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
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
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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
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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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 4
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 5
(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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 6
(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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 7
(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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 8
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;
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 9
(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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
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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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 11
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 12
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 13
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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 14
(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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 15
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 16
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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 17
(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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 18
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 19
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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 20
(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.
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 21
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 22
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
PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
PAGE 23
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:
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Printed Name: Ric L. Floyd
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Its: Executive Vice President and General Counsel
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TRUSTEE:
By:
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PEGASUS SOLUTIONS, INC. DEFERRED COMPENSATION TRUST
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