<PAGE> 1
As filed with the Securities and Exchange Commission on November 12, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------------------
PEGASUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2605174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3811 TURTLE CREEK BOULEVARD, SUITE 1100 75219
DALLAS, TEXAS 75219 (Zip Code)
(Address of Executive Offices)
--------------------
AMENDED 1997 STOCK OPTION PLAN
(Full Title of the Plan)
JOHN F. DAVIS III
PEGASUS SYSTEMS, INC.
3811 TURTLE CREEK BOULEVARD, SUITE 1100
DALLAS, TEXAS 75219
(214) 528-5656
(Name, address and telephone number, including area code, of agent for service)
--------------------
WITH COPIES TO:
GUY KERR, ESQ.
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201-6776
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TITLE Proposed Proposed Maximum
OF SECURITIES Amount To Maximum Aggregate Offering Amount of
TO BE REGISTERED Be Registered Offering Price Price (1) Registration Fee
Per Share (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 333,333 shares $16.29 $5,429,994.57 $1,646.00
$.01 Par Value
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for purposes of calculating the registration fee, based on
the average of the high and low prices reported on the Nasdaq National Market on
November 5, 1997.
In addition, pursuant to Rule 416 under the Securities Act of 1933, as
amended, this Registration Statement also covers shares of Common Stock of the
Company issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The information specified by Item 1 and Item 2 of Part I of Form S-8 is
omitted from this filing in accordance with the provisions of Rule 428 under the
Securities Act of 1933, as amended (the "Securities Act"), and the introductory
Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents set forth below are incorporated by reference in this
Registration Statement. All documents subsequently filed by Pegasus Systems,
Inc. (the "Company") pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this Registration Statement and
to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
(1) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997;
(2) The Company's Prospectus on Form 424(b) filed with the
Securities and Exchange Commission on August 7, 1997; and
(3) The description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on August 4, 1997 pursuant
to Section 12 of the Exchange Act, and all amendments thereto
and reports which have been filed for the purpose of updating
such description.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. 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 or her 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 or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the 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 or she 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
fully extent permitted by Delaware law any employees and agents of the Company.
Reference is made to the Rights Agreement filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-1 (File No. 333-28595) (the "S-1
Registration Statement") declared effective on August 6, 1997, 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 against directors
and officers for any act, error, omission,
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<PAGE> 4
misstatement, misleading statement or breach of duty by directors and officers
in their capacity as directors and officers of the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
5.1 Opinion of Locke Purnell Rain Harrell (A Professional
Corporation).
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Locke Purnell Rain Harrell (A Professional
Corporation) (included in opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of this
Registration Statement).
99.1 Amended 1997 Stock Option Plan.
ITEM 9. UNDERTAKINGS.
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
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<PAGE> 5
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
this Registration Statement or any material change to
such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, 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 such 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas on November 12, 1997.
PEGASUS SYSTEMS, INC.
By: /s/ John F. Davis, III
-------------------------------
John F. Davis, III
Chief Executive Officer,
President and Director
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<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints each of John F. Davis,
III, Jerome L. Galant and Ric L. Floyd, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done on and about the premises
as fully and to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ John F. Davis, III Chief Executive Officer, November 12, 1997
-------------------------------- President and Director (Principal
John F. Davis, III Executive Officer)
/s/ Jerome L. Galant Chief Financial Officer November 12, 1997
-------------------------------- (Principal Financial and
Jerome L. Galant Accounting Officer)
/s/ John W. Biggs Director November 12, 1997
--------------------------------
John W. Biggs
/s/ Donald R. Dixon Director November 12, 1997
--------------------------------
Donald R. Dixon
/s/ William C. Hammett, Jr. Director November 12, 1997
--------------------------------
William C. Hammett, Jr.
/s/ Ian Malcolm Highet Director November 12, 1997
--------------------------------
Ian Malcolm Highet
/s/ Rockwell A. Schnabel Director November 12, 1997
--------------------------------
Rockwell A. Schnabel
/s/ Paul Travers Director November 12, 1997
--------------------------------
Paul Travers
/s/ Mark C. Wells Director November 12, 1997
--------------------------------
Mark C. Wells
/s/ Bruce Wolff Director November 12, 1997
--------------------------------
Bruce Wolff
</TABLE>
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Locke Purnell Rain Harrell (A Professional Corporation)
(included in opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of this Registration
Statement).
99.1 Amended 1997 Stock Option Plan.
<PAGE> 1
EXHIBIT 5.1
November 12, 1997
Pegasus Systems, Inc.
3811 Turtle Creek Boulevard, Suite 1100
Dallas, Texas 75219
Re: Registration of 333,333 shares of Common Stock, par value $.01
per share, pursuant to a Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as special counsel for Pegasus Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-8 (the "Registration Statement"), of 333,333
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock") to be offered pursuant to the Pegasus Systems, Inc. Amended 1997 Stock
Option Plan (the "Option Plan").
Based upon our examination of such papers and documents and the
investigation of such matters of law as we have deemed relevant or necessary in
rendering this opinion, we hereby advise you that we are of the opinion that:
1. The Company is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Delaware.
2. Assuming, with respect to shares of Common Stock issued after the
date hereof, (i) the receipt of proper consideration for the issuance thereof in
excess of par value thereof, (ii) the availability of a sufficient number of
shares of Common Stock authorized by the Company's Certificate of Incorporation
then in effect, (iii) compliance with the terms of any agreement entered into
in connection with any options under the Option Plan, and (iv) no change occurs
in the applicable law or the pertinent facts, the shares of Common Stock
purchasable upon the exercise of any option granted under the Option Plan will
upon issuance be duly authorized and validly issued, fully paid and
non-assessable shares of Common Stock.
