PREVIEW TRAVEL INC, DEF 14A, 1998-04-24

PREVIEW TRAVEL INC
DEF 14A, 1998-04-24
TRANSPORTATION SERVICES

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<PAGE>

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
[X]Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
[_]Definitive Additional Materials RULE 14A-6(E)(2))
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

PREVIEW TRAVEL, INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)

-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
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[_]Fee paid previously with preliminary materials.
--------------------------------------------------------------------------

[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
--------------------------------------------------------------------------
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>

PREVIEW TRAVEL, INC.

----------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD MAY 27, 1998

----------------

The Annual Meeting of Stockholders (the "Annual Meeting") of Preview Travel,
Inc., a Delaware corporation (the "Company"), will be held at the Park Hyatt
Hotel, San Francisco, located at 333 Battery Street on Wednesday, May 27,
1998, at 10:00 a.m., local time, for the following purposes:

1. To elect eight (8) directors of the Company to serve until the next
Annual Meeting of Stockholders or until their respective successors are
elected and qualified;

2. To ratify the appointment of Coopers & Lybrand L.L.P. as the independent
accountants of the Company for the fiscal year ending December 31, 1998;

3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.

The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part
of this Notice.

The Board of Directors has fixed the close of business on April 15, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.

All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card
as promptly as possible in the postage-prepaid envelope provided to ensure
your representation and the presence of a quorum at the Annual Meeting. If you
send in your proxy card and then decide to attend the Annual Meeting to vote
your shares in person, you may still do so. Your proxy is revocable in
accordance with the procedures set forth in the Proxy Statement.

By Order of the Board of Directors,

/s/ KENNETH R. PELOWSKI
Kenneth R. Pelowski
Executive Vice President of Finance
and Administration, Chief Financial
Officer and Secretary

San Francisco, California
April 24, 1998

IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED
EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND
SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.

THANK YOU FOR ACTING PROMPTLY.

<PAGE>

PREVIEW TRAVEL, INC.
747 FRONT STREET
SAN FRANCISCO, CALIFORNIA 94111

PROXY STATEMENT

GENERAL

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Preview Travel, Inc., a Delaware
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Park Hyatt Hotel, San Francisco, located at 333 Battery Street, on Wednesday,
May 27, 1998, at 10:00 a.m., local time, and any adjournment or postponement
thereof.

This Proxy Statement, the enclosed proxy card and the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1997, including
financial statements, were first mailed to stockholders entitled to vote at
the meeting on or about April 24, 1998.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Chief Financial Officer) a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the Annual Meeting and voting in
person.

RECORD DATE; VOTING SECURITIES

The close of business on April 15, 1998 has been fixed as the record date
(the "Record Date") for determining the holders of shares of Common Stock of
the Company entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, the Company had approximately 11,362,913
shares of Common Stock outstanding and held of record by approximately 242
stockholders.

VOTING AND SOLICITATION

Each outstanding share of Common Stock on the Record Date is entitled to one
vote on all matters. Shares of Common Stock may not be voted cumulatively.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of the
Company's transfer agent. The Inspector will also determine whether or not a
quorum is present. The nominees for election as directors at the Annual
Meeting will be elected by a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the meeting. All other
matters submitted to the stockholders will require the affirmative vote of a
majority of shares present in person or represented by proxy at a duly held
meeting at which a quorum is present under Delaware law for approval of
proposals presented to stockholders. In general, Delaware law also provides
that a quorum consists of a majority of the shares entitled to vote and
present in person or represented by proxy. The Inspector will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum and as negative votes for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. Any proxy which is returned using the form of proxy enclosed and which
is not marked as to a particular item will be voted FOR the election of
directors, FOR ratification of the appointment of the designated independent
auditors and as the proxy holders deem advisable on other matters that may
come before the meeting, as the case may be with respect to the item not
marked. If a broker indicates on the enclosed proxy or its substitute that it
does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
present with respect to that matter. The Company believes that the tabulation
procedures to be followed by the Inspector are consistent with the general
statutory requirements in Delaware concerning voting of shares and
determination of a quorum.
<PAGE>

The solicitation of proxies will be conducted by mail and the Company will
bear all attendant costs. These costs will include the expense of preparing
and mailing proxy solicitation materials for the Annual Meeting and
reimbursements paid to brokerage firms and others for their expenses incurred
in forwarding solicitation materials regarding the Annual Meeting to
beneficial owners of the Company's Common Stock. The Company may conduct
further solicitation personally, telephonically or by facsimile through its
officers, directors and employees, none of whom will receive additional
compensation for assisting with the solicitation.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

NOMINEES

Effective as of the Annual Meeting, the Company's Bylaws will provide for
eight (8) directors. At the Annual Meeting, the stockholders will elect eight
(8) directors to serve until the next Annual Meeting of Stockholders or until
their respective successors are elected and qualified. Director William R.
Hearst, III has informed the Company that he does not intend to stand for
reelection to the Board of Directors at the Annual Meeting. In the event any
nominee is unable or unwilling to serve as a director at the time of the
Annual Meeting, the proxies may be voted for the balance of those nominees
named and for any substitute nominee designated by the present Board or the
proxy holders to fill such vacancy, or for the balance of the nominees named
without nomination of a substitute, or the size of the Board may be reduced in
accordance with the Bylaws of the Company. The Board has no reason to believe
that any of the persons named below will be unable or unwilling to serve as a
nominee or as a director if elected.

Assuming a quorum is present, the eight nominees receiving the highest
number of affirmative votes of shares entitled to be voted for them will be
elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted FOR the election of each of the
eight nominees named below. In the event that additional persons are nominated
for election as directors, the proxy holders intend to vote all proxies
received by them in such a manner as will ensure the election of as many of
the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders.

The names of the nominees, their ages as of April 15, 1998 and certain other
information about them are set forth below:

<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<C> <C> <S> <C>
Kenneth J. Orton............ 46 President and Chief Executive 1997
Officer of the Company
James J. Hornthal........... 44 Chairman of the Company 1985
Thomas W. Cardy............. 41 Executive Vice President, 1991
Entertainment and New Media of
Communications Equity Associates,
Inc.
Thomas A. Cullen............ 38 President of the Interactive 1997
Services Group of U S WEST Media
Group
Theodore J. Leonsis......... 42 President of AOL Studios 1985
Douglas J. Mackenzie........ 38 General Partner of Kleiner 1995
Perkins Caufield & Byers
James E. Noyes.............. 51 Chief Operating Officer of 1996
Signature Resorts, Inc.
David S. Pottruck........... 49 President and Co-Chief Executive 1997
Officer of The Charles Schwab
Corporation
</TABLE>

There are no family relationships among any of the directors or executive
officers of the Company.

