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                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT is entered into as of the 1st day of August, 2001, by
and between Pegasus Solutions, Inc., a Delaware corporation (the "Company") and
Susan Cole (the "Executive").

         WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is essential and in the best interest of the Company and its
stockholders to enter into this Agreement to retain the services of the
Executive and to ensure Executive's continued dedication and efforts; and

         WHEREAS, in order to induce the Executive to enter into and continue
employment by the Company, the Company desires to provide the Executive with
certain benefits during the term of Executive's employment and, in the event
Executive's employment is terminated, to provide the Executive with the benefits
and payments described herein.

         NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

1.       EMPLOYMENT TERM.

         The "Employment Term" shall commence on May 7, 2001 (the "Effective
Date") and shall expire on the fourth anniversary of the Effective Date provided
that such term will be automatically renewed and extended indefinitely after the
fourth anniversary of the Effective Date until terminated as provided herein, in
the event Executive remains in the employ of the Company after the fourth
anniversary of the Effective Date.

2.       EMPLOYMENT.

         (a) Subject to the provisions of Section 8 hereof, the Company agrees
to continue to employ the Executive and the Executive agrees to remain in the
employ of the Company during the Employment Term. During the Employment Term,
the Executive shall be employed as the Executive Vice President and Chief
Financial Officer of the Company. The Executive shall perform the duties,
undertake the responsibilities and exercise the authority customarily performed,
undertaken and exercised by persons situated in a similar executive capacity.
Executive shall also promote, by entertainment or otherwise, the business of the
Company.

         (b) During the Employment Term, excluding periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during usual business hours to the business and
affairs of the Company to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder. The Executive may (1) serve on corporate,
civil or charitable boards or committees, (2) manage personal investments and
(3) deliver lectures and teach at educational institutions, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities hereunder. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the Executive
prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the performance
of the Executive's responsibilities to the Company.



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3.       COMPENSATION.

         (a) Base Salary. Beginning on the Effective Date, the Company agrees to
pay or cause to be paid to the Executive an annual base salary as mutually
agreed, and as may be increased from time to time by the Compensation Committee
of the Board (hereinafter referred to as the "Base Salary"). Such Base Salary
shall be payable in accordance with the Company's customary practices applicable
to its executives.

         (b) Annual Bonus. In addition to Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Employment Term, an annual
discretionary bonus (the "Annual Bonus") in accordance with the terms and
conditions of the bonus plan approved by the Compensation Committee. Any actual
payment or award under such Annual Bonus plan, and the size of any payment or
award, will be in accordance with the terms of the plan. Each such Annual Bonus
shall be paid no later than the end of the third (3rd) month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.

         (c) Supplemental Employee Retirement Plan. In addition to the Base
Salary and Annual Bonus, the Executive shall be entitled to participate in the
Company's Supplemental Employee Retirement Plan as adopted by the Company
effective January 1, 2000 and as amended thereafter provided that Executive has
agreed to such amendment. Executive shall not be subject to any amendment to the
Supplemental Employee Retirement Plan without Executive's written consent.

         (d) Stock Plans. Executive shall be entitled to participate in the
Company's Stock Option Plans, Employee Stock Purchase Plans and such other
stock-related plans as may be applicable to executives of the Company and to
receive such stock option grants and any and all other rights of participation
as may be provided therein.

         (e) Car Allowance. Executive shall be entitled to a car allowance of
Seven Hundred Fifty Dollars ($750.00) per month for each month during the term
of this Agreement.

4.       EMPLOYEE BENEFITS.

         During the Employment Term and beginning on the Effective Date, the
Executive shall be entitled to participate in all employee benefit plans,
practices and programs maintained by the Company and made available to employees
generally, including, without limitation, all pension, retirement, profit
sharing, savings, medical, hospitalization, disability, dental, life or travel
accident insurance benefit plans. Unless otherwise provided herein, the
compensation and benefits under, and the Executive's participation in, such
plans, practices and programs shall be on the same basis and terms as are
applicable to employees of the Company generally, but in no event on a basis
less favorable in terms of benefit levels and coverage than offered to other
similarly situated executives of the Company. The Company may reduce benefit
levels if such changes are part of broad-based changes in the Company's benefit
programs offered generally to all employees. Notwithstanding the foregoing,
except as otherwise set forth herein, nothing herein shall obligate the Company
to adopt such plans, practices or programs.



