
said notice. If Tenant's notice shall cover all of the space hereby demised,
and Landlord shall elect to give the aforesaid recapture notice
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with respect thereto, then the Term shall expire and end on the date stated in
Tenant's notice as fully and completely as if that date had been herein
definitely fixed for the expiration of the Term. If, however, this Lease is
terminated pursuant to the foregoing with respect to less than the entire
Premises, the Monthly Base Rent, Expense Adjustment, and Electrical Cost then in
effect shall be adjusted on the basis of the number of rentable square feet
retained by Tenant in proportion to the original Area of the Premises, and this
Lease as so amended shall continue thereafter in full force and effect. In such
event, Tenant shall pay the cost of erecting demising walls and public corridors
and making other required modifications to physically separate the portion of
the Premises remaining subject to this Lease from the rest of the Premises. If
Landlord, upon receiving Tenant's notice that it intends to sublet or assign any
such space, shall not exercise its right to recapture the space described in
Tenant's notice. Landlord will, as hereinabove provided, determine whether to
approve the Tenant's request to sublet or assign the space covered by its
notice. Notwithstanding the foregoing provisions, Landlord will not unreasonably
withhold such consent to an assignment or sublease if the following conditions
are satisfied:
(a) In the reasonable judgment of Landlord, the subtenant or
assignee (A) is of a character or engaged in a business or proposes to
use the Premises in a manner which is in keeping with the standards of
Landlord for the Building, (B) will not violate the provisions of any
lease or agreement affecting the Building, and (C) does not have an
unfavorable reputation or credit standing;
(b) Either the area of the Premises to be sublet or the remaining
area of the Premises is regular in shape with appropriate means of
ingress or egress suitable for normal renting purposes;
(c) Tenant is not in default under this Lease;
(d) The proposed sublease or assignee is not a person or entity
with whom Landlord is then negotiating to lease space in the Building;
(e) The amount of the aggregate rent to be paid by the proposed
assignee or subtenant is not less than the current prevailing rent for
comparable direct lease space in the Building;
(f) The use of the Premises by such proposed assignee or sublessee
is permitted under this Lease; and
(g) In no event shall the following be considered as suitable
assignees or sublessees under this subsection; any governmental body,
agency or bureau (of the United States, any state, county, municipality
or any subdivision thereof); any foreign government or subdivision
thereof; any health care professional or health care service
organization; schools or similar organizations; employment agencies;
radio; television or other communication stations; restaurants; and
retailers offering retail services from the Premises.
If Landlord consents to such sublet or assignment, such consent shall be
expressly contingent upon Tenant's payment to Landlord, as Rent, the Landlord's
costs and expenses incurred in connection therewith, including, but not limited
to, attorney's fees and Landlord's construction supervision fee, if applicable.
Without limiting the foregoing, in no event shall the following be considered
suitable assignees or sublessees under this Section 20.01: any governmental
body, agency or bureau (of the United States, any state, county, municipality
or any subdivision thereof); any foreign government or subdivision thereof; any
health care professional or health care service organization; schools or
similar organizations; employment agencies; radio, television or other
communication stations; restaurants; and retailers.
20.02 EXCESS RENT. If Tenant individually, or as debtor or debtor in
possession or if a trustee in bankruptcy acting on behalf of Tenant pursuant to
the Bankruptcy Code, 11 U.S.C. 101 et seq., shall sublet or assign the Premises
or any part thereof or assign any interest in this Lease at a rental rate (or
additional consideration) in excess of the then current Monthly Base Rent,
Expense Adjustment, and Electrical Cost per rentable square foot, said excess
Rent (or additional consideration) shall be and become the property of Landlord
and shall be paid to Landlord as it is received by Tenant, less the Tenant's
reasonable brokerage (excluding commissions paid to brokers who are Tenant's
affiliates), legal and other expenses ("Tenant's Costs") incurred in connection
with such assignment or, in the case of a sublease, less the monthly pro rata
share of such Tenant's Costs as determined by dividing such Tenant's Costs by
the number of months in the term of such sublease. If Tenant shall sublet the
Premises or any part thereof, Tenant shall be responsible for all actions and
neglect of the subtenant and its officers, partners, employees, agents, guests
and invitees as if such subtenant and such persons were employees of Tenant.
Nothing in this Section 20.02 shall be construed to relieve Tenant from the
obligation to obtain Landlord's prior written consent to any proposed sublease.
20.03 NO WAIVER. The consent by Landlord to any Transfer shall not be
construed as a waiver or release of Tenant from liability for the performance
of all covenants and obligations to be performed by Tenant under this Lease,
and Tenant shall remain liable therefor, nor shall the collection or acceptance
of Rent from any assignee, subtenant or occupant constitute a waiver or release
of Tenant from any of its obligations or liabilities under this Lease. Any
consent given pursuant to this Article 20 shall not be construed as relieving
Tenant from the obligation of obtaining Landlord's prior written consent to any
subsequent assignment or subletting.
20.04 INCLUDED TRANSFERS. If Tenant is a partnership, a withdrawal or
change, whether voluntary, involuntary or by operation of law or in one or more
transactions, of partners owning a controlling interest in Tenant shall be
deemed a voluntary assignment of this Lease and subject to the provisions of
this Article 20. If Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale, transfer or
redemption of a controlling interest of the capital stock of Tenant in one or
more transactions, shall be deemed a voluntary assignment of this Lease and
subject to the provisions of this Article 20. However, the preceding sentence
shall not apply to corporations the stock of which is traded through a national
or regional exchange or over-the-counter. Neither this Lease nor any interest
therein nor any estate
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created thereby shall pass by operation of law or otherwise to any trustee,
custodian or receiver in bankruptcy of Tenant or any assignee for the
assignment of the benefit of creditors of Tenant.
ARTICLE 21.
DEFAULT: LANDLORD'S RIGHTS AND REMEDIES
21.01 DEFAULT. The occurrence of any one or more of the following matters
constituted a default ("Default") by Tenant under this Lease:
(a) Failure by Tenant to pay any Rent or any other amounts due and
payable by Tenant under this Lease and such failure continues for five
(5) days after the giving of written notice of such failure by Landlord
to Tenant provided Landlord shall not be obligated to give more than two
(2) notices in any calendar year, and Tenant shall for all subsequent
failures to pay be in default immediately without the requirement of
Landlord to give notice of such failure to Tenant;
(b) Failure by Tenant to observe or perform any of the covenants in
this Lease in respect to assignment and subletting;
(c) Abandonment of the Premises as prohibited in Article 18;
(d) Failure by Tenant to cure forthwith, after notice thereof from
Landlord or another tenant acquiring knowledge thereof, any hazardous
condition that Tenant has created in violation of law or of this Lease;
(e) Failure by Tenant to observe or perform any other covenant,
agreement, condition or provision of this Lease, if such failure shall
continue for twenty (20) days after written notice thereof to Tenant by
Landlord;
(f) The levy upon execution of the attachment by legal process of
the leasehold interest of Tenant, or the filing or creation of a lien in
respect of such leasehold interest;
(g) Tenant or any guarantor of this Lease becomes insolvent or
bankrupt or admits in writing its inability to pay its debts as they
mature, makes an assignment for the benefit of creditors, or applies for
or consents to the appointment of a trustee or receiver for itself or
for all or a part of its property;
(h) Proceedings for the appointment of a trustee, custodian or
receiver of Tenant or any guarantor of this Lease or for all or a part
of Tenant's or such guarantor's property are filed against Tenant or
such guarantor and are not dismissed within thirty (30) days;
(i) Proceedings in bankruptcy, or other proceedings for relief under
any law for the relief of debtors, are instituted by or against Tenant
or any guarantor of this Lease, and, if instituted against Tenant or
such guarantor, are allowed against either or are consented to by either
or are not dismissed within sixty (60) days thereof;
(j) Tenant shall repeatedly default in the timely payment of Rent or
any other charges required to be paid, or shall repeatedly default in
keeping, observing or performing any other covenant, agreement,
condition or provision of this Lease, whether or not Tenant shall timely
cure any such payment or other default. For the Purposes of this
subsection, the occurrence of similar defaults three (3) times during
any twelve (12) month period shall constitute a repeated default.
Any notice periods provided for under this Article 21.01 shall run concurrently
with any statutory notice periods, and any notice given hereunder may be given
simultaneously with or incorporated into any such statutory notice.
21.02 LANDLORD'S REMEDIES. If a Default occurs, Landlord shall have the
following rights and remedies, which shall be distinct, separate and cumulative,
and which may be exercised by Landlord concurrently or consecutively in any
combination and which shall not operate to exclude or deprive Landlord of any
other right or remedy which Landlord may have in law or equity:
(a) Landlord may terminate this Lease by giving to Tenant notice of
the Landlord's intention to do so, in which event the Term shall end,
and all right, title and interest of Tenant hereunder shall expire, on
the date stated in such notice;
(b) Landlord may terminate the right of Tenant to possession of the
Premises without terminating this Lease by giving notice to Tenant that
Tenant's right of possession shall end on the date stated in such
notice, whereupon the right of Tenant to possession of the Premises or
any part thereof shall cease on the date stated in such notice but
Tenant's obligations under this Lease shall continue in full force and
effect; and
(c) Landlord may enforce the provisions of this Lease and may
enforce and protect the rights or Landlord hereunder by a suit or suits
in equity or at law for the specific performance of any covenant or
agreement contained herein, or for the enforcement of any other
appropriate legal or equitable remedy, including injunctive relief and
recovery of all moneys due or to become due from Tenant under any of the
provisions of this Lease.
21.03 SURRENDER OF POSSESSION. If Landlord exercises either of the remedies
provided for in subparagraphs (a) and (b) of Article 21.02, Tenant shall
surrender possession and vacate the Premises immediately and deliver possession
thereof to
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Landlord, and Landlord may then, or at any time thereafter, re-enter and take
complete and peaceful possession of the Premises, full and complete license so
to do being granted to Landlord, and Landlord may remove all property
therefrom, without being deemed in any manner guilty of trespass, eviction or
forcible entry and detainer and without relinquishing Landlord's right to Rent
or any other right given to Landlord hereunder or by operation of law.
21.04 DAMAGES. If Landlord terminates the right of Tenant to possession of
the Premises without terminating this Lease, such termination of possession
shall not release Tenant, in whole or in part, from Tenant's obligation to pay
the Rent hereunder for the full stated Term, and Landlord shall have the right
to the immediate recovery of all such amounts. Alternatively, at Landlord's
option, Landlord shall have the right, from time to time, to recover from
Tenant, and Tenant shall remain liable for, all Monthly Base Rent, Expense
Adjustment, Electrical Cost and any other sums then due under this Lease during
the period from the date of such notice or termination of possession to the end
of the Term. Landlord may file suit from time to time to recover any such sums
and no suit or recovery by Landlord of any such sums or portion thereof shall
be a defense to any subsequent suit brought for any other sums due under this
Lease. Alternatively, if Landlord elects to terminate this Lease, Landlord
shall be entitled to recover from Tenant all Monthly Base Rent, Expense
Adjustment, and Electrical Cost accrued and unpaid for the period up to and
including such termination date, as well as all other additional sums payable
by Tenant hereunder. In addition, Landlord shall be entitled to recover, as
damages for loss of the benefit of its bargain and not as a penalty, the sum of
(x) the unamortized cost to Landlord, computed and determined in accordance
with generally accepted accounting principles, of any tenant improvements
provided by Landlord at its expense, (y) the aggregate sum which at the time of
such termination represents the excess, if any, of the present value of the
aggregate Monthly Base Rent, Expense Adjustment, and Electrical Cost (as
reasonably estimated by Landlord) for the remainder of the Term over the then
present value of the then aggregate fair rental value of the Premises for the
balance of the Term, immediately prior to such termination, such present worth
to be computed in each case on the basis of a six percent (6%) per annum
discount from the respective dates upon which rentals would have been payable
hereunder had the Term not been terminated, and (z) any damages in addition
thereto, including reasonable attorney's fees and court costs, which Landlord
shall have sustained by reason of the breach of any of the covenants of this
Lease other than for the payment of Rent.
21.05 RELETTING. In the event Landlord terminates the right of Tenant to
possession of the Premises without terminating this Lease as aforesaid,
Landlord shall have no obligation to, but may relet the Premises or any part
thereof for the account of Tenant for such rent, for such time (which may be
for a term extending beyond the Term) and upon such terms as Landlord in
Landlord's sole discretion shall determine, and Landlord shall not be required
to accept any tenant offered by Tenant or to observe any instructions given by
Tenant relative to such reletting and may give the leasing of any unleased
space in the Building priority over the reletting of the Premises. Also, in any
such event, Landlord may make repairs, alterations and additions in or to the
Premises and redecorate (using only Building standard materials in
substantially the same configuration as the Premises) the same to the extent
deemed by Landlord necessary or desirable, and, in connection therewith, change
the locks to the Premises, and Tenant shall upon demand pay the cost thereof
together with Landlord's expenses of reletting. Landlord may collect the rents
from any such reletting and apply the same first to the payment of the expenses
of re-entry, redecoration, repair and alterations and the expense of reletting
(including without limitation brokers' commissions and attorneys' fees) and
second to the payment of Rent herein provided to be paid by Tenant. Any excess
of residue shall operate only as an offsetting credit against the amount of
Rent as the same theretofore became or thereafter becomes due and payable
hereunder, but the use of such offsetting credit to reduce the amount of Rent
due Landlord, if any, shall not be deemed to give Tenant any right, title or
interest in or to such excess or residue and any such excess or residue shall
belong solely to Landlord. No such re-entry or repossession, repairs,
alterations and additions, or reletting shall be construed as an eviction or
ouster of Tenant, an election on Landlord's part to terminate this Lease or an
acceptance of a surrender of this Lease, unless a written notice of such
intention be given to Tenant, or shall operate to release Tenant in whole or in
part from any of Tenant's obligations hereunder. Landlord may, at any time and
from time to time, sue and recover judgment for any deficiencies remaining
after the application of the proceeds of any such reletting.
21.06 REMOVAL OF TENANT'S PROPERTY. All property removed from the Premises by
Landlord pursuant to any provisions of this Lease or of law shall be handled,
removed or stored by Landlord at the cost, expense and risk of Tenant, and
Landlord, shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay Landlord upon demand for all expenses
incurred by Landlord in such removal and storage.
21.07 COSTS. Tenant shall pay all costs, charges and expenses, including
court costs and reasonable attorneys' fees incurred by Landlord or its
beneficiaries in enforcing Tenant's obligations under this Lease, in the
exercise by Landlord of any of its remedies in the event of a default, in any
litigation, negotiation or transactions in which Tenant causes Landlord,
without Landlord's fault, to become involved or concerned, or in consideration
of any request for approval of or consent to any action by Tenant which is
prohibited by this Lease or which may be done only with Landlord's approval or
consent, whether or not such approval or consent is given.
21.08 CUMULATIVE RIGHTS. All of Landlord's rights and remedies under this
Lease shall be cumulative with and in addition to any and all rights and
remedies which Landlord may have at law or equity. Any specific remedy provided
for in any provision of this Lease shall not preclude the concurrent or
consecutive exercise of a remedy provided for in any other provision hereof.
21.09 LOCK-OUT. If a Default occurs, Landlord is entitled and is hereby
authorized, without any notice to Tenant whatsoever, to enter upon the Premises
by use of a master key, a duplicate key, picking the locks, or other peaceable
means, and to change, alter, and/or modify the door locks on all entry doors of
the Premises, thereby excluding Tenant, and its officers, principals, agents,
employees, visitors and representatives therefrom. In the event that Landlord
has either terminated Tenant's right of possession to the Premises pursuant to
the foregoing provisions of this Lease, or has terminated this Lease by reason
of the Default, Landlord shall not thereafter be obligated to provide Tenant
with a key to the Premises at any time; provided, however, that in any such
instance, during Landlord's normal business hours and at the convenience
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of Landlord, and upon the written request of Tenant accompanied by such written
waivers and releases as Landlord may require, Landlord will escort Tenant or
its authorized personnel to the Premises to retrieve any personal belongings or
other property of Tenant not subject to Landlord's liens or security interests
described in this Lease or available under applicable laws. If Landlord elects
to exclude Tenant from the Premises without permanently repossessing the
Premises or terminating this Lease pursuant to the foregoing provisions of this
Lease, then Landlord (at any time prior to permanent repossession or
termination) shall not be obligated to provide Tenant a key to re-enter the
Premises until such time as all delinquent Rent has been paid in full and all
other Defaults, if any, have been completely cured to Landlord's satisfaction,
and Landlord has been given assurance reasonably satisfactory to Landlord
evidencing Tenant's ability to satisfy its remaining obligations under this
Lease. During any such temporary period of exclusion, Landlord will, during
Landlord's regular business hours and at Landlord's convenience, upon written
request by Tenant, escort Tenant or its authorized personnel to the Premises to
retrieve personal belongings of Tenant or its employees, and such other
property of Tenant as is not subject to Landlord's liens and security interests
described in this Lease or available under applicable laws. The provisions
hereof shall override and control any conflicting provisions of Section 93.002
of the Texas Property Code (as amended).
ARTICLE 22.
LIMITATION OF LIABILITY
22.01 LIMITATION. If Tenant obtains a money judgment against Landlord
resulting from any default or other claim arising under this Lease, that
judgment shall be satisfied only out of the rents, issues, profits, and other
income thereafter actually received on account of Landlord's right, title and
interest in the Building, and no other real, personal or mixed property of
Landlord (or of any of the partners which comprise Landlord, or of partners,
officers, shareholders, directors or principals of such partners comprising
Landlord, if any, or of Landlord's officers, shareholders, directors, or
owners, if any) wherever situated, shall be subject to levy, attachment or
execution, or otherwise used to satisfy any such judgment. Tenant hereby waives
any right to satisfy a judgment against Landlord except from the rents, issues,
profits and other income thereafter actually received on account of Landlord's
right, title and interest in the Building.
ARTICLE 23.
HOLDING OVER
If Tenant retains possession of the Premises or any part thereof after
the termination of the Term or any extension thereof, by lapse of time or
otherwise, Tenant, unless Landlord otherwise elects, shall become a tenant at
sufferance and shall pay Landlord monthly Rent, at one and one-half times the
rate of Monthly Base Rent, Expense Adjustment, and Electrical Cost in effect
for the month immediately preceding said holding over, computed on a per month
basis, for each month or part thereof (without reduction for any such partial
month) that Tenant thus remains in possession. Alternatively, at the election
of Landlord expressed in a written notice to Tenant and not otherwise, such
retention of possession shall constitute a renewal of this Lease for one (1)
year, requiring the payment by Tenant of Monthly Base Rent, Expense Adjustment,
and Electrical Cost then in effect, as adjusted for said year as if said year
were an extension of the Term. The provisions of this Article 23 do not exclude
Landlord's right of reentry or any other right hereunder.
ARTICLE 24.
