Document:

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                                                                   EXHIBIT 10.15

                             PEGASUS SOLUTIONS, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

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                                TABLE OF CONTENTS
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ARTICLE I PURPOSE .......................................................................   1

ARTICLE II DEFINITIONS, CONSTRUCTION, AND ADOPTION ......................................   1
         2.01       DEFINITIONS .........................................................   1
         2.02       CONSTRUCTION ........................................................   6
         2.03       ADOPTION BY OTHERS ..................................................   6

ARTICLE III PARTICIPATION AND SERVICE ...................................................   6
         3.01       PARTICIPATION .......................................................   6
         3.02       SERVICE .............................................................   7
         3.03       ELECTION TO PARTICIPATE IN SAVINGS
                    CONTRIBUTIONS .......................................................   7
         3.04       TRANSFER ............................................................   7

ARTICLE IV CONTRIBUTIONS ................................................................   8
         4.01       EMPLOYER CONTRIBUTIONS ..............................................   8
         4.02       KEY EMPLOYEE SAVINGS CONTRIBUTION AGREEMENT .........................   8
         4.03       DISPOSITION OF FORFEITURES ..........................................   9

ARTICLE V PARTICIPANTS' ACCOUNTS ........................................................   9
         5.01       INDIVIDUAL ACCOUNTS .................................................   9
         5.02       DEEMED INVESTMENT ACCOUNTS; PARTICIPANT DIRECTION ...................   9
         5.03       ACCOUNT ADJUSTMENTS .................................................  10

ARTICLE VI VESTING ......................................................................  11
         6.01       RETIREMENT, DEATH, DISABILITY OR A CHANGE OF CONTROL ................  11
         6.02       OTHER SEVERANCE FROM SERVICE ........................................  11
         6.03       COMPUTATION OF YEARS OF SERVICE FOR VESTING .........................  11
         6.04       DETERMINATION OF AMOUNT .............................................  12

ARTICLE VII BENEFICIARY .................................................................  12
         7.01       DESIGNATION OF BENEFICIARY ..........................................  12
         7.02       NO BENEFICIARY ......................................................  12

ARTICLE VIII NOTICES ....................................................................  13
         8.01       NOTICE TO COMPANY ...................................................  13
         8.02       RELIANCE UPON NOTICE ................................................  13

ARTICLE IX HARDSHIP WITHDRAWALS AND IN-SERVICE
                    WITHDRAWALS .........................................................  13
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         9.01       HARDSHIP WITHDRAWALS ................................................  13
         9.02       INVOLUNTARY DISTRIBUTIONS ...........................................  13
         9.03       OTHER WITHDRAWALS AND LOANS .........................................  14

ARTICLE X METHODS OF PAYMENT ............................................................  14
         10.01      BENEFIT COMMENCEMENT DATE ...........................................  14
         10.02      FORM OF BENEFIT .....................................................  14
         10.03      COMPANY RESPONSIBILITY ..............................................  15

ARTICLE XI NATURE OF PLAN; FUNDING ......................................................  15
         11.01      NO TRUST REQUIRED ...................................................  15
         11.02      FUNDING OF OBLIGATION ...............................................  15

ARTICLE XII ADMINISTRATION ..............................................................  16
         12.01      APPOINTMENT OF ADMINISTRATIVE COMMITTEE .............................  16
         12.02      DUTIES OF ADMINISTRATIVE COMMITTEE; CHAIRMAN
                    AND SECRETARY .......................................................  16
         12.03      MEETINGS ............................................................  16
         12.04      INDEMNIFICATION OF ADMINISTRATIVE COMMITTEE
                    AND COMPENSATION COMMITTEE ..........................................  16
         12.05      UNCLAIMED BENEFITS ..................................................  17
         12.06      CLAIMS PROCEDURE ....................................................  17

ARTICLE XIII MISCELLANEOUS ..............................................................  18
         13.01      NONGUARANTEE OF EMPLOYMENT ..........................................  18
         13.02      NONALIENATION OF BENEFITS ...........................................  19
         13.03      NO PREFERENCE .......................................................  19
         13.04      INCOMPETENCE OF RECIPIENT ...........................................  19
         13.05      TEXAS LAW TO APPLY ..................................................  19

ARTICLE XIV AMENDMENTS OR TERMINATION OF PLAN ...........................................  19
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                             PEGASUS SOLUTIONS, INC.
                      EXECUTIVE DEFERRED COMPENSATION PLAN
                            (Effective July 1, 2002)

                                   ARTICLE I

                                     PURPOSE

         On this 28th day of February 2003, PEGASUS SOLUTIONS, INC., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter, the "Company"), hereby adopts the PEGASUS SOLUTIONS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN (hereinafter, the "Plan"), to be effective
as of July 1, 2002;

                                  WITNESSETH:

         WHEREAS, the Company wishes to promote in a select group of its
management or highly compensated employees and those of its affiliates the
strongest interest in the successful operation of the business and increased
efficiency in their work, to align the financial interests of such employees
with those of Company shareholders, to ensure competitive pay and benefits for
those individuals and to provide an opportunity for accumulation of funds for
their retirement; and

         WHEREAS, it is intended that the Plan be "unfunded" for purposes of the
Employee Retirement Income Security Act of 1974, as amended (hereinafter,
"ERISA") and not be construed to provide income to any participant or
beneficiary under the Internal Revenue Code of 1986, as amended (hereinafter,
the "Code") prior to actual receipt of benefits hereunder;

         NOW, THEREFORE, the Company hereby agrees as follows:

                                   ARTICLE II

                     DEFINITIONS, CONSTRUCTION, AND ADOPTION

2.01              Definitions.

                  The following words and phrases, when used herein, unless
                  their context clearly indicates otherwise, shall have the
                  following respective meanings:

                  (a)      ACCOUNT: The bookkeeping account established for each
                           Participant pursuant to Section 5.01 which may
                           include a Savings Contribution Account, a Restoration
                           Contribution Account, an Employer Contribution
                           Account, a Supplemental Contribution Account, and a
                           Discretionary Contribution Account, if any, and
                           deemed Income thereon.

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                  (b)      ADMINISTRATIVE COMMITTEE: The Compensation and
                           Benefits Administrative Committee of the Company;
                           provided, however, that during any period the
                           Administrative Committee is not constituted, the term
                           shall mean the Compensation Committee.

                  (c)      AFFILIATE: Any corporation which is included within a
                           controlled group of corporations (as defined in
                           Section 414(b) of the Code) which includes an
                           Employer; any trade or business, whether or not
                           incorporated, which is under common control (as
                           defined in Section 414(c) of the Code) with an
                           Employer; any organization, whether or not
                           incorporated, which is a member of an affiliated
                           service group (as defined in Section 414(m) of the
                           Code) which includes an Employer; and any other
                           entity required to be aggregated with an Employer
                           pursuant to regulations under Section 414(o) of the
                           Code.

                  (d)      BENEFICIARY: A person or entity, either in an
                           individual or fiduciary capacity, designated by a
                           Participant in accordance with the provisions of
                           Section 7.01 to receive any death benefit which shall
                           be payable under this Plan.

                  (e)      CHANGE OF CONTROL: The occurrence of any one of the
                           following events:

                           (i)      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
                                    (A) an employee benefit plan (or a trust
                                    forming a part thereof) maintained by (1)
                                    the Company or (2) 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 (B) the
                                    Company or its Subsidiaries;

                           (ii)     The individuals who, as of the effective
                                    date of the amendment and restatement of the
                                    Plan, 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,

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                                    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

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

                           (iv)     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).

                  (f)      COMPANY: PEGASUS SOLUTIONS, INC., a corporation
                           organized and existing under the laws of the State of
                           Delaware, or its successor or successors.

                  (g)      COMPENSATION: The Participant's earned income,
                           salary, bonus and other remuneration from the
                           Employer, including Savings Contributions and
                           contributions to the 401(k) Plan or a cafeteria plan
                           pursuant to section 125 of the Code, but excluding
                           amounts realized from the exercise of a non-qualified
                           stock option or when restricted stock or property
                           held by the Participant either becomes freely
                           transferable or is no longer subject to a substantial
                           risk of forfeiture under section 83 of the Code,
                           "gross-up" payments of any kind, reimbursements or
                           other expense allowances, and moving expenses, as
                           determined in the discretion of the Compensation
                           Committee. Notwithstanding the foregoing,
                           Compensation shall also include severance pay under
                           the terms of an Employment Agreement during the
                           period described thereunder.

                  (h)      COMPENSATION COMMITTEE: The Compensation Committee of
                           the Board of Directors; provided, however, that
                           during any period the Compensation Committee is not
                           constituted, the term shall mean the Board of
                           Directors of the Company.

                  (i)      DISABILITY or DISABLED:

                           (i)      A mental or physical disability, either
                                    occupational or non occupational in cause,
                                    which satisfies the definition of
                                    "disability"

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                                    (or any corresponding term) as set forth in
                                    the Employment Agreement; or

                           (ii)     If there is no Employment Agreement or if
                                    the Employment Agreement has no such defined
                                    term or concept, a mental or physical
                                    disability, either occupational or
                                    non-occupational in cause, which satisfies
                                    the definition of "disability" (or any
                                    corresponding term) as set forth in the
                                    principal long-term disability policy or
                                    plan provided by the Company then covering
                                    the Participant; or

                           (iii)    If there is no such policy then covering the
                                    Participant, a mental or physical disability
                                    which, as determined by the Administrative
                                    Committee in good faith upon receipt of and
                                    in reliance on sufficient competent medical
                                    advice from one or more individuals selected
                                    by the Administrative Committee who are
                                    qualified to give professional medical
                                    advice, impairs or is expected to impair the
                                    Participant's ability to substantially
                                    perform the Participant's duties as an
                                    Employee of the Company for a period of at
                                    least ninety (90) consecutive days.

                  (j)      DISCRETIONARY CONTRIBUTION: An amount, if any,
                           credited by an Employer for the Plan Year to a
                           Participant pursuant to Section 4.01(e) hereof.

                  (k)      EFFECTIVE DATE: The original Effective Date is
                           July 1, 2002.

                  (l)      EMPLOYEE: An individual on the payroll of an Employer
                           whose wages from the Employer are subject to
                           withholding for purposes of Federal income taxes and
                           for purposes of the Federal Insurance Contributions
                           Act or any individual designated by the Compensation
                           Committee as an Employee for purposes of the Plan.

                  (m)      EMPLOYER or PARTICIPATING EMPLOYER: PEGASUS
                           SOLUTIONS, INC. and any other Affiliate of the
                           Company which employs a Key Employee.

                  (n)      EMPLOYER CONTRIBUTION: An amount credited by an
                           Employer for the Plan Year to a Participant pursuant
                           to Section 4.01(c) hereof.

                  (o)      EMPLOYMENT AGREEMENT: A written employment agreement
                           in effect between the Company and a Participant.

                  (p)      EMPLOYMENT COMMENCEMENT DATE: The first date on which
                           an Employee completes an hour of Service.

                  (q)      ENTRY DATE: The first day of each calendar month.

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                  (r)      401(k) PLAN: THE PEGASUS SOLUTIONS, INC. 401(k)
                           SAVINGS PLAN, as amended or restated from time to
                           time.

                  (s)      INCOME: The deemed net gain or loss of the
                           bookkeeping accounts maintained for all Participants
                           and former Participants from deemed investments, as
                           further described in Section 5.03(a) hereof.

                  (t)      KEY EMPLOYEE: Any Employee who is designated by the
                           Compensation Committee as eligible to participate in
                           this Plan.

                  (u)      PARTICIPANT: A Key Employee participating in the Plan
                           in accordance with the provisions of Article III.

                  (v)      PARTICIPATION: The period commencing on the date on
                           which an Employee becomes a Participant and ending on
                           the date on which the Employee incurs a Severance
                           from Service or is no longer designated as a Key
                           Employee.

                  (w)      PLAN: PEGASUS SOLUTIONS, INC. EXECUTIVE DEFERRED
                           COMPENSATION PLAN, the Plan set forth herein, as
                           amended from time to time.

                  (x)      RE-EMPLOYMENT COMMENCEMENT DATE: The first date on
                           which an Employee completes an hour of Service upon
                           his return to the employment of an Employer after a
                           Severance from Service.

                  (y)      RESTORATION CONTRIBUTION: Any amount credited by an
                           Employer for the Plan Year to a Participant pursuant
                           to Section 4.01(b) hereof.

                  (z)      RETIREMENT: A Participant's or former Participant's
                           termination of employment on or after attaining
                           age 60.

                  (aa)     SAVINGS CONTRIBUTION: An amount credited by an
                           Employer for the Plan Year to a Participant pursuant
                           to Section 4.01(a) hereof.

                  (bb)     SERVICE: A Participant's Service shall include his
                           period of employment with an Employer or any
                           Affiliate determined in accordance with Section 3.02,
                           and shall include any period during which he is
                           receiving severance benefits under an Employment
                           Agreement.

                  (cc)     SEVERANCE FROM SERVICE: With respect to an Employee,
                           the earlier of (i) the date on which he terminates
                           his employment with the Employer or, if a
                           Participant's Employment Agreement entitles him or
                           her to continued benefits under the Plan after
                           termination of employment, the last day of the month
                           in which his or her continued benefits cease, or (ii)
                           the date of his Retirement, Disability or death;
                           provided, however, that a

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                           Severance from Service shall not be deemed to occur
                           upon a transfer between Employers or Affiliates.