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5.       EXECUTIVE BENEFITS.

         During the Employment Term, the Executive shall be entitled to
participate in all executive benefit or incentive compensation plans maintained
or established by the Company for the purpose of providing compensation and/or
benefits to executives of the Company including, but not limited to, any
supplemental retirement, salary continuation, stock option, deferred
compensation, supplemental medical or life insurance or other bonus or incentive
compensation plans; provided, however, the grant of a stock option in any year
is not guaranteed and will be dependent on the Board's evaluation of the
Executive's performance. Unless otherwise provided herein, the compensation and
benefits under, and the Executive's participation in, such plans shall be on the
same basis and terms as other similarly situated executives of the Company. No
additional compensation provided under any of such plans shall be deemed to
modify or otherwise affect the terms of this Agreement or any of the Executive's
entitlements hereunder. Notwithstanding the foregoing, except as otherwise set
forth herein, nothing herein shall obligate the Company to adopt such plans,
practices or programs.

6.       OTHER BENEFITS.

         (a) Fringe Benefits and Perquisites. During the Employment Term, the
Executive shall be entitled to all fringe benefits and perquisites generally
made available by the Company to its executives. Unless otherwise provided
herein, the fringe benefits and perquisites provided to Executive shall be on
substantially the same basis and terms as other similarly situated executives of
the Company.

         (b) Expenses. The Executive shall be entitled to receive reimbursement
of all expenses reasonably incurred by him in connection with the performance of
Executive's duties hereunder or for promoting, pursuing or otherwise furthering
the business or interests of the Company in accordance with the accounting
procedures and expense reimbursement policies of the Company as it shall adopt
from time to time.

7.       VACATION AND SICK LEAVE.

         During the Employment Term, at such reasonable times as the Board shall
in its discretion permit, the Executive shall be entitled without loss of pay,
to absent himself voluntarily from the performance of Executive's employment
under this Agreement, provided that:

         (a) The Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board.

         (b) The Executive shall be entitled to sick leave (without loss of pay)
in accordance with the Company's policies as in effect from time to time.

8.       TERMINATION.

         During the Employment Term, the Executive's employment hereunder may be
terminated under the following circumstances:

         (a) Cause. The Company may terminate the Executive's employment for
"Cause". A termination of employment is for "Cause" if the Executive:



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         (1)      has been convicted of or plead guilty or no contest to a
                  felony;

         (2)      intentionally engaged in conduct which is demonstrably and
                  materially injurious to the Company, monetarily or otherwise
                  or from which Executive derives an improper material personal
                  benefit; provided, however, that no termination of the
                  Executive's employment shall be for Cause as set forth in this
                  clause (2) until:

                  (i) there shall have been delivered to the Executive a copy of
                  a written notice setting forth that the Executive was guilty
                  of the conduct set forth in this clause (2) and specifying the
                  particulars thereof in reasonable detail; and

                  (ii) the Executive shall have been provided an opportunity to
                  be heard by the Board (with the assistance of the Executive's
                  counsel if the Executive so desires). No act, nor failure to
                  act, on the Executive's part shall be considered "intentional"
                  unless Executive has acted, or failed to act, with an absence
                  of good faith and without a reasonable belief that Executive
                  action or failure to act was in the best interest of the
                  Company.

         (3)      commits gross malfeasance or intentionally fails to perform
                  the duties of the Executive's position; provided, however, the
                  Company shall first notify the Executive in writing stating
                  with reasonable specificity the action or inaction of the
                  Executive which forms the basis for such notice and the
                  Executive fails to cure such malfeasance or failure within ten
                  (10) days of the date of such notice, and

         (4)      violates any valid non-competition or non-disclosure agreement
                  or the Company's insider trading policy, if any.

         Notwithstanding anything contained in this Agreement to the contrary,
no failure to perform by the Executive after a Notice of Termination is given by
the Executive shall constitute Cause for purposes of this Agreement.