SUBORDINATION AND ATTORNMENT
24.01 SUBORDINATION. Landlord may have heretofore encumbered or may
hereafter encumber with a mortgage or trust deed the Building, or any interest
therein, and may have heretofore sold and leased back or may hereafter sell and
lease back the land on which the Building is located, and may have heretofore
encumbered or may hereafter encumber the leasehold estate under such lease with
a mortgage or trust deed. (Any such mortgage or trust deed is herein called a
"Mortgage" and the holder of any such mortgage or the beneficiary under any
such trust deed is herein called a "Mortgagee." Any such lease of the
underlying land is herein called a "Ground Lease", and the lessor under any
such lease is herein called a "Ground Lessor." Any Mortgage which is a first
lien against the Building, the land on which the Building is located, the
leasehold estate or the lessor under a Ground Lease (if the property is not
then subject to an unsubordinated mortgage) is herein called a "First Mortgage"
and the holder or beneficiary of or Ground Lessor under any First Mortgage is
herein called a "First Mortgagee.") This Lease is, or shall be, subject and
subordinate to any First Mortgage now or hereafter encumbering the Building.
This provision shall be self-operative, and no further instrument of
subordination shall be required to effectuate such subordination. If requested
by a First Mortgagee, Tenant will either (i) subordinate its interest in this
Lease to said First Mortgage, and to any and all advances made thereunder and
to the interest thereon, and to all renewals, replacements, supplements,
amendments, modifications and extensions thereof, or (ii) make certain of
Tenant's rights and interest in this Lease superior thereto; and Tenant will
promptly execute and deliver such agreement or agreements as may be reasonably
required by such Mortgagee or Ground Lessor, provided, however, Tenant
covenants it will not subordinate this Lease to any Mortgage or Ground Lease
other than a First Mortgage (including a Ground Lease defined as a First
Mortgage hereunder) without the prior written consent of the First Mortgagee.
Tenant agrees that Landlord may assign the rents and interests in this Lease to
the holder of any Mortgage or Ground Lease. In conjunction with the foregoing
provisions, Tenant hereby acknowledges its agreement to execute the
Subordination, Non-Disturbance and Attornment Agreement and/or the Lease
Estoppel Certificate required by such Mortgagee and/or Ground Lessor within ten
(10) days following the receipt of a written request therefor. Landlord shall
attempt to obtain a non-disturbance agreement reasonably satisfactory to Tenant
from any future First Mortgagee, provided Landlord's failure to obtain such an
agreement shall not create any liability on the part of Landlord to Tenant,
create a default by Landlord under this Lease, or create a defense, offset, or
counterclaim to Tenant's obligations under this Lease.
24.02 ATTORNMENT. It is further agreed that (a) if any Mortgage shall be
foreclosed, or if any Ground Lease be terminated, (i) the liability of the
Mortgagee or purchaser at such foreclosure sale or the liability of a
subsequent owner designated as Landlord under this Lease shall exist only so
long as such Mortgagee, purchaser or owner is the owner of the Building or
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the land on which the Building is located, and such liability shall not continue
or survive after further transfer of ownership; and (ii) upon request of the
Mortgagee, if the Mortgage shall be foreclosed, Tenant will attorn, as Tenant
under this Lease, to the purchaser at any foreclosure sale under any Mortgage or
upon request of the Ground Lessor, if any Ground Lease shall be terminated,
Tenant will attorn as Tenant under this Lease to the Ground Lessor, and Tenant
will execute such instruments as may be necessary or appropriate to evidence
such attornment; (b) this Lease may not be modified, amended, canceled or
surrendered, without the prior written consent, in each instance, of the First
Mortgagee; and (c) Tenant waives the provisions of any statute or rule of law,
now or hereafter in effect, that may give or purport to give Tenant any right to
terminate or otherwise adversely affect Landlord's interest in this Lease or
reduce or limit the obligations of Tenant hereunder in the event of the
prosecution or completion of any such foreclosure proceeding. No Mortgagee or
any purchaser at a foreclosure sale shall be liable for any act or omission of
the Landlord which occurred prior to such sale or conveyance, nor shall Tenant
be entitled to any offset against or deduction from Rent due after such date by
reason of any act or omission of the Landlord prior to such date. Further,
Tenant agrees that no Mortgagee shall be bound by the prepayment of Rent made in
excess of thirty days before the date on which such payment is due or any
amendment or modification made with such Mortgagee's consent to the extent such
consent is required as provided above.
24.03 MORTGAGEE REQUIREMENTS. Should any prospective First Mortgagee require a
modification or modifications of this Lease, which modification or modifications
will not cause an increased cost or expense to Tenant or in any other way
materially and adversely change the rights and obligations of Tenant hereunder,
in the reasonable judgment of Tenant, then and in such event, Tenant agrees that
this Lease may be so modified and agrees to execute whatever documents are
required therefor and deliver the same to Landlord within fifteen (15) days
following the request therefor. Should any prospective Mortgagee or Ground
Lessor require execution of a short form of lease for recording (containing,
among other customary provisions, the names of the parties, a description of the
Premises and the Term of this Lease), Tenant agrees to execute such short form
of Lease and deliver the same to Landlord within fifteen (15) days following the
request therefor.
24.04 POWER OF ATTORNEY. If Tenant fails within fifteen (15) days after
written demand therefor to execute and deliver any instruments as may be
necessary or proper to effectuate any of the covenants of Tenant set forth above
in this Article, Tenant hereby makes, constitutes and irrevocably appoints any
one of the Landlord or its representatives as its attorney-in-fact (such power
of attorney being coupled with an interest) to execute and deliver any such
instruments for and in the name of Tenant.
ARTICLE 25.
ESTOPPEL CERTIFICATE
Tenant agrees that from time to time, upon not less than seven (7) days'
prior written request by Landlord, Tenant will, and Tenant will cause any
subtenant, licensee, concessionaire or other occupant of the Premises to,
promptly complete, execute and deliver to Landlord or any party or parties
designated by Landlord a statement in writing certifying: (i) that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same are in full force and effect as modified and identifying the
modifications); (ii) the dates to which the Rent and other charges have been
paid; (iii) that the Premises have been unconditionally accepted by the Tenant
(or if not, stating with particularity the reasons why the Premises have not
been unconditionally accepted); (iv) the amount of any Security Deposit held
hereunder; (v) that, so far as the party making the certificate knows, Landlord
is not in default under any provisions of this Lease, if such is the case, and
if not, identifying all defaults with particularity; and (vi) any other matter
reasonable requested by Landlord. Any purchaser or Mortgagee of any interest in
the Building shall be entitled to rely on said statement. Failure to give such a
statement within seven (7) days after said written request shall be conclusive
evidence, upon which Landlord and any such purchaser or Mortgagee shall be
entitled to rely that this Lease is in full force and effect and Landlord is not
in default and Tenant shall be estopped from asserting against Landlord or any
such purchaser or Mortgagee any defaults of Landlord existing at that time but
Tenant shall not thereby be relieved of the affirmative obligation to give such
statement. Moreover, if Tenant fails to deliver or cause to be delivered such
statement within said seven (7) day period, Landlord shall be entitled to
collect from Tenant upon demand, as liquidated damages occasioned by such delay
and not as a penalty (the actual damages resulting from such delay being
impossible to ascertain), a sum equal to one-fifteenth of the Monthly Base Rent
for each day, up to fifteen (15) days, after the expiration of said seven (7)
day period that Tenant fails to deliver such statement. If such failure persists
after such fifteen (15) day period, Landlord shall be entitled to pursue any and
all remedies it may have with respect to such Default, including termination of
this Lease or Tenant's right to possession and collection of damages, including
consequential damages, arising by reason for such Default.
ARTICLE 26.
INTENTIONALLY DELETED
ARTICLE 27.
NOTICES AND DEMANDS
27.01 PARTIES' NOTICES. All notices, demands, approvals, consents, requests
for approval or consent or other writings in this Lease provided to be given,
made or sent by either party hereto to the other ("Notice") shall be in writing
and shall be deemed to have been fully given, made or sent when made by personal
service or two (2) business days after deposit in the United States mail,
certified or registered and postage prepaid and properly addressed as follows:
To Landlord: The Utah State Retirement Investment Fund
c/o CB Commercial Real Estate Group, Inc.
533 South Fremont Avenue
Los Angeles, California 90071
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Attn: Managing Director
with a copy to:
The Utah State Retirement Investment Fund
c/o CB Commercial Realty Advisors, Inc.
533 South Fremont Avenue
Los Angeles, California 90071
Attn: Director of Asset Management
and a copy to:
Compass Management, Inc.
3811 Turtle Creek Boulevard, Suite 240
Dallas, Texas 75219
Attn: Property Manager for Turtle Creek
To Tenant: (i) If any Notice is to be given Tenant
prior to occupancy, to the address set forth
in Section 1.02.
(ii) If any Notice is to be given
Tenant after occupancy, to the
Premises; provided, however, if the
Premises shall have been vacated,
Notice may be posted on the door to the
Premises, except as Landlord may be
otherwise notified in writing.
The address to which any Notice should be given, made or sent to either party
may be changed by written notice given by such party as above provided.
27.02 MORTAGEE'S NOTICE AND CURE RIGHTS. Tenant agrees to give any First
Mortgagee, by registered or certified mail, a copy of any notice or claim of
default served upon the Landlord by Tenant, provided that prior to such notice
Tenant has been notified in writing (by way of service on Tenant of a copy or
an assignment of Landlord's interests in leases, or otherwise) of the address
of such First Mortgagee. Tenant further agrees that if Landlord shall have
failed to cure such default within twenty (20) days after such notice to
Landlord (or if such default cannot be cured or corrected within that time,
then such additional time as may be necessary if Landlord has commenced within
such twenty (20) days and is diligently pursuing the remedies or steps
necessary to cure or correct such default), then the First Mortgagee shall have
an additional thirty (30) days within which to cure or such default (or if such
default cannot be cured or corrected within that time, then such additional time
as may be necessary if such First Mortgagee has commenced within such thirty
(30) days and is diligently pursuing the remedies or steps necessary to cure or
correct such default, including the time necessary to obtain possession if ion
is to cure or correct such default) before Tenant may exercise any right or
remedy which it may have on account of any such default of Landlord. The
foregoing provision shall not limit Tenant's right to abate rent under Sections
8.04, 12.01, and 13.02.
27.03 NOTICE TO TENANT. Any notice, demand, request or consent to be made
by or required of Landlord, may be made and given by Landlord's Management
Agent with the same force and effect as if made and given by Landlord.
ARTICLE 28.
CONSTRUCTION OF LEASE
28.01 CONSTRUCTION. The language in all parts of this Lease shall in all
cases be construed as a whole according to its fair meaning and neither strictly
for nor against either Landlord or Tenant. Article and Section headings in this
Lease are for convenience only and are not to be construed as part of this Lease
or in any way defining, limiting, amplifying, construing, or describing the
provisions hereof. Time is of the essence of this Lease and every term, covenant
and condition hereof. The words "Landlord" and "Tenant," as herein used, shall
include the plural as well as the singular. The neuter gender includes the
masculine and feminine. In the event there is more than one person or entity
which executes this Lease as Tenant, the obligations to be performed and
liability of all such persons and entities shall be joint and several. All of
the covenants of Tenant here under shall be and deemed construed to be
"conditions" as well as "covenants" as though the words specifically expressing
or importing conditions were used in each separate instance. Landlord and Tenant
agree that in the event any term, covenant or condition herein contained (other
than with respect to the payment of Rent) is held to be invalid or void by any
court of competent jurisdiction, the invalidity of any such term, covenant or
condition shall in no way affect any other term, covenant or condition herein
contained.
28.02 Amendments. This Lease contains and embodies the entire agreement of
the parties hereto, and no representation, inducements or agreements, oral or
otherwise, not contained in this Lease shall be of any force or effect. This
Lease may not be modified in whole or in part in any manner other than by an
instrument in writing duly signed by both parties hereto.
ARTICLE 29.
REAL ESTATE BROKERS
Tenant represents and warrants unto Landlord that Tenant has directly
dealt with and only with the Broker(s), if any, identified in Article 1 of this
Lease as broker in connection with this Lease, and agrees to indemnify and hold
harmless Landlord from and against any and all claims or demands, damages,
liabilities and expenses of any type or nature whatsoever arising by reason of
the incorrectness or breach of the aforesaid representation or warranty.
Landlord shall pay, and agrees
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to indemnify and hold harmless Tenant from and against any claim by the
Broker(s) for its commission arising out of the execution and delivery of this
Lease pursuant to a separate agreement between Landlord and Broker.
ARTICLE 30.
MISCELLANEOUS
30.01 BENEFIT. Subject to the provisions of Articles 19 and 20 hereof, all
terms, covenants and conditions on this Lease shall be binding upon and inure
to the benefit of and shall apply to the respective heirs, executors,
administrators, successors, assigns and legal representatives or Landlord and
Tenant.
30.02 EXECUTION AND DELIVERY. The execution of this Lease by Tenant and
delivery of the same to Landlord or Landlord's Management Agent do not
constitute a reservation of or option to lease the Premises or an agreement by
Landlord to enter into a Lease, and this Lease shall become effective only if
and when Landlord executes and delivers a counterpart hereof to Tenant;
provided, however, the execution and delivery by Tenant of this Lease to
Landlord or Landlord's Management Agent shall constitute an irrevocable offer
by Tenant to lease the Premises on the terms and conditions herein contained,
which offer may not be withdrawn or revoked for thirty (30) days after such
execution and delivery. If Tenant is a corporation, it shall deliver to
Landlord concurrently with the delivery to Landlord of an executed Lease, a
certified resolution of Tenant's directors authorizing execution and delivery
of this Lease and the performance by Tenant of its obligations hereunder. If
Tenant is a partnership, it shall deliver to Landlord concurrently evidence of
execution and performance authority. Tenant shall not record this Lease or any
memorandum or other evidence hereof.
30.03 DEFAULT UNDER OTHER LEASE. If the term of any lease (other than this
Lease) made by Tenant for any demised premises in the Building shall be
terminated or terminable after the making of this Lease, because of any default
by Tenant under such other lease, such fact shall empower Landlord, at
Landlord's sole option, to declare this Lease to be in default by written
notice to Tenant.
30.04 APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the laws of the state in which the Building is located.
30.05 LATE CHARGES AND DEFAULT INTEREST. At the option of Landlord, Landlord
may impose a late payment fee equal to the lesser of five percent (5%) of the
amount due or the maximum amount permitted by applicable law if any payment of
Rent is paid more than five (5) days after its due date. In addition, any
amount due hereunder shall bear interest after default in the payment thereof
at the annual rate of the lesser of (i) the rate of eighteen percent (18%) per
annum or (ii) the maximum lawful interest rate permitted by applicable law.
30.06 NON-WAIVER OF DEFAULTS. No waiver of any provision of this Lease shall
be implied by any failure of Landlord to enforce any remedy on account or the
violation of such provision, even if such violation be continued or repeated
subsequently, and no express waiver shall affect any provision other than the
one specified in such waiver and in that event only for the time and in the
manner specifically stated. No receipt of monies by Landlord from Tenant
after the termination of this Lease will in any way alter the length of the
Term of Tenant's right of possession hereunder or, after the giving of any
notice, shall reinstate, continue or extend the Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of Rent shall not waive or affect said notice, suit or judgment,
nor shall any such payment be deemed to be other than an account of the amount
due, nor shall the acceptance of Rent be deemed a waiver of any breach by
Tenant of any term, covenant or condition of this Lease. No endorsement or
statement on any check or any letter accompanying any check or payment of Rent
shall be deemed an accord and satisfaction. Landlord may accept any such check
or payment without prejudice to Landlord's right to recover the balance due of
any installment or payment of Rent or pursue any other remedies available to
Landlord with respect to any existing Defaults. None of the terms, covenants
or conditions of this Lease can be waived by either Landlord or Tenant except
by appropriate written instrument.
30.07 FORCE MAJEURE. Neither Landlord nor Tenant shall not be deemed in
default with respect to the failure to perform any of the terms, covenants and
conditions of this Lease on its part to be performed, if such failure is due in
whole or in part to any strike, lockout, labor dispute (whether legal or
illegal), civil disorder, inability to procure materials, failure of power,
restrictive governmental laws and regulations, riots, insurrections, war, fuel
shortages, accidents, casualties, Acts of God, acts caused directly or
indirectly by the other (or the other's agents, employees, guest or invitees),
acts of other tenants or occupants of the Building or any other cause beyond
reasonable control. In such event, the time for performance shall be extended
by an amount of time equal to the period of the delay so caused. Except to
extent such release is prohibited by law, Landlord shall not be liable to
Tenant for any expense, injury, loss or damage resulting from work done in or
upon, or the use of, any adjacent or nearby building, land, street, alley or
underground vault or passageway. The foregoing shall not limit, reduce, or
otherwise affect Tenant's obligation to make payments due under this Lease,
except for abatement provided for in Sections 8.04, 12.01, and 13.02.
30.08 LANDLORD'S RIGHT TO PERFORM TENANT'S DUTIES. If Tenant fails timely to
perform any of its duties under this Lease, Landlord shall have the right (but
not the obligation), after the expiration of any grace period specifically
provided by this Lease, to perform such duty on behalf and at the expense of
Tenant without further notice to Tenant, and all sums expended or expenses
incurred by Landlord in performing such duty shall be deemed to be Rent under
this Lease and shall be due and payable to Landlord upon demand by Landlord.
30.09 RIDER, WORK LETTER AND EXHIBITS. Any Rider, Work Letter and/or Exhibit
attached hereto are hereby
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<PAGE> 23
incorporated in this Lease by reference.
30.10 FINANCIAL STATEMENTS. Tenant shall, when requested by Landlord from
time to time, furnish a true and accurate audited statement of its financial
condition prepared in conformity with generally accepted accounting principles
and in a form reasonably satisfactory to Landlord.
30.11 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall create
any relationship between the parties hereto other than that of Landlord and
Tenant, and it is acknowledged and agreed that Landlord shall not be deemed to
be a partner of Tenant in the conduct of its business, or a joint venturer or a
member of a joint or common enterprise with Tenant.
30.12 NO RECORDING. Tenant shall not record this Lease or any memorandum
thereof without the prior written consent of Landlord.
30.13 HAZARDOUS WASTE. During the term of the Lease, Tenant shall comply with
all statutes, ordinances, rules, orders, regulations and requirements of the
federal, state, county and city governments and all departments thereof
applicable to the presence, storage, use, maintenance and removal of petroleum
or petroleum products, natural or synthetic gas, urea formaldehyde foam
insulation, radon gas, asbestos, PCB transformers, other toxic, hazardous,
contaminated or pollutant substances, and underground storage tanks
(collectively, "Hazardous Materials") in, on or about the Premises, which
generation treatment, release, presence, storage, use, maintenance, removal or
disposition is caused or permitted by Tenant. In no event shall the aforesaid
be construed to mean that Landlord acquiesces, has given or will give its
consent or that Tenant need not obtain Landlord's consent prior to Tenant's
storing, using, maintaining, or removing Hazardous Materials in, on or about
the Premises, and Tenant shall not store, use, maintain, or remove Hazardous
Materials in, on or about the Premises. Tenant agrees to indemnify and forever
hold harmless Landlord, its agents, successors, and assigns, and Landlord's
Mortgagee(s), as their interest may appear, from all claims, losses, damages,
expenses and costs, including, but not limited to, losses, damages, expenses and
costs, incurred by reason of Tenant's use, storage, maintenance or removal of
Hazardous Materials in, on, or about the Premises, or any part of the Property.