2
<PAGE>

Kenneth J. Orton joined the Company in April 1994 as President and Chief
Operating Officer, and in June 1997 was appointed to serve as the President
and Chief Executive Officer and a director of the Company. From September 1989
to March 1994, Mr. Orton was Vice President and General Manager of the San
Francisco division of Epsilon, a database marketing firm and a wholly owned
subsidiary of American Express Company. Prior to his employment with Epsilon,
Mr. Orton was Vice President of M/A/R/C Inc., a market research and database
marketing company, and Vice President of Sales and Marketing for Future
Computing. Mr. Orton also serves as a director of ONSALE, Inc. Mr. Orton
received a B.A. degree from California State University, Fullerton.

James J. Hornthal founded the Company in 1985 and has served as Chairman
since inception. Mr. Hornthal also served as President of the Company until
April 1994 and as Chief Executive Officer until June 1997. Prior to starting
Preview Travel, Mr. Hornthal was a General Partner at Oak Grove Ventures, a
venture capital firm, and a Consultant for The Boston Consulting Group, a
management consulting firm. Mr. Hornthal also serves as a director of several
privately held technology-based and media companies. Mr. Hornthal received an
A.B. degree from Princeton University and an M.B.A. degree from Harvard
Business School, where he was a Baker Scholar.

Thomas W. Cardy has been a director of the Company since December 1991.
Since September 1988, Mr. Cardy has been employed with Communications Equity
Associates, Inc. ("CEA"), an investment banking firm serving the entertainment
and new media industries, and is currently Executive Vice President,
Entertainment and New Media at CEA. Prior to joining CEA in 1988, Mr. Cardy
was a Senior Manager with Arthur Andersen & Co., a public accounting firm. Mr.
Cardy received a B.A. degree from the University of Florida and is a certified
public accountant.

Thomas A. Cullen has been a director of the Company since April 1997. Since
August 1989, Mr. Cullen has served in various senior management positions with
U S WEST, Inc., a telecommunications and media company, and, since April 1997,
he has been President of the Interactive Services Group of U S WEST Media
Group, a subsidiary of U S WEST, Inc. Mr. Cullen also serves as a director of
SportsLine USA, Inc. Mr. Cullen received a B.S.B.A. degree from Northern
Arizona University and an M.B.A. degree from the University of Colorado.

Theodore J. Leonsis has been a director of the Company since June 1985. Mr.
Leonsis is currently President of AOL Studios, an operating division of
America Online, Inc., an online services company ("AOL"); from November 1996
to March 1998, Mr. Leonsis served as President and Chief Executive Officer of
AOL Studios, and from September 1994 to November 1996, he served as President
of America Online Services Company. Prior to joining AOL, Mr. Leonsis was the
founder and President of Redgate Communications Corporation, a media marketing
company he founded in 1986, which was subsequently acquired by AOL in May
1994. Mr. Leonsis also serves as a director of several privately held
companies. Mr. Leonsis received a B.A. degree from Georgetown University.

Douglas J. Mackenzie has been a director of the Company since February 1995.
Since June 1989, Mr. Mackenzie has been employed with Kleiner Perkins Caufield
& Byers, a venture capital firm, of which he has been a general partner since
1994. Mr. Mackenzie serves as a director of Visio Corporation and several
private technology-based companies. Mr. Mackenzie received a B.A. degree in
Economics and an M.S. degree in Industrial Engineering from Stanford
University, and an M.B.A. degree from Harvard University.

James E. Noyes has been a director of the Company since January 1996. Since
July 1996, Mr. Noyes has served as a director and Executive Vice President of
Signature Resorts, Inc. ("Signature"), a developer and operator of vacation
ownership resorts and has served as the Chief Operating Officer of Signature
since March 1998. From 1988 to June 1996, Mr. Noyes served as President of The
Trase Miller Group, a travel technology services company and previously served
as its Vice President/General Manager from 1982 through 1988 and its Vice
President of Marketing and Sales from 1980 to 1982. Mr. Noyes is also a
founder of Premier Yachts, Ltd. Mr. Noyes also serves as a director of Ball
Horticultural, Inc. and as a Chairman of Grand Getaways, Inc. Mr. Noyes
received a B.A. degree from Dartmouth College and an M.B.A. degree from
Stanford University.

3
<PAGE>

David S. Pottruck has been a director of the Company since September 1997.
Since 1984, Mr. Pottruck has served in various senior management positions
with The Charles Schwab Corporation ("Schwab"), a financial services company,
and is currently the President and Co-Chief Executive Officer and a director
of Schwab. He is also Chief Executive Officer of Charles Schwab & Co., Inc.,
the brokerage subsidiary of Schwab. Mr. Pottruck serves as a director of
McKesson Corporation and Decibel Instruments, Inc. Mr. Pottruck received B.A.
and M.B.A. degrees from the University of Pennsylvania.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

During the period from January 1, 1997 through December 31, 1997 (the "last
fiscal year"), the Board met nine times. No director attended fewer than 75%
of the aggregate number of meetings of the Board and meetings of the
committees of the Board on which he or she serves. The Board has an Audit
Committee and a Compensation Committee. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Although there are no formal procedures for stockholders to nominate persons
to serve as directors, the Board will consider nominations from stockholders,
which should be addressed to Kenneth R. Pelowski at the Company's address set
forth above.

The Audit Committee consists of directors Cardy and Cullen, two of the
Company's non-employee directors, and held three meetings during the last
fiscal year. The Audit Committee recommends the engagement of the firm of
certified public accountants to audit the financial statements of the Company
and monitors the effectiveness of the audit effort, the Company's financial
and accounting organization and its system of internal accounting controls.

The Compensation Committee consists of directors Leonsis, Mackenzie and
Pottruck, and held two meetings during the last fiscal year. Its functions are
to establish and administer the Company's policies regarding annual executive
salaries and cash incentives and long-term equity incentives. The Compensation
Committee administers the Company's 1988 Stock Option Plan, 1997 Stock Option
Plan, 1997 Directors' Stock Option Plan and 1997 Employee Stock Purchase Plan.