                  (dd)     SUPPLEMENTAL CONTRIBUTION: An amount credited by an
                           Employer for the Plan Year to a Participant pursuant
                           to Section 4.01(d) hereof.

                  (ee)     TRUST: The trust, if any, established by the Company
                           in accordance with the provisions of Article XI.

                  (ff)     VALUATION DATE: Each business day.

                  (gg)     YEAR or PLAN YEAR: The 12-month period beginning on
                           each January 1st and ending on December 31st of each
                           calendar year.

                  (hh)     YEAR OF SERVICE. As defined in Section 3.02 hereof.

2.02              Construction.

                  The masculine gender, where appearing in the Plan, shall be
                  deemed to include the feminine gender, unless the context
                  clearly indicates to the contrary. The words "hereof,"
                  "herein," "hereunder" and other similar compounds of the word
                  "here" shall mean and refer to the entire Plan and not to any
                  particular provision or Section.

2.03              Adoption by Others.

                  Any Affiliate of the Company which employs a Key Employee is
                  automatically an Employer under the Plan. Any Affiliate of the
                  Company may adopt this Plan and thereby become an Employer;
                  provided, however, that the Board of Directors of the Company
                  approves such adoption; provided, further, that the
                  administrative powers and control of the Company as provided
                  herein shall not be deemed diminished under the Plan by reason
                  of the adoption of the Plan by any other Employer, and such
                  administrative powers and control granted in Section 12.01
                  hereunder with respect to the appointment of the
                  Administrative Committee and other matters shall apply only
                  with respect to the Company and not to any other Employer.

                                  ARTICLE III

                            PARTICIPATION AND SERVICE

3.01              Participation.

                  A Key Employee shall become a Participant in the Plan on one
                  of the following dates, provided that, prior to such date, he
                  shall first have undertaken the actions specified in Section
                  3.03 hereof:

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                  (a)      In the case of an individual classified as a Key
                           Employee prior to the Effective Date, on the
                           Effective Date, or if he shall not have elected to
                           participate prior to the Effective Date but elects
                           to participate within thirty (30) days thereafter,
                           then on the first Entry Date following the Effective
                           Date; or

                  (b)      In the case of an individual classified as a Key
                           Employee on or after the Effective Date, on the first
                           Entry Date immediately following such individual's
                           classification.

                  In the event that a Participant shall cease to qualify as a
                  Key Employee, his Participation shall thereupon cease but he
                  shall continue to accrue Service hereunder during the period
                  of his continued employment with the Employer or any
                  Affiliate. Notwithstanding the foregoing, a Participant shall
                  continue to participate in the Plan pursuant to the terms of
                  an Employment Agreement, where applicable.

3.02              Service.

                  The amount of benefit payable to or on behalf of a Participant
                  shall be determined on the basis of his Years of Service. A
                  Year of Service shall mean the period of time, computed to the
                  nearest completed month, commencing on the Participant's
                  Employment Commencement Date and ending on the Participant's
                  Severance from Service. Notwithstanding the preceding
                  sentence, the Compensation Committee may, in its discretion,
                  credit a Participant with additional full or partial Years of
                  Service.

3.03              Election to Participate in Savings Contributions.

                  A Key Employee otherwise eligible to participate pursuant to
                  Section 3.01, may, after having received a written explanation
                  of the terms of, and the benefits provided under, the Plan,
                  elect to participate in such Plan on such form or forms as the
                  Administrative Committee may provide and may execute a Savings
                  Contribution agreement described in Section 4.02 hereof, in
                  order to have a Savings Contribution made on his behalf to the
                  Plan. Such election to participate and execution of a Savings
                  Contribution agreement shall be effected by a newly eligible
                  Participant, no later than thirty (30) days following his
                  becoming eligible to participate in the Plan, and by all other
                  Participants with respect to elections to defer Compensation
                  earned during a Year, on or prior to December 31 of the Year
                  preceding such Year. Notwithstanding the foregoing, a Key
                  Employee who has not elected to have Savings Contributions
                  made on his behalf to the Plan shall continue to participate
                  in the Plan and be eligible to have other contributions made
                  to the Plan on his behalf, including Restoration
                  Contributions, Employer Contributions, Supplemental
                  Contributions and Discretionary Contributions, if any.

3.04              Transfer.

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                  An Employee who is transferred between Participating Employers
                  shall be eligible for participation and benefits as in the
                  absence of such transfer.

                                   ARTICLE IV

                                  CONTRIBUTIONS

4.01              Employer Contributions.

                  The Employer shall credit Key Employee accounts in accordance
                  with the following:

                  (a)      Savings Contribution -- For each Year, the Employer
                           shall credit the Savings Contribution Account of each
                           of its Key Employees with an amount agreed to be
                           credited by such Employer pursuant to a Savings
                           Contribution agreement under Section 4.02 entered
                           into between the Employer and the Key Employee for
                           such Year.

                  (b)      Restoration Contribution -- For each Year, the
                           Employer shall credit each Key Employee with a
                           Restoration Contribution equal to the Participant's
                           Compensation multiplied by the Company's maximum
                           potential matching contribution percentage for the
                           401(k) Plan, reduced by the actual matching
                           contribution made for the Participant under the
                           401(k) Plan for the Year, if any.

                  (c)      Employer Contribution -- For each Year, the Employer
                           shall credit each Key Employee with an Employer
                           Contribution equal to one per cent (1%) of
                           Compensation multiplied by Years of Service
                           determined as of the end of such Year (not to exceed
                           twenty-five percent (25%) of Compensation).
                           Notwithstanding the foregoing, for the year 2002,
                           only Compensation during the period from July 1, 2002
                           to December 31, 2002 shall be considered for purposes
                           of the Employer Contribution.

                  (d)      Supplemental Contribution: -- For the year 2003, the
                           Employer shall credit each Key Employee with a
                           Supplemental Contribution equal to $10,000 multiplied
                           by the Key Employee's Years of Service determined as
                           of December 31, 2002. For each subsequent Year
                           through and including 2006, the Employer shall credit
                           each Key Employee with a Supplemental Contribution
                           equal to $5,000 multiplied by Years of Service
                           determined as of the end of the preceding Year.

                  (e)      Discretionary Contribution: -- In addition to the
                           contributions described above, the Employer may
                           credit the Discretionary Contribution Account of any
                           one or more Participants with such additional amounts
                           as determined in the sole discretion of the
                           Compensation Committee.

4.02              Key Employee Savings Contribution Agreement.

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                  Prior to commencement of Participation hereunder, a Key
                  Employee shall have entered into a Savings Contribution
                  agreement with his Employer. The terms of such agreement shall
                  provide that the Participant agrees to accept a reduction in
                  his Compensation from the Employer equal to any whole
                  percentage. A Participant may defer up to one hundred percent
                  (100%) of Compensation. In consideration of such agreement,
                  the Employer will credit the Key Employee's Savings
                  Contribution Account for each Year with an amount equal to the
                  total amount by which the Key Employee's Compensation from the
                  Employer was reduced during the Year pursuant to the
                  agreement.

                  Savings Contribution agreements shall remain in effect until
                  terminated or amended by the Participant in accordance with
                  the procedures set forth herein. Any amendment or termination
                  of an agreement shall not be effective until January 1
                  following the year in which an election so to amend or
                  terminate is executed by the Participant, provided that such
                  election is made on or prior to December 31. If a Participant
                  terminates his agreement as provided above, then he may elect
                  to enter into another agreement to be effective as of January
                  1 following his execution of a new agreement provided that
                  such election is made on or prior to December 31.

4.03              Disposition of Forfeitures.

                  If, upon a Severance from Service, a Participant is not one
                  hundred percent (100%) vested in his Restoration Contribution
                  Account or his Discretionary Contribution Account, if any,
                  then as of the end of the Year in which his Severance from
                  Service occurs, the forfeitures from such Accounts shall be
                  retained by the Company or used to reduce future contributions
                  under the Plan, if any.

                                   ARTICLE V

                             PARTICIPANTS' ACCOUNTS

5.01              Individual Accounts.

                  The Administrative Committee shall create and maintain
                  adequate records in the form of bookkeeping entries to
                  disclose the interest hereunder of each Participant, former
                  Participant and Beneficiary. Such bookkeeping entries shall be
                  in the form of individual accounts and credits and charges
                  shall be made to such accounts in the manner herein described.
                  When appropriate, a Participant shall have a Savings
                  Contribution Account, a Restoration Contribution Account, an
                  Employer Contribution Account, a Supplemental Contribution
                  Account, and a Discretionary Contribution Account, if any.

5.02              Deemed Investment Accounts; Participant Direction.

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                  The Administrative Committee shall designate a selection of
                  investment funds (hereinafter, the "Funds") in which each
                  Participant's bookkeeping Account may be deemed to be invested
                  under the Plan.

                  Each Participant or former Participant may direct that the
                  investment of his bookkeeping account will be deemed to be
                  made in any one or more of the Funds. Notwithstanding the
                  foregoing, the Company is under no obligation to acquire or
                  provide any investment funds, and the Plan will be unfunded as
                  provided at Section 11.01 hereof.

5.03              Account Adjustments.

                  The accounts of Participants, former Participants and
                  Beneficiaries shall be adjusted in accordance with the
                  following:

                  (a)      Income -- As frequently as daily, the Income
                           allocable to each of the Funds shall, as a
                           bookkeeping entry, be allocated and credited to the
                           bookkeeping accounts of Participants, former
                           Participants and Beneficiaries who had balances in
                           their accounts on such date that are deemed invested
                           in such Funds in accordance with Participant
                           direction.

                  (b)      Savings Contributions -- The amount credited pursuant
                           to Section 4.01(a) hereof for a Year shall be
                           credited to the Participant's Savings Contribution
                           Account as soon as practicable following the
                           Participant's reduction of his Compensation.

                  (c)      Restoration Contributions -- As soon as practicable
                           each Year or in the Year following the Year for which
                           the Restoration Contributions are made, or in a
                           combination of both Years, the amounts credited
                           pursuant to Section 4.01(b) hereof shall be credited
                           to the Restoration Contribution Accounts of
                           Participants. A Participant who incurs a Severance
                           from Service during the Year shall receive a pro rata
                           allocation of Restoration Contributions, based on the
                           number of completed months of Service for the Year.

                  (d)      Employer Contributions -- As soon as practicable each
                           Year or in the Year following the Year for which the
                           Employer Contributions are made, or in a combination
                           of both Years, the amounts credited pursuant to
                           Section 4.01(c) hereof shall be credited to the
                           Employer Contribution Accounts of Participants. A
                           Participant who incurs a Severance from Service
                           during the Year shall receive a pro rata allocation
                           of Employer Contributions, based on the number of
                           completed months of Service for the Year.

                  (e)      Supplemental Contributions -- As soon as practicable
                           each Year, the amounts credited pursuant to Section
                           4.01(d) hereof shall be credited to the Supplemental
                           Contribution Accounts of Participants.

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                  (f)      Discretionary Contributions -- As soon as practicable
                           each Year, the amounts credited pursuant to Section
                           4.01(e) hereof, if any, shall be credited to the
                           Discretionary Contribution Accounts of Participants
                           who have met the requirements to share in the
                           allocation as determined by the Compensation
                           Committee.

                                   ARTICLE VI

                                     VESTING

6.01              Retirement, Death, Disability or a Change of Control. Upon the
                  first to occur of a Participant's or former Participant's
                  Retirement, death, Disability or a Change of Control, such
                  Participant or former Participant, or his Beneficiary, as the
                  case may be, shall be fully vested in and entitled to the
                  total amount credited to his Accounts.

6.02              Other Severance From Service. If a Participant's or former
                  Participant's termination of employment is for any reason
                  other than Retirement, death or Disability, such Participant
                  or former Participant, or his Beneficiary, as the case may be,
                  shall be vested in and entitled to his entire Savings
                  Contribution Account, Employer Contribution Account and
                  Supplemental Contribution Account, and his "vested percentage"
                  at the date of the Severance from Service of the total amount
                  credited to his Restoration Contribution Account and his
                  Discretionary Contribution Account, if any. Such "vested
                  percentage" shall be determined in accordance with the
                  following schedule:

<Table>
<Caption>
                           Years of              Vested         Forfeited
                           Service               Percentage     Percentage
                           -------               ----------     ----------
<S>                        <C>                   <C>            <C>
                           Less than 1                0%           100%
                           1 but less than 2         34%            66%
                           2 but less than 3         67%            33%
                           3 or more                100%             0%
</Table>

6.03              Computation of Years of Service for Vesting.

                  (a)      General. For purposes of computing a Participant's or
                           former Participant's vested percentage, each
                           Participant or former Participant shall be credited
                           with all Service to which he is entitled pursuant to
                           Section 3.02.

                  (b)      Forfeitures. Upon a Participant's or former
                           Participant's termination of employment for any
                           reason other than Retirement, death, or Disability,
                           he shall immediately forfeit that portion of his
                           Account to which he is not entitled under Section
                           6.02.