30.14 BANKRUPTCY. Landlord and Tenant understand that, notwithstanding certain
provisions to the contrary contained herein, a trustee or debtor in possession
under the United States Bankruptcy Code ("Code") may have certain rights to
assume or assign this Lease. Landlord and Tenant further understand that, in
such event, Landlord is entitled under the Code to adequate assurance of future
performance of the terms and provisions of this Lease. The parties hereto agree
that, with respect to any such assumption or assignment, the term "adequate
assurance" shall include at least the following: (1) since the financial
condition and resources of Tenant were a material inducement to Landlord in
entering into this Lease, in order to assure Landlord that the proposed assignee
will have the resources with which to pay all Rent payable pursuant to the terms
hereof, any proposed assignee must have, as demonstrated to Landlord's
satisfaction, a net worth (as defined in accordance with generally accepted
accounting principles consistently applied) of not less than the net worth of
tenant on the date this Lease became effective, increased by seven percent (7%),
compounded annually, for each year from the Commencement Date through the date
of the proposed assignment; (2) since Landlord's asset will be substantially
impaired if the trustee in bankruptcy or any assignee of this Lease makes any
use of the Premises other than the Permitted Use, any proposed assignee must
have been engaged in the conduct of business for the five (5) years prior to any
such proposed assignment, which business does not violate the Permitted Use, and
such proposed assignee shall continue to engage in the Permitted Use; and (3)
any proposed assignee of this Lease must assume and agree to be personally bound
by the terms, covenants and provisions of this Lease.
30.15 LANDLORD'S CONTINGENCY. Tenant acknowledges and agrees that the terms
and conditions of this Lease are specifically contingent upon the approval by
Landlord's Mortgagee(s) of this Lease. Accordingly, in the event that
Landlord's Mortgagee(s) fails to approve this Lease, this Lease shall
automatically terminate and be of no further force or effect.
30.16 SECURITY. LANDLORD SHALL HAVE NO RESPONSIBILITY TO PREVENT, AND SHALL
NOT BE LIABLE TO TENANT, ITS AGENTS, EMPLOYEES, CONTRACTORS, VISITORS OR
INVITEES FOR, LOSSES DUE TO THEFT OR BURGLARY, OR FOR DAMAGES OR INJURY TO
PERSONS OR PROPERTY DONE BY PERSONS GAINING ACCESS TO THE PREMISES OR THE
BUILDING, AND TENANT HEREBY RELEASES LANDLORD FROM ALL LIABILITY FOR SUCH
LOSSES, DAMAGES OR INJURY, EVEN IF CAUSED BY LANDLORD'S NEGLIGENCE, EXCEPT TO
EXTENT SUCH WAIVER IS PROHIBITED BY LAW.
30.17 LIMITATION ON WARRANTIES. LANDLORD'S DUTIES AND WARRANTIES ARE LIMITED
TO THOSE EXPRESSLY STATED IN THIS LEASE AND SHALL NOT INCLUDE ANY IMPLIED DUTIES
OR IMPLIED WARRANTIES, NOW OR IN THE FUTURE. NO REPRESENTATIONS OR WARRANTIES
HAVE BEEN MADE BY LANDLORD OTHER THAN THOSE CONTAINED IN THIS LEASE. TENANT
HEREBY WAIVES ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE
PREMISES WHICH MAY EXIST BY OPERATION OF LAW OR IN EQUITY, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF HABITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
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<PAGE> 24
LANDLORD: TENANT:
THE UTAH STATE RETIREMENT THE HOTEL INDUSTRY SWITCH COMPANY
INVESTMENT FUND,
an independent agency of the By: /s/ JOHN F. DAVIS, III
State of Utah --------------------------------
Name: John F. Davis, III
By: CB Commercial Realty Title: President
Advisors, Inc., a Delaware
corporation, Agent
By: /s/ MATTHEW C. HURLBUT
- --------------------------------
Name: Matthew C. Hurlbut
Title Vice President
By: /s/ JOSEPH W. MARKLING
- --------------------------------
Name: Joseph W. Markling
Title: First Vice President
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<PAGE> 25
EXHIBIT A
LEGAL DESCRIPTION
BEING a tract of land situated in the City of Dallas, Dallas County, Texas, and
being part of the W. Grigsby Survey, Abstract 501, and also being part of Block
1345 in the City of Dallas, and being the tracts of land conveyed to Turtle
Creek Square Limited, an Illinois partnership, with Turtle Creek Square, Inc.,
a Texas corporation, sole general partner, by deed dated 8/31/79, and recorded
in Volume 79172, Page 580, Deed Records, Dallas County, Texas, and being more
particularly described as follows:
BEGINNING at the intersection of the Northeasterly Line of Blackburn Street
with the Northwesterly Line of Turtle Creek Boulevard;
THENCE N 44 degrees 35' 00" W along said Northeasterly line of Blackburn Street
a distance of 326.65 feet to an iron rod set for corner;
THENCE N 45 degrees 25' 00" E departing along said Northeasterly Line of
Blackburn Street a distance of 1.92 feet to an iron rod set for corner, said
iron rod also being the beginning of a curve to the right;
THENCE along said curve to the right having a central angle of 40 degrees
22' 00", a radius of 70.00 feet and an arc length of 49.32 feet to an iron rod
set for corner;
THENCE N 85 degrees 47' 00" E a distance of 110.25 feet to an iron rod set for
corner, said iron rod also being the beginning of a curve to the left;
THENCE along said curve to the left having a central angle of 74 degrees 47'
00", a radius of 110.00 feet, and an arc length of 143.57 feet to an iron rod
set for corner;
THENCE N 11 degrees 00' 00" E a distance of 438.38 feet to an iron rod set for
corner;
THENCE S 79 degrees 00' 00" E a distance of 132.75 feet to an iron rod set for
corner;
THENCE S 11 degrees 00' 00" W a distance of 92.16 feet to an iron rod set for
corner;
THENCE S 79 degrees 00' 00" E a distance of 13.00 feet to an iron rod set for
corner;
THENCE S 11 degrees 00' 00" W a distance of 17.60 feet to an iron rod set for
corner;
THENCE S 79 degrees 00' 00" E a distance of 364.33 feet to an iron rod set for
corner situated in said Northwesterly Line of Turtle Creek Boulevard;
THENCE S 22 degrees 44' 30" W along said Northwesterly Line of Turtle Creek
Boulevard a distance of 212.69 feet to an iron rod set for corner;
THENCE N 79 degrees 00' 00" W departing said Northwesterly Line of Turtle Creek
Boulevard a distance of 309.80 feet to an iron rod set for corner;
THENCE S 11 degrees 00' 00" W a distance of 16.00 feet to an iron rod set for
corner;
THENCE N 79 degrees 00' 00" W a distance of 33.0 feet to an iron rod set for
corner;
THENCE S 11 degrees 00' 00" W a distance of 102.00 feet to an iron rod set for
corner;
THENCE N 79 degrees 00' 00" W a distance of 12.99 feet to an iron rod set for
corner;
THENCE S 33 degrees 30' 00" W a distance of 92.76 feet to an iron rod set for
corner;
THENCE S 56 degrees 30' 00" E a distance of 113.36 feet to an iron rod set for
corner;
THENCE S 33 degrees 30' 00" W a distance of 57.96 feet to an iron rod set for
corner;
THENCE S 56 degrees 30' 00" E a distance of 39.57 feet to an iron rod set for
corner;
THENCE N 86 degrees 57' 48" E a distance of 53.17 feet to an iron rod set for
corner;
THENCE S 56 degrees 35' 49" E a distance of 30.82 feet to an iron rod set for
corner;
THENCE S 56 degrees 30' 00" E a distance of 90.43 feet to an iron rod set for
corner situated in said Northwesterly Line of Turtle Creek Boulevard, said iron
rod also the beginning of a curve to the right;
THENCE along said Northwesterly Line of Turtle Creek Boulevard the following:
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<PAGE> 26
Along said curve to the right having a central angle of 26 degrees 48' 58", a
radius of 274.10 feet and an arc length of 128.13 feet to an iron rod set for
corner;
S 84 degrees 44' 30" W a distance of 56.00 feet to an iron rod set for corner,
said iron rod the beginning of a curve to the left;
Along said curve to the left having a central angle of 23 degrees 25' 02", a
radius of 403.34 feet an arch length of 164.85 feet to the POINT OF BEGINNING
and containing 5.0237 acres or 218,831 square feet of land, more or less.
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<PAGE> 27
EXHIBIT 1
FLOOR PLAN
[FLOOR PLAN]
TURTLE CREEK CENTRE FLOOR 11
14,386 USF 2/21/92
14,875 RSF
[FLOOR PLAN]
TURTLE CREEK CENTRE FLOOR 12
12,498 USF
14,875 RSF
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<PAGE> 28
EXHIBIT 2
THIRD FLOOR ROFR AREA
[FLOOR PLAN]
TURTLE CREEK CENTRE FLOOR 3
12,577 USF
14,653 RSF
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<PAGE> 29
EXHIBIT 3
RULES AND REGULATIONS
(1) Tenant shall not, whether temporarily, accidentally or
otherwise, allow anything to remain in, place or store anything in, or obstruct
in any way, any portion of the Building other than the Premises, including any
sidewalk, plaza area, driveway, passageway, entrance, exit, stairway, lobby,
corridor, hall, elevator, shipping platform, truck concourse or vault area in or
about the Building. All passageways, entrances, exits, elevators, stairways,
corridors, halls and roofs of the Building are not for the use of the general
public, and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons in whose presence, in the judgment of Landlord,
shall be prejudicial to the safety, character, reputation or other interests of
the Building, its tenants or Landlord; provided, however, that nothing herein
contained shall be construed to prevent ingress and egress to persons with whom
Tenant deals within the normal course of Tenant's business. Tenant shall not
enter nor permit its employees, agents, guests or invitees to enter into areas
of the Building designated for the exclusive use of Landlord, its employees,
guests or invitees. Tenant shall not use, nor permit the use by its employees,
agents, guests or invitees, if any common area in the Building other than for
access to and from the Premises. No bicycle or motorcycle shall be brought into
the Building or kept on the Premises without the consent of Landlord.
(2) No deliveries of any nature nor freight, furniture or bulky
matter of any description will be received into the Building or carried into the
elevators except in such a manner, during such hours and using only the freight
elevators and those passageways as may be approved by Landlord, and then only
upon having been scheduled in advance. Any hand trucks, carryalls or similar
appliances used for the delivery or receipt of merchandise, supplies or
equipment shall be equipped with rubber tires, side guards and such other
safeguards as Landlord shall require.
(3) Tenant, or the employees, agents, servants, visitors or
licensees of Tenant shall not at any time place, leave or discard any rubbish,
paper, articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals
(except for guide dogs for sight impaired persons) of any kind shall be brought
or kept in or about the Building. Tenant shall not permit any noise, odor or
litter which is objectionable to Landlord or other tenants of the Building to
emanate from the Premises.
(4) Any person in the Building will be subject to identification
by employees and agents of Landlord. All persons in or entering the Building
shall be required to comply with the security policies of the Building. Tenant
shall keep doors to unattended areas locked and shall otherwise exercise
reasonable precautions to protect property from theft, loss, or damage. Tenant
shall not attach or permit to be attached additional locks or similar devices to
any door or window, change existing locks or the mechanism thereof, or make or
permit to be made any keys for any door other than those provided by Landlord.
If more than two keys for one lock area desired, Landlord will provide them upon
payment therefor by Tenant. Upon termination of this Lease, or of the Tenant's
possession, the Tenant shall surrender to Landlord all keys to the Premises.
Landlord shall not be responsible for the theft, loss or damage of any property.
Landlord may at all times keep a pass key to the Premises. Canvassing,
soliciting or peddling in the Building is prohibited, and Tenant shall cooperate
to prevent same.
(5) Except for portions of the Premises specifically designated by
Tenant and consented to in writing by Landlord in advance to be used for an
employee kitchen or lounge area, Tenant shall not cook, sell, purchase or
permit the preparation, sale or purchase of food on the Premises.
(6) Tenant shall not mark, paint, drill into or in any way deface
any part of the Building or Premises. No boring, driving of nails or screws,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may direct. Tenant shall not install any
resilient tile or similar floor covering in the Premises except with the prior
approval of Landlord.
(7) Tenant shall give immediate notice to Landlord in case of
theft, unauthorized solicitation or accident in the Premises or in the Building
or of defects therein or in any fixtures or equipment, or of any known
emergency in the Building.
(8) Tenant shall not use the Premises or permit the Premises to be
used for any other purpose than the Permitted Use, without Landlord's prior
permission.
(9) Tenant shall not advertise for laborers giving the Premises as
an address, nor pay such laborers at a location in the Premises.
(10) The requirements of Tenant will be attended to only upon
application at the office of Landlord in the Building. Employees of Landlord
shall not perform any Work or do anything outside of their regular duties,
unless under special instructions from the office of Landlord.
(11) Tenant shall at all times keep the Premises neat and orderly.
(12) Tenant shall not make excessive noises, cause disturbances or
vibrations or use or operate any electrical or mechanical devices that emit
excessive sound or other waves or disturbances or create obnoxious odors, any
of which may be offensive to the other tenants and occupants of the Building,
or that would interfere with the operation of any device, equipment, radio,
television broadcasting or reception from or within the Building or elsewhere
and shall not place or install any projections, antennas, aerials or similar
devices inside or outside of the Premises or on the Building without Landlord's
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<PAGE> 30
prior written approval.
(13) Tenant shall comply with all applicable federal, state and
municipal laws, ordinances and regulations, and building rules and shall not
directly or indirectly make any use of the Premises which may be prohibited by
any of the foregoing or which may be dangerous to persons or property or may
increase the cost of insurance or require additional insurance coverage. Tenant
shall not use, suffer or permit the Premises or any part hereof to be used for
the manufacture, sale or distribution by gift or otherwise of any spirituous,
fermented or intoxicating liquors or any drugs. Tenant shall not bring or store
firearms of any kind into the Building. Tenant shall not use the Premises for
the manufacture, distribution or sale of any merchandise or other materials.
Tenant shall not install any equipment utilizing an ammonia or other process
necessitating venting. Tenant shall not permit any odors, acids, vapors or
other gases or materials to be discharged from the Premises into the common
areas, waste lines, vents, flues or other tenant spaces in the Building. Tenant
shall not use, suffer or permit the use of the Premises or any part thereof for
housing accommodations, for lodging or sleeping purposes or for any immoral or
illegal purpose.
(14) The water and wash closets, drinking fountains and other
plumbing fixtures shall not be used for any purpose other then those for which
they were constructed, and no sweepings, rubbish, rags, coffee grounds or other
substances shall be thrown therein. All damages resulting from any misuse of
the fixtures shall be borne by the Tenant who, or whose servants, employees,
agents, visitors or licensees, shall have caused the same. No person shall waste
water by interfering or tampering with the faucets or otherwise.
(15) Tenant, its servants, employees, customers, invitees and
guests shall, when using the parking facilities in and around the building,
observe and obey all signs regarding fire lanes and no parking zones, and when
parking always park between the designated lines. Landlord reserves the right
to tow away, at the expense of the owner, any vehicle which is improperly
parked or parked in a no-parking zone. All vehicles shall be parked at the sole
risk of the owner, and Landlord assumes no responsibility for any damage to or
loss of vehicles, except to the extent of Landlord's gross negligence.
(16) Except as otherwise provided in the Lease, Tenant shall not
employ persons to do janitor, repair or decorating work in the Premises, and no
persons other than the janitors or contractors designated by Landlord shall
clean, decorate, remodel or repair the Premises without prior written consent
of Landlord.
(17) Tenant shall not install or operate any refrigerating, heating
or air-conditioning equipment, nor any equipment of any type or nature that
will or may necessitate any changes, replacements or additions to, or in the
use or, the water system heating system, plumbing system, air-conditioning
system or electrical system of the Premises or the Building, without first
obtaining the prior written consent of Landlord. Business machines and
mechanical equipment belonging to or installed by or at the direction of Tenant
that cause noise or vibration capable of being transmitted to the structure of
the Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenant in the Building shall be installed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to reduce such noise and vibration to a level satisfactory to
Landlord and such other tenants.
(18) Landlord reserves the right to prescribe and to approve the
weight, size and location of safes, book shelves and other heavy equipment,
fixtures and articles in and about the Premises and the Building and to require
all such items to be moved in and out of the Building and the Premises only at
such times and in such manner as Landlord shall direct and in all events at
Tenant's sole risk and responsibility. Tenant shall not overload any floors.
(19) Tenant shall not, without the prior written consent of
Landlord, install any shades, draperies, blinds or other window covering,
awning, sign, lettering, picture, notice, advertisement or object unacceptable
to Landlord on or against glass partitions, doors or windows that would be
visible outside the Premises or any sign, lettering, picture, notice or
advertisement within the Premises that would be visible outside the Premises.
Landlord shall have the right to prohibit any advertisement of or by Tenant in
any public media, by direct solicitation or otherwise, which advertisement, in
Landlord's opinion, tends to impair the reputation of Building or its
desirability as a high-quality office building. Upon written notice from
Landlord, Tenant shall immediately refrain from and discontinue any such
advertisement.
(20) Landlord reserves the right to rescind, add to and amend any
rules or regulations, to add reasonable new rules or regulations, and to waive
any rules or regulations with respect to any tenant or tenants.
(21) The Building shall be a no-smoking building, with no smoking
allowed in the Premises or in any other area of the Building, including any
exterior portions thereof, provided that Landlord may provide for a smoking
area, in which case Tenant shall ensure that its employees smoke only in such
smoking area.
<PAGE> 31
EXHIBIT 4
Work Letter
The terms used herein shall have the meanings ascribed to them
in the Lease, unless otherwise stated herein.
1. Construction of the Premises. The Landlord and the
Tenant agree that their respective rights and obligations in reference to the
construction of the Premises shall be as provided herein. Floor 11 either is
complete or will be subject to a minor amount of work. None of such work will
have an impact on the Commencement Date for Floor 11, which shall be the date
provided in Section 1.08. The Allowance, as defined below, shall be determined
based on the square footage of both Floor 11 and Floor 12, though Landlord and
Tenant acknowledge and agree that Tenant need not spend it equally on the cost
of work on Floor 11 and Floor 12, but may spend proportionally more on Floor
12. In addition, the Landlord's Work will be completed in phases and Tenant
shall be entitled to apply those portions of the Allowance not spent in early
phases to the cost of the work in later phases.
1.01 Tenant's Plans and Specifications.
(a) Landlord shall cause to be prepared detailed
architectural, telephone, mechanical and engineering plans including all
dimensions and specifications for all work to be performed by Landlord in the
Premises substantially in accordance with the space plan provided by Tenant or
Tenant's architect and previously submitted to Landlord ("Plans").
(b) Tenant shall cooperate as necessary in connection
with the preparation of the Plans, in a complete and timely manner, and without
limiting the foregoing, shall provide to Landlord all information as shall be
required by Landlord's engineers to prepare mechanical plans pursuant to
Section 1.02 hereof, which information shall include, but not be limited to,
the following:
(1) any special floor-loading conditions which
may exceed the structural weight limits of the floor.
