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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 2000
REGISTRATION NO. 333-93713
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PEGASUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7389 75-2605174
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
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
CHIEF EXECUTIVE OFFICER AND PRESIDENT
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)
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COPIES TO:
GUY KERR
JOHN B. MCKNIGHT
WHIT ROBERTS
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
(214) 740-8000
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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.
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If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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. [ ]
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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.
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PRELIMINARY NOTE
This registration statement assumes the closing of the merger
transaction between Pegasus Systems, Inc. and REZ, Inc. that is described in the
prospectus forming a part of this registration statement under the caption
"Pegasus Systems, Inc. - Acquisition of REZ, Inc."
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The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission becomes effective.
This prospectus is not an offer to sell these securities and it is not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted.
Subject to Completion, Dated March 31, 2000
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PROSPECTUS
3,409,250 SHARES
PEGASUS SYSTEMS, INC.
COMMON STOCK
This prospectus relates to the offering of up to 3,409,250 shares of
common stock of Pegasus Systems, Inc., which is not being underwritten. We are
registering the shares of common stock for the accounts of some of our selling
stockholders who received shares of our common stock in connection with an
acquisition.
We will not receive any of the proceeds from the sale of the shares
offered by this prospectus. All the expenses related to the registration of the
shares will be paid by us, except that the selling stockholders will pay any
underwriting, brokerage or related fees, discounts, commissions or the fees or
expenses of counsel or advisors to the selling stockholders.
The selling stockholders may sell the shares of common stock directly
or through one or more broker-dealers on the Nasdaq National Market, in
negotiated transactions or otherwise, at prices related to the prevailing market
prices or at negotiated prices. See "Plan of Distribution."
Our common stock is traded on the Nasdaq National Market under the
symbol "PEGS." On March 30, 2000, the last reported sale price for the common
stock on the Nasdaq National Market was $16.19 per share.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
THE DATE OF THIS PROSPECTUS IS April __, 2000.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Where You Can Find More Information..................................... 5
Information Incorporated by Reference................................... 5
Note Regarding Forward-Looking Statements............................... 6
Pegasus Systems, Inc.................................................... 7
Risk Factors............................................................ 9
Use of Proceeds......................................................... 21
Selling Stockholders.................................................... 21
Plan of Distribution.................................................... 24
Legal Matters........................................................... 25
Experts................................................................. 25
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
Pegasus files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission, or the SEC.
You may inspect and copy these materials at the public reference facilities
maintained by the SEC at:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
You also may obtain copies of these materials from the SEC at
prescribed rates by writing to the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the operation of the public reference
rooms. You also can find Pegasus SEC filings at the SEC's website at
http://www.sec.gov. Pegasus common stock is quoted on the Nasdaq National Market
under the trading symbol "PEGS." Reports, proxy statements and other information
about Pegasus may be inspected at the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933, as amended, ("Securities Act") with respect to the
shares of common stock offered in this prospectus. This prospectus is part of
that registration statement and, as permitted by the SEC's rules, does not
contain all of the information set forth in the registration statement. For
further information about us and our common stock, we refer you to those copies
of contracts or other documents that have been filed as exhibits to the
registration statement, and statements relating to such documents are qualified
in all respects by such reference. You can review and copy the registration
statement and its exhibits and schedules from the SEC at the address listed
above or from its Internet site.
Our world wide web site is located at http://www.pegsinc.com.
Information contained on our website does not constitute, and shall not be
deemed to constitute, part of this prospectus.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
information we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that we
file with the SEC. The information incorporated by reference is considered to be
part of this prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below, and all future documents filed by us with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") until the offering of these shares is
terminated:
(1) Our annual report on Form 10-K for the fiscal year ended December
31, 1999;
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(2) The description of our capital stock contained in our registration
statement on Form 8-A filed with the Commission on August 9, 1997;
(3) The description of the rights to purchase Series A Preferred Stock
contained in our registration statement on Form 8-A filed with the Commission on
October 9, 1998;
(4) The consolidated financial statements, as well as the related
financial statement schedule, of REZ, Inc. for the years ended December 31,
1999, 1998 and 1997 which appear in our Pre-Effective Amendment No. 5 to
Registration Statement on Form S-4 (File No. 333-92683) filed with the SEC on
March 29, 2000; and
(5) The information contained under the caption "Unaudited Pro Forma
Financial Information and Related Notes" appearing in our Pre-Effective
Amendment No. 5 to Registration Statement on Form S-4 (File No. 333-92683) filed
with the SEC on March 29, 2000.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this prospectus
modifies, supersedes or replaces such statement. Any statement so modified,
superseded or replaced shall not be deemed, except as so modified, superseded or
replaced, to constitute a part of this prospectus.
We will provide without charge to you, upon your written or oral
request, a copy of any or all of the information incorporated by reference in
this prospectus. Requests should be directed to:
Pegasus Systems, Inc.
3811 Turtle Creek Boulevard, Suite 1100
Dallas, Texas 75219
Attention: Ric Floyd
Telephone number (214) 528-5656
You should rely only on the information contained in this prospectus.
Pegasus has not authorized anyone to provide you with information that is
different from what is contained in this prospectus. This prospectus is dated
April __, 2000. You should not assume that the information contained in this
prospectus is accurate as of any date other than that date.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act which are intended to be covered by the
safe harbors created thereby. Generally, these forward-looking statements
include but are not limited to statements about our plans, objectives,
expectations, intentions and other statements contained in this prospectus that
are not historical facts. You can identify these statements by forward-looking
words, such as "expect,"
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"anticipate," "intend," "plan," "believe," "seek," "estimate," "may," "will" and
"continue" or similar words. In addition, statements related to our merger with
REZ, Inc. and the combined company's performance and financial condition
following the merger are further examples of forward-looking statements. You
should read statements that contain these words carefully because they may
discuss our future expectations, contain projections of our future results of
operations or of our financial condition or state other forward-looking
information. We caution readers that these forward-looking statements are not
guarantees of future performance or events and are subject to a number of
uncertainties, risks and other influences, many of which are beyond our control
and may influence the accuracy of the statements and projections upon which the
statements are based. The factors listed in the sections captioned "Risk
Factors" as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in the "Risk Factors" section and elsewhere in this
prospectus could have a material adverse effect on our business, operating
results and financial condition.
PEGASUS SYSTEMS, INC.
This document may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus, including "Risk Factors," and all materials incorporated by
reference into this prospectus carefully before making an investment decision.
OVERVIEW
Pegasus is a leading provider of transaction processing and electronic
commerce services to the hotel industry worldwide. Pegasus historically has been
organized into three businesses: Pegasus Electronic Distribution, Pegasus
Commission Processing and Pegasus Business Intelligence.
o Pegasus Electronic Distribution improves 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. Pegasus Electronic Distribution includes
the GDS distribution service and the Internet-based distribution services, which
include TravelWeb.com, the private-label reservation service and other
Internet-based distribution services.
o Pegasus Commission Processing improves the efficiency and
effectiveness of the commission payment process for participating hotels and
travel agencies by consolidating the payments in the travel agency's currency of
choice and providing comprehensive transaction reports.
o Pegasus Business Intelligence provides database marketing and
consulting services and is being expanded to provide data mining and reporting
services for benchmark analysis and strategic planning for the hotel industry.
In addition to the services Pegasus historically has provided, as a
result of the merger between Pegasus and REZ, Inc. that is described below under
"--Acquisition of REZ, Inc.," Pegasus offers a fully integrated portfolio of
services and applications to independent hotels, management companies, travel
agencies and hotel chains in approximately 180 countries. Pegasus offers these
services and applications through a global network of approximately 40 offices
with approximately 1,800 employees. Pegasus provides these services to
approximately 25,000 hotels and 80 brands. These services and solutions improve
the efficiency and effectiveness of the hotel reservations process by providing
customers with access to and the use of REZView, the combined company's central
reservation system, which is one of the most advanced, high-performance,
functionally rich reservation systems in the hotel industry. REZView is designed
to operate in numerous processing environments to handle a wide range of
customers from small independent hotels to large hotel chains. As a result of
the merger, Pegasus offers its customers an additional five major types of
services and solutions:
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o We offer representation services primarily to independent
hotels that seek to sell their rooms in marketplaces outside their locale. These
hotels associate themselves with a hotel representation service which uses its
systems and office infrastructure to assist the hotels in marketing and making
reservations for their rooms.
o We provide international brand management services under our
brand names, which include Summit Hotels & Resorts, Golden Tulip Hotels & Tulip
Inns, Sterling Hotels & Resorts and Prima Hotels. As part of the branding
relationship, the hotel receives reservation support, marketing assistance,
purchasing, operations training and financial services.
o Our private label services include the operation of private
label central reservation systems and call centers on behalf of large individual
properties, brand management companies and hotel chains.
o We provide application server processing (ASP) services to
customers who choose to operate their own reservations call centers but want a
transaction processing solution for their central reservation system.
o We license our RezView, Guestview and other applications
software to hotels worldwide.