                                      -11-
<PAGE>

6.04              Determination of Amount. For purposes of Sections 6.01 and
                  6.02, the amount credited to the Account of a Participant on
                  the books of the Company shall be determined by the
                  Administrative Committee as of the Valuation Date immediately
                  preceding the day on which benefit payment is made. The
                  Administrative Committee shall certify to the Corporate
                  Controller of the Company the total amount of the allocations
                  to the credit of the Participant on the books of the Company,
                  and shall determine whether the payment of the amount credited
                  to the Participant's accounts under the Plan is to be paid
                  directly by the Company, from the Trust, or by a combination
                  of such sources (except to the extent the provisions of the
                  Trust specify payment from the Trust). The payment of such
                  amount shall be made in the manner provided under Article X.

                                  ARTICLE VII

                                   BENEFICIARY

7.01              Designation of Beneficiary. Each Participant or former
                  Participant from time to time may designate any person or
                  persons (who may be designated contingently or successively),
                  as his Beneficiary or Beneficiaries to whom any remaining
                  amounts standing to the credit of the Participant or former
                  Participant in his accounts are to be paid if he dies before
                  payment of all such amounts. Each Beneficiary designation
                  shall be in the form prescribed by the Administrative
                  Committee and will be effective only when filed with the
                  Administrative Committee during the Participant's or former
                  Participant's lifetime. Each Beneficiary designation filed
                  with the Administrative Committee will cancel all Beneficiary
                  designations previously filed with the Administrative
                  Committee.

7.02              No Beneficiary. If any Participant or former Participant fails
                  to designate a Beneficiary in the manner provided above; or if
                  the Beneficiary designated by a Participant or former
                  Participant dies before him and the Participant or former
                  Participant fails to designate a new Beneficiary, or if the
                  Beneficiary designated by a deceased Participant or former
                  Participant dies before complete distribution of the deceased
                  Participant's or former Participant's benefit, the
                  Administrative Committee shall direct that such Participant's
                  or former Participant's accounts be paid as follows, with such
                  payment to be made at the time and in the manner specified in
                  Section 10.02 hereof:

                  (a)      To the surviving spouse of such Participant or former
                           Participant;

                  (b)      To the surviving children, and the descendants of any
                           deceased child, per stirpes, of the Participant or
                           former Participant;

                  (c)      To the Participant's surviving brothers and sisters;
                           or

                  (d)      To the Participant's personal representative
                           (executor or administrator).

                                      -12-
<PAGE>

                                  ARTICLE VIII

                                     NOTICES

8.01              Notice to Company. As soon as practicable after a Participant,
                  former Participant or Beneficiary becomes entitled to payment
                  of his accounts in accordance with Article VII, the
                  Administrative Committee shall give written notice to the
                  Corporate Controller of the Company, and to the trustee of the
                  Trust, if applicable, which notice shall include the following
                  information and directions:

                  (a)      Name and address of the Participant, former
                           Participant or Beneficiary.

                  (b)      Method and amount of payment to be made pursuant to
                           Article X.

                  (c)      Whether the payment is to be paid directly by the
                           Company, from the Trust, or by a combination of such
                           sources (except to the extent the provisions of the
                           Trust specify payment from the Trust).

8.02              Reliance Upon Notice. Upon receipt of any notice as provided
                  in this Article VIII, the Corporate Controller or the trustee
                  of the Trust, if applicable, shall promptly take whatever
                  action and make whatever payments are called for therein.

                                   ARTICLE IX

                 HARDSHIP WITHDRAWALS AND IN-SERVICE WITHDRAWALS

9.01              Hardship Withdrawals. The Compensation Committee may, in its
                  sole discretion, direct that payment of benefits to a
                  Participant be made, in advance of the date such payments are
                  due hereunder (hereinafter called a "Hardship Withdrawal"), if
                  the Compensation Committee determines that the Participant has
                  an unforeseeable emergency as hereinafter defined. No Hardship
                  Withdrawal shall be in an amount greater than the lesser of
                  (i) the amount needed for the unforeseeable emergency and (ii)
                  the vested balance of the Participant's Accounts on the date
                  of such Hardship Withdrawal. An unforeseeable emergency is
                  defined as set forth in Treasury Regulations Section
                  1.457-2(h)(4), including a severe financial hardship resulting
                  from a sudden and unexpected illness or accident of the
                  Participant or of a dependent (as defined in Section 152(a) of
                  the Code), casualty loss, or other similar extraordinary and
                  unforeseeable circumstances beyond the control of the
                  Participant.

9.02              Involuntary Distributions. Notwithstanding anything contained
                  in the Plan to the contrary, if at any time any Participant is
                  finally determined by the Internal Revenue Service ("IRS") or
                  the Department of Labor ("DOL") not to qualify as a member of
                  a select group of "management or highly compensated employees"
                  as such term is used in ERISA Section 401(a)(1), the
                  Compensation Committee

                                      -13-
<PAGE>

                  may, in its sole discretion, immediately distribute in one
                  lump sum to such Participant his vested account under the
                  Plan. A final determination of the IRS or DOL shall be a
                  decision rendered by the IRS or DOL which is no longer subject
                  to administrative appeal within the IRS or DOL.

9.03              Other Withdrawals and Loans. Except as set forth in Sections
                  9.01 and 9.02, no in-service withdrawals or loans are
                  permitted by the Plan.

                                   ARTICLE X

                               METHODS OF PAYMENT

10.01             Benefit Commencement Date. When a Participant, former
                  Participant or Beneficiary is entitled to receive a payment
                  under Section 6.01 or 6.02, such benefit payment will be made
                  (or will commence to be made) as soon as practicable following
                  death, Disability, Retirement or other Severance from Service.
                  The Participant may, no later than twelve (12) months prior to
                  the event entitling him to a distribution, make an irrevocable
                  election to commence his benefit payment either (a) no later
                  than ninety (90) days following the last day of the month in
                  which death, Disability, Retirement, or other Severance from
                  Service occurred or (b) no later than ninety (90) days
                  following the beginning of the Year following the Year in
                  which death, disability, retirement or other Severance from
                  Service occurred.

10.02             Form of Benefit. Except for hardship withdrawals under Section
                  9.01 or distributions under Section 9.02, the form of payment
                  shall be made in such form as the Participant may elect from
                  the following alternatives:

                  (a)      Single Lump-Sum Payment, under which a single
                           lump-sum payment is made to the Participant, former
                           Participant or his Beneficiary in an amount equal to
                           one hundred percent (100%) of the amount to which he
                           is entitled.

                  (b)      Annuity, under which the Participant's benefit shall
                           be payable as a single life annuity paid monthly
                           during the Participant's lifetime with the last
                           payment to be made for the month in which the
                           Participant's death occurs.

                  (c)      50% or 100% Survivor Annuity, under which monthly
                           payments are made to the Participant during the
                           Participant's lifetime and, if the Participant is
                           survived by a Beneficiary, continuing monthly
                           payments in the amount of fifty percent (50%) or one
                           hundred percent (100%) of the amount payable to the
                           Participant to such Beneficiary for the Beneficiary's
                           lifetime; and

                  (d)      10-Year Certain Annuity, under which monthly payments
                           are made to the Participant or the Participant's
                           Beneficiary for a period of one hundred twenty (120)
                           months, and if the Participant and the Beneficiary
                           die within one hundred twenty (120) months of the
                           date the benefits commenced,

                                      -14-
<PAGE>

                           continuing monthly payments of the same amount to the
                           Participant's estate for the balance of such one
                           hundred twenty (120) month period.

                  Any election pursuant to this Section 10.02 must be made prior
                  to the date on which such Key Employee's participation
                  hereunder first commences, with all payments to be made in the
                  form of a lump sum in the absence of a timely election and,
                  except as expressly provided otherwise in this Plan, shall be
                  irrevocable; provided, however, that a Participant may change
                  such election once during any Year, with the new election to
                  be effective for a distribution arising from a Severance from
                  Service of the Participant only if such distribution is to be
                  made or commence to be made more than twelve (12) months after
                  the date of the new election. The Administrative Committee
                  shall, as of the last day of the calendar quarter within which
                  the Severance from Service occurs, certify to the Trustee or
                  the Corporate Controller of the Employer, as applicable, the
                  method of payment selected by the Participant.

10.03             Company Responsibility. Any payment due to Participants under
                  this Plan and not paid through the Trust, if any, will be
                  payable from the general assets of the Company or the
                  Affiliates.

                                   ARTICLE XI

                             NATURE OF PLAN; FUNDING

11.01             No Trust Required.

                  The adoption of this Plan and any setting aside of amounts by
                  the Employer with which to discharge its obligations hereunder
                  shall not be deemed to create a trust; legal and equitable
                  title to any funds so set aside shall remain in the Employer,
                  and any recipient of benefits hereunder shall have no security
                  or other interest in such funds. Any and all funds so set
                  aside shall remain subject to the claims of the general
                  creditors of the Employer. This provision shall not require
                  the Employer to set aside any funds, but the Employer may set
                  aside such funds if it chooses to do so.

11.02             Funding of Obligation.

                  Section 11.01 above to the contrary notwithstanding, the
                  Employer may elect to transfer assets to the Trust, the
                  provisions of which may require the use of the Trust's assets
                  to satisfy claims of an Employer's general unsecured creditors
                  in the event of such Employer's insolvency and direct that no
                  Participant shall at any time have a prior claim to such
                  assets. The assets of the Trust shall not be deemed to be
                  assets of this Plan.

                                      -15-
<PAGE>

                                  ARTICLE XII

                                 ADMINISTRATION

12.01             Appointment of Administrative Committee.

                  The Administrative Committee shall administer, construe and
                  interpret the Plan. All usual and reasonable expenses of the
                  Administrative Committee shall be paid by the Employer.
                  Decisions of the Administrative Committee and/or the
                  Compensation Committee with respect to any matter involving
                  the Plan shall be final and binding on the Company, its
                  shareholders, each Employer and all Participants, former
                  Participants, and Beneficiaries. For purposes of ERISA, the
                  Administrative Committee shall be the Plan "administrator"
                  with respect to the general administration of the Plan.

12.02             Duties of Administrative Committee; Chairman and Secretary.

                  The Administrative Committee shall maintain complete and
                  adequate records pertaining to the Plan, including but not
                  limited to Participants' accounts, amounts transferred to the
                  Trust, and all other records, which shall be necessary or
                  desirable in the proper administration of the Plan. The
                  Administrative Committee shall choose from its members a
                  Chairman and may appoint a Secretary to keep such records as
                  may be necessary of the acts and resolutions of the
                  Administrative Committee, and the Secretary so appointed may,
                  but need not, be a member of the Administrative Committee. The
                  Secretary may perform any and all purely ministerial acts,
                  which may be delegated to him in writing by the Administrative
                  Committee. The Administrative Committee may employ such
                  persons or appoint such agents to assist it in the performance
                  of its duties as it may deem appropriate.

12.03             Meetings.

                  Except as otherwise specifically provided for herein, any and
                  all acts and decisions of the Administrative Committee shall
                  be by a majority of the members. Any action which might be
                  taken at a meeting of the Administrative Committee may be
                  taken without a meeting if authorized by a writing or writings
                  signed by all of the members of the Administrative Committee,
                  and such action will be effective on the date on which the
                  last signature is placed on such writing or writings, or such
                  earlier or later effective date as is set forth in the writing
                  or writings. The Administrative Committee may delegate to each
                  or any one of its members or to its Secretary authority to
                  sign any documents on its behalf, or to perform ministerial
                  acts, but no person to whom such authority is delegated shall
                  perform any act involving the exercise of any discretion even
                  though he alone may sign any document required by third
                  parties.

12.04             Indemnification of Administrative Committee and Compensation
                  Committee.

                  The Company (the "Indemnifying Party") hereby agrees to
                  indemnify and hold harmless the members of the Administrative
                  Committee, the Compensation Committee, and the Secretary, if
                  any (the "Indemnified Parties") against any losses, claims,
                  damages or liabilities to which any of the Indemnified Parties
                  may become subject to the extent that such losses, claims,
                  damages or liabilities or

                                      -16-
<PAGE>

                  actions in respect thereof arise out of or are based upon any
                  act or omission of the Indemnified Party in connection with
                  the administration of this Plan (other than any act or
                  omission of such Indemnified Party constituting gross
                  negligence or willful misconduct), and will reimburse the
                  Indemnified Party for any legal or other expenses reasonably
                  incurred by him or her in connection with investigating or
                  defending against any such loss, claim, damage, liability or
                  action. Promptly after receipt by the Indemnified Party of
                  notice of the commencement of any action or proceeding with
                  respect to any loss, claim, damage or liability against which
                  the Indemnified Party believes he is indemnified, the
                  Indemnified Party shall, if a claim with respect thereto is to
                  be made against the Indemnifying Party, notify the
                  Indemnifying Party in writing of the commencement thereof;
                  provided, however, that the omission so to notify the
                  Indemnifying Party shall not relieve it from any liability
                  which it may have to the Indemnified Party to the extent the
                  Indemnifying Party is not prejudiced by such omission. If any
                  such action or proceeding shall be brought against the
                  Indemnified Party, and it shall notify the Indemnifying Party
                  of the commencement thereof, the Indemnifying Party shall be
                  entitled to participate therein, and, to the extent that it
                  shall wish, to assume the defense thereof, with counsel
                  reasonably satisfactory to the Indemnified Party, and, after
                  notice from the Indemnifying Party to the Indemnified Party of
                  its election to assume the defense thereof, the Indemnifying
                  Party shall not be liable to such Indemnified Party for any
                  legal or other expenses subsequently incurred by the
                  Indemnified Party in connection with the defense thereof other
                  than reasonable costs of investigation or reasonable expenses
                  of actions taken at the written request of the Indemnifying
                  Party. The Indemnifying Party shall not be liable for any
                  compromise or settlement of any such action or proceeding
                  effected without its consent, which consent will not be
                  unreasonably withheld.