(2) specifications of any heat emanating
equipment to be installed by Tenant which may require special air conditioning,
(3) electrical specifications of any equipment
that requires non-standard electrical power outlets, and
(4) complete specifications of any data-line
wiring required, including cable routing, conduit size, cable type and similar
items (provided Landlord shall have the right to approve but shall not perform,
and the Landlord's Work, as hereinafter defined, shall exclude all data-line
wiring and cable routing in and to the Premises).
(c) The Plans shall be delivered to Tenant for its review
and consideration as soon as reasonably possible. Any change or modification of
such Plans shall not be valid or binding unless consented to by Landlord in
writing.
1.02 Landlord's Work.
(a) Landlord shall furnish and install substantially in
accordance with the Plans the materials and items described therein
("Landlord's Work"). The Plans, the costs of Tenant's space plan, Landlord's
Work, and the installation of cable described in Section 1.01 (b)(4), shall be
at Tenant's sole cost and expense, provided that Tenant shall be entitled to a
credit against the cost of the Plans, the costs of Tenant's space plan,
Landlord's Work, and the installation of cable described in Section 1.01(b)(4),
in an amount up to the lesser of (a) $178,500, (i.e., $6.00, multiplied by the
area of the Premises) or (b) the actual costs of the Plans and the Landlord's
Work (the "Allowance").
(b) If Landlord determines that the cost of the
Landlord's Work, will exceed the Allowance, then prior to commencement of the
Landlord's Work, Landlord will submit to Tenant a cost estimate for the
Landlord's Work ("Cost Estimate") which Tenant shall approve or reject within
seven (7) days after receipt thereof. It is understood that the cost of
Landlord's Work shall include Landlord's then applicable construction
supervision fee which shall not exceed four percent (4%) of the total cost of
the Landlord's Work, the cost of Tenant's space plan, the cost of the Plans,
and the costs of the installation of the cable described in Section 1.01(b)(4).
Tenant's failure to reject the Cost Estimate within said seven (7) day period
shall be to be an acceptance thereof. If Tenant rejects the Cost Estimate,
Tenant shall, together with such rejection, propose such changes to the Plans
as will cause the Cost Estimate to be acceptable. If the accepted Cost exceeds
the Allowance, then Tenant shall pay to Landlord the amount of such excess
within ten (10) business days after receipt by Tenant of a bill therefor, but
in no event later than the Commencement Date.
1.03 Extra Work.
(a) Tenant may request substitutions, additional or extra
work and/or materials over and above Landlord's Work ("Extra Work") to be
performed by Landlord provided that the Extra Work, in Landlord's judgment, (1)
shall not delay completion of Landlord's Work or the Commencement Date of the
Lease; (2) shall be practicable and consistent with existing physical
conditions in the Building and any other plans for the Building which have been
filed with the appropriate municipality or other governmental authorities
having jurisdiction thereover (3) shall not impair Landlord's ability to
perform any of Landlord's obligation hereunder or under the Lease or any other
lease of space in the Building; and (4) shall not affect any portion of the
Building other than the Premises.
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<PAGE> 32
(b) (1) In the event Tenant requests Landlord to perform
Extra Work and if Landlord accedes to such request, then and in that event,
prior to commencing such Extra Work, Landlord shall submit to Tenant a written
estimate ("Estimate") for said Extra Work to be performed. Within seven (7)
days after Landlord's submission of the Estimate, Tenant shall, in writing,
either accept or reject the Estimate. Tenant's failure either to accept or
reject the Estimate within said seven (7) day period shall be deemed rejection
thereof.
(2) In the event that Tenant rejects the Estimate or the
Estimate is deemed rejected, Tenant shall within seven (7) days after such
rejection propose to Landlord such necessary revisions of the Plans so as to
enable Landlord to proceed as though no such Extra Work had been requested.
Should Tenant fail to submit such proposals regarding necessary revisions of
the Plans within said seven (7) day period, Landlord, in its sole discretion,
may proceed to complete Landlord's Work in accordance with the Plans already
submitted, with such variations as in Landlord's sole discretion may be
necessary so as to eliminate the Extra Work.
(c) (1) All Extra Work shall require the installation of new
materials at least comparable to Building standards and any substitution shall
be of equal or greater quality than that for which it is substituted.
(2) Tenant may request the omission of an item of
Landlord's Work, provided that such omission shall not delay the completion of
Landlord's Work and Landlord thereafter shall not be obligated to install the
same. Credits for items deleted or not installed shall be granted in amounts
equal to credits obtainable from subcontractors or materialmen. In no event
shall there be any cash credits.
(d) In the event Landlord performs Extra Work hereunder,
Tenant shall pay to Landlord, upon acceptance of the Estimate or submission of
Landlord's bid therefor, as the case may be, a sum equal to twenty percent
(20%) of the Estimate or bid price to the extent the Estimate together with the
amount set forth in the Cost Estimate exceeds the Allowance. In the event of
any such excess, Tenant shall pay to Landlord such excess cost for the Extra
Work within seven (7) days after receipt by Tenant of a bill therefore or at
such other time or times as agreed to, but in no event shall the entire balance
be paid later than the completion of the Extra Work.
2. COMPLETION-PUNCH LIST. When the Landlord is of the opinion
that the Landlord's Work is complete, then the Landlord shall so notify the
Tenant. The Tenant agrees that upon such notification, the Tenant promptly (and
not later than two (2) business days after the date of Landlord's said notice)
will inspect the Premises and furnish to the Landlord a written statement that
the Landlord's Work have been completed and are complete as required by the
provisions of this EXHIBIT 4 and the Lease with the exception of certain
specified and enumerated items (hereinafter referred to as the "Punch List").
The Tenant agrees that at the request of the Landlord from time to time
thereafter, the Tenant will indicate in writing to Landlord whether any prior
Punch List items have been completed. If the Punch List consists only of items
which would not materially impair the Tenant's use or occupancy of the
Premises, then, in such event, the Landlord's Work shall be deemed complete and
Tenant shall be deemed to have accepted possession of the Premises, provided,
Landlord shall promptly complete all such Punch List items; provided, however,
that in no event shall Landlord be obligated to repair latent defects, not
originally listed on the Punch List, beyond a period of six (6) months after
the Completion Date. The date on which the Landlord's Work is complete,
pursuant to the provisions of this subsection, is sometimes referred to as the
"Date of Substantial Completion" or "Substantial Completion Date." The
Landlord's Work shall be deemed to be substantially complete and the Date of
Substantial Completion will be deemed to have occurred upon the issuance of a
certificate of occupancy or other similar license, permit, or authorization.
Promptly after the Substantial Completion Date, upon Landlord's request, Tenant
will execute an instrument in the form attached hereto as EXHIBIT 4.1, setting
forth the Commencement Date of the Lease, so that said date is certain and such
instrument, when executed, is hereby made part of this Lease and incorporated
herein by reference.
3. POSSESSION-EXTENSION OF TERM AND ACKNOWLEDGMENTS.
(a) The Tenant will take possession of the Premises as of and
on the Commencement Date which, as set forth in Section 1.08 of the Lease,
shall be the later of (a) the date set forth in Section 1.08(a) or (b) the date
which is two (2) days following the Date of Substantial Completion of the
Landlord's Work as to 6917 rentable square foot area on Floor 12, but in no
event later than February 1, 1996. Landlord has not agreed or represented that
the Premises will be substantially ready for occupancy on the date specified in
Section 1.08(a) of the Lease. If for any reason whatsoever the Landlord's Work
as to such 6917 rentable square feet on Floor 12 is not complete on said date,
this Lease shall nevertheless continue in full force and effect, and no
liability shall arise against Landlord because of any such delay, provided,
however, that all Rent due hereunder shall abate on a per diem basis and, as
hereinabove provided, the Commencement Date shall be deferred until the Date of
Substantial Completion of the Landlord's Work as to such 6917 rentable square
foot area on Floor 12. Notwithstanding the foregoing, there shall be no
abatement of Rent and no deferral of the Commencement Date if the Landlord's
Work is not substantially complete due to any special equipment, fixtures or
materials, changes, alterations or additions requested by Tenant, any delay of
Tenant in submitting information necessary for the preparation of the Plans,
the failure of Tenant to timely approve or reject the Cost Estimate, the
failure of the Tenant to submit revisions following rejection or deemed
rejection of the Estimate, the requirement of Tenant for any Extra Work, or the
failure of the Tenant in supplying information of approving or authorizing
plans, specifications, estimates or other matters, or any other act or omission
of Tenant ("Tenant Delay"). If Tenant shall occupy all or any part of the
Premises prior to the Commencement Date, all of the covenants and conditions of
this Lease, including the obligation to pay Rent, shall be binding upon the
parties hereto in respect to such occupancy as if the first day of the Term had
been the date when Tenant began such occupancy.
(b) In the event the Date of Substantial Completion of the
Landlord's Work as to such 6917 rentable square foot area on Floor 12, or the
date Landlord's Work would have been complete but for any Tenant Delays, is
later than the date setforth in Section 1.08(a) of the Lease, (1) the Date of
Substantial Completion of the Landlord's Work as to such
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<PAGE> 33
6917 rentable square foot area on Floor 12, shall be modified to be the earlier
of the Date of Substantial Completion of the Landlord's Work as to such 6917
rentable square foot area on Floor 12, or the date Landlord's Work would have
been complete but for any Tenant Delays and Monthly Base Rent, Expense
Adjustment, and Electrical Cost will commence accordingly, (2) the Expiration
Date shall be on the last day of the calendar month in which the original Term
as set forth in Article I would expire if it were measured from the earlier of
the Date of Substantial Completion of the 6917 rentable square foot area on
Floor 12, or the date Landlord's Work would have been complete but for any
Tenant Delays, and (3) the Term shall be modified to be the period from the Date
of Substantial Completion of the 6917 rentable square foot area on Floor 12 to
the Expiration Date. Promptly after the Date of Substantial Completion of the
6917 rentable square foot area on Floor 12, the parties will execute an
instrument in the form attached as Addendum 1 hereto, setting forth the
Expiration Date of the Lease, as so modified, so that said dates are certain
and such instrument, when executed, is hereby made a part of this Lease and
incorporated herein by reference.
4. TENANT'S ENTRY PRIOR TO COMPLETION DATE. Landlord may permit
Tenant or its agents or laborers to enter the Premises at Tenant's sole risk
prior to the Commencement Date in order to perform through Tenant's own
contractors such work as Tenant may desire, at the same time that Landlord's
contractors are working in the Premises. The foregoing License to enter prior
to the Commencement Date, however, is conditioned upon Tenant's labor not
interfering with Landlord's contractors or with any other tenant or its labor.
If at any time such entry shall cause disharmony. interference or union
disputes of any nature whatsoever, or if Landlord shall, in Landlord's
reasonable judgment, determine that such entry, such work or the continuance
thereof shall interfere with, hamper or prevent Landlord from proceeding with
the completion of the Building or Landlord's Work at the earliest possible
date, this license may be withdrawn by Landlord immediately upon written notice
to Tenant. Such entry shall be deemed to be under and subject to all of the
terms, covenants and conditions of the Lease, and Tenant shall comply with
all of the provisions of the Lease which are the obligations or covenants of
the Tenant, including, but not limited to, the provisions of Section 9.01 of the
Lease, except that the obligation to pay Rent shall not commence until the
Commencement Date. In the event that Tenant's agents or laborers incur any
charges from Landlord, including, but not limited to, charges for use of
construction or hoisting equipment on the Building site, such charges shall be
deemed an obligation of Tenant and shall be collectible as Rent pursuant to the
Lease, and upon default in payment thereof, Landlord shall have the same
remedies as for a default in payment of Rent pursuant to the Lease.
5. LANDLORD'S ENTRY AFTER SUBSTANTIAL COMPLETION. At any time
after the Commencement Date, Landlord may enter the Premises to complete Punch
List items, and such entry by Landlord, its agents, servants, employees or
contractors for such purpose shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of Rent, or relieve Tenant from any obligation under this Lease, or impose any
liability upon Landlord or its agents.
6. DELAYS. Landlord and Tenant mutually acknowledge that the
Landlord's construction process in order to complete the Premises requires a
coordination of activities and a compliance by the Landlord and Tenant without
delay of all obligations imposed upon the Landlord and Tenant pursuant to this
EXHIBIT 4 and that time is of the essence in the performance of Landlord's and
Tenant's obligations hereunder and Landlord's and Tenant's compliance with the
terms and provisions or this EXHIBIT 4.
7. PROVISIONS SUBJECT TO LEASE. The provisions of this EXHIBIT 4
are specifically subject to the provisions of the Lease.
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<PAGE> 34
EXHIBIT 4.1
NOTICE OF LEASE TERM DATES
Re: Office Building Lease (the "Lease") dated _________,199__ between The
Utah State Retirement Investment Fund, an independent agency of the
State of Utah ("Landlord") and _______________ a ____________
corporation ("Tenant") for the premises located at 3811 Turtle Creek
Boulevard, Suite _______, Dallas, Texas and commonly known as Turtle
Creek Centre ("Premises")
The undersigned, as Tenant, hereby confirms as of this _____ day of ______,
199_, the following:
1. The Substantial Completion Date for the Premises occurred on ______,
199_, and Tenant is currently occupying the same.
2. The Commencement Date, Expiration Date, and expiration date of the
Abatement Period, as each is defined in the Lease, are as follows:
Commencement Date:__________________
Expiration Date:____________________
3. All alterations and improvements required to be performed by
Landlord pursuant to the terms of the Lease to prepare the entire Premises
for Tenant's initial occupancy have been satisfactorily completed.
4. As of the date hereof, Landlord has fulfilled all of its obligations
under the Lease.
5. The Lease is in full force and effect and has not been modified,
altered, or amended.
6. There are no offsets or credits against Rent.
LANDLORD:
THE UTAH STATE RETIREMENT INVESTMENT FUND,
an independent agency of the State of Utah
By: CB Commercial Realty Advisors, Inc.
a Delaware corporation, Agent
By: /s/ MATTHEW C. HURLBUT
-----------------------------------------
Its: Vice President
-----------------------------------------
By:
-----------------------------------------
Its:
-----------------------------------------
Date:
-----------------------------------------
TENANT:
-----------------------------------------
-----------------------------------------
By: /s/ JOHN F. DAVIS, III
-----------------------------------------
Its:
-----------------------------------------
Date:
-----------------------------------------
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<PAGE> 1
EXHIBIT 10.57
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE HOTEL
CLEARING CORPORATION, a Delaware corporation ("HCC"), and HFS INCORPORATED
("Participant"), to be effective the 16th day of May, 1997.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) Commissionable Reservations. Commissionable Reservations
within a particular time period equals the number of
reservations (both voice and electronic) processed through
the HCC System within such time period that are identified as
"commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC and for
which a travel agent commission is paid pursuant to this
Agreement.
(ii) HCC System. The HCC System is HCC's automated clearinghouse
system to provide for the coordination of reservation
information, transfer of hotel reservation commissions and
ancillary services to Travel Agents and Participating
Entities.
(iii) Participating Entity. A Participating Entity is an operator
of a hotel reservation system that has executed a HCC
Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel agency who
has executed an HCC Subscriber Agreement. A list of current
HCC Travel Agents will be periodically provided by HCC to
Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent Commissions
are the commissions paid by Participant to HCC Travel Agents
pursuant to this Agreement. HCC Travel Agent Commissions will
be based on commission rates provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for the
use and benefit of Participant, its franchisees and affiliates, and
other Participating Entities. HCC will provide all reasonable and
necessary technical support, hardware and software, except as
otherwise provided herein, and modifications to the HCC System to
provide clearinghouse services to Participant and its franchisees
and affiliates as described below. Upon compliance with the terms
of this Agreement by Participant, its franchisees and affiliates,
and subject to Section 5 hereof, HCC will provide the following
clearinghouse services to Participant and its franchisees and
affiliates:
(i) identify Participant to travel agents as being a HCC System
Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
(ii) provide billing statements for HCC Travel Agent Commissions,
Transaction Fees (as defined below) and other fees, costs and
expenses to Participant no later than the fifteenth (15th)
business day after the end of each month as provided in
Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions received
from Participant and its affiliates and franchisees to the
appropriate HCC Travel Agents as set forth in the HCC Travel
Agent Commission information provided by Participant;
(iv) provide no later than the fifteenth (15th) business day of
each month reports to Participant and HCC Travel Agents
reflecting HCC Travel Agents' reservation transactions with
Participant and HCC Travel Agent Commissions owed based upon
the data provided to HCC by Participant and its affiliates
and franchisees who are participating in the HCC System; and
(v) provide telephone customer support services from 8:00 a.m. to
5:00 p.m., U.S. Central time, Monday through Friday,
exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently and in good
faith do the following:
(i) Cooperate reasonably with HCC personnel with respect to the
implementation of the HCC System between HCC Travel Agents
and Participant and its affiliates and franchisees;
(ii) Provide HCC with all that is reasonably required by HCC to
process all reservations (including all reservations made
electronically or by voice, through the use of a central
reservation "800" phone number, inclusive of no-shows,
cancellations and non-commissionable transactions) made by
HCC Travel Agents with Participant and, subject to 2.2(iv),
its affiliates and franchisees no less often than on a
semi-monthly basis such data being complete and accurate to
the best of Participant's knowledge and ability and inclusive
of all of the information to permit HCC to provide the
clearinghouse services described in Section 2.1 hereof and,
without limitation, being such information as set forth on
Exhibit A hereof; and permit and authorize HCC to obtain and
use such data concerning such reservations made with
Participant and, subject to 2.2(iv), its affiliates and
franchisees except such data designated as confidential
pursuant to Section 7 hereof. The foregoing shall be subject
to receipt by Participant from HCC of the instructions,
specifications, directions, information, assistance, and
cooperation reasonably required by Participant to provide the
foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent Commissions
reported to HCC for processing pursuant to this Agreement
within two (2) business days of receipt of the billing
statement described in Section 3.5 hereof;
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<PAGE> 3
(iv) Use its reasonable efforts to cause each of its franchisees
and affiliates to fully and timely participate in the HCC
System pursuant to this Agreement;
(vi) Permit HCC to use its name as an entity participating in the
HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or
enhance the capability of the HCC System, and Participant agrees to
cooperate reasonably with HCC to the extent reasonably necessary to
effectuate modifications and enhancements of the HCC System. If
Participant determines that such modification or enhancement is
likely to require Participant to make significant modifications to
its central reservation system (any such modifications to be at
Participant's sole expense), HCC will provide at least ninety (90)
days' prior notice to Participant of such modification or
enhancement and Participant may, at its option, terminate this
Agreement upon sixty (60) days notice to HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For the [*] Commissionable Reservations processed
each month, Participant shall pay HCC a transaction fee ("HCC
Transaction Fee") each month of U.S. [*] for each such
Commissionable Reservation processed. For any month wherein
the total of Commissionable Reservations is [*]
but less than [*] shall be due [*]
for each such Commissionable Reservation [*]
(b) For each Commissionable Reservation in excess of [*]
processed each month, [*]
each month (the [*] ) as
follows:
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but less than
[*] a [*] for each
Commissionable Reservation between [*] ;
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] but less than
[*] a [*] for each
Commissionable Reservation between [*] ;
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] and less than
[*] a [*] for each
Commissionable Reservation between [*] ; and
For any month wherein the total of Commissionable
Reservations processed are in excess of [*] a
[*] for each Commissionable
Reservation in excess of [*] .
