Pegasus Solutions Sells Two Luxury Hotel Brands to IndeCorp Corporation and Enters into a Significant Technology Services Agreement

Gains New Reservations System Customer: Preferred Hotels & Resorts

Pegasus Solutions, Inc. (Nasdaq: PEGS) announced today that it has agreed to sell its London-based Summit Hotels & Resorts and Phoenix-based Sterling Hotels & Resorts business units to IndeCorp Corporation for an estimated US$12.0 million. In addition, IndeCorp has signed a technology services agreement with Pegasus with an estimated value of US$40 million over its five-year term. Headquartered in Chicago, IndeCorp is a holding company that owns and operates the luxury hotel brand Preferred Hotels & Resorts Worldwide. Dallas-based Pegasus Solutions is a leading provider of hotel industry transaction processing and electronic commerce services.

As part of the agreement, Pegasus will be the exclusive provider of reservations technology, voice and electronic reservation processing, commission processing and a host of other ancillary services to IndeCorp brands, to all Preferred Hotels & Resorts member hotels, including Summit Hotels & Resorts and Sterling Hotels & Resorts hotel members. In addition, Preferred Hotels & Resorts will become a new central reservations system (CRS) customer of Pegasus’ Application Service Processing unit, moving its reservation system contract to Pegasus in July 2001. Furthermore, the agreement calls for Preferred to move its global distribution system (GDS) connectivity to Pegasus’ Electronic Distribution Switch.

The Summit and Sterling brands will join Preferred Hotels & Resorts as wholly owned subsidiaries of IndeCorp. Summit has 167 independent luxury hotel members in 44 countries; Sterling has 141 in 30 countries. Pegasus Solutions originally acquired the Summit and Sterling representation services as part of its acquisition of Phoenix-based REZsolutions in April, 2000.

"When IndeCorp approached us with this deal, it made perfect sense for all parties,” said John F. Davis, III, president and chief executive officer of Pegasus Solutions. “First, we are selling our two upscale, luxury brands to one of the world’s best-known operators of luxury hotel marketing distribution services, which will be of great benefit to the Summit and Sterling hotel members. Second, divesting these brands will greatly reduce Pegasus’ costs in a traditionally labor-intensive portion of our business.

"Moreover, while we are selling our Summit and Sterling brand business, we are pleased that we will retain them as clients, and gain a new one: Preferred Hotels & Resorts Worldwide. Not only will Summit and Sterling properties continue to use our commission processing service, Internet and GDS distribution, NetBooker™ Web site hosting and private-label voice reservations service, but we are expanding our service relationship by moving them with Preferred to our ASP reservation system services,” Davis said.

Under the terms of the transaction, IndeCorp will pay Pegasus US$4.2 million upon closing, consisting of US$3.2 million is in cash at closing, and US$1 million payable in a note to Pegasus Solutions. The balance will be payable over four years, subject to Summit and Sterling membership contracts being renewed.

Pegasus Solutions Chief Financial Officer Jerry Galant said, “Revenues from Summit and Sterling operations were expected to contribute between US$15 and US$20 million in 2001. However, their EBITDA margins have been beneath our corporate goals. We believe this transaction is in the best interest of our shareholders, and should improve our profit margins and will enable us to focus on our core technology offerings. As a result of this transaction, we expect 2001 revenues for Pegasus to be in the range of US$205 to US$210 million, but are still comfortable with a cash EPS projection of US$0.60 to US$0.65 per share for 2001.”

As part of the divestiture, 57 Summit employees currently employed by Pegasus will become IndeCorp. employees. Summit will continue to be headquartered in London, and Sterling Hotels will be based in Chicago, Illinois, at IndeCorp headquarters.

Pegasus Solutions' Application Service Processing (ASP) business unit provides central reservations system (CRS) services to the hospitality industry. Pegasus' CRS is used on an ASP basis by more than 10,000 hotel properties, representing more than 2 million hotel rooms worldwide. Pegasus also provides CRS software licenses to an additional 20 hotel brands, representing 12,000 hotel properties. Pegasus' comprehensive portfolio of CRS technology and voice reservations products and services offers "end-to-end" solutions that bring a seamlessly integrated approach to managing hotel reservations, rate plans and inventory.