12.05             Unclaimed Benefits.

                  During the time when a benefit hereunder is payable to any
                  Participant or Beneficiary, the Administrative Committee may,
                  at its own instance, mail by registered or certified mail to
                  such Participant or Beneficiary, at his last known address, a
                  written demand for his then address, or for satisfactory
                  evidence of his continued life, or both. If such information
                  is not furnished to the Administrative Committee within twelve
                  (12) months from the mailing of such demand, then the
                  Administrative Committee may, in its sole discretion, declare
                  such benefit, or any unpaid portion thereof, suspended, with
                  the result that such unclaimed benefit shall be treated as a
                  forfeiture for the Year within which such twelve (12)-month
                  period ends, but shall be subject to restoration through an
                  Employer credit to its bookkeeping records of the
                  Participant's Accounts if the lost Participant or Beneficiary
                  later files a claim for such benefit.

12.06             Claims Procedure. If any person (hereinafter called the
                  "Claimant") feels that he is being denied a benefit to which
                  he is entitled under this Plan, such Claimant may file a
                  written claim for said benefit with the Administrative
                  Committee. Within ninety (90) days following the receipt of
                  such claim the Administrative Committee shall determine and
                  notify the Claimant as to whether he is entitled to

                                      -17-
<PAGE>

                  such benefit. If an extension of time is required to process
                  the claim, this time period may be extended an additional
                  ninety (90) days. If the claim requires the Administrative
                  Committee to make a determination in the event of Disability,
                  the time period in which the Administrative Committee will
                  review the claim is forty-five (45) days, with two possible
                  extensions of thirty (30) days each. In all cases, the
                  Claimant will be notified in writing of an extension and the
                  reasons for the extension. If the claim is denied, the written
                  notice of denial to the Claimant will include the specific
                  reasons for the denial, references to the provisions of the
                  Plan supporting the denial, a description of any additional
                  information necessary for the claim to be granted, a
                  description of the Plan's claims review procedures, and a
                  statement regarding the Claimant's legal rights to challenge a
                  denial of his or her claim following appeal.

                  If the Claimant still feels that he has a claim, the Claimant
                  may file an appeal with the Administrative Committee in
                  writing within sixty (60) days of receiving the notice of
                  denial. If the Claimant requires the Administrative Committee
                  to make a determination of Disability, the Claimant may file
                  an appeal with the Administrative Committee in writing within
                  one hundred eighty (180) days of receiving the notice of
                  denial. The Claimant may submit documents, records, and other
                  information related to his or her appeal. Upon request, the
                  Claimant may review information relevant to the benefit claim
                  or the Administrative Committee will provide the Claimant with
                  copies of information relevant to the benefit claim without
                  charge. Final determination on the claim will be made no later
                  than sixty (60) days after the Administrative Committee's
                  receipt of the Claimant's written request for an appeal. If
                  additional time is required for processing the Claimant's
                  appeal, this time period may be extended an additional sixty
                  (60) days. If the claim requires the Administrative Committee
                  to make a determination of Disability, a final determination
                  will be made within forty-five (45) days of the Claimant's
                  request for an appeal. If additional time is required for
                  processing the appeal, this time period may be extended an
                  additional forty-five (45) days. In all cases, the Claimant
                  will be notified of an extension and the reasons for the
                  extension. If the Claimant's appeal is denied, the written
                  notice of denial will include the specific reasons for the
                  denial, references to the provisions of the Plan supporting
                  the denial, and a statement regarding the Claimant's legal
                  rights to challenge the denial of the claim. Upon request, the
                  Claimant may review information relevant to the benefit claim
                  or the Administrative Committee will provide the Claimant with
                  copies of information relevant to the benefit claim without
                  charge. The final decision of the Administrative Committee
                  shall be conclusive and binding upon all parties having or
                  claiming to have an interest in the matter being reviewed.

                                  ARTICLE XIII

                                  MISCELLANEOUS

13.01             Nonguarantee of Employment.

                                      -18-
<PAGE>

                  Nothing contained in this Plan shall be construed as a
                  contract of employment between the Employer and any Employee,
                  or as a right of any Employee to be continued in the
                  employment of the Employer, or as a limitation on the right of
                  the Employer to discharge any of its Employees, with or
                  without cause.

13.02             Nonalienation of Benefits.

                  Benefits payable under this Plan shall not be subject in any
                  manner to anticipation, alienation, sale, transfer,
                  assignment, pledge, encumbrance, charge, garnishment,
                  execution, or levy of any kind, either voluntary or
                  involuntary, prior to actually being received by the person
                  entitled to the benefit under the terms of the Plan; and any
                  attempt to anticipate, alienate, sell, transfer, assign,
                  pledge, encumber, charge or otherwise dispose of any right to
                  benefits payable hereunder shall be void.

13.03             No Preference.

                  No Participant shall have any preference over the general
                  creditors of an Employer in the event of such Employer's
                  insolvency.

13.04             Incompetence of Recipient.

                  If the Administrative Committee receives evidence satisfactory
                  to it that any person entitled to receive a payment hereunder
                  is, at the time the benefit is payable, physically, mentally
                  or legally incompetent to receive such payment and to give a
                  valid receipt therefor, and that an individual or institution
                  is then maintaining or has custody of such person and that no
                  guardian, committee or other representative of the estate of
                  such person has been duly appointed, the Administrative
                  Committee may direct that such payment thereof be paid to such
                  individual or institution maintaining or having custody of
                  such person, and the receipt of such individual or institution
                  shall be valid and a complete discharge for the payment of
                  such benefit.

13.05             Texas Law to Apply.

                  THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS OF
                  THE STATE OF TEXAS EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
                  LAW.

                                  ARTICLE XIV

                        AMENDMENTS OR TERMINATION OF PLAN

         The Company, by action of its Board of Directors, or by action of a
person so authorized by resolution of the Board of Directors, shall have the
power and right from time to time to modify, amend, supplement, suspend or
terminate the Plan, provided that a Participant shall not be subject to any such
amendment or termination without his or her written consent. If the Plan

                                      -19-
<PAGE>

should be amended or terminated, the Company shall be liable for any benefits
accrued under the Plan as of the date of such action.

         IN TESTIMONY WHEREOF, PEGASUS SOLUTIONS, INC. has caused this
instrument to be executed in its name and on its behalf, by the officer
thereunto duly authorized, this 28th day of February, 2003 effective as of July
1, 2002.

                                     PEGASUS SOLUTIONS, INC.

                                     By:
                                        --------------------

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

ATTEST:
       -----------------

                                      -20-<PAGE>
                                                                   EXHIBIT 10.16

                             PEGASUS SOLUTIONS, INC.
                           DEFERRED COMPENSATION TRUST

         This Trust Agreement is made effective the 28th day of February, 2003,
by and between PEGASUS SOLUTIONS, INC., a Delaware corporation, having its
principal place of business in Dallas, Texas, (the "Company"), and the CHARLES
SCHWAB TRUST COMPANY (the "Trustee");

         WHEREAS, the Company sponsors two nonqualified deferred compensation
plans known as the PEGASUS SOLUTIONS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN (the "SERP") and the PEGASUS SOLUTIONS, INC. EXECUTIVE DEFERRED
COMPENSATION PLAN (the "DCP") (hereinafter collectively referred to as the
"Plans");

         WHEREAS, the Company has incurred or expects to incur liability under
the terms of such Plans with respect to the individuals participating in such
Plans;

         WHEREAS, the Company wishes to establish a trust known as the PEGASUS
SOLUTIONS, INC. DEFERRED COMPENSATION TRUST (hereinafter called the "Trust") and
to contribute to the Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of the Company's Insolvency, as
defined in Section 3(a) herein, until paid to participants in the Plans and
their beneficiaries in such manner and at such times as specified in the Plans;

         WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plans
as unfunded Plans maintained for the purpose of providing deferred compensation
for a select group of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended;

         WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plans;

         NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows in this Trust
Agreement:

SECTION 1.        ESTABLISHMENT OF TRUST.

         (a)      The Company hereby deposits with Trustee in trust One Dollar
                  ($1.00), which shall become the principal of the Trust to be
                  held, administered and disposed of by Trustee as provided in
                  this Trust Agreement. As soon as administratively possible
                  after December 31, 2002, the Company shall deposit cash
                  sufficient to fund 50% of the FAS 87 SERP pension expense for
                  the 2000, 2001, and 2002 fiscal years. Thereafter, no later
                  than December 31st of each calendar year, the

PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST

                                     PAGE 1

<PAGE>

                  Company shall deposit cash to the Trust sufficient to fund 50%
                  of the FAS 87 SERP pension expense for the current fiscal year
                  to the extent that at least 50% of the accumulated FAS 87 SERP
                  pension expense has not been funded pursuant to Section 1(f)
                  of the Trust. Amounts that are credited under the DCP shall be
                  deposited in cash to the Trust as soon as administratively
                  practicable after the crediting date.

         (b)      The Trust hereby established shall be irrevocable, unless
                  terminated in accordance with Section 18 hereof.

         (c)      The Trust is intended to be a grantor trust, of which the
                  Company is the grantor, within the meaning of subpart E, part
                  I, subchapter J, chapter 1, subtitle A of the Internal Revenue
                  Code of 1986, as amended, and shall be construed accordingly.

         (d)      The principal of the Trust, and any earnings thereon, shall be
                  held separate and apart from other funds of the Company and
                  shall be used exclusively for the uses and purposes of
                  participants in the Plans and general creditors as herein set
                  forth. participants in the Plans and their beneficiaries shall
                  have no preferred claim on, or any beneficial ownership
                  interest in, any assets of the Trust. Any rights created under
                  the Plans and this Trust Agreement shall be mere unsecured
                  contractual rights of participants in the Plans and their
                  beneficiaries against the Company. Any assets held by the
                  Trust will be subject to the claims of the Company's general
                  creditors under federal and state law in the event of
                  Insolvency, as defined in Section 3(a) herein.

         (e)      The Company, in its sole discretion, may at any time, or from
                  time to time, make deposits of cash or other property (in
                  addition to those required deposits pursuant to Section 1(a)
                  of the Trust) in trust with Trustee, to be held, administered
                  and disposed of by Trustee as provided in this Trust
                  Agreement. Neither Trustee, any participant in the Plans, nor
                  any beneficiary shall have any right to compel such additional
                  deposits.

         (f)      The Company shall, as soon as administratively practicable,
                  but no later that ninety (90) days after the occurrence of a
                  Change of Control, contribute to the Trust the amount by which
                  the present value amount in (1) below exceeds the value of all
                  Trust assets as of the applicable date:

                  (1)      The present value of all benefits (vested and
                           unvested) payable under the Plans on a pre-tax basis
                           to participants in the Plans. Each participant's
                           benefit for purposes of calculating present value
                           shall be the highest benefit the participant would
                           have accrued under the Plans within the twenty-four
                           (24) months following such event, assuming that the
                           participant's service continues for twenty-four (24)
                           months at the same rate of compensation, that the
                           participant continues to make future deferrals under
                           the DCP in accordance with his prior elections, and
                           that the participant is terminated at a time when the
                           participant is entitled to

PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST

                                     PAGE 2
<PAGE>

                           receive any benefit enhancement provided by the Plans
                           upon a Change of Control. Any benefit enhancement or
                           right with respect to the Plans which is provided
                           under a participant's employment or severance
                           agreement shall be taken into account in making the
                           foregoing calculation insofar as it may increase
                           benefits under the Plans.

                  (2)      The calculations required under Sections 1(a) or 1(f)
                           shall be made by the Company, or a qualified actuary
                           or consultant selected by the Administrator of the
                           Plans, based on the terms of the Plans and the
                           actuarial assumptions and methodology set forth in
                           Appendix A attached hereto. Before a Change of
                           Control, Appendix A may be revised by the
                           Administrator from time to time. After a Change of
                           Control, Appendix A may be revised only with the
                           written consent of 100% of the participants (or
                           beneficiaries of any deceased participants).