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[*] Confidential Treatment Requested
<PAGE> 4
Provided however, notwithstanding the preceding provisions of this
3.1(b), the total [*] paid per month shall not exceed an amount
equal to [*] in the aggregate.
3.2 Commission Payments. HCC shall pay HCC Travel Agent Commissions in
the travel agent's local currency or the currency requested by the
travel agency. HCC shall be responsible for complying with laws and
regulations relating to the treatment of unclaimed property
(sometimes referred to as "escheatment" laws) resulting from checks
issued to travel agents under this Agreement. The parties will
jointly establish mutually acceptable procedures to be implemented
by HCC in order to comply with such laws and regulations. The
parties will meet to establish such procedures by no later than
thirty (30) days after the effective date, and will cooperate and
work diligently with one another in order to finalize same as
promptly as practical.
3.3 Disputed Commissions. HCC will provide Participant and HCC Travel
Agents with periodic reports indicated under Section 2.1(iv) that
will indicate any exceptions to HCC Travel Agent Commissions, based
on discrepancies between information given HCC by Participant
compared to other information available to HCC. With respect to all
exceptions as to which Participant provides supporting
documentation, HCC will forward such documentation to the
appropriate HCC Travel Agent(s), and the HCC Travel Agents involved
may pursue such dispute directly with Participant('s) franchisees,
but HCC will not have any liability to either Participant or any
travel agent (HCC or non-HCC) with respect to the resolution of any
disputed commission. No dispute concerning any travel agent
commissions will in any way affect or reduce the obligations of
Participant to (i) timely pay all other HCC Travel Agent
Commissions reported to HCC for processing and (ii) timely pay to
HCC all Transaction Fees and other fees, costs and additional
expenses owed by Participant under this Agreement; nor shall any
such dispute in any way affect or reduce the obligations of [*] due
under this Agreement.
3.4 Billing Statements. Based upon the information provided HCC by or
with respect to Participant pursuant to Section 2.2, above, HCC
will provide Participant a monthly billing statement detailing (i)
HCC Travel Agent Commissions to be paid by Participant for the
period covered by such billing statement; (ii) HCC Transaction Fees
to be paid by Participant, based on Commissionable Reservations for
the period covered by such billing statement; (iii) [*], based on
Commissionable Reservations for the period covered by such billing
statements, (iv) any refund of the Incentive Fee which is due and
(v) all other costs and fees owed by Participant pursuant to this
Agreement. All fees and costs shall be paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall begin
on the effective date set forth at the beginning of this Agreement
and, unless earlier terminated pursuant to the provisions of this
Agreement, shall expire on the last day of the sixtieth (60th)
month after the date of this Agreement. However, this Agreement will
be automatically renewed and extended for additional twelve (12)
month periods unless, at least sixty (60) days prior to the
expiration of the initial term of this Agreement or any additional
twelve (12) month period, either party provides written notice to
the other of its decision not to renew and extend.
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[*] Confidential Treatment Requested
<PAGE> 5
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of such
party to cure such default after notice and opportunity to cure as
provided by Section 6.3 below, the nondefaulting party may
terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default by
Participant and the failure of Participant to cure such default
after notice and opportunity to cure as provided by Section 6.3
below, then, if HCC does not terminate this Agreement under Section
5.1, until such time as such Event of Default is cured HCC shall
have the right to suspend the status of Participant as a
Participating Entity and to notify all HCC Travel Agents of such
default and suspension through central reservation systems or
otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due hereunder
within the time required;
(ii) The failure of Participant or HCC to satisfy the obligations
set forth in this Agreement;
(iii) The refusal or failure of either party to perform diligently
and in good faith each and every material provision of this
Agreement;
(iv) If either HCC or Participant (the "Defaulting Party") becomes
insolvent, takes any step leading to its cessation as a going
concern, or ceases business operations for reasons other than
a strike and other than assignment as allowed by this
Agreement, then the other party (the "Insecure Party") may
immediately terminate this Agreement upon written notice to
the other party unless the Defaulting Party immediately gives
the Insecure Party adequate assurance of the future
performance of this Agreement. If bankruptcy proceedings are
commenced with respect to the Defaulting Party, and if this
Agreement has not otherwise terminated, then the Insecure
Party may suspend all further performance of this Agreement
until the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any similar
or successor provision. Any such suspension of further
performance by the Insecure Party pending the Defaulting
Party's assumption or rejection will not be a breach of this
Agreement.
Any such Event of Default shall not relieve the defaulting party from any
of its obligations hereunder, and the non-defaulting party shall, except
as provided in this Agreement, be entitled to whatever remedies at law or
in equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if such
event listed in Section 6.1 is caused by or results from acts of
God, fire, war, civil unrest, accident, power fluctuations or
outages, telecommunication fluctuations, outages or delays, utility
failures, mechanical defects, or other events beyond the control of
the defaulting party. However, if any such occurrence results in
any of the events described in Section 6.1, and the same continues
for more than thirty (30) consecutive days, either party may
terminate this
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<PAGE> 6
Agreement by providing notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting
party specifying the alleged default. In the case of a monetary
default by either party, the defaulting party will only be allowed
to cure such default within two (2) business days after receipt of
such notice, by delivering that amount owed to HCC in good funds
into the non-defaulting party's bank account. In all other
instances, the defaulting party will be entitled to fifteen (15)
days from receipt of notice within which to cure the default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it is
acknowledged by Participant and HCC that each may receive
confidential and proprietary information that is the property of
the other party. All such confidential and proprietary information
will be marked or otherwise identified as such and will be treated
as confidential and proprietary subject only to disclosure where
required by law. Such designation may be removed by each party
making the designation. Participant acknowledges that it will have
no access to and will not use the HCC System or related property,
other than as specifically provided for in this Agreement, and that
such system and related property is confidential and proprietary
property of HCC. Any use of HCC service marks or trade names by
Participant is subject to prior written approval of HCC, provided,
that Participant may describe the HCC System contemplated by this
Agreement in its franchise offering circular and other materials as
required by state or federal law. Unless otherwise provided herein,
any use of Participant's service marks or trade names by HCC is
subject to prior written approval of Participant. The provisions of
this Section 7.1 will remain binding and in force and effect as
long as such information remains confidential (other than by breach
of this Agreement), notwithstanding the expiration or termination
of this Agreement at any time. Except as is necessary in connection
with the performance of this Agreement, information regarding the
reservations and other transactions of Participant processed by HCC
shall be treated as confidential whether or not so marked or
otherwise identified as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant agrees
to indemnify and hold harmless HCC and HCC's affiliates, directors,
officers, employees and stockholders, from and against any losses,
claims, liabilities, damages or expenses (including reasonable
attorney's fees) occurring as a result of or arising out of a
material breach of this Agreement on account of Participant's (or
its franchisees) fault, to the extent not caused by the fault of
HCC ("HCC's Losses"). HCC agrees to indemnify and hold harmless
Participant, and Participant's affiliates, directors, officers,
employees and stockholders, from and against any losses, claims,
liabilities, damages or expenses (including reasonable attorney's
fees) ("Participant's Losses") occurring as a result of or arising
out of a material breach of this Agreement on account of HCC's
fault to the extent not caused by the fault of Participant.
Promptly after receipt by an indemnified party of notice of the
commencement of any action or the presentation or other assertion
of any claim which could result in any indemnification claim
pursuant to this Section 8.1, such indemnified party will give
prompt notice thereof to the indemnifying party and the
indemnifying party will be entitled to participate therein or, to
the extent that it wishes, assume the defense thereof with its own
counsel. If the indemnifying party elects to assume the defense of
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<PAGE> 7
any such action or claim, the indemnifying party shall not be
liable to the indemnified party for any fees of other counsel or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation and preparation, unless representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The parties agree to
cooperate to the fullest extent possible in connection with any
claim for which indemnification is or may be sought under this
Agreement. Whether or not the indemnifying party elects to assume
the defense of any such action or claim, the indemnifying party
shall not be liable for any compromise or settlement of any such
action or claim effected without its consent (which shall not be
unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE FOR ANY
FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY PARTICIPANT
OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC SYSTEM NOR WILL
IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO ACT WITH RESPECT TO
THE DATA OR THE PAYMENT OF COMMISSIONS UNLESS EXPRESSLY SET FORTH
HEREIN. EXCEPT WITH RESPECT TO HCC'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE
PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED
BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof, neither
party will be liable to the other for any consequential damages
caused or resulting from any breach of this Agreement or arising
out of the performance of this Agreement, and each party hereby
expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out of or
relating to this contract, or the breach thereof, will be settled
by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment upon the
award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. There shall be a panel of three
arbitrators. Each party will select one arbitrator within thirty
(30) days of notice of the dispute, and the two (2) arbitrators
selected shall select a third neutral arbitrator within thirty (30)
days after the second arbitrator is chosen. All reasonable and
necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration will be borne by the losing party
or assessed in the award as otherwise deemed appropriate by the
arbitrators. If the demand for arbitration is initiated by
Participant, venue of the arbitration proceedings will be
determined by HCC. If the demand for arbitration is initiated by
HCC, venue of the arbitration proceedings will be determined by
Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is not
an exclusive agreement with respect to reservations commissions
clearinghouse services and that each party may contract with other
parties providing same or similar services.
-7-
<PAGE> 8
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently contracting
with each other at arms length. HCC will not be deemed by this
Agreement to be granting a license to Participant with respect to
the HCC System or any software or service mark related thereto, or
otherwise, this being a contract for the use and rendering of
services only.
10.4 Assignment. This Agreement is not assignable by HCC or Participant
without the prior written consent of the non-assigning party, and
such consent shall not be unreasonably withheld or delayed provided
that Participant may assign this Agreement to a wholly-owned
subsidiary or in connection with the sale of its reservation system
or franchise system and either party may assign this Agreement
without consent in the event of a merger, consolidation, or sale of
substantially all of its assets.
10.5 Notices. All notices and other communications contemplated hereby
must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified mail,
return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery),
shipping prepaid, (d) sent by telecopy or facsimile with
confirmation of receipt to the number indicated, or (e) transmitted
directly to the recipient by electronic data transmission pursuant
to arrangements made between the parties. Such notices and other
communications (except in the case of electronically transmitted
data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd. 339 Jefferson Rd.
Suite 1100 Parsipany, NJ 07054
Dallas, TX 75219 Attn: Flo Lugli
Attention: John F. Davis, III Fax: 201-428-1084
If by telecopy/facsimile to:
528-5675
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein, notices
will be deemed given and received when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant to the
laws of the State of Texas without reference to its conflict of
laws principles. Subject to the agreement to arbitrate and the
jurisdiction and venue provisions set forth in Section 10.1 hereof,
any action brought relating to or arising out of this Agreement
must be brought in the state or federal courts situated in the
county and state of the residence or principal place of business of
the party against whom the action is brought (or any of them, if
more than one).
-8-
<PAGE> 9
10.7 Entire Agreement. This Agreement and the Exhibits attached hereto
constitute the entire agreement between HCC and Participant with
respect to the provision of services under the HCC System and
supersedes and replaces any and all other agreements and
representations, verbal or written, with respect to the subject
matter of this Agreement. There are no representations, warranties
or agreements made or relied upon by either party with respect to
the subject matter of this Agreement that are not contained in this
Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon and
will inure to the benefit of the legal representatives, successors
and duly authorized assigns of each party whether resulting from
merger, acquisition, reorganization or assignment pursuant to the
terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the terms
and provisions of this Agreement will be kept confidential and
shall be disclosed only to those persons and entities as required
by law or as permitted by the other party hereto. The parties may,
however, disclose the existence of this Agreement to any person or
entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION HOSPITALITY FRANCHISE SYSTEMS, INC.
By: /s/ JOHN F. DAVIS, III By: /s/ FLO LUGLI
------------------------------ ------------------------------
Its: President Its: VP Worldwide Sales
------------------------------ ------------------------------
-9-
<PAGE> 10
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
- 10 -
<PAGE> 1
EXHIBIT 10.58
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and WESTIN HOTELS
COMPANY ("Participant"), to be effective the 9th day of June, 1997.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) Commissionable Reservations. Commissionable Reservations
within a particular time period equals the number of
reservations (both voice and electronic) processed through
the HCC System within such time period that are identified
as "commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC and for
which a travel agent commission is paid pursuant to this
Agreement.
(ii) HCC System. The HCC System is HCC's automated
clearinghouse system to provide for the coordination of
reservation information, transfer of hotel reservation
commissions and ancillary services to Travel Agents and
Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a
HCC Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel agency
who has executed an HCC Subscriber Agreement. A list of
current HCC Travel Agents will be periodically provided by
HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant to HCC
Travel Agents pursuant to this Agreement. HCC Travel
Agent Commissions will be based on commission rates
provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for
the use and benefit of Participant, its franchisees and
affiliates, and other Participating Entities. HCC will provide
all reasonable and necessary technical support, hardware and
software, except as otherwise provided herein, and modifications
to the HCC System to provide clearinghouse services to
Participant and its franchisees and affiliates as described
below. Upon compliance with the terms of this Agreement by
Participant, its franchisees and affiliates, and subject to
Section 5 hereof, HCC will provide the following clearinghouse
services to Participant and its franchisees and affiliates:
(i) identify Participant to travel agents as being a HCC
System Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
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<PAGE> 2
(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and other
fees, costs and expenses to Participant no later than the
fifteenth (15th) business day after the end of each month
as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions received
from Participant and its affiliates and franchisees to the
appropriate HCC Travel Agents as set forth in the HCC
Travel Agent Commission information provided by
Participant;
(iv) provide no later than the fifteenth (15th) business day of
each month reports to Participant and HCC Travel Agents
reflecting HCC Travel Agents' reservation transactions
with Participant and HCC Travel Agent Commissions owed
based upon the data provided to HCC by Participant and its
affiliates and franchisees who are participating in the
HCC System; and
(v) provide telephone customer support services from 8:00 a.m.
to 5:00 p.m., U.S. Central time, Monday through Friday,
exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently and in good
faith do the following:
(i) Cooperate reasonably with HCC personnel with respect to
the implementation of the HCC System between HCC Travel
Agents and Participant and its affiliates and
franchisees;
(ii) Provide HCC with all that is reasonably required by HCC to
process all reservations (including all reservations made
electronically or by voice, through the use of a central
reservation "800" phone number, inclusive of no-shows,
cancellations and non-commissionable transactions) made by
HCC Travel Agents with Participant and, subject to
2.2(iv), its affiliates and franchisees no less often than
on a semi-monthly basis such data being complete and
accurate to the best of Participant's knowledge and
ability and inclusive of all of the information to permit
HCC to provide the clearinghouse services described in
Section 2.1 hereof and, without limitation, being such
information as set forth on Exhibit A hereof; and permit
and authorize HCC to obtain and use such data concerning
such reservations made with Participant and, subject to
2.2(iv), its affiliates and franchisees except such data
designated as confidential pursuant to Section 7 hereof.
The foregoing shall be subject to receipt by Participant
from HCC of the instructions, specifications, directions,
information, assistance, and cooperation reasonably
required by Participant to provide the foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to
this Agreement within two (2) business days of receipt of
the billing statement described in Section 3.5 hereof;
(iv) Use its reasonable efforts to cause each of its
franchisees and affiliates to fully and timely participate
in the HCC System pursuant to this Agreement;
2
<PAGE> 3
(vi) Permit HCC to use its name as an entity participating in
the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or
enhance the capability of the HCC System, and Participant agrees
to cooperate reasonably with HCC to the extent reasonably
necessary to effectuate modifications and enhancements of the HCC
System. If Participant determines that such modification or
enhancement is likely to require Participant to make significant
modifications to its central reservation system (any such
modifications to be at Participant's sole expense), HCC will
provide at least ninety (90) days' prior notice to Participant of
such modification or enhancement and Participant may, at its
option, terminate this Agreement upon sixty (60) days notice to
HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For the first * processed each month, * shall pay
* each month of U.S. * for each such * processed.
For any month wherein the total of * is greater than
* but less than * , no * for each such
Commissionable Reservation over * .
(b) For each Commissionable Reservation in excess of *
processed each month, * each month * as follows:
For any month wherein the total of Commissionable
Reservations processed are * , a * of * for
each Commissionable Reservation between * ;
For any month wherein the total of Commissionable
Reservations processed are * , a * of * for
each Commissionable Reservation between * ;
For any month wherein the total of Commissionable
Reservations processed are * , a * of * for
each Commissionable Reservation between * ; and
For any month wherein the total of Commissionable
Reservations processed are in * , a * of * for
each Commissionable Reservation in excess of * .
Provided however, notwithstanding the preceding provisions of
this 3.2(b), the total Participant Transaction Fee paid per month
shall not exceed an amount equal to * in the aggregate.
3.2 Commission Payments. HCC shall pay HCC Travel Agent Commissions
in the travel agent's local currency or the currency requested by
the travel agency. HCC shall be responsible for complying with
laws and regulations relating to the treatment of unclaimed
property (sometimes referred to as "escheatment" laws) resulting
from checks issued to travel agents under this Agreement. The
parties will jointly establish mutually acceptable procedures to
be implemented by HCC in order to comply with such laws and
regulations. The parties will
* CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE> 4
meet to establish such procedures by no later than thirty (30)
days after the effective date, and will cooperate and work
diligently with one another in order to finalize same as promptly
as practical.
3.3 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section
2.1(iv) that will indicate any exceptions to HCC Travel Agent
Commissions, based on discrepancies between information given HCC
by Participant compared to other information available to HCC.
With respect to all exceptions as to which Participant provides
supporting documentation, HCC will forward such documentation to
the appropriate HCC Travel Agent(s), and the HCC Travel Agents
involved may pursue such dispute directly with Participant('s)
franchisees, but HCC will not have any liability to either
Participant or any travel agent (HCC or non-HCC) with respect to
the resolution of any disputed commission. No dispute concerning
any travel agent commissions will in any way affect or reduce the
obligations of Participant to (i) timely pay all other HCC Travel
Agent Commissions reported to HCC for processing and (ii) timely
pay to HCC all Transaction Fees and other fees, costs and
additional expenses owed by Participant under this Agreement; nor
shall any such dispute in any way affect or reduce the
obligations of HCC to timely pay Participant all Participant
Transaction Fees due under this Agreement.