COMPENSATION OF DIRECTORS

Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and the grant of stock options, directors are not
compensated for their services as directors. Directors who are employees of
the Company are eligible to participate in the Company's 1988 and 1997 Stock
Option Plans and will be eligible to participate in the Company's 1997
Employee Stock Purchase Plan. Directors who are not employees of the Company
are eligible to participate in the Company's 1997 Stock Option Plan and 1997
Directors' Stock Option Plan. The Company's 1997 Directors' Stock Option Plan
provides that each person who becomes a nonemployee director of the Company
will be granted a nonstatutory stock option to purchase 20,000 shares of
Common Stock on the date on which the optionee first becomes a nonemployee
director of the Company. Thereafter, on the date of each annual meeting of the
Company's stockholders at which such director is elected, each such
nonemployee director shall be granted an additional option to purchase 5,000
shares of Common Stock if, on such date, he or she shall have served on the
Company's Board of Directors for at least six months.

RECOMMENDATION OF THE BOARD:

THE BOARD RECOMMENDS A VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.

4
<PAGE>

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Coopers & Lybrand L.L.P. has served as the Company's independent auditors
since 1995 and has been appointed by the Board to continue as the Company's
independent auditors for the fiscal year ending December 31, 1998. In the
event that ratification of this selection of auditors is not approved by a
majority of the shares of Common Stock voting at the Annual Meeting in person
or by proxy, the Board will reconsider its selection of auditors.

A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting. This representative will have an opportunity to make a
statement and will be available to respond to appropriate questions.

RECOMMENDATION OF THE BOARD:

THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.

5
<PAGE>

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of April 15, 1998 for (i) each person who is known by the Company to
own beneficially more than five percent of the outstanding shares of Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table of this proxy statement (the "Named
Executive Officers"), and (iv) all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OWNED (1) OWNED(1)
---------------- ------------ ------------
<S> <C> <C>
Entities affiliated with Kleiner Perkins Caufield &
Byers (2).......................................... 1,231,419 10.8
2750 Sand Hill Road
Menlo Park, CA 94025
James J. Hornthal (3)............................... 1,082,812 9.4
America Online, Inc. (4)............................ 1,001,312 8.8
8619 Westwood Center Drive
Vienna, Virginia 22182-2285
U S WEST Interactive Services, Inc. ................ 932,539 8.2
9000 East Nichols Avenue
Englewood, CO 80112
KLAS, Inc. ......................................... 635,456 5.6
3228 Channel 8 Drive
Las Vegas, NV 89114
General Electric Capital Corporation (5)............ 572,736 5.0
60 Long Ridge Road
Stamford, CT 06927
Kenneth J. Orton (6)................................ 164,131 1.4
Roy F. Walkenhorst (7).............................. 81,277 *
John M. Petrone (8)................................. 34,373 *
Barrie Seidenberg (9)............................... 28,487 *
Thomas W. Cardy (10)................................ 37,863 *
Thomas A. Cullen (11)............................... 932,539 8.2
William R. Hearst, III (2).......................... 1,231,419 10.8
Theodore J. Leonsis (12)............................ 78,100 *
Douglas J. Mackenzie (2)............................ 1,231,419 10.8
James E. Noyes...................................... 45,974 *
David S. Pottruck................................... 22,222 *
All directors and officers as a group (16 persons)
(13)............................................... 3,805,508 32.2
</TABLE>
- --------
* Less than 1%.

(1) Applicable percentage of beneficial ownership is based on 11,362,913
shares of Common Stock outstanding as of April 15, 1998, together with
applicable options and warrants for such stockholder. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission. The number of shares beneficially owned by a
person includes shares of Common Stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of
April 15, 1998. Such shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person holding
such options but are not deemed outstanding for the purposes of computing
the percentage ownership of each other person. To the Company's
knowledge, the persons

6
<PAGE>

named in this table have sole voting and investment power with respect to
all shares of Common Stock shown as owned by them, subject to community
property laws where applicable and except as indicated in the other
footnotes to this table. Unless otherwise indicated, the address of each
of the individuals named above is: c/o Preview Travel, Inc., 747 Front
Street, San Francisco, California 94111.

(2) Includes 1,230,626 shares and 793 shares held by Kleiner Perkins Caufield
& Byers VII and KPCB Information Sciences Zaibatsu Fund II, respectively.
William R. Hearst, III and Douglas J. Mackenzie, both directors of the
Company, are general partners of KPCB VII Associates, the general partner
of each of Kleiner Perkins Caufield & Byers VII and KPCB Information
Sciences Zaibatsu Fund II. Each of Messrs. Hearst and Mackenzie disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest therein.

(3) Includes 197,812 shares issuable upon exercise of outstanding options
exercisable within 60 days of April 15, 1998. A portion of the shares
issuable upon exercise of such stock options is subject to repurchase by
the Company at the original exercise price in the event of termination of
employment, which repurchase right lapses over time. Also includes
816,616 shares held by Hornthal Living Trust and an aggregate of 68,384
shares held in trusts of which Mr. Hornthal is a trustee and has voting
power.

(4) Does not include 78,100 shares held by Theodore J. Leonsis, a director of
the Company. Mr. Leonsis is President of AOL Studios, an operating
division of AOL. Mr. Leonsis disclaims beneficial ownership of the shares
held by AOL.

(5) Includes 555,555 shares and 17,181 shares held by General Electric
Capital Corporation and NBC Multimedia, Inc., an affiliate of General
Electric Capital Corporation, respectively.

(6) Includes 164,131 shares issuable upon exercise of outstanding options
exercisable within 60 days of April 15, 1998.

(7) Includes 11,127 shares issuable upon exercise of outstanding options
exercisable within 60 days of April 15, 1998.

(8) Includes 34,373 shares issuable upon exercise of outstanding options
exercisable within 60 days of April 15, 1998.

(9) Includes 28,487 shares issuable upon exercise of outstanding options
exercisable within 60 days of April 15, 1998.

(10) Includes 20,000 shares held by Mr. Cardy, 2,500 shares held by Eugenia C.
Cardy and 15,363 shares held by Thomas W. Cardy Family Trust.

(11) Includes 932,539 shares held by U S WEST Interactive Services, Inc., of
which Mr. Cullen is President. Mr. Cullen disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.