ACQUISITION OF REZ, INC.
Pegasus recently completed a merger transaction with REZ, Inc. (formerly
known as REZsolutions, Inc.). As a result of the merger, REZ has become a
wholly-owned subsidiary of Pegasus. To complete the merger, the outstanding
shares of REZ common stock were converted into 3.99 million shares of Pegasus
common stock and cash of approximately $115 million, with an additional $20
million promissory note being issued to the majority stockholder of REZ in lieu
of a portion of the cash to which it otherwise would be entitled. The Agreement
and Plan of Merger that sets forth the terms of the merger provides for an
adjustment in the amount of cash payable in the merger, as well as escrow
arrangements with respect to the cash and stock issued in connection with the
merger. The Agreement and Plan of Merger is attached as an appendix to the
Registration Statement on Form S-4 (File No. 333-92683) as amended and declared
effective on March 31, 2000. Except where the context otherwise requires,
references in this prospectus to the "merger" refer to Pegasus' merger
transaction with REZ, Inc.
CORPORATE INFORMATION
Except where the context otherwise requires, references in this prospectus
to "Pegasus Systems, Inc.," "Pegasus," "we," "our," "us" and the "combined
company" refer to Pegasus Systems, Inc. and our consolidated subsidiaries,
including REZ, Inc. and its subsidiaries (sometimes referred to as "REZ" in this
prospectus). Our World Wide Web address is www.pegsinc.com. Information
contained in our website does not constitute part of this prospectus.
The address of our principal executive offices is 3811 Turtle Creek
Boulevard, Suite 1100, Dallas, Texas 75219, and our telephone number is (214)
528-5656.
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.
DIFFICULTIES AND SUBSTANTIAL COSTS INTEGRATING THE TECHNOLOGY, OPERATIONS AND
PERSONNEL OF THE COMBINED COMPANY MAY REDUCE THE OPERATIONAL EFFICIENCIES AND
FINANCIAL BENEFITS OF THE MERGER.
As a result of the difference in services provided and customers and the
geographic distance separating their bases of operation, the business and
operations of the combined company may not be quickly and efficiently
integrated. If the combined company does not integrate its operations and
technologies quickly and smoothly, it may incur substantial expenses and not
attain the operational efficiencies and financial benefits of the merger which
may adversely affect the earnings and earnings per share of the combined
company.
o Distracting management and other key personnel from the business of the
combined company
o Perceived and potential adverse changes in business focus or product
offerings
o Potential incompatibility of business cultures
o Pegasus' inexperience in integrating its operations with those of
another company
o Costs and delays in implementing common systems and procedures,
particularly in integrating different information systems
o Possible negative effects on customer service resulting from the
differing focus on product and service offerings
o Inability to retain and integrate key management, technical, sales and
customer support personnel
INTEGRATION OF THE COMBINED COMPANY MAY PROVE MORE DIFFICULT DUE TO THE RECENT
FORMATION OF REZ AND FUTURE POTENTIAL BUSINESS ACQUISITIONS WHICH MAY DIVERT THE
RESOURCES OF THE COMBINED COMPANY.
The challenges of integrating the organizations and operations of Pegasus
and REZ may be compounded by the ongoing efforts associated with the integration
of Anasazi, Inc. and the Utell operations that resulted in the formation of REZ
in December 1997. In addition, any potential future acquisitions by the combined
company may also make integration efforts difficult. REZ is still in the process
of integrating the operations of these predecessor companies which, following
the merger, may compound the difficulties integrating the operations of Pegasus
and REZ encountered by the combined company. The integration of the combined
company's operations following the merger will require the dedication of
management resources, which may distract management's attention from the
day-to-day business of the combined company.
PEGASUS' LACK OF EXPERIENCE IN MANAGING A BUSINESS WITH A BROAD MARKET SCOPE AND
A LARGE NUMBER OF EMPLOYEES AND OFFICES SPREAD ACROSS NUMEROUS COUNTRIES AROUND
THE WORLD COULD ADVERSELY AFFECT THE BUSINESS OF THE COMBINED COMPANY.
Due to Pegasus' limited experience in operating and managing a company with
significant and widespread foreign operations and a large number of employees
and offices, the combined company may fail to derive the expected economic
benefits and operating efficiencies of the merger. Since Pegasus has
little experience in managing or operating many of the services and solutions
offered by REZ, and REZ has little experience with Pegasus' areas of operations,
the combined company could face problems managing and staffing a large business
operation. Following the merger, there will be a significant increase in
Pegasus' management resources required to oversee a large number of employees
and business offices located in numerous foreign countries, while Pegasus'
senior management team will largely remain unchanged, which may further
complicate the combined company's ability to effectively manage its resources.
The combined company may also experience difficulties in handling the laws,
regulations and cultural differences associated with employing a large personnel
pool and operating offices in foreign countries.
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DUE TO THE UNCERTAINTIES RAISED BY THE MERGER TRANSACTION, SOME CUSTOMERS OF THE
COMBINED COMPANY COULD DELAY PURCHASING DECISIONS, OR CEASE DOING BUSINESS WITH
THE COMBINED COMPANY ALTOGETHER, WHICH COULD ADVERSELY AFFECT THE BUSINESS OF
THE COMBINED COMPANY.
Uncertainty in the marketplace or customer concern regarding the impact of
the merger could result in customers or potential customers of the combined
company deferring purchasing decisions, or ceasing to do business with the
combined company altogether, which could harm its business. As a result, the
near-term quarterly results of Pegasus could fail to meet the expectations of
investors and analysts.
THE MERGER WILL GREATLY INCREASE THE NUMBER OF FREELY TRADABLE PEGASUS SHARES,
WHICH COULD DRIVE DOWN THE PRICE OF PEGASUS STOCK.
With the issuance of the 3.99 million shares of Pegasus common stock in the
merger, the former stockholders of REZ hold approximately 16.4% of the
outstanding number of shares of common stock of Pegasus, based on the number of
shares of Pegasus common stock outstanding on February 29, 2000. Sales in the
public market of a substantial number of these shares shortly after the
completion of the merger could adversely affect the market price of the Pegasus
common stock. Further, any negative effect on the market price for Pegasus
common stock may not be limited by magnitude or period of time. The terms of
stockholder agreements executed by REZ stockholders that received approximately
97% of the shares issued in the merger contractually prohibit the resale of any
shares of Pegasus common stock for 30 days following the closing of the merger,
and subsequently restrict the resale of more than half of the shares for nine
months following the closing of the merger. Subject to these contractual
restrictions, all of the shares issued in the merger will be freely tradable in
the market.
REZ HAS REPORTED NET LOSSES IN MOST RECENT HISTORICAL PERIODS BEFORE THE MERGER,
AND IF THESE LOSSES CONTINUE THEY WOULD ADVERSELY AFFECT PEGASUS' FINANCIAL
PERFORMANCE AND CONDITION.
Before the closing of the merger, REZ incurred net losses for the years
ended December 31, 1998 and December 31, 1999. If the combined company is not
successful in reversing the performance of REZ's business operations, it would
have a negative impact on the overall business of the combined company. Further,
as a result of the purchase accounting treatment of the merger, non-cash charges
associated with the amortization of goodwill and other intangibles will
adversely affect the combined company's performance in future periods. These
negative factors may adversely affect the market price for Pegasus common stock
in the future.
DUE TO HISTORICALLY SLOWER REVENUE GROWTH AND LOWER OPERATING MARGINS OF THE
BUSINESS ACQUIRED THROUGH THE MERGER, THE FUTURE PERFORMANCE OF THE COMBINED
COMPANY'S BUSINESS COULD BE NEGATIVELY IMPACTED.
Before the closing of the merger, REZ has typically experienced slower
revenue growth and lower operating margins than Pegasus has historically
experienced. As a result, the combined company's business will likely experience
slower revenue growth and lower operating margins than that of Pegasus. If the
combined company's revenue growth and operating margins do not improve over the
previous operating performance of the business acquired through the merger, the
combined company's cash flow and operating revenue could be adversely affected.
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THE SUBSTANTIAL EXPENSES ASSOCIATED WITH THE MERGER COULD ADVERSELY AFFECT THE
FINANCIAL RESULTS OF THE COMBINED COMPANY.