<PAGE> 2
Pegasus Systems, Inc.
November 12, 1997
Page 2
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement filed by the Company with the Securities and Exchange
Commission for the registration under the Securities Act, of 333,333 shares of
Common Stock of the Company covered by the Option Plan. By so consenting, we do
not thereby admit that our firm's consent is required by Section 7 of the
Securities Act.
Very truly yours,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ Guy Kerr
-------------------------------
Guy Kerr
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 21, 1997, except as to Note
13, which is as of May 12, 1997 and Note 15, which is as of August 6, 1997,
relating to the financial statements of Pegasus Systems, Inc. which appears on
page F-2 of Pegasus Systems, Inc.'s Registration Statement on Form S-1 dated
August 6, 1997. 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 such Registration Statement on Form S-1 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.
PRICE WATERHOUSE LLP
Dallas, Texas
November 11, 1997
<PAGE> 1
EXHIBIT 99.1
PEGASUS SYSTEMS, INC.
AMENDED 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, to compensate Non-Employee Directors
of the Company 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.
(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 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.
<PAGE> 2
(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) "Non-Employee Director" means any person who is a member
of the Board who is not an Employee.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(p) "Option" means a stock option granted pursuant to the
Plan.
(q) "Optioned Stock" means the Common Stock subject to an
Option.
(r) "Optionee" means an Employee, Consultant or Non-Employee
Director who receives an Option.
(s) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
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(t) "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.
(u) "Plan" means this Amended 1997 Stock Option Plan.
(v) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(w) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 below.
(x) "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 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 333,333 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, Consultants or Non-Employee Directors, 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 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
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<PAGE> 4
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 10(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
(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.
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<PAGE> 5
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees,
Consultants and Non-Employee Directors. Incentive Stock Options may be granted
only to Employees. An Employee, Consultant or Non-Employee Director 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 15 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 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.
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
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
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<PAGE> 6
(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. Grants to Non-Employee Directors. Notwithstanding any other
provision of the Plan, each Non-Employee Director shall, on each date of
election or re-election as a Board member be granted a Nonstatutory Stock Option
for two thousand (2,000) Shares of Common Stock of the Company at an exercise
price equal to eighty five percent (85%) of the Fair Market Value of the Shares
at the end of the business day immediately preceding the date of election or
re-election of the Non-Employee Director. Additionally, each Non-Employee
Director serving more than a one (1) year term shall, on the date of each annual
meeting of the Company's stockholders preceding each additional year of office,
be granted an additional Nonstatutory Stock Option for two thousand (2,000)
Shares of Common Stock of the Company at an exercise price equal to eighty five
percent (85%) of the Fair Market Value of the Shares at the end of the business
day immediately preceding the date of each meeting. Each such Option shall fully
vest at the expiration of twelve (12) months from the date of the grant;
provided further, that each Non-Employee Director holding office for all or part
of the year prior to the annual stockholder meeting during 1998 shall be granted
a Nonstatutory Stock Option for two thousand (2,000) Shares of Common Stock of
the Company at an exercise price equal to eighty five percent (85%) of the Fair
Market Value of the Shares at the end of the business day on September 22, 1997
for those Board members holding office on that date and each Non-Employee
Director not holding office as of September 22, 1997 but holding office after
that date but prior to the annual
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<PAGE> 7
stockholder meeting during 1998 shall be granted a Nonstatutory Stock Option for
two thousand (2,000) Shares of Common Stock of the Company at an exercise price
equal to eighty five percent (85%) of the Fair Market Value of the Shares at the
end of the business day immediately preceding the date of election. Each Option
granted to a Non-Employee Director holding office for all or part of the year
prior to the annual stockholder meeting during 1998 shall be subject to approval
by the Company's stockholders at the annual stockholders meeting during 1998 and
shall vest, if so approved by the stockholders, in full on the later of (i) the
date of the Company's annual stockholder meeting during 1998 or (ii) six (6)
months following the date such Option is granted. Each Non-Employee Director
Option shall have a term of three (3) years. Expiration of a Non-Employee
Director's term of office shall not affect a Non-Employee Director's right to
exercise its Option to the extent such Option is vested at any time prior to the
expiration of the Director's term.
10. 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.
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 13 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
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<PAGE> 8
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.
The provisions of this Section 10(b) shall not be applicable to
Non-Employee Directors.
(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 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
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<PAGE> 9
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 11. 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;
(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.
12. 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
Administrator 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.
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<PAGE> 10
13. 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 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.
(i) 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 422(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
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<PAGE> 11
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.
(ii) 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.
14. 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.
15. 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.
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<PAGE> 12
(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.
16. 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.
17. 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.
18. Agreements. Options shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
19. 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 AMENDED 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:
------------------------------------------------------------
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
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<PAGE> 14
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 AMENDED 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:
(a) Right to Exercise.
(i) This Option may not be exercised for a
fraction of a Share.
(ii) 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).
(iii) 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.
(b) 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:
(a) cash; or
(b) check; or
(c) 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
(d) 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.
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
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<PAGE> 17
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.
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
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<PAGE> 18
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) 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.
(b) 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.
(c) 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.
(d) 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.
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
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<PAGE> 19
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
<PAGE> 22
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").
(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
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<PAGE> 23
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the 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
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<PAGE> 25
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.
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:
- ----------------------------------- -------------------------------
(Signature)
Its:
------------------------------
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
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<PAGE> 27
offering subject 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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