(12) Does not include 1,001,312 shares held by AOL, of which shares Mr.
Leonsis disclaims beneficial ownership.

(13) Includes 475,511 shares issuable upon exercise of stock options
exercisable within 60 days of April 15, 1998 A portion of the shares
issued or issuable upon exercise of such stock options is subject to
repurchase by the Company at the original exercise price in the event of
termination of employment, which repurchase right lapses over time.

7
<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS

The following table shows the compensation earned by (a) the individual who
served as the Company's Chief Executive Officer during the fiscal year ended
December 31, 1997, (b) the four other most highly compensated individuals who
served as an executive officer of the Company during the fiscal year ended
December 31, 1997 (the "Named Executive Officers"); and (c) the compensation
received by each such individual for the Company's two preceding fiscal years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------ ------------
SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) OPTIONS (#) ($) (1)
- --------------------------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Kenneth J. Orton.............. 1997 $204,926 $20,000 120,000 $1,264
President and Chief Executive
Officer 1996 157,125 25,000 30,000 1,323
1995 156,048 25,000 65,000 3,634
James J. Hornthal............. 1997 170,139 15,000 25,000 1,764
Chairman 1996 167,425 -- -- 1,440
1995 169,657 -- 190,000 2,188
Roy F. Walkenhorst............ 1997 154,019 17,663 12,500 3,607
President, News Travel
Network, Inc. (2) 1996 123,481 41,680 3,125 2,737
1995 122,130 18,847 11,875 3,881
John M. Petrone............... 1997 120,529 36,875 20,000 133
Senior Vice President of
Technology 1996 95,572 47,500 10,000 --
1995 31,448 -- 40,000 --
Barrie A. Seidenberg.......... 1997 113,077 35,000 30,000 133
Senior Vice President of
Online Services 1996 89,217 27,500 10,000 --
1995 49,827 2,500 30,000 --
</TABLE>
- --------
(1) Consists of travel benefits and life insurance premiums paid by the
Company.
(2) Mr. Walkenhorst resigned as President of the News Travel Network effective
March 31, 1998.

In March 1997, the Company entered into an agreement with Mr. Orton pursuant
to which, in the event of the involuntary termination of Mr. Orton's
employment with the Company (other than for cause) prior to February 26, 1998,
Mr. Orton will be retained as a consultant to the Company for a period of up
to 12 months, for which Mr. Orton will receive a monthly consulting fee equal
to one-twelfth of his most recent annual compensation. In addition, each of
Mr. Orton's then outstanding stock options were amended to provide that
Mr. Orton may pay the exercise price under such options by executing a
promissory note for the applicable exercise price.

In January 1998, Mr. Orton, Mr. Petrone and Ms. Seidenberg were granted
options to purchase 100,000, 20,000 and 20,000 shares of Common Stock,
respectively, at an exercise price of $9.25 per share, the fair market value
of the Common Stock on the date of grant. In addition, in January 1998 Mr.
Hornthal was granted an option to purchase 35,000 shares of Common Stock at an
exercise price of $13.50 per share, the fair market value of the Common Stock
on the date of grant.

The following table shows certain information regarding stock options
granted to the Named Executive Officers during the year ended December 31,
1997. No stock appreciation rights were granted to these individuals during
the year.

8
<PAGE>

OPTION GRANTS IN FISCAL YEAR 1997

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
NUMBER OF APPRECIATION
SHARES PERCENTAGE OF FOR OPTION
UNDERLYING TOTAL OPTIONS EXERCISE TERM(2)
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------
NAME GRANTED (1) EMPLOYEES SHARE DATE 5% 10%
---- ----------- ------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Orton........ 15,000 2.4% $2.60 02/25/02 $10,775 $ 23,810
105,000 16.8% $2.60 06/03/02 75,425 166,669
James J. Hornthal....... 25,000 4.0% $2.60 02/25/02 17,958 39,683
Roy F. Walkenhorst (3).. 12,500 2.0% $8.50 09/15/02 (2,552) 24,604
John M. Petrone......... 5,000 0.8% $2.60 01/28/02 3,592 7,937
15,000 2.4% $8.50 09/15/02 (3,603) 29,525
Barrie A. Seidenberg.... 10,000 1.6% $2.60 01/28/02 7,183 15,873
20,000 3.2% $8.50 09/15/02 (4,083) 39,366
</TABLE>
- --------
(1) These stock options, which were granted under the 1988 Stock Option Plan,
become exercisable at a rate of 25% of the total number of shares of
Common Stock subject to the option on the first anniversary of the date of
grant, and 2.083% of the total number of shares monthly thereafter, as
long as the optionee remains an employee with, consultant to, or director
of the Company.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Securities and Exchange Commission. There is no
assurance provided to any executive officer or any other holder of the
Company's securities that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any
other defined level. Unless the market price of the Common Stock
appreciates over the option term, no value will be realized from the
option grants made to the executive officers.
(3) Mr. Walkenhorst resigned from his position as President of News Travel
Network effective March 31, 1998.

OPTION EXERCISES AND HOLDINGS

The following table provides certain summary information concerning the
shares of Common Stock represented by outstanding stock options held by each
of the Named Executive Officers as of December 31, 1997.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT OPTIONS AT
SHARES VALUE DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($) (2)
ACQUIRED ON REALIZED ------------------------- ------------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Orton........ -- -- 121,041 148,959 $ 646,707 $ 747,168
James J. Hornthal....... -- -- 190,000 25,000 977,075 124,063
Roy F. Walkenhorst (3).. -- -- 9,191 18,309 48,818 30,369
John M. Petrone......... -- -- 27,499 42,501 146,630 144,307
Barrie Seidenberg....... -- -- 20,362 49,368 108,358 153,767
</TABLE>
- --------
(1) The amount set forth represents the difference between the fair market
value of the shares on the date of exercise and the exercise price of the
option.
(2) Based on the $7.56 per share closing price of the Company's Common Stock
on The Nasdaq National Market as of December 31, 1997, minus the exercise
price, multiplied by the number of shares underlying the option.
(3) Mr. Walkenhorst resigned from his position as President of the News Travel
Network effective March 31, 1998.