Pegasus estimates that the aggregate costs and expenses that will be
incurred in connection with the merger will be approximately $11.0 million.
These costs will primarily relate to the costs associated with combining the
operations of the two companies and the fees of financial advisors, attorneys
and accountants. Although Pegasus believes that the costs will not exceed this
estimate, the estimate may be incorrect or unanticipated contingencies may occur
that substantially increase the costs of combining their operations. In
subsequent quarters, the combined company may incur additional charges to
reflect costs associated with the merger.
NON-CASH CHARGES ASSOCIATED WITH THE MERGER WILL REDUCE PEGASUS' EARNINGS IN THE
FUTURE, WHICH COULD ADVERSELY AFFECT PEGASUS' STOCK PRICE.
Pegasus expects to amortize approximately $269.6 million of acquired
intangible assets and goodwill over periods ranging from three to ten years,
which will negatively impact results of operations for the duration of the
applicable periods. The amortization expense relating to the intangible assets
and goodwill purchased in the merger will not be tax deductible. In addition,
Pegasus anticipates expensing the costs associated with in process research and
development, which will negatively impact results of operations in the quarter
in which the merger is completed. As a result, Pegasus' earnings per share will
be adversely affected, which may negatively affect the market price of Pegasus
common stock.
SOME OF THE COMBINED COMPANY'S CUSTOMERS MAY CEASE TO DO BUSINESS OR REDUCE THE
AMOUNT OF BUSINESS THAT THEY DO WITH THE COMBINED COMPANY, WHICH COULD CAUSE A
DECLINE IN THE COMBINED COMPANY'S REVENUES.
Since some of Pegasus' current customers compete with the businesses
acquired by Pegasus through the merger, and one of REZ's current customers is a
direct competitor of Pegasus, the merger may cause some of Pegasus' customers to
end or curtail their relationships with the combined company and seek
alternative vendors. Pegasus estimates that its customers that are direct
competitors of REZ accounted for approximately $600,000 of revenues in fiscal
1999, and REZ estimates that its customer that is a direct Pegasus competitor
accounted for approximately $900,000 of revenues in fiscal 1999. While the
combined company is working to minimize any negative impact the merger may have
in this regard, one or more customers of the combined company may use the merger
to end or curtail their relationships with the combined company, which could
have a material adverse effect on the business, operating results and financial
condition of the combined company.
THE COMBINED COMPANY MAY REQUIRE ADDITIONAL FINANCING TO MEET ITS FUTURE CAPITAL
AND OPERATIONAL REQUIREMENTS AND MAY FACE UNCERTAINTY IN OBTAINING FAVORABLE
FINANCING ALTERNATIVES.
If the liquidity and cash flow from operations of the combined company are
insufficient to meet its operating and capital requirements, the combined
company may have to seek additional financing, including public or private debt
or equity offerings which may be dilutive to current Pegasus stockholders. If
adequate funds are not available on acceptable terms, the combined company may
be unable to develop or enhance its services, take advantage of future
opportunities or respond to competitive pressures or unanticipated requirements.
The combined company's future capital requirements will depend on numerous
factors, including the combined company's profitability, operational cash
requirements, competitive pressures, development of new services and
applications, acquisition of complementary businesses or technologies and
response to unanticipated requirements. There can be no assurance that any
financing alternatives sought by the combined company will be available, or, if
available, will be on terms or in amounts attractive to the combined company.
PEGASUS IS GROWING RAPIDLY AND MAY NOT HAVE THE RESOURCES TO EFFECTIVELY MANAGE
ADDITIONAL GROWTH.
The recent growth and potential future growth of Pegasus has placed
significant demands on its management as well as on its administrative,
operational and financial resources. The expansion of the combined company's
business to take advantage of new market opportunities will require significant
management attention and financial resources. To manage additional growth the
combined company may be required to:
o Expand its sales, marketing and customer support organizations
o Attract and retain additional qualified personnel
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o Expand its physical facilities
o Invest in the development or enhancement of its current services and
develop new services that meet changing industry needs
o Develop systems, procedures or controls to support the expansion of its
operations
An inability on the part of the combined company to sustain or manage any
additional growth could have a material adverse effect on the business,
operating results and financial condition of the combined company.
BECAUSE A LARGE PORTION OF THE COMBINED COMPANY'S EXPENSES WILL BE RELATIVELY
FIXED AND THE COMBINED COMPANY CANNOT ACCURATELY PREDICT THE COMPETITIVE
ENVIRONMENT THAT THE COMBINED COMPANY WILL FACE, UNEXPECTED REVENUE SHORTFALLS
AND QUARTERLY VARIATIONS MAY ADVERSELY AFFECT THE BUSINESS OF THE COMBINED
COMPANY.
The expense levels of the combined company, a large portion of which are
relatively fixed, are based primarily on estimates of future revenues. In the
future, the combined company may not accurately predict the introduction of its
new or enhanced services or those of its competitors, or the degree of customer
acceptance of new services. The combined company also may be unable to adjust
spending rapidly enough to compensate for any unexpected revenue shortfall. In
addition, Pegasus' past and future operating results vary significantly from
quarter to quarter due to a variety of factors, many of which are outside its
control. It is likely that in one or more future quarters Pegasus' results may
fall below the expectations of securities analysts and investors. Due to the
relatively fixed nature of the combined company's costs, and because operating
costs are based on anticipated revenues, a decline in revenue from even a
limited number of transactions, failure to achieve expected revenue in any
fiscal quarter or unanticipated variation in the recognition of revenues may
cause significant variations in operating results from quarter to quarter. This
could have a material adverse effect on the business, operating results and
financial condition of the combined company. The combined company believes that
period-to-period comparisons of its past operating results should not be relied
upon as an indication of future performance of the combined company.
LOSS OF THE COMBINED COMPANY'S ARRANGEMENTS WITH KEY CUSTOMERS OR THIRD-PARTY
SERVICE PROVIDERS COULD ADVERSELY AFFECT ITS BUSINESS.
The business of the combined company will be dependent upon its customer
arrangements with hotel chains, independent hotels, hotel representation firms,
hotel management companies, travel agencies, travel agency consortia, global
distribution systems and Internet-based information and reservation providers.
If the combined company is unable to renew, extend or enter into contracts or
arrangements with its current or future customers or with alternate service
providers on favorable terms or initiate new terms, it could harm the business
operations of the combined company. For instance, the combined company relies on
third parties to provide remittance and worldwide currency exchange services,
and for facility maintenance and disaster recovery services for the computer and
voice/data communications systems used in all of its services. Further, neither
Pegasus nor REZ has entered into written agreements with most of the travel
agencies relating to Pegasus Commission Processing or REZ's financial services.
CLAIMS MADE BY REZ CUSTOMERS COULD LEAD TO THE LOSS OF THOSE CUSTOMERS OR TO
LITIGATION.
Several important REZ customers, including several national hotel chains,
have within the last two years asserted breach of their respective customer
contracts. REZ did not believe that it was in breach of these contracts. In each
of these cases, REZ believed that
o the customer asserted the claim in the hope that it could re-open
contract negotiations, or
o the customer has misinterpreted the contract, or
o REZ has resolved any potential breach in accordance with the remedies
provisions contained in the contract.
If the combined company does not satisfactorily address these or similar future
customer situations, any customer dispute could lead to loss of the customer and
litigation which, if decided against the combined company, could be material and
adverse to business, operating results and financial condition of the combined
company.
THE COMBINED COMPANY WILL DEPEND ON ITS ABILITY TO EFFECTIVELY DEVELOP NEW
TECHNOLOGIES AND SERVICES TO MEET THE CHANGING INDUSTRY STANDARDS, PRACTICES AND
CUSTOMER NEEDS ASSOCIATED WITH THE RAPIDLY CHANGING AND INTENSELY COMPETITIVE
HOTEL INDUSTRY.
The combined company will depend, in part, on its ability to develop
leading technologies, enhance its existing services and develop and introduce
new technologies and services to meet the needs of the combined company's
customers. The combined company also must continue to meet the demands of
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. Although the combined company will strive to be a
technological leader, future technology advances may not complement or be
compatible with its services. In addition, the combined company may be unable to
economically and timely incorporate technology changes and technology advances
into its business. The combined company may be unsuccessful in effectively using
new technologies, adapting its services to emerging industry standards or
developing, introducing and marketing service enhancements or new services. The
combined company may also experience difficulties that could delay or prevent
the successful development, introduction or marketing of these services. If the
combined company is unable to develop and introduce new services or enhance
existing services on a timely and cost-effective basis or if new services do not
achieve market acceptance, it could have a material adverse effect on the
business, operating results and financial condition of the combined company.