3.4 Billing Statements. Based upon the information provided HCC by
or with respect to Participant pursuant to Section 2.2, above,
HCC will provide Participant a monthly billing statement
detailing (i) HCC Travel Agent Commissions to be paid by
Participant for the period covered by such billing statement;
(ii) HCC Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such
billing statement; (iii) * , based on Commissionable
Reservations for the period covered by such billing statements,
(iv) * which is due and (v) all other costs and fees owed by
Participant pursuant to this Agreement. All fees and costs shall
be paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall
begin on the effective date set forth at the beginning of this
Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire on the last day of the
sixtieth (60th) month after the date of this Agreement. However,
this Agreement will be automatically renewed and extended for
additional twelve (12) month periods unless, at least sixty (60)
days prior to the expiration of the initial term of this
Agreement or any additional twelve (12) month period, either
party provides written notice to the other of its decision not to
renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of
such party to cure such default after notice and opportunity to
cure as provided by Section 6.3 below, the nondefaulting party
may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default
by Participant and the failure of Participant to cure such
default after notice and opportunity to cure as provided by
Section 6.3 below, then, if HCC does not terminate this Agreement
under Section 5.1, until such time as such Event of Default is
cured HCC shall have the right to suspend the status of
Participant as a Participating Entity and to notify all HCC
Travel Agents of such default and suspension through central
reservation systems or otherwise.
* CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 5
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material
provision of this Agreement;
(iv) If either HCC or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation
as a going concern, or ceases business operations for
reasons other than a strike and other than assignment as
allowed by this Agreement, then the other party (the
"Insecure Party") may immediately terminate this Agreement
upon written notice to the other party unless the
Defaulting Party immediately gives the Insecure Party
adequate assurance of the future performance of this
Agreement. If bankruptcy proceedings are commenced with
respect to the Defaulting Party, and if this Agreement has
not otherwise terminated, then the Insecure Party may
suspend all further performance of this Agreement until
the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any
similar or successor provision. Any such suspension of
further performance by the Insecure Party pending the
Defaulting Party's assumption or rejection will not be a
breach of this Agreement.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall,
except as provided in this Agreement, be entitled to whatever remedies
at law or in equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages
or delays, utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive
days, either party may terminate this Agreement by providing
notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting
party specifying the alleged default. In the case of a monetary
default by either party, the defaulting party will only be
allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in
good funds into the non-defaulting party's bank account. In all
other instances, the defaulting party will be entitled to fifteen
(15) days from receipt of notice within which to cure the
default.
SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it
is acknowledged by Participant and HCC that each may receive
confidential and proprietary information that is the property of
the other party. All such confidential and proprietary
information will be marked or otherwise identified as such and
will be treated as confidential and proprietary subject only
5
<PAGE> 6
to disclosure where required by law. Such designation may be
removed by each party making the designation. Participant
acknowledges that it will have no access to and will not use the
HCC System or related property, other than as specifically
provided for in this Agreement, and that such system and related
property is confidential and proprietary property of HCC. Any
use of HCC service marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may
describe the HCC System contemplated by this Agreement in its
franchise offering circular and other materials as required by
state or federal law. Unless otherwise provided herein, any use
of Participant's service marks or trade names by HCC is subject
to prior written approval of Participant. The provisions of this
Section 7.1 will remain binding and in force and effect as long
as such information remains confidential (other than by breach of
this Agreement), notwithstanding the expiration or termination of
this Agreement at any time. Except as is necessary in connection
with the performance of this Agreement and HCC's business,
information regarding the reservations and other transactions of
Participant processed by HCC shall be treated as confidential
whether or not so marked or otherwise identified as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's affiliates,
directors, officers, employees and stockholders, from and against
any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) occurring as a result of or arising
out of a material breach of this Agreement on account of
Participant's (or its franchisees) fault, to the extent not
caused by the fault of HCC ("HCC's Losses"). HCC agrees to
indemnify and hold harmless Participant, and Participant's
affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) ("Participant's Losses")
occurring as a result of or arising out of a material breach of
this Agreement on account of HCC's fault to the extent not caused
by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could
result in any indemnification claim pursuant to this Section 8.1,
such indemnified party will give prompt notice thereof to the
indemnifying party and the indemnifying party will be entitled to
participate therein or, to the extent that it wishes, assume the
defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party
for any fees of other counsel or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same
counsel would be inappropriate due to actual or potential
differing interests between them. The parties agree to cooperate
to the fullest extent possible in connection with any claim for
which indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action
or claim effected without its consent (which shall not be
unreasonably withheld).
SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE FOR
ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY
PARTICIPANT OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO
ACT WITH RESPECT TO THE DATA OR THE PAYMENT OF COMMISSIONS UNLESS
EXPRESSLY SET FORTH
6
<PAGE> 7
HEREIN. EXCEPT WITH RESPECT TO HCC'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, ALL WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE
PRODUCT OR SERVICE OR OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED
BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof,
neither party will be liable to the other for any consequential
damages caused or resulting from any breach of this Agreement or
arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, will be
settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. There shall be
a panel of three arbitrators. Each party will select one
arbitrator within thirty (30) days of notice of the dispute, and
the two (2) arbitrators selected shall select a third neutral
arbitrator within thirty (30) days after the second arbitrator is
chosen. All reasonable and necessary costs and fees (including
attorney's fees) incurred in connection with the arbitration will
be borne by the losing party or assessed in the award as
otherwise deemed appropriate by the arbitrators. If the demand
for arbitration is initiated by Participant, venue of the
arbitration proceedings will be determined by HCC. If the demand
for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations
commissions clearinghouse services and that each party may
contract with other parties providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length. HCC will not be
deemed by this Agreement to be granting a license to Participant
with respect to the HCC System or any software or service mark
related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the non-
assigning party, and such consent shall not be unreasonably
withheld or delayed provided that Participant may assign this
Agreement to a wholly-owned subsidiary or in connection with the
sale of its reservation system or franchise system and either
party may assign this Agreement without consent in the event of a
merger, consolidation, or sale of substantially all of its
assets.
10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified
mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery),
shipping prepaid, (d) sent by telecopy or facsimile with
confirmation of receipt to the number indicated, or (e)
transmitted directly to the recipient by electronic data
7
<PAGE> 8
transmission pursuant to arrangements made between the parties.
Such notices and other communications (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Attention: John F. Davis, III
If by telecopy/facsimile to:
214-528-5675
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein,
notices will be deemed given and received when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict
of laws principles. Subject to the agreement to arbitrate and
the jurisdiction and venue provisions set forth in Section 10.1
hereof, any action brought relating to or arising out of this
Agreement must be brought in the state or federal courts situated
in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any
of them, if more than one).
8
<PAGE> 9
10.7 "Participant" and "Participant's Properties". For purposes of
this Agreement, "Participant" and "Participant's Properties"
shall mean only those properties which, at the time, are Westin
Corporate or Westin branded properties participating in HCC. In
the event and to the extent during the term of this Agreement,
properties cease to be Westin Corporate or Westin branded
properties, they shall not be subject to this Agreement.
10.8 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and
Participant with respect to the provision of services under the
HCC System and supersedes and replaces any and all other
agreements and representations, verbal or written, with respect
to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by
either party with respect to the subject matter of this Agreement
that are not contained in this Agreement.
10.9 Successors and Assigns. This Agreement will be binding upon and
will inure to the benefit of the legal representatives,
successors and duly authorized assigns of each party whether
resulting from merger, acquisition, reorganization or assignment
pursuant to the terms hereof.
10.10 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential
and shall be disclosed only to those persons and entities as
required by law or as permitted by the other party hereto. The
parties may, however, disclose the existence of this Agreement to
any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION WESTIN HOTELS COMPANY
By: /s/ M. NICHOLAS JENT By: /s/ TIMOTHY M. COLEMAN
----------------------------- -----------------------------
M. Nicholas Jent Timothy M. Coleman
Its: VP Sales Its: VP Distribution
9
<PAGE> 10
EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
10
<PAGE> 1
EXHIBIT 10.59
HCC PARTICIPANT AGREEMENT
This Agreement (the "Agreement") is entered into by and between THE
HOTEL CLEARING CORPORATION, a Delaware corporation ("HCC"), and BEST WESTERN
INTERNATIONAL, INC. ("Participant"), to be effective the 30 day of July, 1997.
SECTION 1. DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) Commissionable Reservations. Commissionable Reservations
within a particular time period equals the number of
reservations (both voice and electronic) processed through
the HCC System within such time period that are identified
as "commissionable" or "partially commissionable" on the
transaction records provided by Participant to HCC and for
which a travel agent commission is paid pursuant to this
Agreement.
(ii) HCC System. The HCC System is HCC's automated
clearinghouse system to provide for the coordination of
reservation information, transfer of hotel reservation
commissions and ancillary services to Travel Agents and
Participating Entities.
(iii) Participating Entity. A Participating Entity is an
operator of a hotel reservation system that has executed a
HCC Participant Agreement.
(iv) HCC Travel Agents. An HCC Travel Agent is a travel agency
who has executed an HCC Subscriber Agreement. A list of
current HCC Travel Agents will be periodically provided by
HCC to Participant.
(v) HCC Travel Agent Commissions. HCC Travel Agent
Commissions are the commissions paid by Participant to HCC
Travel Agents pursuant to this Agreement. HCC Travel
Agent Commissions will be based on commission rates
provided by Participant to HCC.
SECTION 2. THE HCC SYSTEM
2.1 Duties of HCC. HCC will provide and operate the HCC System for
the use and benefit of Participant, its franchisees and
affiliates, and other Participating Entities. HCC will provide
all reasonable and necessary technical support, hardware and
software, except as otherwise provided herein, and modifications
to the HCC System to provide clearinghouse services to
Participant and its franchisees and affiliates as described
below. Upon compliance with the terms of this Agreement by
Participant, its franchisees and affiliates, and subject to
Section 5 hereof, HCC will provide the following clearinghouse
services to Participant and its franchisees and affiliates:
(i) identify Participant to travel agents as being a HCC
System Participating Entity;
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPERATELY WITH THE S.E.C.
-2-
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(ii) provide billing statements for HCC Travel Agent
Commissions, Transaction Fees (as defined below) and other
fees, costs and expenses to Participant no later than the
fifteenth (15th) business day after the end of each month
as provided in Section 3 below;
(iii) distribute collected HCC Travel Agent Commissions received
from Participant and its affiliates and franchisees to the
appropriate HCC Travel Agents as set forth in the HCC
Travel Agent Commission information provided by
Participant;
(iv) provide no later than the fifteenth (15th) business day of
each month reports to Participant and HCC Travel Agents
reflecting HCC Travel Agents' reservation transactions
with Participant and HCC Travel Agent Commissions owed
based upon the data provided to HCC by Participant and its
affiliates and franchisees who are participating in the
HCC System; and
(v) provide telephone customer support services from 8:00 a.m.
to 5:00 p.m., U.S. Central time, Monday through Friday,
exclusive of legal holidays.
The procedures of the HCC System are subject to changes for enhancements from
time to time as determined by HCC, provided that no such changes will have a
significant adverse impact on the clearinghouse services described above.
2.2 Duties of Participant. Participant shall diligently and in good
faith do the following:
(i) Cooperate reasonably with HCC personnel with respect to
the implementation of the HCC System between HCC Travel
Agents and Participant and its affiliates and
franchisees;
(ii) Provide HCC with all that is reasonably required by HCC to
process all reservations (including all reservations made
electronically or by voice, through the use of a central
reservation "800" phone number, inclusive of no-shows,
cancellations and non-commissionable transactions) made by
HCC Travel Agents with Participant and, subject to
2.2(iv), its affiliates and franchisees no less often than
on a semi-monthly basis such data being complete and
accurate to the best of Participant's knowledge and
ability and inclusive of all of the information to permit
HCC to provide the clearinghouse services described in
Section 2.1 hereof and, without limitation, being such
information as set forth on Exhibit A hereof; and permit
and authorize HCC to obtain and use such data concerning
such reservations made with Participant and, subject to
2.2(iv), its affiliates and franchisees except such data
designated as confidential pursuant to Section 7 hereof.
The foregoing shall be subject to receipt by Participant
from HCC of the instructions, specifications, directions,
information, assistance, and cooperation reasonably
required by Participant to provide the foregoing.
(iii) Pay, pursuant to this Agreement, all Travel Agent
Commissions reported to HCC for processing pursuant to
this Agreement within two (2) business days of receipt of
the billing statement described in Section 3.5 hereof;
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<PAGE> 3
(iv) Use its reasonable efforts to cause each of its
franchisees and affiliates to fully and timely participate
in the HCC System pursuant to this Agreement;
(vi) Permit HCC to use its name as an entity participating in
the HCC System.
2.3 Modification or Enhancement of the HCC System or Participant
System. HCC may in its sole discretion modify the operation or
enhance the capability of the HCC System, and Participant agrees
to cooperate reasonably with HCC to the extent reasonably
necessary to effectuate modifications and enhancements of the HCC
System. If Participant determines that such modification or
enhancement is likely to require Participant to make significant
modifications to its central reservation system (any such
modifications to be at Participant's sole expense), HCC will
provide at least ninety (90) days' prior notice to Participant of
such modification or enhancement and Participant may, at its
option, terminate this Agreement upon sixty (60) days notice to
HCC.
SECTION 3. FEES, COSTS, AND PAYMENTS
3.1 Fees for Processing HCC Travel Agent Commissions.
(a) For the first * Commissionable Reservations processed
each month, * shall pay * each month of U.S. * for
each such Commissionable Reservation processed. For any
month wherein the total of Commissionable Reservations is
greater than * but less than * shall be due from
either party for each such Commissionable Reservation over
* .
(b) For each Commissionable Reservation in excess of *
processed each month, * each month (the "Participant
Transaction Fee") as follows:
For any month wherein the total of Commissionable
Reservations processed are * , a * of * for
each Commissionable Reservation between * ;
For any month wherein the total of Commissionable
Reservations processed are * , a * of * each
Commissionable Reservation between * ;
For any month wherein the total of Commissionable
Reservations processed are * , a * of * for
each Commissionable Reservation between * ; and
For any month wherein the total of Commissionable
Reservations processed are in * , a * of * for
each Commissionable Reservation in excess of * .
Provided however, notwithstanding the preceding provisions of
this 3.2(b), the total Participant Transaction Fee paid per month
shall not exceed an amount equal to * in the aggregate.
3.2 Commission Payments. HCC shall pay HCC Travel Agent Commissions
in the travel agent's local currency or the currency requested by
the travel agency. HCC shall be responsible for
* CONFIDENTIAL TREATMENT REQUESTED
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complying with laws and regulations relating to the treatment of
unclaimed property (sometimes referred to as "escheatment" laws)
resulting from checks issued to travel agents under this
Agreement. The parties will jointly establish mutually
acceptable procedures to be implemented by HCC in order to comply
with such laws and regulations. The parties will meet to
establish such procedures by no later than thirty (30) days after
the effective date, and will cooperate and work diligently with
one another in order to finalize same as promptly as practical.
3.3 Disputed Commissions. HCC will provide Participant and HCC
Travel Agents with periodic reports indicated under Section
2.1(iv) that will indicate any exceptions to HCC Travel Agent
Commissions, based on discrepancies between information given HCC
by Participant compared to other information available to HCC.
With respect to all exceptions as to which Participant provides
supporting documentation, HCC will forward such documentation to
the appropriate HCC Travel Agent(s), and the HCC Travel Agents
involved may pursue such dispute directly with Participant('s)
franchisees, but HCC will not have any liability to either
Participant or any travel agent (HCC or non-HCC) with respect to
the resolution of any disputed commission. No dispute concerning
any travel agent commissions will in any way affect or reduce the
obligations of Participant to (i) timely pay all other HCC Travel
Agent Commissions reported to HCC for processing and (ii) timely
pay to HCC all Transaction Fees and other fees, costs and
additional expenses owed by Participant under this Agreement; nor
shall any such dispute in any way affect or reduce the
obligations of HCC to timely pay Participant all Participant
Transaction Fees due under this Agreement.
3.4 Billing Statements. Based upon the information provided HCC by
or with respect to Participant pursuant to Section 2.2, above,
HCC will provide Participant a monthly billing statement
detailing (i) HCC Travel Agent Commissions to be paid by
Participant for the period covered by such billing statement;
(ii) HCC Transaction Fees to be paid by Participant, based on
Commissionable Reservations for the period covered by such
billing statement; (iii) * to be paid by HCC, based on
Commissionable Reservations for the period covered by such
billing statements, (iv) * which is due and (v) all other
costs and fees owed by Participant pursuant to this Agreement.
All fees and costs shall be paid in U.S. dollars.
SECTION 4. TERM
4.1 Term of Agreement. The initial term of this Agreement shall
begin on the effective date set forth at the beginning of this
Agreement and, unless earlier terminated pursuant to the
provisions of this Agreement, shall expire on the last day of the
twenty fourth (24th) month after the date of this Agreement.
However, this Agreement will be automatically renewed and
extended for additional twelve (12) month periods unless, at
least sixty (60) days prior to the expiration of the initial term
of this Agreement or any additional twelve (12) month period,
either party provides written notice to the other of its decision
not to renew and extend.
SECTION 5. TERMINATION
5.1 Termination Upon Default. Upon the occurrence of an Event of
Default (as defined below) by either party and the failure of
such party to cure such default after notice and opportunity to
cure as provided by Section 6.3 below, the nondefaulting party
may terminate this Agreement at any time.
5.2 Suspension of Status. Upon the occurrence of an Event of Default
by Participant and the failure of Participant to cure such
default after notice and opportunity to cure as provided by
Section 6.3 below, then, if HCC does not terminate this Agreement
under Section 5.1, until
* CONFIDENTIAL TREATMENT REQUESTED
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<PAGE> 5
such time as such Event of Default is cured HCC shall have the
right to suspend the status of Participant as a Participating
Entity and to notify all HCC Travel Agents of such default and
suspension through central reservation systems or otherwise.
SECTION 6. DEFAULT
6.1 Events of Default. Subject to Section 6.2 below, any one of the
following will be considered an Event of Default:
(i) The failure of either party to pay any amount due
hereunder within the time required;
(ii) The failure of Participant or HCC to satisfy the
obligations set forth in this Agreement;
(iii) The refusal or failure of either party to perform
diligently and in good faith each and every material
provision of this Agreement;
(iv) If either HCC or Participant (the "Defaulting Party")
becomes insolvent, takes any step leading to its cessation
as a going concern, or ceases business operations for
reasons other than a strike and other than assignment as
allowed by this Agreement, then the other party (the
"Insecure Party") may immediately terminate this Agreement
upon written notice to the other party unless the
Defaulting Party immediately gives the Insecure Party
adequate assurance of the future performance of this
Agreement. If bankruptcy proceedings are commenced with
respect to the Defaulting Party, and if this Agreement has
not otherwise terminated, then the Insecure Party may
suspend all further performance of this Agreement until
the Defaulting Party assumes or rejects this Agreement
pursuant to Section 365 of the Bankruptcy Code or any
similar or successor provision. Any such suspension of
further performance by the Insecure Party pending the
Defaulting Party's assumption or rejection will not be a
breach of this Agreement.
Any such Event of Default shall not relieve the defaulting party from
any of its obligations hereunder, and the non-defaulting party shall,
except as provided in this Agreement, be entitled to whatever remedies
at law or in equity are available to it.
6.2 Force Majeure. It will not constitute an Event of Default if
such event listed in Section 6.1 is caused by or results from
acts of God, fire, war, civil unrest, accident, power
fluctuations or outages, telecommunication fluctuations, outages
or delays, utility failures, mechanical defects, or other events
beyond the control of the defaulting party. However, if any such
occurrence results in any of the events described in Section 6.1,
and the same continues for more than thirty (30) consecutive
days, either party may terminate this Agreement by providing
notice as required herein.