9
<PAGE>

Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933 or the Securities Exchange Act of
1934 that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Stock Performance Graph which
follows shall not be deemed to be incorporated by reference into any such
filings.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended December 31,
1997. The Committee is responsible for establishing and monitoring the general
compensation policies and compensation plans of the Company, as well as the
specific compensation levels for executive officers. It also makes
recommendations to the Board of Directors concerning the granting of options
under the Company's 1988 and 1997 Stock Option Plans. Executive officers who
are also directors have not participated in deliberations or decisions
involving their own compensation.

GENERAL COMPENSATION POLICY

Under the supervision of the Board of Directors, the Company's compensation
policy is designed to attract and retain qualified key executives critical to
the Company's growth and long-term success. It is the objective of the Board
of Directors to have a portion of each executive's compensation contingent
upon the Company's performance as well as upon the individual's personal
performance. Accordingly, each executive officer's compensation package is
comprised of three elements: (i) base salary which reflects individual
performance and expertise, (ii) variable bonus awards payable in cash and tied
to the achievement of certain performance goals that the Board of Directors
establishes from time to time for the Company and (iii) long-term stock-based
incentive awards which are designed to strengthen the mutuality of interests
between the executive officers and the Company's stockholders.

The summary below describes in more detail the factors which the Board of
Directors considers in establishing each of the three primary components of
the compensation package provided to the executive officers.

BASE SALARY

The level of base salary is established primarily on the basis of the
individual's qualifications and relevant experience, the strategic goals for
which he or she has responsibility, the compensation levels at companies which
compete with the Company for business and executive talent, and the incentives
necessary to attract and retain qualified management. Base salary is adjusted
each year to take into account the individual's performance and to maintain a
competitive salary structure. Company performance does not play a significant
role in the determination of base salary.

CASH-BASED INCENTIVE COMPENSATION

Cash bonuses are awarded on a discretionary basis to executive officers on
the basis of their success in achieving designated individual goals and the
Company's success in achieving specific company-wide goals, such as the
increase in gross bookings, continued revenue growth and the maintenance of a
high level of customer service.

LONG-TERM INCENTIVE COMPENSATION

The Company has utilized its stock option plans to provide executives and
other key employees with incentives to maximize long-term stockholder values.
Awards under this plan by the Board of Directors take the form of stock
options designed to give the recipient a significant equity stake in the
Company and thereby closely align his or her interests with those of the
Company's stockholders. Factors considered in making such awards

10
<PAGE>

include the individual's position in the Company, his or her performance and
responsibilities, and internal comparability considerations.

Each option grant allows the executive officer to acquire shares of Common
Stock at a fixed price per share (the fair market value on the date of grant)
over a specified period of time (up to 10 years). The options typically vest
in periodic installments over a four-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide a return to the executive officer only if he or she
remains in the Company's service, and then only if the market price of the
Common Stock appreciates over the option term.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Kenneth J. Orton has served as the Company's President since April 1994 and
as Chief Executive Officer since June 1997. His base salary for fiscal 1997
was $204,926.

The factors discussed previously in "Base Salaries," "Cash-Based Incentive
Compensation," and "Long-Term Incentive Compensation" were also applied in
establishing the amount of Mr. Orton's salary and stock option grant. In
reviewing Mr. Orton's performance, the Committee noted in particular a number
of achievements by the Company in 1997, including the successful completion of
the Company's initial public offering, the establishment of key strategic and
distribution relationships, the significant growth in online travel bookings
and the successful recruiting and hiring of other key officers and employees.
Based on annual survey data which takes into consideration the CEO
compensation of similar sized companies in the same geographic region and
industry, the Committee believes that the base salary level for the CEO is
commensurate with salaries paid to chief executive officers of comparable
companies engaged in similar industries.

DEDUCTIBILITY OF EXECUTIVE COMPENSATION

The Committee has considered the impact of Section 162(m) of the Internal
Revenue Code adopted under the Omnibus Budget Reconciliation Act of 1993,
which section disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the CEO
and the four other most highly compensated executive officers, respectively,
unless such compensation meets the requirements for the "performance-based"
exception to Section 162(m). As the cash compensation paid by the Company to
each of its executive officers is expected to be below $1 million and the
Committee believes that options granted under the Company's 1988 and 1997
Stock Option Plans to such officers will meet the requirements for qualifying
as performance-based, the Committee believes that Section 162(m) will not
affect the tax deductions available to the Company with respect to the
compensation of its executive officers. It is the Committee's policy to
qualify, to the extent reasonable, its executive officers' compensation for
deductibility under applicable tax law. However, the Company may from time to
time pay compensation to its executive officers that may not be deductible.

SUBMITTED BY THE COMPENSATION
COMMITTEE:
Theodore J. Leonsis
Douglas J. Mackenzie
David S. Pottruck

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of the Company's Board of
Directors are currently Messrs. Leonsis, Mackenzie and Pottruck, each of whom
were appointed to the Compensation Committee in September 1997. Prior to
September 1997 and during the year ended December 31, 1996, Messrs. Hearst and
Leonsis comprised the Compensation Committee. None of Messrs. Mackenzie,
Pottruck, Hearst or Leonsis has at any time been an officer or employee of the
Company or any subsidiary of the Company.

Mr. Leonsis is President of AOL Studios, an operating division of AOL.
Messrs. Hearst and Mackenzie are general partners of KPCB VII Associates, the
general partner of each of Kleiner Perkins Caufield & Byers VII

11
<PAGE>

and KPCB Information Sciences Zaibatsu Fund II, which collectively are a
principal stockholder of the Company (the "KPCB Funds").

Since July 1994, the Company has maintained a relationship with AOL pursuant
to which the Company developed and launched online travel services through a
Preview Travel content area on the AOL network and AOL's Web site, AOL.com
(together, the "AOL Online Area"), in January 1995. In September 1997, the
Company entered into an agreement with AOL pursuant to which the Company
serves as AOL's primary and preferred provider of travel services on the AOL
Online Area. In addition, AOL has agreed to exclusively promote and advertise
Preview Travel in online areas controlled by AOL and to deliver a minimum
number of annual page views to the online areas promoting the Company. Over
the five-year term of the agreement, the Company is obligated to make minimum
payments totaling $32 million to AOL, as well as pay a percentage of
commissions earned by the Company in excess of certain quarterly thresholds.
The Company has also agreed to deliver content through the AOL Online Area and
to provide travel services that are competitive in price and performance. The
Company and AOL both have the right to sell advertising in the Company's
content areas distributed through AOL, subject to the Company's obligation to
pay a percentage of advertising revenues above certain threshold amounts to
AOL after the second year of the agreement. Under a separate agreement, the
Company has agreed to develop and manage a travel-related destination database
for AOL in exchange for the right to receive all advertising revenues
generated from such database up to a certain threshold, and share in
advertising revenues thereafter. The Company's agreements with AOL expire in
September 2002, or earlier in the event of a material breach or the Company's
failure to deliver satisfactory content to the database or achieve specified
annual levels of travel services bookings. Frank J. Caufield, a director of
AOL, is a limited partner of KPCB VII Associates.

