Document:

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                                                                    EXHIBIT 10.6

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is entered into as of the 1st day of December, 2002, by
and between Pegasus Solutions, Inc., a Delaware corporation (the "Company") and
John F. Davis, III (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 his 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 his employment and, in the event his
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" commenced on January 1, 2000 (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 7 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 Chief Executive 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 as may be
permitted by the Company's Executive Deferred Compensation Plan.

         (c) Car Allowance. Executive shall be entitled to a car allowance of
One Thousand Four Hundred Dollars ($1,400.00) per month for each month remaining
during the term of this Agreement. This section 3(c) shall terminate and be of
no effect as of January 1, 2003.

         (d) Club Dues. Executive shall be entitled to reimbursement by the
Company for monthly dues payable to a country club of Executive's choosing. This
section 3(d) shall terminate and be of no effect as of January 1, 2003.

         (e) Life Insurance. Executive shall be entitled to the continuation of
such life insurance coverage, if any, at the Company's expense, as is currently
in effect as of the date 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.

         (a) Executive shall be entitled to participate in the Company's
Executive Deferred Compensation Plan, as approved and adopted by the Company's
Board of Directors September 10, 2002 (the "Executive Deferred Compensation
Plan") supplemental medical or life insurance or other bonus or incentive
compensation plans applicable to executives of the Company; provided, however,
the grant of a stock option or other form of stock compensation 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.

         (b) Supplemental Executive Retirement Plan. The Executive shall be
entitled to participate in the Company's Supplemental Executive Retirement Plan,
as amended and approved by the Board of Directors September 10, 2002, and as
hereafter amended provided that Executive has agreed in writing to such
amendment.

         (c) Stock Plans. Executive shall be entitled to participate in the
Company's stock incentive plans, employee stock purchase plans and such other
stock-related plans as may be applicable to executives of the Company.

         (d) 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. Effective January 1, 2003,
Executive shall be entitled to participate in the Executive Benefits and
Perquisite Plan approved and adopted by the Company's Board of Directors on
September 10, 2002 and as hereafter amended provided that Executive has agreed
in writing to such amendment. Unless otherwise provided, 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.

         (e) Expenses. The Executive shall be entitled to receive reimbursement
of all expenses reasonably incurred 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.

6.       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 his 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.

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7.       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:

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

         (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's 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; or

         (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, until the Termination Date
specified in a Notice of Termination (as each term is hereinafter defined)
relating to the Executive's Disability, in the event the Executive is no longer
under a Disability,

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the Executive will be entitled to return to Executive 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 his employment for "Good
                  Reason". For purposes of this Agreement, "Good Reason" shall
                  mean the occurrence of any of the events or conditions
                  described in subsections (i) through (vi) hereof:

                           (i) If the Executive shall cease to be the Chief
                           Executive 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 Executive 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 his 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 7(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 12 hereof.

                  (2) The Executive's right to terminate Executive's employment
                  pursuant to this Section 7(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 8(d) hereof.

8.       COMPENSATION UPON TERMINATION.

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         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,

                  (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) 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.

                  (3) payments as more specifically provided by the Executive
                  Deferred Compensation Plan and Supplemental Executive
                  Retirement Plan, and

                  (4) one (1) additional year of vesting from the Termination
                  Date of all stock option and restricted stock 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,

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

                  (3) payments as more specifically provided by the Executive
                  Deferred Compensation plan and Supplemental Executive
                  Retirement Plan, and

                  (4) one (1) additional year of vesting from the Termination
                  Date of all stock option and restricted stock 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 pay to the Executive the following:

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

                  (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 twenty-four (24) 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. 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's dependents and beneficiaries the Executive Benefit
                  and Perquisites Plan (except life and disability insurance, if
                  any, will not be continued and "bridged" healthcare benefits
                  will not be provided unless Executive has satisfied the
                  requirement for "retirement" as defined in the plan) and the
                  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, benefits and perquisites (including deductibles and
                  costs) provided in this Section 8(d)(3) during the
                  Continuation Period shall be no less favorable to the
                  Executive and Executive's dependents and beneficiaries, than
                  the coverages, benefits and perquisites in effect as of the
                  Termination Date. The Company's obligation hereunder with
                  respect to the foregoing coverages, benefits and perquisites
                  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 8(d)(3)
                  shall not be interpreted as to limit any benefits to which the
                  Executive, Executive's 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 , as of the