         (b) Disability. The Company may terminate the Executive's employment
after having established the Executive's Disability. For purposes of this
Agreement, "Disability" means a physical or mental infirmity which impairs the
Executive's ability to substantially perform Executive's material duties under
this Agreement which continues for a period of at least ninety (90) consecutive
days. The Executive shall be entitled to the compensation and benefits provided
for under this Agreement for any period during the Employment Term and prior to
the Termination Date (as hereinafter defined) resulting from the Executive being
unable to work due to a physical or mental infirmity and as otherwise provided
in this Agreement in connection with Disability. Notwithstanding anything
contained in this Agreement to the contrary, if prior to the Termination Date
specified in a Notice of Termination (as hereinafter defined) relating to the
Executive's Disability, the Executive is no longer under a Disability, the
Executive will be entitled to return to Executive's position with the Company as
set forth in this Agreement in which event no Disability of the Executive will
be deemed to have occurred.

         (c) Good Reason.

         (1) The Executive may terminate Executive's employment for "Good
         Reason". For purposes of this Agreement, "Good Reason" shall mean the
         occurrence of any of the events or conditions described below in
         subsections (i) through (vi) hereof:



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                  (i) If the Executive shall cease to be the Chief Financial
                  Officer of the Company (or any successor or parent thereof) or
                  upon the assignment to the Executive of any material duties or
                  responsibilities which are inconsistent with Executive's
                  position or responsibilities; or any removal of the Executive
                  from or failure to reappoint or reelect him to any such
                  offices or positions, except during a period of Disability or
                  in connection with the termination of Executive's employment
                  for Disability, Cause, as a result of Executive's death, or by
                  the Executive other than for Good Reason;

                  (ii) A reduction in the Executive's Base Salary or any failure
                  to pay the Executive any compensation or benefits to which
                  Executive is entitled within thirty (30) days of the due date;

                  (iii) A Change of Control as hereinafter defined;

                  (iv) Any material breach by the Company of any provision of
                  this Agreement; provided, however, the Executive shall first
                  notify the Company in writing stating with reasonable
                  specificity the breach by the Company and the Company fails to
                  cure such breach within ten (10) days of the date of such
                  notice;

                  (v) Any purported termination of the Executive's employment
                  for Cause by the Company which is found by a court of
                  competent jurisdiction or an arbitrator not to comply with the
                  terms of Section 8(a); or

                  (vi) The failure of the Company to obtain an agreement,
                  reasonably satisfactory to the Executive, from any successor
                  or assign of the Company to assume and agree to perform this
                  Agreement, as contemplated in Section 13 hereof.

         (2) The Executive's right to terminate Executive's employment pursuant
         to this Section 8(c) shall not be affected by Executive's incapacity
         due to physical or mental illness.

         (d) Voluntary Termination. Upon thirty (30) days prior written notice,
either the Executive or the Company may voluntarily terminate the Executive's
employment hereunder at any time; provided, however, in the event of any such
termination by the Company, the Company shall pay to the Executive the amounts
set forth in Section 9(d) hereof.

9.       COMPENSATION UPON TERMINATION.

         Upon termination of the Executive's employment during the Employment
Term, the Executive shall be entitled to the following benefits:

         (a) If the Executive's employment with the Company shall be terminated
by the Company for Cause or by the Executive other than for Good Reason, the
Company shall pay the Executive all amounts earned and accrued through the
Termination Date but not paid as of the Termination Date, including:

         (1) the Base Salary,



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         (2) an amount equal to the Pro Rata Bonus,

         (3) reimbursement for reasonable and necessary expenses incurred by the
         Executive on behalf of the Company during the period ending on the
         Termination Date,

         (4) vacation pay, and

         (5) sick leave (collectively, "Accrued Compensation").

         (b) If the Executive's employment with the Company shall be terminated
by the Company for Disability, the Company shall pay the Executive all amounts
earned or accrued through the Termination Date but not paid as of the
Termination Date, including the Accrued Compensation. In addition, the Executive
shall be entitled to the following:

         (1) the Base Salary and all other benefits customarily received for a
         period of one (1) year from the Termination Date resulting from such
         Disability,

         (2) an amount equal to the Pro Rata Bonus. The "Pro Rata Bonus" is an
         amount equal to the maximum bonus amount the Executive would have been
         entitled to in the fiscal year of the Termination Date multiplied by a
         fraction, the numerator of which is the number of days in such fiscal
         year through the Termination Date and the denominator of which is 365,

         (3) payments as more specifically provided by the Supplemental Employee
         Retirement Plan, and

         (4) one (1) additional year of vesting from the Termination Date of all
         stock option grants not then expired or terminated.