6.3 Cure Period. Upon the occurrence of an Event of Default, the
non-defaulting party will give written notice to the defaulting
party specifying the alleged default. In the case of a monetary
default by either party, the defaulting party will only be
allowed to cure such default within two (2) business days after
receipt of such notice, by delivering that amount owed to HCC in
good funds into the non-defaulting party's bank account. In all
other instances, the defaulting party will be entitled to fifteen
(15) days from receipt of notice within which to cure the
default.
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SECTION 7. CONFIDENTIALITY
7.1 Proprietary Information. During the term of this Agreement, it
is acknowledged by Participant and HCC that each may receive
confidential and proprietary information that is the property of
the other party. All such confidential and proprietary
information will be marked or otherwise identified as such and
will be treated as confidential and proprietary subject only to
disclosure where required by law. Such designation may be
removed by each party making the designation. Participant
acknowledges that it will have no access to and will not use the
HCC System or related property, other than as specifically
provided for in this Agreement, and that such system and related
property is confidential and proprietary property of HCC. Any
use of HCC service marks or trade names by Participant is subject
to prior written approval of HCC, provided, that Participant may
describe the HCC System contemplated by this Agreement in its
franchise offering circular and other materials as required by
state or federal law. Unless otherwise provided herein, any use
of Participant's service marks or trade names by HCC is subject
to prior written approval of Participant. The provisions of this
Section 7.1 will remain binding and in force and effect as long
as such information remains confidential (other than by breach of
this Agreement), notwithstanding the expiration or termination of
this Agreement at any time. Except as is necessary in connection
with the performance of this Agreement and HCC's business,
information regarding the reservations and other transactions of
Participant processed by HCC shall be treated as confidential
whether or not so marked or otherwise identified as confidential.
SECTION 8. INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless HCC and HCC's affiliates,
directors, officers, employees and stockholders, from and against
any losses, claims, liabilities, damages or expenses (including
reasonable attorney's fees) occurring as a result of or arising
out of a material breach of this Agreement on account of
Participant's (or its franchisees) fault, to the extent not
caused by the fault of HCC ("HCC's Losses"). HCC agrees to
indemnify and hold harmless Participant, and Participant's
affiliates, directors, officers, employees and stockholders, from
and against any losses, claims, liabilities, damages or expenses
(including reasonable attorney's fees) ("Participant's Losses")
occurring as a result of or arising out of a material breach of
this Agreement on account of HCC's fault to the extent not caused
by the fault of Participant. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
the presentation or other assertion of any claim which could
result in any indemnification claim pursuant to this Section 8.1,
such indemnified party will give prompt notice thereof to the
indemnifying party and the indemnifying party will be entitled to
participate therein or, to the extent that it wishes, assume the
defense thereof with its own counsel. If the indemnifying party
elects to assume the defense of any such action or claim, the
indemnifying party shall not be liable to the indemnified party
for any fees of other counsel or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation and
preparation, unless representation of both parties by the same
counsel would be inappropriate due to actual or potential
differing interests between them. The parties agree to cooperate
to the fullest extent possible in connection with any claim for
which indemnification is or may be sought under this Agreement.
Whether or not the indemnifying party elects to assume the
defense of any such action or claim, the indemnifying party shall
not be liable for any compromise or settlement of any such action
or claim effected without its consent (which shall not be
unreasonably withheld).
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SECTION 9. DISCLAIMER OF WARRANTIES
9.1 Waiver of Warranties. HCC WILL NOT BE RESPONSIBLE OR LIABLE FOR
ANY FALSIFICATIONS OR INACCURACIES IN THE DATA PROVIDED BY
PARTICIPANT OR THE INFORMATION PROCESSED BY OR THROUGH THE HCC
SYSTEM NOR WILL IT HAVE ANY LIABILITY FOR ANY ACT OR FAILURE TO
ACT WITH RESPECT TO THE DATA OR THE PAYMENT OF COMMISSIONS UNLESS
EXPRESSLY SET FORTH HEREIN. EXCEPT WITH RESPECT TO HCC'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, ALL WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION,
ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE OR
OTHERWISE, ARE DISCLAIMED BY HCC AND WAIVED BY PARTICIPANT.
9.2 No Consequential Damages. Except with respect to the
indemnification provisions set forth in Section 8.1 hereof,
neither party will be liable to the other for any consequential
damages caused or resulting from any breach of this Agreement or
arising out of the performance of this Agreement, and each party
hereby expressly waives such damages.
SECTION 10. MISCELLANEOUS
10.1 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, will be
settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. There shall be
a panel of three arbitrators. Each party will select one
arbitrator within thirty (30) days of notice of the dispute, and
the two (2) arbitrators selected shall select a third neutral
arbitrator within thirty (30) days after the second arbitrator is
chosen. All reasonable and necessary costs and fees (including
attorney's fees) incurred in connection with the arbitration will
be borne by the losing party or assessed in the award as
otherwise deemed appropriate by the arbitrators. If the demand
for arbitration is initiated by Participant, venue of the
arbitration proceedings will be determined by HCC. If the demand
for arbitration is initiated by HCC, venue of the arbitration
proceedings will be determined by Participant.
10.2 Non-Exclusive Agreement. Each party acknowledges that this is
not an exclusive agreement with respect to reservations
commissions clearinghouse services and that each party may
contract with other parties providing same or similar services.
10.3 Status of Parties. This Agreement will not constitute a
partnership, joint venture or similar arrangement. The parties
hereto are separate and distinct entities independently
contracting with each other at arms length. HCC will not be
deemed by this Agreement to be granting a license to Participant
with respect to the HCC System or any software or service mark
related thereto, or otherwise, this being a contract for the use
and rendering of services only.
10.4 Assignment. This Agreement is not assignable by HCC or
Participant without the prior written consent of the non-
assigning party, and such consent shall not be unreasonably
withheld or delayed provided that Participant may assign this
Agreement to a wholly-owned subsidiary or in connection with the
sale of its reservation system or franchise system and either
party may assign this Agreement without consent in the event of a
merger, consolidation, or sale of substantially all of its
assets.
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10.5 Notices. All notices and other communications contemplated
hereby must be in writing (except in the case of electronically
transmitted data) and (a) personally delivered, (b) deposited in
the United States mail, first-class, registered or certified
mail, return receipt requested, with postage prepaid, (c) sent by
overnight courier service (for next business day delivery),
shipping prepaid, (d) sent by telecopy or facsimile with
confirmation of receipt to the number indicated, or (e)
transmitted directly to the recipient by electronic data
transmission pursuant to arrangements made between the parties.
Such notices and other communications (except in the case of
electronically transmitted data) shall be addressed as follows:
IF TO HCC: IF TO PARTICIPANT:
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Attention: John F. Davis, III
If by telecopy/facsimile to:
214-528-5675
or such persons or addresses as any party may request by notice
duly given hereunder. Except as otherwise specified herein,
notices will be deemed given and received when received.
10.6 Controlling Law. This Agreement will be interpreted pursuant to
the laws of the State of Texas without reference to its conflict
of laws principles. Subject to the agreement to arbitrate and
the jurisdiction and venue provisions set forth in Section 10.1
hereof, any action brought relating to or arising out of this
Agreement must be brought in the state or federal courts situated
in the county and state of the residence or principal place of
business of the party against whom the action is brought (or any
of them, if more than one).
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10.7 Entire Agreement. This Agreement and the Exhibits attached
hereto constitute the entire agreement between HCC and
Participant with respect to the provision of services under the
HCC System and supersedes and replaces any and all other
agreements and representations, verbal or written, with respect
to the subject matter of this Agreement. There are no
representations, warranties or agreements made or relied upon by
either party with respect to the subject matter of this Agreement
that are not contained in this Agreement.
10.8 Successors and Assigns. This Agreement will be binding upon and
will inure to the benefit of the legal representatives,
successors and duly authorized assigns of each party whether
resulting from merger, acquisition, reorganization or assignment
pursuant to the terms hereof.
10.9 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement will be kept confidential
and shall be disclosed only to those persons and entities as
required by law or as permitted by the other party hereto. The
parties may, however, disclose the existence of this Agreement to
any person or entity.
AGREED to as of the date first written above.
THE HOTEL CLEARING CORPORATION BEST WESTERN INTERNATIONAL, INC.
By: /s/ M. NICHOLAS JENT By: /s/ GARY L. NIELSEN
----------------------------- ------------------------------
M. Nicholas Jent Gary L. Nielsen
Its: VP Sales Its: Vice President
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EXHIBIT A
Initial Information to be Provided by Participant to HCC
The fields in each commission record are the following:
<TABLE>
<S> <C> <C>
- -Record identifier required validated
- -Chain record number required check for duplicates
- -Chain/Brand code required validated
- -Booking source required validated
- -Property ID required validated
- -PNR Number optional no checks
- -Confirmation number required validated presence
- -Cancellation number optional no checks
- -Corporate ID number optional no checks
- -Subscriber IATA number required validated HCC User
- -Group/Guest last name required validated presence
- -Group/Guest first name optional no checks
- -Status code required validated
- -Reason code optional if present, validate
- -Arrival date required validated, no future
- -Departure date required validated, no future
- -Number of nights required validated presence
- -Number of rooms required validated presence
- -Commissionable revenue required validated, no neg.
- -Gross Commission required validated, no neg.
- -Adjustment amount required validated presence
- -Net Commission due required validate computation
- -Currency code required validated
- -Comments optional no checks
</TABLE>
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EXHIBIT 10.60
HOTEL CLEARING CORPORATION
SUBSCRIBER AGREEMENT
American Express Travel Related Services, Inc. (SUBSCRIBER) hereby contracts
with THE HOTEL CLEARING CORPORATION ("HCC") to provide records of hotel
reservation bookings and to process hotel reservation commissions on the
following terms and conditions:
Definitions:
"SUBSCRIBER" is the travel agency and all of its participating wholly owned
travel agent locations.
"HCC System" is HCC's clearing house system which accounts for reservations
made by travel agents with HCC Hotels and processes commissions payable to
those travel agents for the reservations.
"HCC Hotel" is a hotel property who is a participant in the HCC System and whom
Subscriber and the hotel have directed HCC to collect from.
"HCC Reservation" is a reservation at an HCC Hotel originated by SUBSCRIBER for
which the HCC Hotel has been paid for all or a part of the reserved stay,
including non-refundable deposits for reservations originated by SUBSCRIBER,
for which SUBSCRIBER is entitled to a commission. HCC Reservations include
reservations made by telephone or electronically.
"HCC Reconciliation Report" is a record of all HCC Reservations for a specified
month and a computation of the commission due SUBSCRIBER for those
reservations.
"Subscriber Commission" is the commission payment owed to SUBSCRIBER by an HCC
Hotel as reported in the HCC Reconciliation Report less the HCC Fee.
1. Term and Termination. The initial term of this Agreement shall be one
(1) year. After the expiration of the initial term, either party may terminate
this Agreement on thirty (30) days advance written notice.
2. "HCC Fee". This is the amount paid by SUBSCRIBER to HCC for the
services set forth herein which shall be (i) from May 1, 1997 until August 31,
1997, or until such time as Marriott becomes a fully participating HCC Hotel,
whichever occurs first, an amount equal to * of the total monthly commission
paid by HCC Hotels to SUBSCRIBER as set forth on the HCC Reconciliation Report
and (ii) for the remainder of the term of this Agreement, an amount equal to *
of the total monthly commission paid by HCC Hotels to SUBSCRIBER as set forth
on the HCC Reconciliation Report.
3. The HCC System. During the term of this Agreement, HCC shall within
fifteen (15) business days after the end of each calendar month (the "Month"),
(i) submit a HCC Reconciliation Report to each HCC Hotel for payment to HCC of
all commissions the HCC Hotel owes to SUBSCRIBER for HCC Reservations for the
Month, (ii) transmit to SUBSCRIBER by mail the monthly HCC Reconciliation
Report and (iii) pay to SUBSCRIBER by check in the local currency of SUBSCRIBER
the total Subscriber Commissions paid by all HCC Hotels pursuant to the HCC
Reconciliation Report for the Month (converted to U.S. dollars if necessary).
4. Optional Services. HCC will provide the following services selected by
SUBSCRIBER for the fee indicated:
[ ] Electronic fund transfer of the Subscriber Commission to
SUBSCRIBER's U.S. bank account.
*Confidential Treatment Requested
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
<PAGE> 2
Monthly Fee: Waived.
[ ] Electronic media transfer to SUBSCRIBER of the HCC Reconciliation
Report.
Monthly Fee: Waived.
[ ] Quarterly and annual executive summary reports (by ARC number,
HCC assigned customer number or payment location) of Subscriber
Commission transactions which includes information by hotel,
number of room nights, commissionable revenue and average
commission per stay.
Monthly Fee: Waived.
5. Acknowledgment and Disclaimer. SUBSCRIBER acknowledges that the
services rendered by HCC are those of a clearing house and, except as expressly
set forth herein, under no circumstances shall HCC be responsible for the
collection of commissions owing SUBSCRIBER. HCC shall not be responsible or
liable for any inaccuracy in the information provided to SUBSCRIBER in the HCC
Reconciliation Report. HCC shall only be liable to SUBSCRIBER for the amount
of commissions actually collected by HCC, less the HCC Fee as described herein.
In the event HCC shall fail in any respect to perform the services set forth
herein, it shall, under no circumstances, be liable for uncollected commissions
to SUBSCRIBER or except as set forth in section 7C below, any other liability
resulting therefrom including, without limitation, consequential damages FOR
ANY BREACH OF THIS AGREEMENT BY HCC SHALL BE TERMINATION OF THIS AGREEMENT AND
THE AMOUNT OF COMMISSIONS ACTUALLY COLLECTED BY HCC. ALL WARRANTIES EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR SERVICE, OR
OTHERWISE, ARE DISCLAIMED AND WAIVED. In the event a failure or delay in the
performance of this Agreement results from an act of God, labor strike or other
events beyond the control of the party obligated to perform, such failure or
delay shall not constitute a breach of this Agreement nor shall the parties
hereto be liable for damages resulting from such event.
6. Dispute Resolution. In the event SUBSCRIBER shall initiate any action
against HCC arising out of this Agreement, governing law shall be that of
Texas, without regard to choice of laws, and venue shall be Dallas, Texas. In
the event HCC shall initiate any action against SUBSCRIBER arising out of this
Agreement, governing law shall be that of New York, without regard to choice of
laws, and venue shall be New York, New York. In the event a dispute arises
between SUBSCRIBER and a HCC Hotel with respect to a HCC Reconciliation Report,
HCC shall have no obligation or liability with respect to such dispute between
SUBSCRIBER and a HCC Hotel with respect to a HCC Reconciliation Report, HCC
shall have no obligation or liability with respect to such dispute and
SUBSCRIBER agrees that SUBSCRIBER shall be solely responsible for any action to
resolve the dispute and/or to collect its commission.
7. Miscellaneous.
a) Any notice to be provided with respect to any matter arising out
of this Agreement shall be in writing and shall be delivered by
certified mail or next day delivery.
b) HCC may not use SUBSCRIBER's name or logo without SUBSCRIBER's
prior written consent except as required by law or in connection
with mandatory filings with governmental agencies.
c) HCC agrees to indemnify and hold harmless SUBSCRIBER from any
loss, cost, damage or expense of SUBSCRIBER arising out of HCC's
negligence or willful misconduct.
-2-
<PAGE> 3
d) Neither party shall be liable to the other party for actions
between the parties for special, indirect or consequential
damages.
e) Any proprietary information disclosed to one party by the other
or its representatives shall be so designated and shall be
treated as confidential.
f) This Agreement contains all of the provisions of any agreement
between HCC and SUBSCRIBER with respect to the subject matter set
forth herein and all agreements in effect prior to the date
hereof with respect to the subject matter hereof, including but
not limited to HCC Subscriber Agreements executed prior to the
date hereof, are hereby terminated. SUBSCRIBER has not relied
upon any promises or representations by HCC except as set forth
herein.
g) This Agreement shall be binding upon and shall inure to the
benefit of the heirs, successors and assigns of the parties
hereto.
THE HOTEL CLEARING CORPORATION AMERICAN EXPRESS TRAVEL RELATED
3811 TURTLE CREEK BLVD., SUITE 1100 SERVICES, INC.
DALLAS, TEXAS 75219 20002 N. 19TH AVENUE
PHOENIX, ARIZONA 85027
/s/ M. NICHOLAS JENT /s/ PRIYAN FERNANDO
- ----------------------------------- ---------------------------------------
(Signature) (Signature)
M. Nicholas Jent Priyan Fernando
- ----------------------------------- ---------------------------------------
Printed Name Printed Name
7/18/97 7/16/97
- ----------------------------------- ---------------------------------------
Date Date
-3-
<PAGE> 1
EXHIBIT 10.61
NETBOOKER(SM) AGREEMENT
This Agreement is entered into by and between PEGASUS SYSTEMS, INC., a
Delaware corporation, (hereinafter "Pegasus") and ITT SHERATON CORPORATION
(hereinafter "Participant"), this 10th day of June, 1997.
1.0 DEFINITIONS
1.1 For purposes of this Agreement, the following definitions shall
apply:
(i) NetBooker(SM). A service mark of Pegasus for its service to
provide an Interface (as hereinafter defined) to Pegasus' Hotel
Reservation Functionality (as hereinafter defined).
(ii) Hotel Reservation Functionality. The capability to determine
room availability for specific dates and to make, change and cancel
reservations at a hotel participating in Pegasus' Hotel Reservation
Functionality.
(iii) Interface. All server and application software and hardware
reasonable and necessary for a dependable and operative online
connection between Participant's Web Site and Pegasus' Hotel
Reservation Functionality.
(iv) Participant's Web Site. An Internet site on the World Wide Web
created and maintained by Participant.
(v) Net Reservation. Net Reservations are reservations by accessors
of Participant's Web Site within a particular time period, less the
number of canceled reservations by accessors of Participant's Web Site
during the same time period.
INFORMATION CONTAINED IN THIS AGREEMENT HAS BEEN OMITTED SUBJECT TO A
CONFIDENTIAL TREATMENT REQUEST AND HAS BEEN FILED SEPARATELY WITH THE S.E.C.
1
<PAGE> 2
2.0 NETBOOKER
2.1 Duties of Pegasus. Pegasus will furnish to Participant the
Interface and Hotel Reservation Functionality together with operational and
technical support so that Participant may utilize NetBooker for its benefit on
an uninterrupted basis for use in connection with Participant's web site
providing Reservation Functionality to three (3) of Participant's brands.
Pegasus and Participant shall agree to the requirements for the Interface and,
pursuant to a mutually agreed schedule, shall create and maintain on a
continual basis a dependable and operative Interface.
2.2. Duties of Participant. Participant shall use all reasonable and
necessary efforts to cooperate fully with and provide support for Pegasus'
personnel with respect to the creation of the Interface.