In August 1997, the Company entered into an agreement with Excite, Inc.
("Excite"), pursuant to which Excite has agreed to use Preview Travel as the
exclusive provider of travel reservation services for Excite's Travel Channel
(City.Net) in the U.S. and the WebCrawler Travel Channel, and to deliver a
minimum number of annual page views to the Excite Travel Channel. The
agreement was amended and restated in March 1998, permitting the Company to
enter into similar arrangements with other search engine providers and
providing for the Company to continue to be the exclusive provider of travel
reservations services for the Excite Travel Channel and to provide travel
reservations services and content for the WebCrawler Travel Channel. In
addition, Preview Travel will create a co-branded travel reservations site
that will be included on all travel channels within the Excite network, as
well as travel-related content for the Excite Travel Channel and other Excite
services. Excite has agreed to promote and advertise Preview Travel's services
throughout the Excite network and to deliver a minimum number of annual
impressions within the Excite network. In addition, the Company is eligible to
receive payments from Excite representing a share of advertising revenues
received by Excite in connection with the online areas featuring the Company's
travel services; however, there can be no assurance that such payments, if
any, will be significant. Over the five year term of the agreement, the
Company is obligated to make minimum payments totaling $24 million to Excite
as well as pay a percentage of commissions earned by the Company in excess of
certain thresholds. The Company and Excite will cooperate in selling, and
share revenues from, advertising on the Excite Travel Channel. Vinod Khosla, a
director of Excite, is a general partner of KPCB VII Associates, the general
partner of each of Kleiner Perkins Caufield & Byers VII and KPCB Information
Sciences Zaibatsu Fund II (the "KPCB Funds") and KPCB VII Founders Fund.

Messrs. Hearst, Leonsis and Mackenzie were elected to the Board of Directors
pursuant to a voting agreement dated as of January 31, 1995, by and among the
Company and certain principal stockholders of the Company. Such voting
agreement terminated upon completion of the Company's initial public offering
in November 1997.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 1997, the Company issued, in a private placement transaction, shares of
Series E Preferred Stock convertible into an aggregate of 1,562,806 shares of
Common Stock for an aggregate purchase price of $14,065,258. The following
table summarizes the shares of such Series E Preferred Stock purchased by
Named

12
<PAGE>

Executive Officers, directors and 5% stockholders of the Company and persons
and entities associated with them in such transaction:

<TABLE>
<CAPTION>
INVESTOR SHARES
-------- ------
<S> <C>
General Electric Capital Corporation (1)............................. 555,555
U S WEST Interactive Services, Inc. (Thomas A. Cullen) (1)........... 77,777
James J. Hornthal (2)................................................ 590
David S. Pottruck (2)................................................ 22,222
</TABLE>
- --------
(1) Shares held by affiliated persons and entities have been aggregated.
(2) Includes shares held by family trusts.

Since July 1994, the Company has maintained a relationship with AOL pursuant
to which the Company developed and launched online travel services through a
Preview Travel content area on the AOL network and AOL's Web site (aol.com)
(together, the "AOL Online Area") in January 1995. Theodore J. Leonsis
currently serves as President of AOL Studios, an operating division of AOL,
and previously served as President of America Online Services Company. In
September 1997, the Company entered into an agreement with AOL pursuant to
which the Company serves as AOL's primary and preferred provider of travel
services on the AOL Online Area. In addition, AOL has agreed to exclusively
promote and advertise Preview Travel in online areas controlled by AOL and to
deliver a minimum number of annual page views to the online areas promoting
the Company. Over the five-year term of the agreement, the Company is
obligated to make minimum payments totaling $32 million to AOL, as well as pay
a percentage of commissions earned by the Company in excess of certain
quarterly thresholds. The Company has also agreed to deliver content through
the AOL Online Area and to provide travel services that are competitive in
price and performance. The Company and AOL both have the right to sell
advertising in the Company's content areas distributed through AOL, subject to
the Company's obligation to pay a percentage of advertising revenues above
certain threshold amounts to AOL after the second year of the agreement. Under
a separate agreement, the Company has agreed to develop and manage a travel
related destination database for AOL in exchange for the right to receive all
advertising revenues generated from such database up to a certain threshold,
and share in advertising revenues thereafter. The Company's agreements with
AOL expire in September 2002; however, AOL may terminate the distribution
agreement earlier in the event of a material breach or the Company's failure
to deliver satisfactory content to the database or achieve specified annual
levels of travel services bookings. Frank J. Caufield, a director of AOL, is a
limited partner of KPCB VII Associates, the general partner of each of Kleiner
Perkins Caufield & Byers VII, KPCB VII Founders Fund and KPCB Information
Sciences Zaibatsu Fund II.

Until February 1997, the Company retained travel-related fulfillment and
consulting services from The Trase Miller Group ("Trase Miller"). Mr. Noyes, a
member of the Company's Board of Directors, served as the President of Trase
Miller from 1989 to June 1996. Total amounts paid to Trase Miller in
connection with such services were approximately $558,000 in 1996 and $84,000
in 1997.

13
<PAGE>

payments, if any, will be significant. Over the five year term of the
agreement, the Company is obligated to make minimum payments totaling $24
million to Excite as well as pay a percentage of commissions earned by the
Company in excess of certain thresholds. The Company and Excite will cooperate
in selling, and share revenues from, advertising on the Excite Travel Channel.
Vinod Khosla, a director of Excite, is a general partner of KPCB VII
Associates, the general partner of each of Kleiner Perkins Caufield & Byers
VII and KPCB Information Sciences Zaibatsu Fund II (the "KPCB Funds") and KPCB
VII Founders Fund.

