CMO Employment Terms

April 18, 1997







Michael R. Donahue 2110 Walters Northbrook, Ill. 60062



Dear Mike,



I am pleased to extend to you an offer of employment as Chief Marketing Officer of Pegasus Systems, Inc. The terms of your employment are as follows:



Base Salary: $13,750 per month



Bonus: Up to 40% of annual base salary on the following basis:

- 15% if company meets forecast

- 10% based on mutually agreed goals

- three quarters of one percent for each 1% company exceeds

forecast up to 15% of your base salary



Equity: 40,000 shares at $7.00 per share, vesting over four years.

The shares vest at 25% after the first twelve months, and

2,500 shares per quarter thereafter.



- Participation in future employee stock option plans as

approved by the Compensation Committee



Severanc ...