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<PAGE> 13
THE COMBINED COMPANY'S OPERATIONS DEPEND ON THE EXPERIENCE OF KEY PERSONNEL AND
ITS ABILITY TO RETAIN, ATTRACT, AND INTEGRATE THE KEY PERSONNEL OF PEGASUS AND
REZ.
The combined company's business operations depends on the continued
services of its executive officers and other key personnel, including John F.
Davis, III and Joseph W. Nicholson. The combined company may be unable to retain
the key personnel of Pegasus or REZ or attract other qualified personnel. The
future operations of the combined company depends upon the ability of the
combined company to retain, attract and integrate key management personnel. Even
though Pegasus currently has "key-man" insurance covering Messrs. Davis and
Nicholson, this insurance may not adequately compensate the combined company for
the loss of their services.
Competition for highly-skilled personnel is intense in the industry in
which the combined companies operate. You cannot be assured that the combined
company will be able to successfully identify, attract, hire and retain other
highly-skilled personnel in a timely and effective manner. During the
integration phase, competitors may intensify their efforts to recruit key
employees. The loss of services of any of the key members of the combined
company's management team, the failure to attract and retain other key personnel
or recruit new personnel could disrupt operations and have a negative effect on
employee productivity and morale of the combined company.
RECENT RESIGNATIONS BY SEVERAL REZ OFFICERS BEFORE THE MERGER AND SEVERANCE
PAYMENTS TO VARIOUS REZ OFFICERS MAY HARM THE COMBINED COMPANY.
REZ's chief financial officer and chief sales and marketing officer have
recently resigned, and it is anticipated that REZ's president and chief
executive officer will remain in the employ of the combined company for only 60
days following the merger. The vacancies created by these departures may
adversely affect the integration of the combined company. In addition, some
officers of REZ may be entitled to receive severance payments under the terms of
their respective employment and other agreements. There can be no assurance that
these officers will remain with the combined company.
AS NEARLY ALL OF THE COMBINED COMPANY'S REVENUES ARE DERIVED FROM THE HOTEL
INDUSTRY, A DOWNTURN IN THE HOTEL INDUSTRY WOULD LIKELY ADVERSELY AFFECT THE
COMBINED COMPANY'S BUSINESS.
Nearly all of the combined company's revenues are directly or indirectly
dependent on the hotel industry. The hotel industry could experience rapid and
unexpected downturns. In the event of a downturn in the hotel industry, the
combined company would likely experience significantly reduced demand for its
services and solutions. Any significant downturn in the hotel industry or any
reduction in the demand for hotel rooms and travel generally, would negatively
impact the combined company's revenues and financial condition. For instance,
the hotel industry is highly sensitive to any change in the economic conditions
affecting business or leisure travel as well as other unforeseen events. Many
factors affect the hotel industry, most of which are beyond the control of the
combined company. The hotel industry and demand for hotel rooms or travel may be
affected by, among other things:
o Political instability
o Regional hostilities
o Recession
o Gasoline price escalation
o Inflation
o Any event resulting in significant decreases in demand for hotel rooms
or travel
o Any decrease in hotel room reservation volumes, which may result from
increased competition among hotels
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<PAGE> 14
o A decrease in the average hotel room rate
The combined company may experience substantial period-to-period
fluctuations in its results of operations as a consequence of these industry
patterns and the general economic conditions affecting the demand for hotel
rooms and travel.
REDUCTIONS IN HOTEL COMMISSION PAYMENTS WOULD REDUCE THE COMBINED COMPANY'S
REVENUES AND NET INCOME DERIVED FROM THESE PAYMENTS.
Pegasus Commission Processing and Paycom services derive revenues based on
the dollar value of travel agency commissions paid by hotels. If there is any
change in the commission payment process or any increase in the direct
distribution of rooms by hotels, the combined company's revenues and net income
derived from its commission processing services could substantially decrease.
Hotels typically are under no contractual obligation to pay room reservation
commissions to travel agencies. Hotels could elect to reduce the current
customary commission rate of 10%, limit the maximum commission generally paid
for a hotel room reservation or eliminate commissions entirely. For example,
Marriott Hotels, a significant Pegasus customer, has required travel agencies to
complete a training course and to sign an agreement in order to continue to
receive a 10% commission after November 15, 1999. Failure to do so may result in
the travel agency receiving reduced commissions. 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. Any change in the process affecting the way the combined
company derives revenues could have a material adverse effect on the business,
operating results and financial condition of the combined company.
RAPID CONSOLIDATION IN THE HOTEL INDUSTRY COULD LOWER THE VALUE OF SERVICES
PROVIDED BY THE COMBINED COMPANY.
The combined company will offer volume-based discounting of its fees. The
recent consolidation of the hotel industry has resulted in a higher percentage
of discounted fees, and this trend could continue. In addition, the global
distribution system industry has consolidated into four major global
distribution systems. If further consolidation occurs, the value of the
combined company's services and the benefits to hotel operators of utilizing the
GDS distribution service would be reduced. Any potential decrease in the
combined company's customer base or any potential increase in the percentage of
discounted fees may have a material adverse effect on the business, operating
results and financial condition of the combined company.
THE COMBINED COMPANY'S LIMITED EXPERIENCE IN MANAGING AND INTEGRATING
ORGANIZATIONS MAY RESULT IN FUTURE ACQUISITIONS OR JOINT VENTURES BEING
DIFFICULT AND DISRUPTIVE.
The combined company expects to make acquisitions of other companies or
technologies or enter into joint ventures. These acquisitions or joint ventures
may divert the time and resources of the combined company's management. Further,
Pegasus has limited experience in integrating newly acquired organizations into
its operations. Acquisitions involve many risks, including:
o Difficulty in integrating or otherwise assimilating technologies,
products, personnel and operations
o Diversion of management's attention from other business concerns
o Issuance of dilutive equity securities and incurrence of debt or
contingent liabilities
o Large write-offs and amortized expenses related to goodwill and other
intangible assets
o Loss of key employees of acquired organizations
o Risks of entering markets in which the combined company has no or
limited prior experience
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<PAGE> 15
o Payments of cash, incurrence of debt or assumption of other liabilities
to acquire other businesses
The result of one or more of these factors could have a material adverse
effect on the business, operating results and financial condition of the
combined company.
THE COMBINED COMPANY'S COMPUTER SYSTEMS AND DATABASES MAY SUFFER SYSTEM
FAILURES, BUSINESS INTERRUPTIONS OR SECURITY RISKS.
The combined company's operations will depend 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 its control. A significant amount of the combined company's
computer equipment is located at a single site in Phoenix, Arizona. Any
unanticipated problems may cause a significant system outage or data loss.
Despite the implementation of security measures, the combined 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 combined
company's databases, failure of communication links, security breach or other
loss that causes interruptions in its operations could have a material adverse
effect on the business, operating results and financial condition of the
combined company.
THE COMBINED COMPANY WILL BE DEPENDENT TO A SUBSTANTIAL DEGREE ON INTERNET
COMMERCE FOR ITS FUTURE GROWTH.
The future growth of the combined company's Internet-based distribution
services depends on the viability of the Internet as a channel for distributing
services and products. The combined company's services depend on the expansion
of the Internet infrastructure to enable the Internet to support the future
demand created by expected growth. Participants in the Internet industry may
fail to develop necessary infrastructure or complementary services and products,
such as high speed modems and high speed communication lines. In addition, there
are critical issues concerning the commercial use of the Internet that remain
unresolved, including issues relating to security, reliability, cost, ease of
use, accessibility and quality of service. If the issues concerning the
commercial use of the Internet are not resolved favorably, it could have a
material adverse effect on the business, operating results and financial
condition of the combined company.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD FORCE THE COMBINED COMPANY
TO CHANGE ITS OPERATIONS.
Although several aspects of the travel industry are heavily regulated by the
United States and other governments, the combined company does not believe the
services that it expects to offer are currently subject to any material
industry-specific government regulation. Any future regulations implemented by
federal, state or foreign governmental authorities affecting one or more of the
combined company's current or future services could have a material adverse
effect on the operations of the combined company.
The combined company's primary customers consist of hotel chains, hotel
representation firms, independent hotels, hotel management companies and travel
agencies. Although some of Pegasus' stockholders are customers, the combined
company expects to operate as an entity independent from its stockholders. Any
federal, state or foreign governmental authorities, the competitors or the
consumers of the combined company raising any anti-competitive concerns
regarding the combined company's relationship with its stockholders that are
customers could institute an action against the combined company. Any such
action by federal, state or foreign governmental authorities or allegations by
third parties could have a material adverse effect on the business, operating
results and financial condition of the combined company.