The Company's Restated Certificate of Incorporation filed in connection with
the reincorporation of the Company in Delaware provides that the holders of
the Company's Series E Preferred Stock, voting as a separate class, have the
right to elect one member of the Company's Board of Directors. In addition, in
September 1997, the Company and certain stockholders entered into a voting
agreement pursuant to which such stockholders agreed to vote their shares in
any election so as to elect one designee of U S WEST Interactive Services,
Inc. to the Board of Directors. In addition, Messrs. Hearst, Leonsis and
Mackenzie were elected to the Board of Directors pursuant to a voting
agreement dated as of January 31, 1995, by and among the Company and certain
principal stockholders of the Company. Pursuant to their respective terms, all
of these voting arrangements expired upon the closing of the Company's initial
public offering in November 1997.

In September 1997, the Company entered into an agreement with NBC
Interactive, an affiliate of The National Broadcasting Company ("NBC"),
pursuant to which Preview Travel will be the primary travel site on the NBC
Interactive Neighborhood. In addition, the Company has issued to an affiliate
of NBC Interactive a warrant to purchase 94,500 shares of Series E Preferred
Stock at a purchase price of $9.00 per share. Each share of Series E Preferred
Stock is convertible into one share of Common Stock. Such warrant was
exercised in November 1997 on a net exercise basis for an aggregate of 17,181
shares. NBC is an affiliate of General Electric Capital Corporation.

In April 1998, the Company entered into an agreement with Roy Walkenhorst in
connection with Mr. Walkenhorst's resignation as President of News Travel
Network ("NTN"). Under the terms of the agreement, Mr. Walkenhorst will
continue as an employee of the Company in the position of sales representative
until September 30, 1998 and will be paid a salary of $500 per month in
connection with such services, in addition to continued vesting on stock
options during the term of his employment. In addition, the Company and Mr.
Walkenhorst entered into an agreement pursuant to which Mr. Walkenhorst will
represent on an exclusive basis the licensing of certain NTN programs and
other non-NTN programs until December 31, 1998. In connection with this
agreement, Mr. Walkenhorst will receive a percentage of the gross receipts
from the licenses associated with his representation and a non-refundable
advance of $100,000 paid against such commissions.

The Company has entered into indemnification agreements with each of its
officers and directors containing provisions which may require the Company,
among other things, to indemnify its officers and directors against certain
liabilities that may arise by reason of their status or service as officers or
directors (other than liabilities arising from willful misconduct of a
culpable nature) and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.

14
<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return data
for the Company's stock since November 20, 1997 (the date on which the
Company's stock was first registered under Section 12 of the Securities
Exchange Act of 1934, as amended) to the cumulative return over such period of
(i) the The Nasdaq National Market-US index, and (ii) the Hambrecht and Quist
Technology index. The graph assumes that $100 was invested on November 20,
1997, the date on which the Company completed the initial public offering of
its Common Stock, in the Common Stock of the Company and in each of the
comparative indices. The graph further assumes that such amount was initially
invested in the Common Stock of the Company at a per share price of $11.00,
the price to which such stock was first offered to the public by the Company
on the date of its initial public offering, and reinvestment of any dividends.
The stock price performance on the following graph is not necessarily
indicative of future stock price performance.

[GRAPH]

* Assumes $100 invested on November 20, 1997 in the Common Stock of the
Company and in each of the comparative indices, including reinvestment of
dividends.

<TABLE>
<CAPTION>
11/20/97 12/31/97
-------- --------
<S> <C> <C>
Preview Travel, Inc........................................ $100 $68.75
Nasdaq Stock Market--US.................................... 100 99.53
Hambrecht & Quist Technology............................... 100 96.89
</TABLE>

15
<PAGE>

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Secretary of the
Company, Kenneth R. Pelowski, Preview Travel, Inc., 747 Front Street, San
Francisco, California, 94111, no later than January 24, 1999 in order that
they may be included in the Company's proxy statement and form of proxy for
that meeting.

ADDITIONAL INFORMATION REGARDING 1988 STOCK OPTION PLAN,
1997 STOCK OPTION PLAN, 1997 DIRECTORS' STOCK OPTION PLAN
AND 1997 EMPLOYEE STOCK PURCHASE PLAN

Attached to this Proxy Statement as Appendix 1 is certain information
concerning the Company's 1988 Stock Option Plan, 1997 Stock Option Plan, 1997
Directors' Stock Option Plan and 1997 Employee Stock Purchase Plan, and
attached as Appendix 2 is certain information concerning the federal tax
consequences of participating in such plans. Such information is being
furnished under Section 14(c) promulgated under the Securities Exchange Act of
1934, as amended, in order to perfect the shareholder approval requirement of
Section 14(c) with respect to such plans.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file. To the Company's knowledge, based solely on its review of the
copies of such reports received or written representations from certain
Reporting Persons that no other reports were required, the Company believes
that during its fiscal year ended December 31, 1997, all Reporting Persons
complied with all applicable filing requirements.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

This Proxy Statement incorporates certain documents of the Company by
reference that are not presented herein or delivered herewith. Such documents
are available to any person, including any beneficial owner, to whom this
Proxy Statement is delivered, upon oral or written request, without charge,
directed to Investor Relations, Preview Travel, Inc., 747 Front Street, San
Francisco, California 94111, telephone number (415) 439-1200.

OTHER MATTERS

The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the
Annual Meeting, proxies in the enclosed form will be voted in respect thereof
as the proxy holders deem advisable.

It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.

THE BOARD OF DIRECTORS

April 24, 1998
San Francisco, California

16
<PAGE>

APPENDIX 1

DESCRIPTIONS OF THE 1988 STOCK OPTION PLAN,
1997 STOCK OPTION PLAN, 1997 DIRECTORS' STOCK OPTION PLAN
AND 1997 EMPLOYEE STOCK PURCHASE PLAN

1988 STOCK OPTION PLAN

GENERAL

The 1988 Stock Option Plan was originally adopted by the Board of Directors
(the "Board") and approved by the stockholders in April 1988. A total of
1,681,750 shares of Common Stock has been reserved for issuance under the 1988
Stock Option Plan. As of April 15, 1998, options to purchase 1,231,313 shares
of Common Stock were outstanding under the 1988 Stock Option Plan at a
weighted average exercise price of $4.08 per share, and 450,003 shares had
been issued upon exercise of previously granted options.