         (g)      Whenever the Company makes a contribution to the Trust
                  pursuant to Sections 1(a) or 1(f) it shall furnish the Trustee
                  with a written statement setting forth the computation of all
                  required amounts contributed. The Trustee shall have no duty
                  or responsibility to review or otherwise question any such
                  computation. Whenever a Change of Control occurs or the
                  Company makes a contribution pursuant to Section 1(f), the
                  Company shall deliver to the Trustee, contemporaneously with
                  or immediately prior to such event, a schedule (the "Payment
                  Schedule") indicating the amounts payable under each Plan in
                  respect of each participant, or providing a formula or
                  instructions acceptable to the Trustee for determining the
                  amounts so payable, the form in which such amounts are to be
                  paid (as provided for or available under the Plans) and the
                  time of commencement for payment of such amounts. The Payment
                  Schedule shall include any other necessary instructions with
                  respect to benefits under the Plans payable under the Plans
                  and any conditions with respect to any participant's
                  entitlement to, and the Company's obligation to provide, such
                  benefits, and such instructions may be revised from time to
                  time to the extent so provided under the Plans or this Trust
                  Agreement.

                  A modified Payment Schedule shall be delivered by the Company
                  to the Trustee (i) at each time that additional amounts are
                  required to be paid by the Company to the Trustee pursuant to
                  Section 1(f) and (ii) upon the occurrence of any event
                  requiring a modification of the Payment Schedule. The Company
                  shall also furnish a Payment Schedule or modified Payment
                  Schedule for any or all Plan(s) upon request by the Trustee at
                  any other time. Whenever the Company is required to deliver to
                  the Trustee a Payment Schedule or a modified Payment Schedule,
                  the Company shall also deliver at the same time to each
                  participant the respective portion of the Payment Schedule or
                  modified Payment Schedule that sets forth the amount payable
                  to that participant.

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SECTION 2.        TRUST FUND.

         (a)      All contributions or transfers shall be received by the
                  Trustee in cash, policies of life insurance, if acceptable to
                  the Trustee, or such other assets that are acceptable to the
                  Trustee. The Trust Fund consists of the contributions and
                  transfers received by the Trustee, together with the income
                  and earnings from them and any increments to them, less any
                  investment losses and any payments and distributions that at
                  the time of reference have been made by the Trustee in
                  accordance with the Company's Plans. The Trustee shall have no
                  duty to (i) compute any amount required to be transferred or
                  paid to it by the Company, (ii) collect any contributions or
                  transfers to the Trust Fund, or (iii) determine whether any
                  contribution or transfer complies with the terms of the Plans.

         (b)      The Trustee shall accept a transfer of cash or other property
                  acceptable to the Trustee directly from the trustee of any
                  other trust under the Company's Plans only at the direction of
                  the person appointed by the board of directors of the Company
                  to administer the Plans (the "Administrator").

         (c)      The Trustee shall have no responsibility with respect to such
                  transferred assets except to receive such assets and to hold
                  and administer the same thereafter in accordance with this
                  Trust Agreement. Further, the Trustee shall not be responsible
                  for any act or omission of a predecessor trustee or any other
                  person with respect to such transferred assets and shall not
                  be required to make any claim or demand against any of such
                  persons unless the Company requests in writing that the
                  Trustee make such claim or demand.

         (d)      If the Company creates or maintains one or more nonqualified
                  deferred compensation plans in addition to the Plan, the
                  Company may request the Trustee to hold the assets of such
                  additional Plan or plans in the Trust Fund. The Administrator
                  shall keep records showing the interest of the Plans and each
                  additional Plans in the Trust Fund unless the Trustee enters
                  into an agreement with the Company to keep separate accounts
                  for each such plan. The Company and the Administrator shall
                  not permit or cause the assets of one Plans to be used to pay
                  benefits or the administrative expenses of any other Plans
                  with the assets in the Trust Fund.

SECTION 3.        INVESTMENT AND MANAGEMENT OF PLAN ASSETS.

         (a)      The Company 's president or other duly authorized official
                  shall certify in writing to the Trustee the names and specimen
                  signatures of all persons authorized to act as or on behalf of
                  the Plan's named fiduciary, including the Administrator and
                  these names and specimen signatures shall be updated as
                  necessary by the president or other duly authorized official.

         (b)      The person or persons who direct investment of all or part of
                  the Trust Fund ("Authorized Person") include the Administrator
                  and an Investment Manager (provided that the conditions in
                  paragraph (b) below are satisfied). The Authorized Person, or
                  such person's duly appointed delegate, who may be

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<PAGE>

                  Charles Schwab & Co., Inc. or its successor or assign serving
                  from time to time, which shall be a broker-dealer registered
                  under the Securities Act of 1934, as amended ("the Broker") or
                  the recordkeeper (also referred to as "Authorized Person"),
                  shall direct the Trustee as to investment of assets of the
                  applicable part of the Trust Fund according to procedures
                  agreed to by the Administrator and the Trustee.

                  (1)      Administrator. The Administrator shall notify the
                           Trustee in writing of the identity of the person
                           authorized to act for the Administrator. The
                           Administrator shall have the power to manage, acquire
                           and dispose of the assets of the Trust Fund over
                           which the Administrator exercises control. The
                           Trustee shall not be liable for any acts or omissions
                           of the Administrator or have an obligation to invest
                           or otherwise manage any asset of the Trust Fund
                           subject to the Administrator's control.

                  (2)      Investment Manager. If and to the extent the Company
                           designates an Investment Manager as the Authorized
                           Person, the Investment Manager shall have the power
                           to manage, acquire and dispose of assets of the Trust
                           Fund over which the Investment Manager exercises
                           control. The Company must notify the Trustee in
                           writing of the appointment of each Investment
                           Manager, and the assets over which each Investment
                           Manager shall exercise control. The Company also
                           shall cause the Investment Manager to acknowledge to
                           the Trustee in writing that the Investment Manager is
                           a fiduciary to the Plans with respect to the assets
                           under its control. If the Company appoints more than
                           one Investment Manager, the Company shall be
                           responsible for establishing a diversification policy
                           and monitoring compliance among the Investment
                           Managers.

                           The Trustee shall not be liable for any acts or
                           omissions of the Investment Manager or have an
                           obligation to invest or otherwise manage any asset of
                           the Trust Fund subject to the Investment Manager's
                           control. If the Company revokes the appointment of an
                           Investment Manager, the investment responsibility
                           that had been delegated to the Investment Manager
                           shall revert to the Company unless the Company
                           appoints a successor Investment Manager.

         (c)      The Trustee does not have any of the investment
                  responsibilities normally or statutorily incident to the
                  office of Trustee. Rather, the Trustee acts solely as
                  custodian of the Trust Fund and has only those powers and
                  responsibilities that are necessary to enable it to perform
                  its custodial functions.

                  The Trustee:

                  (1)      Shall not be liable for losses or unfavorable results
                           that may occur because the Trustee complies with the
                           investment directions of the Authorized Person; and

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                                     PAGE 5
<PAGE>

                  (2)      Shall only act upon receipt of proper direction from
                           an Authorized Person and shall have no duty to
                           question any direction issued by the Authorized
                           Person, to review any asset over which the Authorized
                           Person has investment responsibility or to make any
                           suggestions to the Authorized Person regarding
                           investments.

         (d)      The Trustee shall manage and administer the Trust Fund without
                  distinction between principal and income.

         (e)      The Trustee shall not be responsible for the diversification
                  of assets held in the Trust for the Plan. The Company or the
                  Authorized Person shall, instead, be responsible for
                  diversifying assets held in the Trust.

         (f)      The Trustee is authorized to maintain reasonable balances of
                  uninvested cash to facilitate the orderly administration of
                  the Trust Fund without liability for interest.

         (g)      The Trustee shall have no obligation to determine the
                  existence of any conversion, redemption, exchange,
                  subscription or other right relating to any securities that an
                  Authorized Person directs the Trustee to purchase for the
                  Account for which notice was given prior to purchase. The
                  Trustee has no obligation to exercise any such right unless
                  the Authorized Person informs the Trustee of the existence of
                  the right and instructs the Trustee to exercise such right, in
                  writing within a reasonable time before the right expires.

         (h)      If the Authorized Person directs the Trustee to purchase,
                  retain or sell securities issued by any foreign government or
                  business entity, the Authorized Person shall be responsible
                  for advising the Trustee in writing of any laws or regulations
                  of any foreign countries or any U.S. territories or possession
                  that apply to such securities including, without limitation,
                  laws and regulations affecting dividends or interest on such
                  securities.

         (i)      The Trustee delegates to the Broker the duty to hold and
                  account for assets of the Trust Fund which are securities that
                  are publicly traded on a national securities exchange, shares
                  or units issued by an investment company registered under the
                  Investment Company Act of 1940, as amended, certificates of
                  deposit and obligations issued by the U.S. Government, its
                  agencies and instrumentalities. The Broker shall keep records
                  and accounts of all investments, receipts, disbursements and
                  other transactions that affect the value or identity of Trust
                  Fund assets in the Broker's possession. The Trustee's
                  delegation shall be deemed to be made upon the Trustee's
                  acceptance of the Company's Plans.

         (j)      In no event may Trustee invest in securities (including stock
                  or rights to acquire stock) or obligations issued by the
                  Company, other than a de minimis amount held in common
                  investment vehicles in which Trustee invests.

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                                     PAGE 6
<PAGE>

         (k)      With respect to the assets of the Trust associated with the
                  SERP, all rights associated with such assets shall be
                  exercised by Trustee at the direction of the Company or its
                  Authorized Person, and such rights shall in no event be
                  exercisable by or rest with participants in the SERP.

         (l)      With respect to the assets of the Trust associated with the
                  DCP, all rights associated with such assets shall be exercised
                  by Trustee at the direction of the Company or its Authorized
                  Person, and such rights shall in no event be exercisable by or
                  rest with participants in the DCP. The DCP participants'
                  deemed investment elections among the investment funds
                  designated by the Company may be considered as investment
                  alternatives, but the Trustee is under no obligation to invest
                  in or mirror any participant's deemed election in the
                  investment funds.

SECTION 4.        INVESTMENTS.

         (a)      Subject to any general or specific investment guidelines
                  formulated by the Company or the Administrator, the Authorized
                  Person may cause the Trust Fund to be invested and reinvested
                  in every kind of investment including, without limitation,
                  publicly traded equity and debt interests of all kinds issued
                  by domestic or foreign governments, business organizations,
                  limited partnerships, investment companies and trusts or other
                  entities, convertible securities of all kinds,
                  interest-bearing deposits in any depository institution
                  (including The Charles Schwab Trust Company ("CSTC") or any
                  affiliate of CSTC), Company Stock, money market securities of
                  all kinds, collective investments, as described in (b) below
                  and insurance contracts as described in (c) below.

         (b)      Subject to the following provisions, the assets of the Trust
                  Fund may be invested and reinvested, in whole or in part, in
                  any common investment fund (referred to as the "fund")
                  maintained by CSTC or an Investment Manager in which the Trust
                  Fund is eligible to participate. Notwithstanding any other
                  provision of this Trust Agreement, to the extent Trust Fund
                  assets are invested in any such fund, the terms of the fund's
                  governing instrument shall govern the investment
                  responsibilities and powers of the entity responsible for
                  management of the fund (referred to as "fund manager"), and
                  the terms of such governing instrument shall be incorporated
                  into the Trust Agreement. The value of any interest in a fund
                  held by the Trust Fund shall be the fair market value of the
                  interest as determined by the fund manager in accordance with
                  the fund's governing instrument. For purposes of valuation of
                  the Trust Fund assets, the Trustee shall be entitled to rely
                  conclusively on the value reported by the fund manager.

                  The Trust Fund may be invested in a pooled investment vehicle
                  funded by contracts issued by an insurance company qualified
                  to do business in a state including, without limitation, group
                  annuity and guaranteed investment contracts. Any such contract
                  may provide for the allocation of amounts received by the
                  insurance company to its general account, one or more of its
                  separate accounts

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                                     PAGE 7
<PAGE>

                  (including pooled separate accounts), or both. To the extent
                  Trust Fund assets are allocated to a separate account of an
                  insurance company, the Company shall appoint the insurance
                  company as an Investment Manager as provided above.
                  Notwithstanding any other provision of the Trust Agreement,
                  the terms of the contract(s) governing the separate account(s)
                  in which the Trust Fund is invested shall govern the
                  investment responsibilities and powers of the insurance
                  company and, to the extent required by law, the terms of such
                  contract(s) shall be incorporated into the Trust Agreement.

         (c)      To the extent permitted by the Plan, the Authorized Person may
                  direct the Trustee to apply for and purchase annuity contracts
                  and retain or purchase life insurance contracts (referred to
                  as "contracts") from an Insurer, subject to the following
                  provisions:

                  (1)      The Authorized Person shall be responsible for
                           ensuring that the purchases conform with all
                           requirements under the Plan, if any, and any rules
                           and policies established by the Administrator
                           regarding the form, value, optional settlement
                           methods and other provisions of the contracts. The
                           Trustee shall not be responsible for the validity or
                           proper execution of any contract delivered to it, or
                           any act of any person which renders the contract void
                           or voidable. The Trustee shall have no duty to inform
                           participants of the terms and conditions of any such
                           contract.

                  (2)      The Administrator shall instruct the Insurer to
                           notify the Administrator of all premiums becoming due
                           under the contracts. The Administrator shall deliver
                           all premium notices to the Trustee, together with a
                           direction to the Trustee to pay the premiums out of
                           the Trust Fund. The Trustee shall have no
                           responsibility for paying the premium unless the
                           Administrator provides written instructions directing
                           the Trustee to pay the premium and sufficient assets
                           of the Trust Fund are available for that purpose.