THE OPERATIONS OF THE COMBINED COMPANY COULD BE SUBJECT TO NEW LAWS AND
REGULATIONS RELATING TO THE INTERNET.
The combined company will be subject to the same federal, state, local and
foreign laws as other companies conducting business on the Internet. Today there
are relatively few laws specifically directed towards online services. However,
due to the increasing popularity and use of the Internet and online services, it
is possible that laws and regulations will be adopted with respect to the
Internet or online services. The vast majority of these laws were adopted
prior to the advent of the Internet and related technologies and, as a result,
do not contemplate or address the unique issues of the Internet and related
technologies. Those laws that do reference the Internet have not yet been
thoroughly interpreted by the courts and their applicability and reach are
therefore uncertain. These laws and regulations could cover issues such
as online contracts, user privacy, freedom of expression, pricing, fraud,
content and quality of products and services, taxation, advertising,
intellectual property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain.
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NEW LEGISLATION AND GOVERNMENTAL REGULATION OF PRIVACY ISSUES RELATING TO THE
INTERNET COULD AFFECT THE COMBINED COMPANY'S OPERATIONS.
Changes to existing laws or the passage of new laws intended to address
privacy issues relating to the Internet could directly affect the way the
combined company will do business and could create uncertainty in the
marketplace. Several states within the United States have proposed legislation
that would limit the uses of personal user information gathered online or
require online services to establish privacy policies and some foreign
jurisdictions have adopted similar legislation. The United States Federal Trade
Commission also has recently settled a proceeding with one online service
regarding the manner in which personal information is collected from users and
provided to third parties. This could reduce demand for the combined company's
services, increase the cost of doing business as a result of litigation costs or
increased service delivery costs, or otherwise harm its business.
THE COMBINED COMPANY MAY BE SUBJECT TO PENALTIES FOR FAILING TO PROPERLY QUALIFY
AS A FOREIGN CORPORATION IN VARIOUS JURISDICTIONS DUE TO ITS OPERATIONS AS AN
INTERNET COMPANY.
Since the combined company's services will be accessible worldwide, foreign
jurisdictions may require that the combined company comply with their laws. The
combined company's failure to comply with foreign laws could subject it to
penalties ranging from fines to bans on the combined company's ability to offer
its services. In the United States, companies are required to qualify as foreign
corporations in states where they are conducting business. As an Internet
company, it is unclear in which states the combined company is actually
conducting business. The combined company's failure to qualify as a foreign
corporation in a jurisdiction where it is required to do so could subject it to
taxes and penalties for the failure to qualify and could result in its inability
to enforce contracts in those jurisdictions. Any new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to the combined company's business, could adversely affect its
business, operating results and financial condition.
THE COMBINED COMPANY'S INTERNATIONAL OPERATIONS WILL MAKE IT SUSCEPTIBLE TO
GLOBAL ECONOMIC FACTORS, FOREIGN TAX LAW ISSUES, FOREIGN BUSINESS PRACTICES AND
CURRENCY FLUCTUATIONS.
Before completion of the merger, Pegasus had little experience outside of
the United States. The combined company's international operations will be
subject to particular risks, including:
o Pegasus' inexperience in managing foreign operations
o Difficulties and costs of managing and staffing foreign operations
o Costs associated with the termination of any foreign employees
o Impact of possible adverse political and economic conditions
o Fluctuations in the value of the U.S. dollar relative to other
currencies and among foreign currencies
o Potentially adverse tax consequences
o Impact of the policies of the United States and foreign governments on
foreign trade
o Reduced protection for intellectual property rights in some countries
o Unexpected changes in regulatory requirements
o Cost of adapting the Pegasus services to foreign markets
If the combined company does not realize the expected results from
international operations, it could have a material adverse effect on the
business, operating results and financial position of the combined company.
THE COMBINED COMPANY MAY BE UNABLE TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS
OR PREVENT THEIR UNAUTHORIZED USE, WHICH COULD DIVERT ITS FINANCIAL RESOURCES
AND HARM ITS BUSINESS.
The combined company's success will depend upon its proprietary technology.
The combined company
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<PAGE> 17
currently relies upon a combination of copyright, trademarks, trade secrets,
confidentiality procedures and contractual provisions to protect this
proprietary technology. Despite current efforts to protect these proprietary
rights, these protective measures may not be adequate to prevent
misappropriation or independent third-party development of the combined
company's technology. Many foreign jurisdictions offer less protection of
intellectual property rights than the United States. Effective copyright,
trademark and trade secret protection may not be available in other
jurisdictions. In addition, the combined company may need to litigate claims
against third parties to enforce its intellectual property rights, protect its
trade secrets, determine the validity and scope of the proprietary rights of
others or defend against claims of infringement or invalidity. This litigation
could result in substantial cost and diversion of management resources. A
successful claim against the combined company could effectively block its
ability to use or license its technology in the United States or abroad. If the
combined company cannot adequately protect its proprietary rights, it could have
a material adverse effect on the business, operating results and financial
condition of the combined company.
THE COMBINED COMPANY RELIES ON TECHNOLOGY LICENSES FROM THIRD PARTIES, THE LOSS
OF WHICH MAY HARM THE COMBINED COMPANY'S ABILITY TO DEVELOP AND SELL ITS
SERVICES.
The combined company currently has, and in the future may procure, licenses
from third parties relating to its services or technology. The combined
company's inability to obtain or maintain these licenses could impair its
ability to develop and sell its services. The combined company's competitors may
obtain licenses with lower royalty obligations or other terms more favorable
than those received by the combined company. If the combined company or its
suppliers are unable to obtain licenses, the combined company could be forced to
market services without some technological features. The combined company also
licenses some software and technology for their operations. The combined
company's inability to obtain licenses or its inability to obtain such licenses
on competitive terms could have a material adverse effect on the business,
operating results and financial condition of the combined company.
THE COMBINED COMPANY MAY LOSE MARKET SHARE AND BE REQUIRED TO REDUCE PRICES AS A
RESULT OF ITS INTENSELY COMPETITIVE MARKETS.
The combined company will compete in markets that are rapidly evolving,
intensely competitive and involve continually changing technology and industry
standards. The combined company may not be successful in competing against its
current and future competitors. The competitors of the combined company may be
able to respond more quickly to new or emerging technologies, services or
changes in customer requirements. The combined company may experience increased
competition from current and potential competitors, many of which have
significantly greater financial, technical, marketing and other resources than
the combined company does. Other participants in the hotel room distribution
process, commission processing, business information, hotel representation
service, hotel branding service, technology service, and hotel property
management system sectors, as well as new competitors, could create services and
applications that are more attractive than the services and applications of the
combined company. Competitive pressures could reduce market share of the
combined company or require it to reduce the prices of its services. An
inability to compete effectively with these services could have a material
adverse effect on the business, operating results and financial condition of the
combined company.
POTENTIAL YEAR 2000 ISSUES MAY EXPOSE THE COMBINED COMPANY TO LIABILITY OR LOSS.
The combined company did not experience any material adverse impact from the
transition to the year 2000. Even though no material adverse impact from the
year 2000 transition has been noted through internal investigations and
inquiries with its major customers and suppliers, the combined company cannot
provide any assurance that its suppliers and customers have not been affected in
a manner that is not yet apparent. The combined company will continue to monitor
its year 2000 compliance and the year 2000 compliance of its suppliers and
customers. The combined company's inability to effectively process electronic
hotel reservations, manage hotel room inventory or consolidate hotel commissions
as a result of year 2000 problems could have a material adverse affect on its
ability to generate revenues from its services.
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THE STOCK PRICE OF PEGASUS HAS BEEN AND MAY CONTINUE TO BE EXTREMELY VOLATILE
DUE TO MANY FACTORS, WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO RESELL SHARES
WHEN YOU WANT TO AT PRICES YOU FIND ATTRACTIVE.