         (c) If the Executive's employment with the Company shall be terminated
by reason of the Executive's death, the Company shall pay the Executive all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date, including the Accrued Compensation. In addition, the Company
shall pay to the Executive's beneficiaries the following:

         (1) the Base Salary and all other benefits customarily received for a
         period of one (1) year from the date of such death,

         (2) an amount equal to the Pro Rata Bonus,

         (3) payments as more specifically provided by the Supplemental Employee
         Retirement Plan, and

         (4) one (1) additional year of vesting from the Termination Date of all
         stock option grants not then expired or terminated.

         (d) If the Executive's employment with the Company shall be terminated
by the Company voluntarily, without Cause or by the Executive for Good Reason,
the Company shall take the following actions and pay to the Executive the
following:

         (1) all Accrued Compensation and a Pro Rata Bonus,



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         (2) the Company shall continue to pay the Executive as severance pay
         and in lieu of any further compensation (except as otherwise provided
         herein) a monthly payment for a period of twelve (12) months following
         the Termination Date (the "Monthly Payment Period") equal to the sum of
         (A) the Executive's monthly Base Salary in effect for the month
         immediately preceding the Termination Date and (B) one twelfth (1/12)
         of the Bonus, provided that if Executive has continuously performed
         pursuant to this Agreement for one (1) year from its Effective Date,
         the Monthly Payment Period shall be increased to twenty-four (24)
         months. The "Bonus" is an amount equal to the maximum bonus amount the
         Executive would have been entitled to in the fiscal year of the
         Termination Date,

         (3) during the twelve (12) month period immediately following the
         Termination Date (the "Continuation Period"), the Company shall at its
         expense continue on behalf of the Executive and Executive dependents
         and beneficiaries the life insurance, disability, medical, dental and
         hospitalization benefits provided (A) to the Executive immediately
         prior to the Notice of Termination or (B) to other similarly situated
         executives who continue in the employ of the Company during the
         Continuation Period. Notwithstanding the immediately preceding
         sentence, the coverage and benefits (including deductibles and costs)
         provided in this Section 9(d)(3) during the Continuation Period shall
         be no less favorable to the Executive and Executive dependents and
         beneficiaries, than the coverages and benefits in effect as of the
         Termination Date. The Company's obligation hereunder with respect to
         the foregoing benefits shall terminate in the event the Executive
         obtains any such benefits (regardless of level and scope of coverage)
         pursuant to a subsequent employer's benefit plans. This Section 9(d)(3)
         shall not be interpreted as to limit any benefits to which the
         Executive, Executive dependents or beneficiaries may be entitled under
         any of the Company's employee benefit plans, programs or practices
         following the Executive's termination of employment, including without
         limitation, retiree medical and life insurance benefits,

         (4) any outstanding stock options (including restricted stock and
         granted performance shares or units) granted to the Executive under any
         stock option plans or under any other incentive plan or arrangement
         shall become vested for an additional twelve (12) months after the
         Termination Date, and

         (5) the Company shall reimburse to the Executive the costs of any
         outplacement services incurred by Executive, up to a maximum amount of
         Fifteen Thousand Dollars ($15,000.00).

         (e) The amounts provided for in Sections 9(a), 9(b)(2), 9(c)(2) and
9(d)(1) shall be paid within thirty (30) days after the Executive's Termination
Date. Expenses incurred by Executive under Section 9(d)(5) shall be paid within
thirty (30) days of the receipt by the Company of a claim for reimbursement
submitted by the Executive.

         (f) The Executive hereby acknowledges that full payment and/or
performance by the Company of its obligations as set forth in Sections 9(a),
(b), (c) or (d) hereof shall be in lieu of any other remedy or cause of action
the Executive may have, either at law or in equity, as a result of the
termination of the Executive's employment pursuant to such Sections.



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10.      DEFINITIONS.

         (a) Notice of Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which indicates the specific termination
provision in this Agreement, if any, relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. Any
purported termination by the Company or by the Executive shall be communicated
by written Notice of Termination to the other. For purposes of this Agreement,
no such purported termination of employment shall be effective without such
Notice of Termination.