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                  Termination Date, one hundred percent (100%) vested, and all
                  restrictions on such grants shall be removed

                  (5) for a period of two (2) years after the date of
                  termination, the Company shall continue to contribute to the
                  Supplemental Executive Retirement Plan and Executive Deferred
                  Compensation Plan for the benefit of the Executive and the
                  Executive shall be entitled to the benefits of the
                  Supplemental Executive Retirement Plan and Executive Deferred
                  Compensation Plan in the same manner as if the Executive had
                  continued as an employee for the additional two (2) years and
                  shall be deemed to have satisfied the eligibility for benefits
                  as described in the Plans, and

                  (6) 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 8(a), 8(b)(2), 8(c)(2) and
8(d)(i) shall be paid within thirty (30) days after the Executive's Termination
Date. Expenses incurred by Executive under Section 8(d)(6) 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 8(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.

9.       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. For purposes of this Agreement, "Termination
Date" shall mean in the case of the Executive's death, his 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
         of at least thirty (30) days, and

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         (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 of Control. For purposes of this Agreement, a "Change of
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 of
         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 of 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 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) A complete liquidation or dissolution of the Company or 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).

10.      EXCISE TAX PAYMENTS.

         In the event of a determination that a portion of any payment or
benefit to the Executive or for his 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 "Code") (a "Payment" or "Payments"), the Company shall
be responsible for the payment of any excise or similar tax assessed in
connection therewith.

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11.      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 7(c) or by the Company
pursuant to Section 7(d) hereof and the Executive is receiving payments from the
Company pursuant to Section 8(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 7(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 or providing hotel
property system services or providing hotel representation or marketing services
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 11 shall for any reason become invalid, illegal, or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other terms herein, but such 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 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.

12.      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, his 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.

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13.      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.

14.      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 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.

15.      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.

16.      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.

17.      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.

                                      -11-
<PAGE>

18.      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 21 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.

19.      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.

20.      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.

21.      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 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
and the Executive has executed this Agreement as of the date and year first
above written.

PEGASUS SOLUTIONS, INC.                     EXECUTIVE:

By:                                         By:
         -----------------------------         ---------------------------------
                                                      John F. Davis, III
Print:
         -----------------------------
Title:
         -----------------------------

                                      -12-<PAGE>
                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is entered into as of the 1st day of December, 2002, by
and between Pegasus Solutions, Inc., a Delaware corporation (the "Company") and
Susan K. 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 his 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 his employment and, in the event his
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" commenced 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 7 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 Executive Vice President and as the 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 constitute a conflict of interest, create issue of
independence or 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.

                                      -1-
<PAGE>

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 as may be
permitted by the Company's Executive Deferred Compensation Plan.

         (c) 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. This section 3(c) shall terminate and be of no effect as of
January 1, 2003.

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.

5.       EXECUTIVE BENEFITS.

         (a) Executive shall be entitled to participate in the Company's
Executive Deferred Compensation Plan, as approved and adopted by the Company's
Board of Directors September 10, 2002 (the "Executive Deferred Compensation
Plan") and all supplemental medical or life insurance or other bonus or
incentive compensation plans applicable to executives of the Company; provided,
however, the grant of a stock option or other form of stock compensation 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

                                      -2-
<PAGE>

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.

         (b) Supplemental Executive Retirement Plan. The Executive shall be
entitled to participate in the Company's Supplemental Executive Retirement Plan,
as amended and approved by the Company's Board of Directors September 10, 2002,
and as hereafter amended provided that Executive has agreed in writing to such
amendment.

         (c) Stock Plans. Executive shall be entitled to participate in the
Company's stock incentive plans, employee stock purchase plans and such other
stock-related plans as may be applicable to executives of the Company.

         (d) 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. Effective January 1, 2003,
Executive shall be entitled to participate in the Executive Benefits and
Perquisite Plan approved and adopted by the Company's Board of Directors
September 10, 2002 and as hereafter amended provided that Executive has agreed
in writing to such amendment. Unless otherwise provided, 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.

         (e) Expenses. The Executive shall be entitled to receive reimbursement
of all expenses reasonably incurred 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.