Several factors have caused the stock price of Pegasus common stock to be
and in the future may be extremely volatile. The Pegasus stock price could be
subject to wide fluctuations in response to a variety of factors, including the
following:
o Actual or anticipated variations in quarterly operating results
o The ability of the combined company to successfully develop, introduce
and market new or enhanced products on a timely basis
o Changes in demand for the combined company's services and solutions due
to the fixed nature of a large portion of the combined company's
expenses
o Unpredictable volume and timing of customer revenues due to seasonality
in the travel industry, the terms of customer contracts and other
factors
o Purchasing and payment patterns
o The pricing policies of the combined company's competitors
o Announcements of technological innovations or new services by the
combined company or its competitors
o Conditions or trends in the Internet and online commerce industries
o Changes in the market valuations of other similarly situated companies
o Developments in Internet regulations
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o Announcements by the combined company or its competitors of significant
acquisitions, strategic partnerships, joint ventures or capital
commitments
o Market fluctuations and performance of the hotel industry
o Unscheduled system downtime
In addition, the trading prices of Internet stocks in general have
experienced extreme price and volume fluctuations. Any negative change in the
public's perception of the prospects of Internet or e-commerce companies or
other broad market and industry factors could depress the market price of
Pegasus common stock, regardless of the combined company's operating
performance. Market fluctuations, as well as general political and economic
conditions, such as recession or interest rate or currency rate fluctuations,
also may decrease the market price of Pegasus' common stock.
LITIGATION MAY DIVERT THE COMBINED COMPANY'S RESOURCES AND REDUCE THE MARKET
PRICE OF PEGASUS COMMON STOCK.
In some instances, following declines in the market price of a company's
securities, securities class-action litigation often has been instituted
against that company. Litigation of this type, if instituted against the
combined company, could result in a decline in the Pegasus stock price, and
could result in substantial costs and a diversion of management's attention and
resources, which could reduce the combined company's operating revenue.
PROVISIONS IN PEGASUS' CHARTER AND BYLAWS MAY DETER POTENTIAL ACQUISITION BIDS,
INCLUDING BIDS WHICH MAY BE BENEFICIAL TO ITS STOCKHOLDERS.
Provisions of Pegasus' certificate of incorporation and bylaws could make it
more difficult for a third party to acquire it, even if doing so would be
beneficial to Pegasus' stockholders. Pegasus' certificate of incorporation and
bylaws provide for a classified 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. Pegasus' certificate of
incorporation also authorizes only the board of directors to fill director
vacancies, including newly created directorships, and states that directors may
be removed only for cause and only by the affirmative vote of holders of at
least two-thirds of the outstanding shares of Pegasus' voting stock voting
together as a single class. These provisions could discourage potential
acquisition proposals and could delay or prevent a change in control
transaction. They could also discourage others from making tender offers for
Pegasus' shares. As a result, these provisions may prevent the market price of
Pegasus' common stock from reflecting the effects of actual or rumored takeover
attempts. These provisions may also prevent significant changes in Pegasus'
board of directors and its management.
PEGASUS' STOCKHOLDER RIGHTS PLAN MAY DISCOURAGE A THIRD PARTY FROM ACQUIRING
CONTROL OF THE COMBINED COMPANY.
On September 28, 1998, the Pegasus board of directors adopted a stockholder
rights plan and declared a dividend distribution of one right for each
outstanding share of Pegasus' common stock to stockholders of record at the
close of business on October 13, 1998. The number of rights associated with
shares of common stock has been proportionately adjusted for the stock split
effected in January 2000. This stockholder rights plan may discourage or
increase the difficulty for a third party to acquire control of the combined
company. In addition, each share of common stock issued in connection with the
merger will be coupled with a right under the stockholder rights plan. Each
right entitles the registered holder to purchase from Pegasus one-one thousandth
of a share of its Series A Preferred Stock for each share of Pegasus
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common stock held, at a price of $90. The rights are exercisable only if a
person or group of affiliated persons acquires, or has announced the intent to
acquire, 20% or more of the Pegasus common stock.
DELAWARE LAW MAY DETER POTENTIAL ACQUISITION BIDS FOR PEGASUS' BUSINESS,
INCLUDING BIDS THAT MAY BE BENEFICIAL TO ITS STOCKHOLDERS.
Pegasus is subject to the provisions of Delaware law which restrict some
mergers with interested stockholders even if such a combination would be
beneficial to stockholders. These provisions may inhibit a non-negotiated merger
or other merger. The anti-takeover provisions of the Delaware General
Corporation Law prevent Pegasus from engaging in a "merger" with any "interested
stockholder" for three years following the date that the stockholder became an
interested stockholder. For purposes of Delaware law, a "merger" includes a
merger or consolidation involving Pegasus and the interested stockholder and the
sale of more than 10% of the combined company's assets. In general, Delaware law
defines an "interested stockholder" as any entity or person beneficially owning
more than 15% of the outstanding voting stock of a corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.
Under Delaware law, a Delaware corporation may opt out of the anti-takeover
provisions. Pegasus does not intend to opt out of these anti-takeover
provisions.
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USE OF PROCEEDS
The selling stockholders are offering all of the shares of common stock
offered by this prospectus for their own accounts. Pegasus will not receive any
of the proceeds from the sale of these shares.
SELLING STOCKHOLDERS
The selling stockholders received the shares of common stock listed
below in connection with a merger transaction pursuant to which we acquired REZ,
Inc. In connection with this merger, an Agreement and Plan of Merger, as
amended, dated November 16, 1999, was executed by REZ, Inc., its majority
stockholder, us, Pegasus Worldwide, Inc., and the escrow agent, which provides,
among other matters, for two escrow arrangements whereby the selling
stockholders place in escrow some shares issued to each of them in the merger
for a possible post-closing adjustment to the merger consideration in favor of
us, as well as some additional shares placed in escrow as collateral for
specified indemnification obligations under the merger agreement. Pursuant to
the terms and conditions of the Agreement and Plan of Merger, a portion of the
shares held in escrow, as set forth in the table below, will be released to the
appropriate stockholders if and to the extent available after satisfying any
post-closing adjustment in favor of us, and the remainder will be released to
the appropriate stockholders to the extent shares are not necessary to satisfy
any indemnification claim we may assert. The selling stockholders may not sell
the shares held in connection with each escrow arrangement until the respective
shares are released from escrow. In addition, the terms of stockholder
agreements executed by REZ stockholders in connection with the merger
contractually prohibit the resale of shares of Pegasus common stock for 30 days
following the closing of the merger, and subsequently restrict the resale of a
portion of the shares for nine months following the closing of the merger.
Set forth below is information with respect to the selling
stockholders, as of the date of this prospectus, including:
o The number of shares issued to each selling stockholder in connection with
the merger, exclusive of the shares held for purposes of each escrow
arrangement described above
o The applicable number of shares held for purposes of each escrow arrangement
for each selling stockholder
o The total number and approximate percentage of shares beneficially owned by
each selling stockholder prior to the offering, including all shares held in
escrow
o The total number of shares that may be sold under this prospectus, including
all shares held in escrow
o Any material relationship that each of the selling stockholders has with us,
whether directly or through our affiliation with REZ, Inc.
The calculations set forth below assume (1) that there will be
34,539,929 outstanding shares of REZ common stock on the closing date of the
merger, which further assumes all REZ option holders will elect to receive a
cash payment for all of their outstanding options to purchase shares of REZ
common stock, and (2) all escrowed shares of our common stock
will ultimately be distributed to the selling stockholders. In addition, the
percentage of outstanding shares of our common stock is based on 24,343,135
shares outstanding as of February 29, 2000, after giving effect to the issuance
of 3.99 million shares of our common stock in the merger.
The selling stockholders will not own any shares of our common stock
after the completion of this offering, except that Messrs. Castleberry and
Schnabel will own 3,000 shares and 6,000 shares, respectively, assuming all
shares of common stock offered pursuant to this prospectus are sold and the
selling stockholders do not engage in any transaction involving our common stock
through the closing of the merger. There can be no assurance that all or any of
the shares offered by this prospectus will be sold. Unless otherwise indicated,
each selling stockholder has sole voting power and investment power with respect
to these shares. The address of the selling stockholders listed below is c/o
REZ, Inc., 7500 N. Dreamy Draw Drive, Suite 120, Phoenix, Arizona 85020, except
as otherwise indicated.
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SHARES BENEFICIALLY OWNED PRIOR TO THE OFFERING(1)
<TABLE>
<CAPTION>
Number of
Number of Shares Held Number of Shares
Shares in Escrow Held in Total Number of
Received at for Post- Escrow for Number of Shares Offered Relationship
Name of the Selling the Closing Closing Indemnification Owned By This to
Stockholder of the Merger Adjustment Obligations Shares Percent Prospectus REZ, Inc.