         (b) Termination Date, Etc. For purposes of this Agreement, "Termination
Date" shall mean in the case of the Executive's death, Executive's date of
death, or in all other cases, the date specified in the Notice of Termination
subject to the following:

         (1) If the Executive's employment is terminated by the Company for
         Cause, the date of the Notice of Termination,

         (2) If the Executive's employment is terminated by the Company due to
         Disability, the date specified in the Notice of Termination shall be at
         least thirty (30) days from the date the Notice of Termination is given
         to the Executive, provided that the Executive shall not have returned
         to the full-time performance of Executive's duties during such period
         for at least thirty (30) days, and

         (3) If the Executive's employment is terminated for Good Reason, the
         date specified in the Notice of Termination shall be not more than
         thirty (30) days from the date the Notice of Termination is given to
         the Company.

         (c) Change In Control. For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:

         (1) An acquisition of any voting securities of the Company (the "Voting
         Securities") by any "Person" (as the term person is used for purposes
         of Section 12(d) or 13(d) of the Securities Exchange Act of 1934, as
         amended (the "Exchange Act")) other than any parent, subsidiary or
         affiliate of the Company immediately after which such Person has
         "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of more than fifty percent (50%) of the
         combined voting power of the Company's then outstanding voting
         securities; provided, however, in determining whether a Change in
         Control has occurred, Voting Securities which are acquired in a
         Non-Control Acquisition (as hereinafter defined) shall not constitute
         an acquisition which would cause a Change in Control. A "Non-Control
         Acquisition" shall mean an acquisition by (i) an employee benefit plan
         (or a trust forming a part thereof) maintained by (A) the Company or
         (B) any corporation or other Person of which a majority of its voting
         power or its voting equity securities or equity interest is owned,
         directly or indirectly, by the Company (for purposes of this
         definition, a "Subsidiary") or (ii) the Company or its Subsidiaries,

         (2) The individuals who, as of the date of this Agreement is approved
         by the Board, are members of the Board (the "Incumbent Board") cease
         for any reason to constitute at least one half (1/2) of the members of
         the Board; provided, however, that if the election, or nomination for
         election of any new director was approved by a vote of the members of
         the Board as provided by the Company's Bylaws, such new director shall,
         for purposes of this Agreement, be considered as a member of the
         Incumbent Board; provided, however, that no individual shall be
         considered a member of the Incumbent Board if



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         such individual initially assumed office as a result of either an
         actual or threatened "Election Contest" (as described in Rule 14a-11
         promulgated under the Exchange Act) or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board (a "Proxy Contest") including by reason of any agreement
         intended to avoid or settle any Election Contest or Proxy Contest, or

         (3) Approval by the stockholders of the Company of:

                  (i)      A complete liquidation or dissolution of the Company,
                           or

                  (ii)     An agreement for the sale or other disposition of all
                           or substantially all of the assets of the Company to
                           any Person (other than a transfer to a Subsidiary or
                           a parent in a Non-Control Acquisition).

11.      EXCISE TAX PAYMENTS.

         In the event of a determination that a portion of any payment or
benefit to the Executive or for Executive's benefit payable or distributable
pursuant to the terms of this Agreement is or will be deemed to be an "excess
parachute payment" within the meaning of Section 280G(b)(1) of the Internal
Revenue Code of 1986, as amended, the Company shall be responsible for the
payment of any excise or similar tax assessed in connection therewith.

12.      NONCOMPETITION.

         (a) Except with the prior written consent of the Company authorized by
a resolution adopted by the Board, for the period beginning upon the date hereof
and ending on (i) in the event of the termination of the Executive's employment
by the Executive for Good Reason pursuant to Section 8(c) or by the Company
pursuant to Section 8(d) hereof and the Executive is receiving payments from the
Company pursuant to Section 9(b) or (d) hereof, the date on which the last such
payment is received; or (ii) in the event of the voluntary termination of the
Executive's employment by the Executive pursuant to Section 8(d) hereof or
termination by the Company for Cause, the date which is nine (9) months from the
Termination Date. Executive shall not directly or indirectly as owner, partner,
joint venturer, stockholder, employee, broker, agent, principal, trustee,
corporate officer, director, licensor, or in any capacity whatsoever engage in,
become substantially financially interested in, employed by or have any
connection with, any business engaged principally in the processing of
electronic hotel reservations or travel agent commissions in any country where
the Company or any of its subsidiaries is then engaged in such business;
provided, however, that Executive may own any securities of any corporation
which is engaged in such business and is publicly traded stock or securities of
such corporation.

         (b) Executive agrees that for a period of one (1) year following
termination of employment with the Company, Executive will not solicit or in any
manner encourage employees of the Company, its subsidiaries or parent to leave
its employ.