                  (3)      The Administrator shall cause the Trustee to be
                           designated as the sole owner of any such contract,
                           with sole power to exercise all rights, privileges,
                           options and other incidents of ownership at the
                           Administrator's direction. The Administrator from
                           time to time shall direct the Trustee regarding the
                           designation of a beneficiary of the death benefit
                           payable under any such contract in accordance with
                           the applicable provisions of the Plan.

         (d)      An Authorized Person may not direct the investment of assets
                  of the Trust Fund in assets that are not acceptable to the
                  Trustee.

SECTION 5.        TRUSTEE POWERS.

         In its administration of the Trust Fund, the Trustee shall have and
exercise whatever powers are necessary to discharge its obligations and exercise
its rights under the Trust

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                                     PAGE 8
<PAGE>

Agreement. Subject to the direction of the Authorized Person, the Trustee shall
have full power and authority with respect to property held in the Trust Fund to
do all such acts, take all proceedings, and exercise all such rights and
privileges, whether specifically referred to or not in this document, as could
be done, taken, or exercised by the absolute owner, including, without
limitation, the following:

        (a)       To collect income generated by the Trust Fund investments and
                  proceeds realized on the sale or disposition of assets and to
                  hold the same pending reinvestment or distribution in
                  accordance with this Trust Agreement;

        (b)       To register Trust Fund property in the Trustee's own name, in
                  the name of a nominee or in bearer form, provided the
                  Trustee's records and accounts show that such property is an
                  asset of the Trust Fund;

        (c)       To deposit securities in a security depository and permit the
                  securities so deposited to be held in the name of the
                  depository's nominee, and to deposit securities issued or
                  guaranteed by the U.S. government or any agency or
                  instrumentality thereof, including securities evidenced by
                  book entry rather than by certificate, with the U.S.
                  Department of the Treasury, a Federal Reserve Bank or other
                  appropriate custodial entity, in the same account as the
                  Trustee's own property, provided the Trustee's records and
                  accounts show that such securities are assets of the Trust
                  Fund;

        (d)       To hold securities issued by a foreign government or business
                  entity at a foreign office of the Trustee or any of its
                  affiliates, or to deposit such securities with a foreign
                  securities depository or bank regulated by a government agency
                  or regulatory authority in the foreign jurisdiction, and to
                  permit the securities so deposited to be held in the nominee
                  name of the depository or bank, provided that the Trustee's
                  records and accounts show that such securities belong to the
                  Trust Fund;

        (e)       To retain the property in the Trust;

         (f)      To sell Trust assets, at either public or private sale, at
                  such time or times and on such terms and conditions as it may
                  deem appropriate;

        (g)       To consent to or participate in any plan for the
                  reorganization, consolidation, or merger of any business unit,
                  any security of which is held in the Trust Fund, to pay calls
                  and assessments imposed upon the owners of such securities as
                  condition of their participating therein, and to consent to
                  any contract, lease, mortgage, purchase or sale of property,
                  by or between such business unit and any other party;

        (h)       To exercise or dispose of any right it may have as the holder
                  of any security, to convert the same into another security, to
                  acquire any additional security or securities, to make any
                  payments, to exchange any security, or to do any other act
                  with reference thereto;

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                                     PAGE 9
<PAGE>

        (i)       To renew or extend the time of payment of any obligation due
                  or becoming due;

        (j)       To grant options to purchase property held in the Trust;

        (k)       To compromise, arbitrate, or otherwise adjust or settle claims
                  in favor of or against the Trust and to deliver or accept
                  consideration in either total or partial satisfaction of any
                  indebtedness or other obligation, and to continue to hold
                  property so received for the period of time that the Trustee
                  deems appropriate;

        (l)       To exchange any property for other property upon such terms
                  and conditions as the Trustee may deem proper and to give or
                  receive money to effect equality in price;

        (m)       To foreclose any obligation by judicial proceeding or
                  otherwise;

        (n)       To sue or defend in connection with any and all securities or
                  property at any time received or held in the Trust Fund and to
                  charge against the Trust Fund all reasonable expenses and
                  attorney's fees in connection therewith;

        (o)       To borrow money from any person, unless otherwise prohibited,
                  with or without giving security;

        (p)       To deposit any security with any protective or reorganization
                  committee, and to delegate to that committee such power and
                  authority as the Trustee may deem proper, and to agree to pay
                  out of the Trust Fund that portion of the expenses and
                  compensation of that committee as the Trustee may deem proper;

        (q)       To deliver to the Company, or the person or persons identified
                  by the Company, proxies and powers of attorney and related
                  informational material, for any securities or other property
                  held in the Trust. The Authorized Person shall instruct the
                  Trustee as to the voting of stock and tendering of shares over
                  which such Authorized Person exercises control according to
                  procedures developed by the Company and Trustee. In no event
                  shall the Trustee be responsible for voting shares of
                  securities held in the Trust or for ascertaining or monitoring
                  whether, or how, proxies are voted or whether the proper
                  number of proxies is received;

        (r)       To appoint agents as necessary or desirable, including legal
                  counsel who may be counsel for the Company;

        (s)       To hold that portion of the Trust Fund as the Trustee may deem
                  necessary for ordinary administration and for the disbursement
                  of funds in cash, without liability for interest, by
                  depositing the same in any bank (including deposits which bear
                  a reasonable rate of interest in a bank or similar financial
                  institution supervised by the United States or a State, even
                  where a bank or financial

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                                    PAGE 10
<PAGE>

                  institution is the Trustee, or otherwise is a fiduciary of the
                  Plan, including CSTC), subject to the rules and regulations
                  governing such deposits, and without regard to the amount of
                  any such deposit;

        (t)       To retain group or individual insurance contracts of all
                  kinds;

        (u)       If directed by the Authorized Person, to acquire, hold, and
                  administer limited partnership interests, or interests in
                  other specialized investment vehicles, provided that the
                  Authorized Person signs any agreement or other necessary
                  documents requested by the Trustee prior to entering into the
                  transaction;

        (v)       To write covered call options on securities where appropriate
                  for the Trust, provided that any such transaction is in
                  conformity with the Plans and all applicable rules,
                  regulations and laws governing the Trustee, the Plan, and this
                  Trust;

        (w)       To the extent permitted under applicable laws, to invest in
                  deposits, long and short term debt instruments, stocks, and
                  other securities, including those of CSTC, The Charles Schwab
                  Corporation (the "Public Company"), Charles Schwab & Co., Inc.
                  (the "Broker/Dealer"), their affiliates and subsidiaries;

        (x)       To combine certificates representing securities with
                  certificates of the same issue held by the Trustee for other
                  fiduciary accounts; and

        (y)       If directed by the Authorized Person, to pool all or any
                  portion of the Trust Fund with assets belonging to any other
                  nonqualified deferred compensation or employee pension benefit
                  trust created by the Company or any Affiliated Company, and to
                  commingle such assets and make joint or common investments and
                  carry joint accounts on behalf of the Plans and such other
                  trust or trusts, allocating undivided shares or interests in
                  such investments or accounts or any pooled assets of the two
                  or more trusts in accordance with their respective interests.

SECTION 6.        USE OF AFFILIATES (IF CSTC IS THE TRUSTEE).

         (a)      CSTC is authorized to contract or make other arrangements with
                  the Public Company, the Broker/Dealer, their affiliates and
                  subsidiaries, successors and assigns and any other
                  organizations affiliated with or subsidiaries of CSTC or
                  related entities, for the provision of services to the Trust
                  or Plans, except where such arrangements are prohibited by law
                  or regulation.

         (b)      CSTC is authorized to place securities orders, settle
                  securities trades, hold securities in custody, and other
                  related activities on behalf of the Trust through or by the
                  Broker/Dealer whenever possible, unless the Authorized Person
                  specifically instructs the use of another broker/dealer.
                  Trades (and related activities) conducted through the
                  Broker/Dealer shall be subject to fees and

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                                    PAGE 11
<PAGE>

                  commissions established by the Broker/Dealer, which may be
                  paid from the Trust or netted from the proceeds of trades.
                  Trades shall not be executed through the Broker/Dealer,
                  however, unless the Company and the Authorized Person have
                  received disclosure concerning the relationship of the
                  Broker/Dealer to CSTC, and fees and commissions which may be
                  paid to the Public Company, Broker/Dealer, CSTC and/or their
                  affiliates or subsidiaries as a result of using the
                  Broker/Dealer's execution or other services.

         (c)      CSTC is authorized to disclose such information as is
                  necessary to the operation and administration of the Trust to
                  the Public Company or any of its affiliates, and to such other
                  persons or organizations that CSTC determines have a
                  legitimate business purpose for obtaining such information.

         (d)      At the direction of the Authorized Person, CSTC may purchase
                  shares of regulated investment companies (or other investment
                  vehicles) advised by the Public Company, Broker/Dealer or CSTC
                  or any affiliate of any of them ("Schwab Funds") except to the
                  extent that such investment is prohibited by law or
                  regulation. Schwab Fund shares may not be purchased or held by
                  the Trust, however, unless the Authorized Person has received
                  disclosure concerning the Public Company's, Broker/Dealer's,
                  CSTC's, and/or their affiliate's or subsidiary's relationship
                  to the Funds, and any fees which may be paid to the Public
                  Company, Broker/Dealer, CSTC and/or their affiliates or
                  subsidiaries.

SECTION 7.        PAYMENTS TO PARTICIPANTS IN THE PLANS AND THEIR BENEFICIARIES.

         (a)      The Trustee shall make distributions, deliveries or transfers
                  of money or property from the Trust Fund as specified in
                  written directions from the Company as long as the Company is
                  not Insolvent. The Trustee shall have no liability for making
                  any distribution, delivery or transfer pursuant to the
                  direction of the Company and shall be under no duty to make
                  inquiry whether any distribution, delivery or transfer
                  directed by the Company is made pursuant to the provisions of
                  the Plans or pursuant to a domestic relations order approved
                  by the Company, nor shall the Trustee be responsible for the
                  adequacy of the Trust Fund to discharge any and all payments
                  and liabilities under the Plan. If the Company instructs the
                  Trustee to make payments subject to certain conditions, the
                  Company will have sole responsibility for confirming whether
                  the conditions exist and for notifying the Trustee if they do
                  not. Unless the Company notifies the Trustee differently, the
                  Trustee will be entitled to assume that any contingencies that
                  apply to a distribution have been satisfied. If the principal
                  of the Trust, and any earnings thereon, are not sufficient to
                  make payments of benefits in accordance with the terms of the
                  Plans, that participant's shortfall in benefits shall be paid,
                  first from such participant's pro rata share of any excess
                  amounts allocated to other participants' Accounts , and
                  second, from the general assets of the Company as each payment
                  falls due. If there are no excess amounts in the Trust, then
                  the participant shall have a claim only against the Company
                  and the Trustee shall have no liability for the unpaid accrued
                  benefits of the participant. Trustee shall

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                                    PAGE 12
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                  notify Company if principal and earnings are not sufficient to
                  make payments of benefits in accordance with the terms of the
                  Plans.

         (b)      If the Trustee is directed by the Company to make a
                  distribution, the Trustee may, but need not follow such
                  direction if the Trustee shall deem it necessary to delay any
                  distribution pending compliance with any legal requirements,
                  including, without limitation, the probate of a will, the
                  appointment of a personal representative, the payment or
                  provision for estate or inheritance taxes, or for death duties
                  or otherwise. In these circumstances, the Trustee shall notify
                  the Company of the need for the delay and shall thereafter
                  take no action pending the receipt of (i) the Company's
                  instructions to distribute notwithstanding such requirements
                  and (ii) an agreement from the Company, in a form satisfactory
                  to the Trustee, protecting the Trustee from any liability
                  arising out of noncompliance with such requirements. Until the
                  Company has acted in accordance with clauses (i) and (ii) of
                  the preceding sentence, the Company shall hold the Trustee
                  harmless from and indemnify it for any liability and related
                  expenses that arise from such delay.

         (c)      Distributions or transfers by the Trustee shall be transmitted
                  to the Company or its designee for delivery to the proper
                  payees or to payee addresses supplied by the Company or its
                  designee, and the Trustee's obligation to make such payments
                  shall be satisfied upon such transmittal. The Trustee shall
                  have no obligation to determine the identity of persons
                  entitled to disbursements under the Plans or their addresses.
                  The Trustee shall not be required to make any disbursement in
                  excess of the liquidated value of the Trust Fund at the time
                  of the disbursement.

         (d)      If a dispute arises over the identity of any person who has a
                  right to benefit payments under the Plans, or the extent of
                  the person's interest, the Trustee may withhold the payment or
                  delivery until the dispute is resolved by arbitration,
                  adjudicated by a court of competent jurisdiction or settled by
                  written agreement among the parties who are affected. Until
                  the dispute is resolved, the Trustee will hold the disputed
                  assets and invest them in a money market fund selected by the
                  Company unless the Company provides contrary investment
                  instructions.

         (e)      The Trustee will refer all inquiries and correspondence
                  pertaining to any benefit payment, and all legal process
                  served on the Trustee that is related to any benefit payments
                  or an Account, to the Company. The Company must respond to the
                  inquiries, correspondence or legal process.