------------------- ------------- ----------- --------------- --------- ------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
UTELL INTERNATIONAL 2,224,006 37,320 102,632 2,363,958 9.7% 2,363,958 Stockholder
GROUP LTD. (2)
MORGAN STANLEY 267,037 4,481 12,323 283,841 1.2 283,841 Stockholder
VENTURE PARTNERS II,
L.P. (3)
REED ELSEVIER INC. 250,201 4,198 11,546 265,945 1.1 265,945 Stockholder
(2)
TRIDENT CAPITAL, 233,302 3,915 10,766 247,983 1.0 247,983 Stockholder
INC. (4)
W. THOMAS 74,908 1,257 3,456 82,621 * 79,621 Vice Chairman
CASTLEBERRY (5) of the Board
and Director
ROCKWELL SCHNABEL 72,671 1,219 3,353 83,243 * 77,243 Director
C. JOSEPH ATTERIDGE 63,153 1,059 2,914 67,126 * 67,126 Former Chief
(6) Sales and
Marketing
Officer and
Director
VERNON L. SNIDER 22,141 371 1,021 23,533 * 23,533 Former Executive
Vice President,
Corporate
Development
------------- ----------- --------------- --------- ------- --------------
TOTAL 3,207,419 53,820 148,011 3,418,250 14.0% 3,409,250
------------- ----------- --------------- --------- ------- --------------
</TABLE>
- -----------------
* Less than one percent
(1) The shares of common stock offered by this prospectus are estimated based
on each selling stockholder's pro rata ownership of the outstanding common
stock of REZ as of February 29, 2000.
(2) Utell International Group, Ltd. and Reed Elsevier Inc. are wholly owned
subsidiaries of Reed Elsevier plc, and collectively owned a majority of the
common stock of REZ. References in this prospectus to "Reed Elsevier" refer
to Reed Elsevier plc and its subsidiaries, as well as the affiliates of
these entities. The address for Reed Elsevier Inc. and Utell International
Group is 275 Washington Street, Newton, Massachusetts 02458.
(3) Represents 1,627,303, 422,344 and 405,422 shares owned of record by Morgan
Stanley Venture Capital Fund II, L.P., Morgan Stanley Venture Investors L.P.
and Morgan Stanley Venture Capital Fund II, C.V, respectively. Morgan
Stanley Venture Partners II, L.P. is the general partner of each of these
funds and therefore deemed the beneficial owner of the shares owned by each
fund. The address for Morgan Stanley Venture Partners II, L.P. is 3000 Sand
Hill Road, Bldg. 4, Suite 250, Menlo Park, California 94025.
(4) Represents 468,262, 276,900 and 1,399,762 shares owned of record by Trident
Capital Partners REZsolutions Fund, L.P., Trident Capital Partners Fund - I,
C.V., and Trident Capital Partners Fund - I, L.P., respectively, for which
Trident Capital, Inc. is deemed to be the beneficial owner. The address for
Trident Capital, Inc. is 2480 Sand Hill Road, Suite 100, Menlo Park,
California 94025.
(5) Held of record by W. Thomas Castleberry and Jean Castleberry, Trustees of
the JTC Revocable Trust.
(6) Held of record by C. Joseph Atteridge and Sheri Atteridge, as
tenants-in-common.
22
<PAGE> 23
CERTAIN RELATIONSHIPS WITH THE SELLING STOCKHOLDERS
Reed Elsevier and REZ are parties to numerous business arrangements including
those described below, some of which will continue in the future. We believe
these arrangements are on an arms-length basis and are on terms no less
favorable to us than could have been obtained from unrelated third parties.
o REZ leases an employee in Toronto, Canada from Reed Elsevier
o Reed Elsevier has an employee lease and service agreement with REZ
for Mexican employees, but no employees are currently leased under
this agreement
o Reed Elsevier subleases a facility from REZ in Italy and in London,
England
o Reed Elsevier has a premises license from REZ in Mexico
o REZ leases space from Reed Elsevier in Dusseldorf, Germany
Pegasus has granted to Reed Elsevier a license to use the Ultraswitch
technology in connection with operations unrelated to the hotel industry. As a
part of this licensing arrangement, Reed Elsevier agreed to not compete with the
services provided by us using the Ultraswitch technology.
We have granted to Reed Elsevier the right to nominate a person to
serve on our board of directors.
REZ, its predecessors and several affiliates of REZ, including Reed
Elsevier and its affiliates have been our stockholders at various times over the
years and in some cases continue to be our stockholders. In connection with our
initial public offering in August 1997, Reed Travel Group, an affiliate of Reed
Elsevier, sold 192,900 shares of our stock and REZ's predecessor sold 34,800
shares of our stock, all at a net price (after underwriting discount) of $8.06
per share. In connection with our secondary public offering in February 1998,
REZ, Reed Elsevier and entities affiliated with Rockwell A. Schnabel sold
313,200, 355,595 and 1,034,948 shares of our common stock, respectively, all at
a net price (after underwriting discount) of $11.00 per share.
During 1996 and 1997, Reed Travel Group provided us with a loan
composed of principal and interest in the approximate amount of $4,536,482. We
paid Reed Travel Group principal and accrued interest on the loan in the
approximate amount of $441,241 and $4,524,941 during the years ended December
31, 1996 and December 31, 1997, respectively. We repaid all the outstanding
amount relating to this loan with a portion of the proceeds from our initial
public offering of common stock at an interest rate of prime plus 2%. The
maturity date for the loan was June 30, 2001. Prime means the prime rate of
interest published in The Wall Street Journal.
Rockwell A. Schnabel, a former director of REZ, served on our board of
directors from September 1996 to July 1998. Mr. Schnabel owns 3,000 shares of
our common stock obtained through the exercise of our options granted at an
exercise price of $10.20 per share to him while serving as our director.
Tom Castleberry, a former director of REZ and our former director owns
6,000 shares of our common stock held in a trust managed by Fiduciary Trust of
California.
Pegasus intends to refinance a revolving bank line of credit of REZ,
which is currently guaranteed by Reed Elsevier. As of March 27, 2000, there was
an outstanding balance of approximately $7 million on this line of credit.
Following completion of the refinancing, Reed Elsevier will no longer be
obligated with respect to the indebtedness underlying the bank line of credit.
23
<PAGE> 24
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholders. As used in this prospectus, "selling
stockholders" includes donees and pledgees selling shares received from a named
selling stockholder after the date of this prospectus. The selling stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The selling stockholders may sell the shares being
offered hereby on the Nasdaq National Market, or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
at negotiated prices. Shares may be sold by one or more of the following means
of distribution:
o Block trades in which the broker-dealer so engaged will attempt to
sell such shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction;
o Purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
o Over-the-counter distributions in accordance with the rules of the
Nasdaq National Market;
o Ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
o Privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of such shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealer or other financial
institutions. In connection with such transactions, broker-dealer or other
financial institutions may engage in short sales of our common stock in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also sell our common stock short and redeliver the
shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of the shares offered hereby, which shares such broker-dealer or
other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction). The selling stockholders
may also pledge such shares to a broker-dealer or other financial institution,
and, upon a default, such broker-dealer or other financial institution may
effect sales of such pledged shares pursuant to this prospectus (as supplemented
or amended to reflect such transaction). In addition, any such shares that
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this prospectus.
In effecting sales, brokers, dealers or agents engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales, and any such commissions, discounts or concessions may be
deemed to be underwriting discounts or commissions under the Securities Act of
1933. The selling stockholders have advised us that they have not entered into
any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling stockholders.
In order to comply with the securities laws of certain states, if
applicable, the shares being offered hereby must be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states such shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and there has been compliance thereof.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934 may apply to
sales of shares in the market and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus
available to the selling stockholders and have informed them of the need for
delivery of copies of this prospectus to purchasers at or prior to
24
<PAGE> 25
the time of any sale of the shares offered hereby. The selling shareholders may
indemnify any broker-dealer that participates in transactions involving the sale
of the shares against certain liabilities, including liabilities arising under
the Securities Act of 1933.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be filed and distributed that will set forth the
number of shares being offered and the terms of the offering, including the name
of any underwriter, dealer or agent, the purchase price paid by any underwriter,
any discount, commission and other item constituting compensation, any discount
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public. In addition, upon being notified by a
selling stockholder that a donee or pledgee intends to sell more than 500
shares, a prospectus supplement will be filed and distributed.
We will pay all the expenses related to the registration of the shares
offered by this prospectus, except for any underwriting, brokerage or related
fees, discounts, commissions or the fees or expenses of counsel or advisors to
the selling stockholders.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by this
prospectus has been passed upon by Locke Liddell & Sapp LLP, Dallas, Texas.