         (c) In case one or more of the terms contained in Subsections (a) or
(b) of this Section 12 shall for any reason become invalid, illegal, or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other terms herein, but such invalid, illegal or unenforceable terms shall
be deemed deleted and such deletion shall not affect the validity of the other
terms of this Section. In addition, if any one or more of the terms contained in
Subsections (a) or (b) of this Section shall for any reason be held to be
excessively broad with



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regard to time, duration, geographic scope or activity that term shall be
construed in a manner to enable it to be enforced to the extent compatible with
applicable law.

13.      SUCCESSORS AND ASSIGNS.

         (a) This Agreement shall be binding upon and shall inure to the benefit
of the Company, its successors and assigns and the Company shall require any
successor or assign to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession or assignment had taken place. The term "Company"
as used herein shall include such successors and assigns. The term "successors
and assigns" as used herein shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.

         (b) Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, Executive's beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.

14.      FEES AND EXPENSES.

         The Company shall pay all legal fees and related expenses (including
the costs of experts, evidence and counsel) incurred by the Executive as a
result of the breach or default by the Company of the terms hereof.

15.      NOTICE.

         For purposes of this Agreement, notice and all other communications
provided for in the Agreement (including the Notice of Termination) shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent by certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses last given by each party to the other, provided that
all notices to the Company shall be directed to the attention of the Board with
a copy to the Secretary of the Company. All notices and communications shall be
deemed to have been received on the earlier of the date of delivery thereof or
on the third (3rd) business day after the mailing thereof, except that notice of
change of address shall be effective only upon receipt.

16.      NON-EXCLUSIVITY OF RIGHTS.

         Nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any benefit, bonus, incentive or other
plan or program provided by the Company or any of its subsidiaries and for which
the Executive may qualify, nor shall anything herein limit or reduce such rights
as the Executive may have under any other agreements with the Company or any of
its subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company or any of
its subsidiaries shall be payable in accordance with such plan or program,
except as explicitly modified by this Agreement.



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17.      SETTLEMENT OF CLAIMS.

         The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off
(except against amounts actually owed by the Executive to the Company as
evidenced by promissory notes, loan agreements and similar documents executed by
the Executive), counterclaim, defense, recoupment or other right which the
Company may have against the Executive or others.

18.      MISCELLANEOUS.

         No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Executive and the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.

19.      GOVERNING LAW.

         This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas without giving effect to the
conflict of law principles thereof. Subject to Section 22 of this Agreement, any
action brought by any party to this Agreement shall be brought and maintained in
a court of competent jurisdiction in Dallas County, Texas.

20.      SEVERABILITY.

         The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provisions hereof shall not affect the
validity or enforceability of the other provisions hereof.

21.      ENTIRE AGREEMENT.

         This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements, if any, understandings and
arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.

22.      ARBITRATION.

         Any dispute or controversy arising out of or relating to this Agreement
shall be determined and settled by arbitration in the City of Dallas, Texas, in
accordance with the Employment Dispute Resolution Rules of the American
Arbitration Association then in effect, and judgement upon the award rendered by
the arbitrator may be entered in any court of competent jurisdiction. Such
arbitrator shall have no power to modify any of the provisions of this
Agreement, and his or her jurisdiction is limited accordingly. A party
requesting arbitration hereunder shall give ten (10) days' written notice to the
other party to request such arbitration. Unless the arbitrator decides
otherwise, the successful party in any such arbitration shall be entitled to
reasonable attorneys' fees and costs associated with such arbitration. If the
parties hereto cannot agree upon an arbitrator, then one shall be appointed by
the governing office of the American Arbitration Association. Any arbitrator so
appointed shall have extensive experience in a profession connected with the
subject matter of the dispute. Whenever any



                                      -11-
<PAGE>

action is required to be taken under this Agreement within a specified period of
time and the taking of such action is materially affected by a matter submitted
to arbitration, such period shall automatically be extended by the number of
days plus ten (10) that are taken for the determination of that matter by the
arbitrator.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its Chairman of the Board or Chairman of the Compensation Committee.

PEGASUS SOLUTIONS, INC.                        EXECUTIVE:


By:                                            By:
   ------------------------------                 ------------------------------
                                                  Susan Cole
Print:
      ---------------------------

Title:
      ---------------------------



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