         (f)      The Company may make payment of benefits directly to the
                  participants in the Plans or their beneficiaries as they
                  become due under the terms of the Plans. The Company shall
                  notify Trustee of its decision to make payment of benefits
                  directly prior to the time amounts are payable to participants
                  or their beneficiaries. In addition, if the principal of the
                  Trust, and any earnings thereon, are not sufficient to make
                  payments of benefits in accordance with the terms of the
                  Plans, the Company shall make the balance of each such payment
                  as it falls due. Trustee

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                  shall notify the Company where principal and earnings are not
                  sufficient.

         (g)      The Trustee is authorized, to the extent required under
                  applicable law, to withhold from distributions to any payee an
                  amount that the Trustee determines is necessary to cover
                  federal and state taxes, and the Trustee is required to
                  withhold such amounts if so directed by the Company. If the
                  Company directs the Trustee to withhold from any payment to a
                  participant or beneficiary any amounts to satisfy federal,
                  state or local income tax or other taxes or charges, the
                  Trustee shall deduct and withhold such amounts and transmit
                  such amounts to the Company for payment to the appropriate
                  taxing authorities. It is agreed that the Company is the
                  "Employer" for purposes of satisfying any applicable
                  withholding requirements, that the Company has the exclusive
                  control over the amount and timing of benefit payments from
                  the Fund and that the Trustee is not the agent for the Company
                  for purposes of withholding income or other taxes. The Company
                  shall furnish to the Trustee all information necessary to
                  carry out such withholding, or, if such information is not
                  provided to the Trustee, then the Company shall hold the
                  Trustee harmless from and indemnify it for any liability and
                  related expenses that arise in connection with improper
                  withholding or failure to withhold.

         (h)      The Company will be the payor for the purposes of Section 3402
                  of the Internal Revenue Code of 1986, as amended (the "Code")
                  and agrees to prepare information on the amount and taxable
                  portion of each distribution made to participants or their
                  beneficiaries, including preparation of IRS Form 1099-R and/or
                  IRS Form W-2.

SECTION 8.        TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY
                  WHEN THE COMPANY IS INSOLVENT.

         (a)      Trustee shall cease payment of benefits to participants in the
                  Plans and their beneficiaries if the Company is Insolvent. The
                  Company shall be considered "Insolvent" for purposes of this
                  Trust Agreement if (1) the Company is unable to pay its debts
                  as they become due, or (2) the Company is subject to a pending
                  proceeding as a debtor under the United States Bankruptcy
                  Code.

         (b)      At all times during the continuance of this Trust, the
                  principal and income of the Trust shall be subject to claims
                  of general creditors of the Company under federal and state
                  law as set forth below.

                  (1)      The Board of Directors of the Company (the "Board")
                           and the Chief Executive Officer of the Company shall
                           have the duty to inform Trustee in writing of the
                           Company's Insolvency. If a person claiming to be a
                           creditor of the Company alleges in writing to Trustee
                           that the Company has become Insolvent, Trustee shall
                           determine whether the Company is Insolvent and,
                           pending such determination, Trustee shall discontinue
                           payment of benefits to participants in the Plans or
                           their beneficiaries.

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                  (2)      Unless Trustee has actual knowledge of the Company's
                           Insolvency, or has received notice from the Company
                           or a person claiming to be a creditor alleging that
                           the Company is Insolvent, Trustee shall have no duty
                           to inquire whether the Company is Insolvent. Trustee
                           may in all events rely on such evidence concerning
                           the Company's solvency as may be furnished to Trustee
                           and that provides Trustee with a reasonable basis for
                           making a determination concerning the Company's
                           solvency.

                  (3)      If at any time Trustee has determined that the
                           Company is Insolvent, Trustee shall discontinue
                           payments to participants in the Plans or their
                           beneficiaries and shall hold the assets of the Trust
                           for the benefit of the Company's general creditors.
                           Nothing in this Trust Agreement shall in any way
                           diminish any rights of participants in the Plans or
                           their beneficiaries to pursue their rights as general
                           creditors of the Company with respect to benefits due
                           under the Plans or otherwise.

                  (4)      Trustee shall resume the payment of benefits to
                           participants in the Plans or their beneficiaries in
                           accordance with Section 7 of this Trust Agreement
                           only after Trustee has determined that the Company is
                           not Insolvent (or is no longer Insolvent).

         (c)      Provided that there are sufficient assets, if Trustee
                  discontinues the payment of benefits from the Trust pursuant
                  to Section 8(b) hereof and subsequently resumes such payments,
                  the first payment following such discontinuance shall include
                  the aggregate amount of all payments due to participants in
                  the Plans or their beneficiaries under the terms of the Plans
                  for the period of such discontinuance, less the aggregate
                  amount of any payments made to participants in the Plans or
                  their beneficiaries by the Company in lieu of the payments
                  provided for hereunder during any such period of
                  discontinuance.

SECTION 9.        PAYMENTS TO THE COMPANY.

         The Company shall have no right or power to direct Trustee to return to
the Company or to divert to others any of the Trust assets before all payment of
benefits have been made to participants in the Plans and their beneficiaries
pursuant to the terms of the Plans.

SECTION 10.       DISPOSITION OF INCOME.

         During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.

SECTION 11.       ACCOUNTING BY TRUSTEE.

         (a)      Trustee shall keep accurate and detailed records of all
                  investments, receipts, disbursements, and all other
                  transactions required to be made, including such

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                  specific records as shall be agreed upon in writing between
                  the Company and Trustee. Within sixty (60) days following the
                  close of each calendar year and within sixty (60) days after
                  the removal or resignation of Trustee, Trustee shall deliver
                  to the Company a written account of its administration of the
                  Trust during such year or during the period from the close of
                  the last preceding year to the date of such removal or
                  resignation, setting forth all investments, receipts,
                  disbursements and other transactions effected by it, including
                  a description of all securities and investments purchased and
                  sold with the cost or net proceeds of such purchase or sales
                  (accrued interest paid or receivable being shown separately),
                  and showing all cash, securities and other property held in
                  the Trust at the end of such year or as of the date of such
                  removal or resignation, as the case may be. Unless the Company
                  files with the Trustee written objections within sixty (60)
                  days after such accounting has been mailed or otherwise
                  delivered, the accounting shall be deemed to have be approved.

         (b)      If the account is not settled as provided above, the Trustee,
                  Company or the Administrator shall have the right to apply to
                  a court of competent jurisdiction at the expense of the Trust
                  Fund for a judicial settlement of the accounting. Any judgment
                  or decree enter in such proceedings shall be conclusive on all
                  persons interested in the Trust Fund.

         (c)      The Trust Fund shall be valued under the applicable Plan
                  provisions, if any, but in any event not less than annually at
                  fair market value. Except as specified below, in the absence
                  of fraud or bad faith, the Trustee's valuation of the Trust
                  Fund shall be conclusive. The reasonable costs incurred in
                  establishing values of the Trust Fund shall be charged against
                  the Trust Fund, unless paid by the Company.

         (d)      Notwithstanding any other provision of this Section 11, if the
                  Trustee determines that the Trust Fund consists in whole or in
                  part of property not traded freely on a recognized market, or
                  that information necessary to ascertain the fair market value
                  is not readily available, the Trustee may request instructions
                  from the Administrator concerning the value of such property
                  for all purposes under the Plan and this Trust Agreement, and
                  the Administrator shall comply with that request. The Trustee
                  shall be entitled to rely upon the value placed upon such
                  property by the Administrator. At the Trustee's option, it may
                  request that the Administrator hire an independent appraiser
                  that meets the requirements of Code section 170(a)(1) to value
                  the property. Alternatively, if the Trustee chooses, or if the
                  Administrator shall fail or refuse to instruct the Trustee on
                  the value of such property within thirty (30) days after
                  receipt of the Trustee's request, the Trustee at its sole
                  discretion may engage an independent appraiser to determine
                  the fair market value of such property. Any expenses with
                  respect to such appraisal shall be paid by the Trustee out of
                  the Trust Fund or, at the option of the Company.

         (e)      All directions, notices and other communications required or
                  permitted by the Trust Agreement shall be in writing and
                  delivered by mail or hand delivery. The Trustee in its
                  absolute discretion may accept or transmit directions or
                  notices

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                  given by facsimile, telex, telegram, telephone or any form of
                  electronic communication that the Trustee reasonably believes
                  in good faith to be genuine unless and until the Administrator
                  notifies the Trustee in writing that such alternative forms of
                  communication are not authorized. If the Trustee chooses to
                  accept one or more alternative methods of communication, the
                  Administrator or the Authorized Person will be required to
                  follow reasonable procedures adopted by the Trustee for
                  written confirmation. In addition, oral instructions may be
                  recorded by the Trustee. If the Administrator or the
                  Authorized Person fails or refuses to comply with the
                  Trustee's confirmation procedures, the Trustee will be
                  entitled to refuse to comply with such directions without
                  incurring any liability. All directions, notices and other
                  communications given under the terms of the Trust Agreement
                  will be deemed effective on receipt.

SECTION 12.       RESPONSIBILITY OF TRUSTEE.

         (a)      Trustee shall act with the care, skill, prudence and diligence
                  under the circumstances then prevailing that a prudent person
                  acting in like capacity and familiar with such matters would
                  use in the conduct of an enterprise of a like character and
                  with like aims, provided, however, that Trustee shall incur no
                  liability to any person for any action taken pursuant to a
                  direction, request or approval given by the Company which is
                  contemplated by, and in conformity with, the terms of the
                  Plans or this Trust and is given in writing by the Company. In
                  the event of a dispute between the Company and a party,
                  Trustee may apply to a court of competent jurisdiction to
                  resolve the dispute.

         (b)      If Trustee undertakes or defends any litigation arising in
                  connection with this Trust or any litigation arising by reason
                  of any act or conduct of the Trustee (except fraudulent,
                  willful or criminal misconduct or gross negligence of the
                  Trustee) in connection with this Trust, the Company agrees to
                  indemnify Trustee against Trustee's costs, expenses and
                  liabilities (including, without limitation, attorneys' fees
                  and expenses) relating thereto and to be primarily liable for
                  such payments. If the Company does not pay such costs,
                  expenses and liabilities in a reasonably timely manner,
                  Trustee may obtain payment from the Trust.

         (c)      The Trustee may consult with legal counsel of its choice,
                  including counsel for the Company, upon any question or matter
                  arising hereunder and the opinion of such counsel when relied
                  upon by the Trustee shall be evidence the Trustee was acting
                  in good faith.

         (d)      Trustee shall have, without exclusion, all powers conferred on
                  Trustees by applicable law, unless expressly provided
                  otherwise herein, provided, however, that if an insurance
                  policy is held as an asset of the Trust, Trustee shall have no
                  power to name a beneficiary of the policy other than the
                  Trust, to assign the policy (as distinct from conversion of
                  the policy to a different form) other than to a successor
                  Trustee, or to loan to any person the proceeds of any
                  borrowing against such policy.

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         (e)      However, notwithstanding the provisions of Section 12(d)
                  above, Trustee may loan to the Company the proceeds of any
                  borrowing against an insurance policy held as an asset of the
                  Trust.

         (f)      In the event the Trustee requests instructions from the
                  Company, the Trustee may await such instructions without
                  incurring liability for the failure to take action in the
                  absence of such instructions. Notwithstanding the foregoing,
                  if the Company fails to provide instructions, the Trustee may
                  take any action appropriate to carry out the purposes of the
                  Trust Agreement without incurring liability for such actions.

         (g)      With advance written consent of the Company, the Trustee is
                  authorized to disclose such information that it considers
                  necessary or proper in the administration of the Trust Fund
                  (including, but not limited to, the existence, nature, terms,
                  and conditions of the Trust Fund and/or the Trust Agreement)
                  to such other persons or organizations that the Trustee
                  determines have a legitimate business purpose for obtaining
                  such information.

         (h)      The parties acknowledge that the Trustee, in the course of its
                  business, may obtain nonpublic information concerning
                  corporations and other business entities including the Company
                  (referred to as "issuers") which may be relevant to an
                  investment decision involving the issuers' securities.
                  However, the Trustee will have no responsibility for failing
                  to use such information in the exercise of its duties under
                  the Trust Agreement or for the benefit of any other person
                  having investment responsibility.

         (i)      The Trustee shall not be a named fiduciary under the Plans and
                  shall not have the authority to interpret or construe the
                  Plan.

         (j)      No person dealing with the Trustee shall be obligated to
                  ensure the proper application of any money paid or property
                  delivered to the Trustee, nor shall any such person be
                  required to recognize any limitations or restrictions in the
                  provisions of the agreement, question the authority of the
                  Trustee to receive and receipt any money becoming due and
                  payable to the Trustee or inquire whether the Trustee has
                  obtained the direction or approval of the Company, the
                  Company, or the Authorized Person to a proposed action. Any
                  person dealing with the Trustee may accept the certification
                  of the Trustee as conclusive evidence of any matter or
                  question relating to the Trust Agreement or the administration
                  of the Trust Fund.

         (k)      Notwithstanding any powers granted to Trustee pursuant to this
                  Trust Agreement or by applicable law, Trustee shall not have
                  any power that could give this Trust the objective of carrying
                  on a business and dividing the gains therefrom, within the
                  meaning of Section 301.7701-2 of the Procedure and
                  Administrative Regulations promulgated pursuant to the
                  Internal Revenue Code.