6.       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 his employment under this
Agreement, provided that:

         (a) The Executive shall be entitled to annual vacation in accordance
with the policies, if any, 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, if any, as in effect from time to
time.

7.       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:

                                      -3-
<PAGE>

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

(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's
                  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; or

(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 (as
hereinafter defined) 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, until the Termination Date (as
hereinafter defined) specified in a Notice of Termination relating to the
Executive's Disability, in the event 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 his employment for "Good
                  Reason". For purposes of this Agreement, "Good Reason" shall
                  mean the occurrence of any of the events or conditions
                  described in subsections (i) through (vi) hereof:

                                      -4-
<PAGE>

                           (i) If the Executive shall cease to be the employed
                           in the capacity as set forth in Section 2(a) above 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 Executive 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 his
                           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 7(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 12 hereof.

                  (2) The Executive's right to terminate Executive's employment
                  pursuant to this Section 7(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 8(d) hereof.

8.       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,

                                      -5-
<PAGE>

                  (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) 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.

                  (3) payments as more specifically provided by the Supplemental
                  Executive Retirement Plan and the Executive Deferred
                  Compensation Plan, and

                  (4) one (1) additional year of vesting from the Termination
                  Date of all stock option and restricted stock 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
                  Executive Retirement Plan and the Executive Deferred
                  Compensation Plan, and

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

                                      -6-
<PAGE>

         (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 pay to the Executive the following:

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

                  (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 twenty four (24) months following the Termination Date
                  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. 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's dependents and beneficiaries the Executive Benefit
                  and Perquisites Plan (except life and disability insurance, if
                  any, will not be continued and "bridged" healthcare benefits
                  will not be provided unless Executive has satisfied the
                  requirement for "retirement" as defined in the plan) and the
                  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, benefits and perquisites (including deductibles and
                  costs) provided in this Section 8(d)(3) during the
                  Continuation Period shall be no less favorable to the
                  Executive and Executive's dependents and beneficiaries, than
                  the coverages, benefits and perquisites in effect as of the
                  Termination Date. The Company's obligation hereunder with
                  respect to the foregoing coverages, benefits and perquisites
                  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 8(d)(3)
                  shall not be interpreted as to limit any benefits to which the
                  Executive, Executive's 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, as of the
                  Termination Date, one hundred percent (100%) vested, and all
                  restrictions on such grants shall be removed, 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 8(a), 8(b)(2), 8(c)(2) and
8(d) (1) shall be paid within thirty (30) days after the Executive's Termination
Date. Expenses incurred by

                                      -7-
<PAGE>

Executive under Section 8(d)(5) shall be paid within thirty (30) days of 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 8(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.

9.       DEFINITIONS.

         (a) Notice of Termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written 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. For purposes of this Agreement, "Termination
Date" shall mean, in the case of the Executive's death, his 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
         of 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 of Control. For purposes of this Agreement, a "Change of
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 (provided such parent, subsidiary or affiliate
         was not created to facilitate an acquisition transaction) 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 of 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 of 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

                                      -8-
<PAGE>

         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 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) A complete liquidation or dissolution of the Company or 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).

10.      EXCISE TAX PAYMENTS.

         In the event of a determination that a portion of any payment or
benefit to the Executive or for his 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 "Code") (a "Payment" or "Payments"), the Company shall
be responsible for the payment of any excise or similar tax assessed in
connection therewith.

11.      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 7(c) or by the Company
pursuant to Section 7(d) hereof and the Executive is receiving payments from the
Company pursuant to Section 8(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 7(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 or providing hotel
property system services or providing hotel representation or marketing services
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.

                                      -9-
<PAGE>

         (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 11 shall for any reason become invalid, illegal, or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other terms herein, but such 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 11 shall for any reason be held to be excessively broad with 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.

12.      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, his 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.

13.      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.

14.      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 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.

15.      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

                                      -10-
<PAGE>

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.

16.      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.

17.      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.

18.      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 21 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.

19.      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.

20.      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.

21.      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

                                      -11-
<PAGE>

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 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
and the Executive has executed this Agreement as of the date and year first
above written.

PEGASUS SOLUTIONS, INC.                     EXECUTIVE:

By:                                         By:
         -----------------------------          -------------------------------
                                                         Susan K. Cole
Print:
         -----------------------------
Title:
         -----------------------------

                                      -12-

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