EXPERTS
The consolidated financial statements incorporated in this registration
statement by reference to the Annual Report on Form 10-K of Pegasus Systems,
Inc. for the year ended December 31, 1999, have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The consolidated financial statements and the related financial statement
schedule of REZ, Inc. and subsidiaries as of December 31, 1999 and 1998 and for
the years ended December 31, 1999, 1998 and 1997 incorporated in this prospectus
by reference from the Registration Statement on Form S-4 (File No. 333-92683) of
Pegasus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
25
<PAGE> 26
================================================================================
3,409,250 SHARES
LOGO
COMMON STOCK
---------------
PROSPECTUS
---------------
April __, 2000
You should rely only on information contained in this prospectus. We have
not authorized anyone to give any information or make any representations in
connection with this offering other than those contained in this prospectus. If
anyone gives you any such information or makes any such representations, you
should not rely on it or them as having been authorized by us. This prospectus
is not an offer to sell common stock and it is not soliciting an offer to buy
common stock in any state where the offer and sale is not permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of our common stock.
================================================================================
<PAGE> 27
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table indicates the estimated expenses to be incurred by
Pegasus in connection with the offering described in the Registration Statement:
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee....... $ 50,740
Printing and engraving fees......................... 10,000*
Accountants' fees and expenses...................... 3,000*
Legal fees and expenses............................. 15,000*
Miscellaneous....................................... 2,000*
-------------
Total..................................... $ 80,740*
=============
</TABLE>
- ----------
* Estimated
ITEM 15. 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 Pegasus may and, in
certain cases, must be indemnified by Pegasus 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
Pegasus. 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 Pegasus, 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 our Third Amended and Restated Certificate of Incorporation
provides that no director of Pegasus shall be liable to Pegasus 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 our Third Amended and Restated Certificate of Incorporation
also provides that Pegasus may indemnify to the fullest extent permitted by
Delaware 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 Pegasus or any predecessor of Pegasus or serves or
served at any other enterprise as a director, officer, employee or agent at the
request of Pegasus or any other predecessor to Pegasus. In addition, Section 7.7
of our Amended and Restated Bylaws provides that Pegasus shall indemnify to the
fullest extent authorized or permitted by law any current or former director or
officer of Pegasus (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 Pegasus or is or
was serving, at the request of Pegasus, as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise and that, subject to applicable law, Pegasus
may indemnify an employee or agent of Pegasus to the extent that and with
respect to such proceedings as, the Board of Directors may determine by
resolution, in its discretion.
Reference is also made to the Rights Agreement incorporated by reference
herein as Exhibit 4.1 hereto, pursuant to which certain holders of capital stock
of Pegasus named therein have agreed to indemnify officers and directors of
Pegasus against certain liabilities under the Securities Act of 1933 or the
Securities Exchange Act of 1934 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 Pegasus.
II-1
<PAGE> 28
Pegasus 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, misstatement, misleading statement or
breach of duty by directors and officers in their capacity as directors and
officers of Pegasus.
ITEM 16. (a) EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) THE FOLLOWING EXHIBITS ARE FILED HEREWITH OR INCORPORATED BY
REFERENCE HEREIN:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 Contribution and Restructuring Agreement dated effective as of
July 21, 1995 by and among Pegasus Systems, Inc. and all of
the stockholders of Pegasus Systems, Inc. (incorporated by
reference to the Registration Statement (File No. 333-28595)
on Form S-1 declared effective by the Commission on August 6,
1997)
2.2 Agreement and Plan of Merger dated as of November 16, 1999, as
amended and restated, by and among Pegasus Systems, Inc.,
Pegasus Worldwide, Inc., REZ, Inc. , Reed Elsevier Inc. and
Utell International Group Ltd. (attached as Appendix A to the
information statement/prospectus contained in the Registration
Statement (File No. 333-92683) on Form S-4 filed with the
Commission on December 14, 1999).
4.1 Rights Agreement dated as of September 28, 1998 by and between
Pegasus Systems, Inc. and American Securities Transfer &
Trust, Inc. (incorporated by reference from Exhibit 4 of
Pegasus Systems, Inc.'s Current Report on Form 8-K filed with
the Commission on October 9, 1998)
4.2 Form of Rights Certificate (incorporated by reference from
Exhibit 3 of Pegasus Systems, Inc.'s Current Report on Form
8-K filed with the Commission on October 9, 1998)
*5.1 Opinion of Locke Liddell & Sapp LLP, regarding the legality of
securities being issued.
+23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Locke Liddell & Sapp LLP ( included in its opinion
filed as Exhibit 5.1)
+23.3 Consent of Deloitte & Touche LLP
*24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule (incorporated by reference to Form
10-K for the fiscal year ended December 31, 1999)
</TABLE>
- ----------
+ Filed herewith.
* Previously filed.
Pegasus will furnish a copy of any exhibit listed above to any shareholder
without charge upon written request to Mr. Ric L. Floyd, Secretary, 3811 Turtle
Creek Blvd., Suite 1100, Dallas, Texas 75219.
(b) FINANCIAL DATA SCHEDULES
Financial Data Schedules incorporated by reference to our Form 10-K for the
fiscal year ended December 31, 1999.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
II-2
<PAGE> 29
(1) To file, during any period in which any 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 of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in aggregate,
represent a fundamental change in the information set forth in the
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 and 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 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any other material change to such information in the registration
statement;
Provided, however, that paragraphs a(1)(i) and a(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 Registrant 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 of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities being offered therein
and the offering of such securities at the time may be deemed to be the initial
bona fide offering thereof; and
(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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13 (a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed by the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 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 30th
day of March, 2000.
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
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* Chief Executive Officer, March 30, 2000
- ----------------------------------------------------- President and Director
John F. Davis, III (Principal Executive Officer)
* Chief Financial Officer March 30, 2000
- ----------------------------------------------------- (Principal Financial and
Jerome L. Galant Accounting Officer)
* Director March 30, 2000
- -----------------------------------------------------
Michael A. Barnett
* Director March 30, 2000
- -----------------------------------------------------
Paul J. Brown
* Director March 30, 2000
- -----------------------------------------------------
Robert B. Collier
* Director March 30, 2000
- -----------------------------------------------------
William C. Hammett, Jr.
* Director March 30, 2000
- -----------------------------------------------------
Thomas F. O'Toole
* Director March 30, 2000
- -----------------------------------------------------
Bruce W. Wolff
*By: /s/ RIC L. FLOYD
----------------------------------------------
Attorney-In-Fact
</TABLE>
II-4
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2.1 Contribution and Restructuring Agreement dated effective as of
July 21, 1995 by and among Pegasus Systems, Inc. and all of
the stockholders of Pegasus Systems, Inc. (incorporated by
reference to the Registration Statement (File No. 333-28595)
on Form S-1 declared effective by the Commission on August 6,
1997)
2.2 Agreement and Plan of Merger dated as of November 16, 1999, as
amended and restated, by and among Pegasus Systems, Inc.,
Pegasus Worldwide, Inc., REZ, Inc. , Reed Elsevier Inc. and
Utell International Group Ltd. (attached as Appendix A to the
information statement/prospectus contained in the Registration
Statement (File No. 333-92683) on Form S-4 filed with the
Commission on December 14, 1999).
4.1 Rights Agreement dated as of September 28, 1998 by and between
Pegasus Systems, Inc. and American Securities Transfer &
Trust, Inc. (incorporated by reference from Exhibit 4 of
Pegasus Systems, Inc.'s Current Report on Form 8-K filed with
the Commission on October 9, 1998)
4.2 Form of Rights Certificate (incorporated by reference from
Exhibit 3 of Pegasus Systems, Inc.'s Current Report on Form
8-K filed with the Commission on October 9, 1998)
*5.1 Opinion of Locke Liddell & Sapp LLP, regarding the legality of
securities being issued.
+23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Locke Liddell & Sapp LLP ( included in its opinion
filed as Exhibit 5.1)
+23.3 Consent of Deloitte & Touche LLP
*24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule (incorporated by reference to Form
10-K for the fiscal year ended December 31, 1999)
</TABLE>
- ----------
+ Filed herewith.
* Previously filed
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on this Amendment No. 1 to Form S-3 of our reports dated February 10,
2000 relating to the financial statements and financial statement schedule,
which appear in Pegasus Systems, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1999. We also consent to the references to us under the
headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Dallas, Texas
March 31, 2000
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment No.
1 to Registration Statement No. 333-93713 of Pegasus Systems, Inc. on Form S-3
of our reports dated February 21, 2000 (which express an unqualified opinion
and include an explanatory paragraph relating to the restatement described in
Note 11), appearing in Registration Statement No. 333-97683 on Form S-4 of
Pegasus Systems, Inc. and to the references to us under the heading "Experts"
in the Prospectus which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 30, 2000