2.3 Exclusive Database and Reservation Functionality. Participant
agrees that the Hotel Reservation Functionality shall be the sole and exclusive
reservation functionality for Participant's Web Site for those hotels
participating in Pegasus' Hotel Reservation Functionality as of the date
hereof. Participant agrees that it will not hyperlink or otherwise provide a
connection or access to any other Internet site containing hotel information or
any capabilities similar to the Hotel Reservation Functionality for hotels
participating in Pegasus' Hotel Reservation Functionality. This section does
not prohibit Participant from utilizing other hotel reservation systems for
hotels not available on the date hereof via Pegasus' Hotel Reservation
Functionality.
2.4 Restricted Use. Participant agrees that the Hotel Reservation
Functionality shall be used solely and exclusively for the purposes set forth
herein and only in connection with the operation of Participant's Web Site.
Any direct or indirect distribution or utilization of the Hotel Reservation
Functionality to any third parties other than individual consumer accessors of
Participant's Web Site is expressly prohibited.
3.0 FEES
3.1 Installation Fee. Upon full execution of this Agreement,
Participant shall pay Pegasus an Installation Fee of * .
* CONFIDENTIAL TREATMENT REQUESTED
2
<PAGE> 3
4.0 TERM
4.1 Term of Agreement. The initial term of this Agreement, unless
earlier terminated pursuant to the provisions of this Agreement, shall begin
upon the date the Interface is operable and shall continue thereafter for a
period of twenty four (24) months provided, however, the term of this Agreement
shall be automatically extended for additional one (1) year terms unless either
party shall, at least sixty (60) days prior to the expiration of the initial or
any extended term, give notice of termination of the Agreement at the end of
the term.
5.0 TERMINATION
5.1 Termination by Participant. Upon the occurrence of an Event of
Default (as hereinafter defined) by Pegasus and the failure of Pegasus to cure
such default after written notice and opportunity to cure as provided by
Section 6.3 hereof, Participant may terminate this Agreement at any time within
thirty (30) days after the expiration of the cure period provided in Section
6.3.
5.2 Termination by Pegasus. Upon the occurrence of an Event of
Default (as hereinafter defined) by Participant and the failure of Participant
to cure such default after written notice and opportunity to cure as provided
by Section 6.3 hereof, Pegasus may terminate this Agreement at any time within
thirty (30) days after the expiration of the cure period provided in Section
6.3.
6.0 DEFAULT
6.1 Events of Default. Subject to Section 6.2 hereof, any one of the
following listed occurrences shall be considered an Event of Default:
(i) The failure to pay any amount due hereunder within the time
required;
(ii) The refusal or failure to diligently and in good faith perform
each and every material provision of this Agreement;
3
<PAGE> 4
(iii) The application by Participant or Pegasus for or the consenting
to the appointment of a receiver, a trustee or liquidator of all or of a
substantial portion of its assets; the making by Participant or Pegasus
of a general assignment for the benefit of creditors; Participant or
Pegasus being adjudicated a bankrupt or becoming insolvent; Participant
or Pegasus filing a voluntary petition in bankruptcy or filing a
petition or answer seeking reorganization or an arrangement with
creditors or seeking to take advantage of any law (whether federal or
state) relating to relief of debtors, or admitting (by answer, by
default or otherwise) the material allegations of a petition filed
against it in any bankruptcy, reorganization, arrangement, insolvency or
other proceedings (whether federal or state) relating to relief of
debtors; Participant or Pegasus admitting in writing that it is unable
to pay its debts as they mature or that it is generally not paying its
debts as they mature; Participant or Pegasus suffering or permitting to
continue for ninety (90) consecutive days any judgment, decree or order,
entered by a court of competent jurisdiction, which approves a petition
seeking reorganization of such party or which appoints a receiver,
trustee or liquidator of such party or of all or a substantial part of
any of its assets; attachment, execution or other judicial seizure of
all or substantially all of the assets of Participant or Pegasus, where
such seizure is not discharged within ninety (90) days; or the filing of
any involuntary petition in bankruptcy against Participant or Pegasus
which is not dismissed within ninety (90) days of its filing.
6.2 Force Majeure. It shall not constitute a default if an Event of
Default is caused by or results from acts of God, fire, war, civil unrest,
accident, power fluctuations or outages, telecommunication fluctuations,
outages or delays, utility failures, mechanical defects, or other events beyond
the control of the defaulting party. However, if an Event of Default results
from any such occurrence and continues for more than thirty (30) consecutive
days, either party may terminate this Agreement by providing notice as required
herein.
6.3 Notice of Default. Upon the occurrence of an Event of Default,
the non-defaulting party shall give written notice to the defaulting party
specifying the alleged default. The defaulting party shall then be entitled to
ten (10) days after receipt of such notice within which to cure any monetary
default and thirty (30) days within which to cure any non-monetary default.
4
<PAGE> 5
7.0 CONFIDENTIALITY
7.1 Confidential Information. During the term of this Agreement, it
is acknowledged by Participant and Pegasus that each may receive or have access
to confidential and proprietary information of the other party including, but
not limited to, software, codes, specifications, database (including but not
limited to database or other identifying information for hotel properties) and
trade secrets ("Confidential Information"). Each party acknowledges that it
shall not acquire any ownership or other rights in or to Confidential
Information of the other, and shall use the Confidential Information only for
the purposes of the performance of this Agreement, and shall keep confidential
and not disclose the Confidential Information to any other person, firm or
corporation without the prior written consent of the other party. Any
Confidential Information transmitted in writing or by other tangible media
shall remain the property of the owner and shall be returned to the owner at
its request, together with all copies made thereof, at the conclusion of this
Agreement. The parties agree that the provisions of this Section 7 shall
survive the expiration or termination of this Agreement.
7.2 Use of Marks. Participant acknowledges that NetBooker, NetBooker
Plus and Click- It! Weekends are each service marks of Pegasus or its
affiliates and Participant agrees to not use any of Pegasus's marks in any way
including, but not limited to, in any advertising or promotional materials,
without the prior written approval of Pegasus.
8.0 INDEMNIFICATION
8.1 Indemnification in the Event of Certain Losses. Participant
agrees to indemnify and hold harmless Pegasus and Pegasus's affiliates,
directors, officers, employees and other stockholders, from and against any
losses, claims, liabilities, damages or expenses (including reasonable
attorney's fees) occurring on account of Participant's fault and through no
fault of Pegasus ("Pegasus' Losses"). Pegasus agrees to indemnify and hold
harmless Participant, and Participant's affiliates, directors, officers,
employees and stockholders, from and against any losses, claims, liabilities,
damages or expenses (including reasonable attorney's fees) occurring on account
of Pegasus's fault and through no fault of Participant ("Participant's
Losses"). Promptly after receipt by an indemnified party of notice of the
commencement of any action or the presentation or other assertion of any claim
which could result in any indemnification claim pursuant to this Section 8.1,
such indemnified party shall give prompt notice thereof to the indemnifying
5
<PAGE> 6
party and the indemnifying party shall be entitled to participate therein or,
to the extent that it shall wish, assume the defense thereof with its own
counsel. If the indemnifying party elects to assume the defense of any such
action or claim, the indemnifying party shall not be liable to the indemnified
party for any fees of other counsel or other expenses, in each case
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation and preparation, unless
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. The parties agree to
cooperate to the fullest extent possible in connection with any claim for which
indemnification is or may be sought under this Agreement.
9.0 DISCLAIMER AND LIMITATION OF LIABILITIES
9.1 Disclaimer, Limitation of Liabilities and Risk of Internet Usage.
PEGASUS WILL NOT BE RESPONSIBLE OR LIABLE FOR (i) ANY FALSIFICATIONS OR
INACCURACIES IN ANY OF THE INFORMATION DISPLAYED ON PARTICIPANT'S WEB SITE ,
(ii) ANY ACT OR FAILURE TO ACT WITH RESPECT TO THE PUBLICATION OF THE
INFORMATION ON THE INTERNET OR THE CREATION OR FUNCTIONALITY OF RESERVATION
CAPABILITIES UNLESS EXPRESSLY SET FORTH HEREIN, (iii) ANY CLAIM, DAMAGE, OR
LIABILITY OF ANY NATURE ARISING OUT OF ACCESS TO PARTICIPANT'S WEB SITE AND/OR
THE MAKING, CHANGING OR CANCELING OF A RESERVATION AND THE USE OF A CREDIT CARD
OR OTHER DEBIT DEVICE IN CONNECTION THEREWITH, OR (iv) ANY CLAIM RESULTING FROM
ANY INTERRUPTION, MALFUNCTION OR CHANGE IN THE USE OF THE INTERNET OR A
DISTRIBUTION SYSTEM, EXCEPT TO THE EXTENT RESULTING FROM PEGASUS' GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. ALL WARRANTIES, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE, MERCHANTABILITY, GOOD AND WORKMANLIKE PRODUCT OR
SERVICE OR OTHERWISE ARE DISCLAIMED BY PEGASUS AND WAIVED BY PARTICIPANT.
PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE OPERATION OF A SITE ON THE
INTERNET IS AT PARTICIPANT'S OWN RISK. Participant acknowledges and agrees
that the Internet is a communication medium over which Pegasus has no control
and that its continued utilization in its present form at current costs is
uncertain. Therefore, if at any time during the term of this Agreement, the
cost of access to the Internet increases or there is imposed a fee or cost for
access to or use of the Internet communication lines, or there is imposed any
law, governmental ruling, or regulation the result of which increases the
6
<PAGE> 7
cost of access to or usage of the Internet to Pegasus or Participant or
otherwise makes it impractical, in either party's reasonable opinion , to
continue to perform this Agreement, either party may, upon notice to the
other, immediately terminate this Agreement without such action constituting
an event of default.
9.3 Repair of NetBooker Operations. Notwithstanding any other
provision of this Agreement, the only obligation of Pegasus in the event of a
material failure in the operation or performance of NetBooker shall be to
repair the malfunction within seven (7) days of receipt of written notice from
Participant requesting such repair.
10. MISCELLANEOUS
10.01 Arbitration of Disputes. Any controversy or claim arising out of
or relating to this contract, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. There
shall be a panel of three arbitrators. Each party shall select one arbitrator
and the two arbitrators selected shall select a third neutral arbitrator. All
reasonable and necessary costs and fees (including attorney's fees) incurred in
connection with the arbitration shall be borne by the losing party or assessed
in the award as otherwise deemed appropriate by the arbitrators.
10.02 Status of Parties. This Agreement shall not constitute a
partnership, joint venture or similar arrangement. The parties hereto are
separate and distinct entities independently contracting with each other at
arms length.
10.03 Assignment. This Agreement is not assignable by Pegasus or
Participant without the prior written consent of the non-assigning party (and
such consent shall not be unreasonably withheld), provided that either party
may assign this Agreement to an affiliate or in the event of an acquisition,
merger or sale of substantially all assets.
10.04 Notices. All notices, requests, consents, payments and other
communications contemplated hereby shall be in writing and (a) personally
delivered, (b) deposited in the United States mail, first-class, registered or
certified mail, return receipt requested,
7
<PAGE> 8
with postage prepaid, (c) sent by overnight courier service (for next business
day delivery), shipping prepaid, or (d) by facsimile transmission, as follows:
If to If to
PEGASUS SYSTEMS, INC.: ITT SHERATON CORPORATION:
3811 Turtle Creek Blvd.
Suite 1100
Dallas, TX 75219
Attention: Sandee Miles Attention:
Facsimile (214) 528-5675 Facsimile: ( )
or such persons or addresses as any party may request by notice duly given
hereunder. Except as otherwise specified herein, notices shall be deemed given
and received at the time of personal delivery or, if sent by U.S. mail, three
(3) business days after mailing, or, if sent by overnight courier, one (1)
business day after such sending.
10.05 Controlling Law. This Agreement shall be interpreted pursuant to
the laws of the State of Texas. The venue for any arbitration or suit brought
with respect to or arising out of this Agreement shall be in the City of
Dallas, Texas or in the state or federal courts situated in Dallas County,
Texas. The parties hereto hereby waive all objections, and they hereby consent
to such jurisdiction and venue.
10.06 Entire Agreement. This Agreement constitutes the entire
agreement between Pegasus and Participant with respect to the implementation
and operation of NetBooker and supersedes and replaces any and all other
agreements and representations, verbal or written, with respect to the subject
matter of this Agreement. There are no representations, warranties or
agreements made or relied upon by either party with respect to the subject
matter of this Agreement which are not contained in this Agreement.
10.07 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the legal representatives, successors and duly
authorized assigns of each party whether resulting from merger, acquisition,
reorganization or assignment pursuant to the terms hereof.
10.08 Confidentiality of the Agreement. The parties agree that the
terms and provisions of this Agreement shall be kept confidential and shall be
disclosed only to those
8
<PAGE> 9
persons and entities as required by law or as permitted by the other party
hereto. The parties may, however, disclose the existence of this Agreement to
any person or entity.
PEGASUS SYSTEMS, INC. ITT SHERATON CORPORATION
By: /s/ M. NICHOLAS JENT By: /s/ BRIAN M. PRATT
--------------------------- -----------------------------
M. Nicholas Jent Brian M. Pratt
Its: VP Sales Its:
---------------------------
Date: 6-10-97 Date: 6-6-97
August 2, 1997
9
<PAGE> 1
EXHIBIT 11.1
EXHIBIT 11.1 -- COMPUTATION OF PER SHARE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
<S> <C> <C>
PRO FORMA NET LOSS PER SHARE:
Net loss.............................. $(3,485) $ (388)
======= ======
Weighted average common shares
outstanding........................ 5,274 5,190
Assumed conversion of Series A
preferred stock into common stock
on date of issuance................ 758 1,538
Application of SAB 83 for preferred
stock, common stock, stock options
and warrants issued subsequent to
June 1, 1996....................... 1,170 753
------- ------
Pro forma weighted average number of
common shares and common share
equivalents outstanding............ 7,202 7,481
======= ======
Pro forma net loss per common share... $ (0.48) $(0.05)
======= ======
SUPPLEMENTAL PRO FORMA NET LOSS PER
SHARE:
Net loss.............................. $(3,485) $ (388)
Pro forma interest expense adjustment
reflecting repurchase of debt with
proceeds from offering............. 539 131
------- ------
Supplemental pro forma net loss....... $(2,946) $ (257)
======= ======
Weighted average common shares
outstanding (excluding options and
common share equivalents).......... 5,274 5,190
Assumed conversion of Series A
preferred stock into common stock
on date of issuance................ 758 1,538
Application of SAB 83 for preferred
stock, common stock, stock options
and warrants issued subsequent to
June 1, 1996....................... 1,170 753
Assumed issuance of shares needed to
repurchase debt of $5.4 million.... 542
Assumed issuance of shares needed to
repurchase debt of $5.2 million.... 525
------- ------
Pro forma weighted average shares used
in the supplemental pro forma net
loss per share calculation......... 7,744 8,006
======= ======
Supplemental pro forma net loss per
share.............................. $ (0.38) $(0.03)
======= ======
</TABLE>
<PAGE> 1
EXHIBIT 16.1
[BELEW AVERITT LLP LETTERHEAD]
June 5, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20540
Ladies and Gentlemen:
We have read the third paragraph of the item titled "Experts" in the Form S-1
Registration Statement of Pegasus Systems, Inc., filed with the Securities and
Exchange Commission on June 5, 1997, and are in agreement with the statements
contained therein.
Yours very truly,
Belew Averitt LLP
By: /s/ Terry L. Orr
--------------------
Terry L. Orr
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The Hotel Industry Switch Company Delaware
The Hotel Clearing Corporation Delaware
TravelWeb, Inc. Delaware
Pegasus Systems, Inc. (UK) Limited UK
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of Pegasus Systems, Inc. of our report dated
February 21, 1997, except as to Note 13, which is as of May 12, 1997, relating
to the financial statements of Pegasus Systems, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the year ended December 31, 1996 listed under Item 16(b)
of this Registration Statement when such schedule is read in conjunction with
the financial statements referred to in our report. The audit referred to in
such report also included this schedule. 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
Dallas, Texas
August 4, 1997
<PAGE> 2
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of Pegasus Systems, Inc. of our report dated
February 21, 1997, except as to Note 13, which is as of May 12, 1997, relating
to the financial statements of Pegasus Systems, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the year ended December 31, 1996 listed under Item 16(b)
of this Registration Statement when such schedule is read in conjunction with
the financial statements referred to in our report. The audit referred to in
such report also included this schedule. 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
Dallas, Texas
July 10, 1997
Submitted in connection with Amendment No. 1
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 2, 1996, relating
to the financial statements of Pegasus Systems, Inc. (formerly The Hotel
Industry Switch Company in 1994) and our report dated April 4, 1995, except for
Note 12, as to which the date is August 21, 1995, relating to the financial
statements of The Hotel Clearing Corporation, which appear in the Prospectus of
Pegasus Systems, Inc. We also consent to the application of such reports to
the Financial Statement Schedules for the years ended December 31, 1993, 1994
and 1995 listed under Item 16(b) of this Registration Statement when such
schedules are read in conjunction with the financial statements referred to in
our reports. The audits referred to in such reports also include these
schedules. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that Belew Averitt LLP has not prepared or certified such "Selected
Financial Data".
Belew Averitt LLP
Dallas, Texas
August 4, 1997
<PAGE> 2
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 2, 1996, relating
to the financial statements of Pegasus Systems, Inc. (formerly The Hotel
Industry Switch Company in 1994) and our report dated April 4, 1995, except for
Note 12, as to which the date is August 21, 1995, relating to the financial
statements of The Hotel Clearing Corporation, which appear in the Prospectus of
Pegasus Systems, Inc. We also consent to the application of such reports to
the Financial Statement Schedules for the years ended December 31, 1993, 1994
and 1995 listed under Item 16(b) of this Registration Statement when such
schedules are read in conjunction with the financial statements referred to in
our reports. The audits referred to in such reports also include these
schedules. We also consent to the references to us under the headings
"Experts" and "Selected Financial Data" in such Prospectus. However, it should
be noted that Belew Averitt LLP has not prepared or certified such "Selected
Financial Data".
Belew Averitt LLP
Dallas, Texas
July 10, 1997
Submitted in connection with Amendment No. 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPANY'S
FORM S-1 FILED JUNE 5, 1997 WITH SECURITIES AND EXCHANGE COMMISSION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH S-1.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 2,487 3,287
<SECURITIES> 2,705 984
<RECEIVABLES> 1,724 2,512
<ALLOWANCES> 45 61
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,062 6,970
<PP&E> 14,561 15,048
<DEPRECIATION> 9,446 10,123
<TOTAL-ASSETS> 13,892 13,601
<CURRENT-LIABILITIES> 4,994 5,565
<BONDS> 6,353 5,957
0 0
15 15
<COMMON> 53 53
<OTHER-SE> 1,886 1,532
<TOTAL-LIABILITY-AND-EQUITY> 13,892 13,601
<SALES> 15,869 4,377
<TOTAL-REVENUES> 15,869 4,377
<CGS> 0 0
<TOTAL-COSTS> 6,199 1,558
<OTHER-EXPENSES> 2,206 623
<LOSS-PROVISION> 25 17
<INTEREST-EXPENSE> 893 212
<INCOME-PRETAX> (3,364) (388)
<INCOME-TAX> 15 0
<INCOME-CONTINUING> (3,485) (388)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,485) (388)
<EPS-PRIMARY> (0.48) (0.05)
<EPS-DILUTED> (0.48) (0.05)
</TABLE>