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SECTION 13.       COMPENSATION AND EXPENSES OF TRUSTEE.

         (a)      The Company shall pay the Trustee quarterly its expenses in
                  administering the Trust Fund and reasonable compensation for
                  its services as Trustee at a rate set forth in the written
                  service agreement for the Plans between the Trustee or an
                  affiliate of the Trustee and the Company for administrative
                  services performed in connection with the Plan, and as amended
                  from time to time. The Trustee reserves the right to alter
                  this rate of compensation at any time by providing the Company
                  with notice of such change at least sixty (60) days prior to
                  its effective date. Reasonable compensation shall include
                  compensation for any extraordinary services or computations
                  required, such as determination of the value of assets when
                  current market values are not published, expenses for the
                  service of an independent appraiser in connection with Company
                  Stock (if any) which ceases to be "readily tradable", and the
                  covering of overdrafts.

         (b)      At the direction of the Company, the Trustee shall pay from
                  the Trust any fees and expenses payable to parties other than
                  the Trustee that are incurred by the Company in administering
                  the Company 's Plans.

SECTION 14.       INDEMNIFICATION.

         In addition to any specific indemnification given the Trustee under
other provisions of the Trust Agreement, the Company hereby indemnifies the
Trustee and its officers, directors, employees, agents and affiliates
("Indemnitees") against, and shall hold the Indemnitees harmless from, any and
all losses, claims, liabilities, and expenses (including reasonable attorney's
fees and costs of defense) imposed upon or incurred by the Indemnitees as a
result of any acts taken, or any failure to act, in accordance with directions
from the Administrator, Authorized Person, Investment Manager or any other
person specified in this Trust Agreement, or any designee of any such person, or
by reason of the Indemnities' good faith execution of their duties with respect
to the Trust. Subject to ERISA, any expenses incurred by an Indemnitee which the
Trustee believes to be subject to indemnification under the Trust Agreement may
be charged against the Trust Fund if not paid by the Company at the Trustee's
request, provided that the Company may delay payment of any amount in dispute
until such dispute is resolved according to the provisions of the Trust
Agreement. Such resolution may include the award of interest on unpaid amounts.

         In addition to any specific indemnification given the Company under
other provisions of the Trust Agreement, the Trustee hereby indemnifies the
Company and its officers, directors, employees, agents and affiliates
("Indemnitees") against, and shall hold the Indemnitees harmless from, any and
all losses, claims, liabilities, and expenses (including reasonable attorney's
fees and costs of defense) imposed upon or incurred by the Indemnitees as a
result of any acts taken, or any failure to act, in accordance with directions
from the Administrator, Authorized Person, Investment Manager or any other
person specified in this Trust Agreement, or any designee of any such person, or
by reason of the Indemnities' good faith execution of their

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duties with respect to the Trust. Subject to ERISA, any expenses incurred by an
Indemnitee which the Company believes to be subject to indemnification under the
Trust Agreement may be assessed to the Trustee at the Company's request,
provided that the Trustee may delay payment of any amount in dispute until such
dispute is resolved according to the provisions of the Trust Agreement. Such
resolution may include the award of interest on unpaid amounts.

SECTION 15.       RESIGNATION AND REMOVAL OF TRUSTEE.

         (a)      Trustee may resign at any time by written notice to the
                  Company, which shall be effective ninety (90) days after
                  receipt of such notice unless the Company and Trustee agree
                  otherwise.

         (b)      Trustee may be removed by the Company, with thirty (30) days
                  written notice or upon shorter notice accepted by Trustee;
                  provided, however, that following a Change of Control, the
                  Trustee may be removed only upon the Company's receipt of
                  written consent from at least 100% of the participants (or, in
                  the case of deceased participants, their beneficiaries).

SECTION 16.       APPOINTMENT OF SUCCESSOR.

         (a)      If Trustee resigns or is removed in accordance with Section 15
                  hereof, the Company may appoint a successor corporate trustee,
                  such as a bank trust department or other entity that may be
                  granted corporate trustee powers under state law, as a
                  successor to replace Trustee upon resignation or removal;
                  provided, however, that following a Change of Control, the
                  Company must obtain written approval of 100% of the
                  participants (or, in the case of deceased participants, their
                  beneficiaries), with respect to its selection of a successor
                  trustee. The appointment shall be effective when accepted in
                  writing by the new Trustee, who shall have all of the rights
                  and powers of the former Trustee, including ownership rights
                  in the Trust assets. The former Trustee shall execute any
                  instrument necessary or reasonably requested by the Company or
                  the successor Trustee to evidence the transfer.

                  The terminating Trustee shall transfer all property of the
                  Trust Fund then held by it to such successor Trustee. The
                  transfer shall be completed within sixty (60) days after
                  receipt of notice of resignation, removal, or transfer, unless
                  the Company extends the time limit. The terminating Trustee
                  may require as a condition of making such transfer that the
                  Company provide a writing indemnifying the Trustee against any
                  losses arising from the replacement of the Trustee. If either
                  party has given notice of termination as provided under this
                  Trust Agreement, and upon the expiration of the advance notice
                  period no other successor Trustee has been appointed and has
                  accepted such appointment, Trustee may apply to a court of
                  competent jurisdiction for appointment of a successor or for
                  instructions. All expenses of Trustee in connection with the
                  proceeding shall be allowed as administrative expenses of the
                  Trust.

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         (b)      The successor Trustee need not examine the records and acts of
                  any prior Trustee and may retain or dispose of existing Trust
                  assets, subject to Sections 11 and 12 hereof. The successor
                  Trustee shall not be responsible for and the Company shall
                  indemnify and defend the successor Trustee from any claim or
                  liability resulting from any action or inaction of any prior
                  Trustee or from any other past event, or any condition
                  existing at the time it becomes successor Trustee.

SECTION 17.       AMENDMENT OR TERMINATION.

         (a)      This Trust Agreement may be amended by a written instrument
                  executed by Trustee and the Company. Notwithstanding the
                  foregoing, without the written consent of at least 100% of the
                  participants (or beneficiaries of any deceased participant),
                  no such amendment shall relieve the Company of its funding
                  obligations set forth in Sections 1(a) and 1(f), cause the
                  Trust to become revocable by the Company, or otherwise
                  conflict with the terms of the Plans.

         (b)      The Trust shall not terminate until the date on which
                  participants in the Plans and their beneficiaries are no
                  longer entitled to benefits pursuant to the terms of the
                  Plans. Upon termination of the Trust, any assets remaining in
                  the Trust shall be returned to the Company. Upon completion of
                  such termination, the Trustee shall be fully relieved all
                  obligation pursuant to this Trust Agreement. The powers of the
                  Trustee shall continue as long as any part of the fund remains
                  in its possession.

         (c)      Notwithstanding any other provision of the Trust Agreement to
                  the contrary, if at any time the Trust is determined by the
                  Internal Revenue Service not to be a "grantor trust," with the
                  result that the income deductions and credits of the Trust are
                  not treated as income, deductions and credits of the Company,
                  or if the Company informs the Trustee that the value of
                  benefits under the Fund will be taxable to Participants or
                  their beneficiaries prior to the first distribution of such
                  benefits, then the Trust Agreement shall immediately terminate
                  and the assets of the Fund shall be liquidated and paid by the
                  Trustee as soon as practicable to the Company or, if directed
                  by the Company, to another person in a cash lump sum (less any
                  expense or cost due).

         (d)      Upon written approval of all participants or, in the case of
                  deceased participants, their beneficiaries entitled at that
                  time to payment of benefits pursuant to the terms of the
                  Plans, the Company may terminate this Trust prior to the time
                  all benefit payments under the Plans have been made. All
                  assets in the Trust at termination shall be returned to the
                  Company.

         (e)      This Trust Agreement may not be amended by the Company or its
                  successor following a Change of Control, as defined herein,
                  without written approval of 100% of the participants or, in
                  the case of deceased participants, their beneficiaries
                  entitled at that time to payment of benefits pursuant to the
                  terms of the Plans.

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SECTION 18.       MISCELLANEOUS.

         (a)      If any paragraph, section, sentence, clause or phrase
                  contained in the Trust Agreement becomes illegal, null, or
                  void or against public policy, for any reason, or is held by
                  any court of competent jurisdiction to be incapable of being
                  construed or limited in a manner to make it enforceable, or is
                  otherwise held by such court to be illegal, null or void or
                  against public policy, the remaining provisions of the Trust
                  Agreement shall not be affected.

         (b)      The Trustee shall notify the Company of any tax levied upon or
                  assessed against the Trust Fund of which the Trustee has
                  knowledge. If the Trustee receives no instructions from the
                  Company, the Trustee may pay the tax from the Trust Fund. If
                  the Company wishes to contest the tax assessment, it shall
                  give appropriate written instructions to the Trustee within
                  ten (10) business days of notice from the Trustee. The Trustee
                  shall not be required to bring any legal actions or
                  proceedings to contest the validity of any tax assessments
                  unless the Trustee has been indemnified to its satisfaction
                  against loss or expense related to such actions or
                  proceedings, including reasonable attorney's fees.

         (c)      No participant or beneficiary of a deceased participant
                  entitled to any benefit under this Trust and the Plans shall
                  have any right to assign, alienate, hypothecate, or encumber
                  such person's interest in any benefits under this Trust
                  Agreement and those benefits shall not in any way be subject
                  to claim of such participant's or beneficiary's creditors or
                  liable to attachment, execution, or other process of law
                  except to the extent required under an approved domestic
                  relations order.

         (d)      The Trust shall be administered in the State of California,
                  and its validity, construction, and all rights hereunder shall
                  be governed by ERISA (to the extent ERISA is applicable to the
                  Trust) and, to the extent not preempted, by the laws of
                  California.

         (e)      For purposes of this Trust Agreement, a "Change of Control"
                  shall mean the occurrence of any of the following:

                  (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

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                           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 (A) an employee benefit plan (or a
                           trust forming a part thereof) maintained by (i) the
                           Company or (ii) 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 (B) the
                           Company or its Subsidiaries;

                  (2)      The individuals who, as of the effective date of the
                           Trust, 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;

                  (3)      A complete liquidation or dissolution of the Company:
                           or

                  (4)      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).

         (f)      For purposes of this Trust Agreement, a Change of Control
                  shall be deemed to have occurred upon receipt by the Trustee
                  of written notice to that effect from the Company. The Chief
                  Executive Officer of the Company or the Board shall furnish
                  written notice to the Trustee when a Change of Control occurs
                  under the terms of the Trust. Upon receipt of a written demand
                  from a participant in the Plans or his or her beneficiary, the
                  Trustee shall request the Chief Executive Officer of the
                  Company and the Board to advise it whether a Change of Control
                  has occurred.

         (g)      Notwithstanding any other provisions of the Trust, if the
                  Internal Revenue Service is requested to issue to the Company
                  a favorable letter ruling with respect to the unfunded,
                  tax-deferred status of the Plans and such request is denied,
                  the Trustee shall, after receiving a written direction from
                  the Administrator, pay to the Company any part of the Trust
                  Fund attributable to Company contributions then remaining in
                  the Trustee's possession. As a condition to such repayment,
                  the Company must execute, acknowledge, and deliver to the
                  Trustee its written

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                  undertaking, in form satisfactory to the Trustee, to
                  indemnify, defend, and hold the Trustee harmless from all
                  claims, actions, demands, or liabilities arising in connection
                  with such repayment, and provided further that such repayment
                  shall occur within one year after the date the request for
                  qualification is denied.

         (h)      Except as otherwise specifically provided herein, any dispute
                  under this Trust Agreement shall be resolved by submission of
                  the issue to a member of the American Arbitration Association
                  who is chosen by the Company and the Trustee. If the Company
                  and the Trustee cannot agree on such a choice, each shall
                  nominate a member of the American Arbitration Association, and
                  the two nominees shall then select an arbitrator. Expenses of
                  the arbitration shall be paid as decided by the arbitrator.

         (i)      The Trustee is authorized to tape record conversations between
                  the Trustee and persons acting on behalf of the Plans or a
                  Participant in the Plans to verify data on transactions.

         (j)      Except as otherwise provided in this Trust Agreement, the
                  Trust Agreement shall inure to the benefit of, and be binding
                  upon, the parties to the Trust Agreement and their successors
                  and assigns.

         (k)      The Company represents that it has consulted with and been
                  advised by its professional advisors and/or counsel concerning
                  the legality and propriety of the Trust Agreement.

         (l)      If other trustees of separate trusts under the Plans may be
                  appointed, then the Trustee under this Trust Agreement shall
                  have no duties or responsibilities for Plan assets not held in
                  the Trust by the Trustee, except as required by applicable
                  law.

SECTION 19.       EFFECTIVE DATE.

         Executed this 28th day of February, 2003.

                              PEGASUS SOLUTIONS, INC.

                              By:
                                 ----------------------------------------------
                              Printed Name:  Ric L. Floyd
                                           ------------------------------------
                              Its: Executive Vice President and General Counsel
                                   --------------------------------------------

                              TRUSTEE:

                              By:
                                 ----------------------------------------------

PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST

                                    PAGE 24

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