The 1988 Stock Option Plan provides for grants to employees of the Company
and any subsidiary of the Company (including officers and employee directors)
of "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for grants of non-
statutory options ("NSOs") to employees (including officers and employee
directors) and consultants (including non-employee directors) of the Company
or any affiliate of the Company. See "Federal Income Tax Aspects of the 1988
Stock Option Plan" below for information concerning the tax treatment of
incentive stock options and nonstatutory options.

The 1988 Stock Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").

PURPOSE

The purposes of the 1988 Stock Option Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to give
employees and consultants of the Company a greater personal stake in the
success of the Company's business, to provide additional incentive to the
employees and consultants of the Company to continue and advance in their
employment and service to the Company and to promote the success of the
Company's business.

ADMINISTRATION

The 1988 Stock Option Plan is administered by the Company's Board of
Directors or a committee of the Board (the "Administrator"). The 1988 Stock
Option Plan is currently being administered by the Board of Directors, except
that, with respect to executive officers of the Company (including executive
officers who are also directors), the 1988 Stock Option Plan is being
administered exclusively by the Compensation Committee of the Board of
Directors. The Administrator may determine the terms of the options granted,
including the exercise price, the number of shares subject to each option and
the exercisability of the option. The Administrator also has the full power to
select the individuals to whom options will be granted and to make any
combination of grants to any participants. The Administrator's interpretation
and construction of any provision of the 1988 Stock Option Plan are final and
binding upon all participants.

Members of the Board receive no additional compensation for their services
in connection with the administration of the 1988 Stock Option Plan. All
directors currently hold office until the annual meeting of stockholders of
the Company following their election, or until their successors are duly
elected and qualified. Directors may be removed from office by the vote or
written consent of the majority of outstanding shares pursuant to the
provisions of Section 141(k) of the Delaware General Corporation Law.

A-1-1
<PAGE>

ELIGIBILITY

The 1988 Stock Option Plan provides that incentive stock options may be
granted only to employees (including officers and employee directors) of the
Company or any subsidiary of the Company, while nonstatutory stock options may
be granted not only to employees (including officers and employee directors),
but also consultants of the Company or any subsidiary of the Company.

The 1988 Stock Option Plan sets neither a maximum nor minimum number of
shares of Common Stock that may be granted under options to any person, other
than the annual per employee limitation set forth in "Limitation on Grants to
Employees," below. However, no employee may be granted incentive stock options
that first become exercisable (i.e., that vest) in any calendar year for
Common Stock having a total fair market value, determined at time of grant, in
excess of $100,000. To the extent options have been issued to a person that
exceed the $100,000 limit, such excess options are treated as nonstatutory
options. See "Federal Income Tax Aspects of the 1988 Stock Option Plan" below.

TERMS AND CONDITIONS OF OPTIONS

Each option is evidenced by a stock option agreement between the Company and
the optionee, and is subject to the following terms and conditions:

(a) Exercise of the Option. The Administrator determines when options may
be exercised. An option is exercised by giving written notice of exercise
to the Company specifying the number of full shares of Common Stock to be
purchased and by tendering of payment of the purchase price. The purchase
price of the shares purchased upon exercise of an option shall be paid in
consideration of such form as is determined by the Administrator, and such
form of consideration may vary for each option. Each optionee should refer
to his or her individual option agreement for information as to the
exercisability and form of consideration applicable to his or her option.

(b) Exercise Price and Consideration. The option exercise price may not
be less than 100% of the fair market value of the Common Stock on the date
of grant.

The Administrator of the 1988 Stock Option Plan determines the fair
market value of the Common Stock. As long as the Common Stock of the
Company is trading on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") (as of the
date of this Prospectus, the Common Stock was traded on the Nasdaq National
Market), the fair market value of a share of Common Stock of the Company
shall be the closing sales price for such stock as quoted on such system on
the date of determination, as such price is reported in The Wall Street
Journal or such other source the Administrator deems reliable.

The consideration to be paid for shares issued on exercise of options
granted under the 1988 Stock Option Plan, including the method of payment,
is determined by the Administrator (in the case of ISOs, such determination
shall be made at the time of grant) and may consist entirely of cash,
check, promissory note or shares of Common Stock having a fair market value
on the exercise date equal to the aggregate exercise price of the shares
purchased. The Administrator may also authorize payments by any combination
of the above methods or any other consideration and method of payment
permitted by law.

(c) Termination of Status As an Employee or Consultant. In the event of
termination of an optionee's employment or consulting relationship with the
Company for any reason other than death or permanent disability, the
optionee may still exercise his or her option to the extent that he or she
was entitled to exercise it at the date of termination, but such exercise
must be made within thirty days (or such other period of time, not
exceeding three months in the case of an ISO or six months in the case of
an NSO, as is determined by the Administrator, with such determination in
the case of an ISO being made at the time the option is granted) and may
not be made later than the date of expiration of the term of the option as
set out in the option agreement.

A-1-2
<PAGE>

(d) Disability. If an optionee is unable to continue his or her
employment or consulting relationship with the Company as a result of his
or her total and permanent disability, an option may be exercised (to the
extent it was exercisable upon the date of termination) within six months
of termination (or such other period of time, not to exceed twelve months,
as is determined by the Administrator, with such determination in the case
of an ISO being made at the time the option is granted), but an option may
not be exercised later than the date of expiration of the term of the
option as set out in the option agreement.

(e) Death. If an optionee should die while employed or serving as a
consultant to the Company, the optionee's estate or a person who has
acquired the right to exercise the option by bequest or inheritance may
exercise the option at any time within six months after the date of death
(but not later than the date of expiration of the term of the option as set
out in the option agreement). The option shall be exercisable to the extent
that the right to exercise would have accrued had the optionee continued
living and working as an employee of or consultant to the Company for
another six months beyond the date of death.

If an optionee should die within 30 days (or such other period of time,
not to exceed three months, as is determined by the Administrator, with
such determination in the case of an ISO being made at the time of grant of
the option) after terminating his or her employment relationship with the
Company, the optionee's estate or person who has acquired the right to
exercise the option may likewise exercise the option at any time within six
months after the date of death, but not later than the date of expiration
of the term of the option as set out in the option agreement. However, in
this case, the option shall be exercisable only to the extent it was
exercisable at the date of termination.

(f) Term of Options. The term of an option is determined by the specific
option agreement. Incentive stock options may not have a term of more than
10 years. Furthermore, the maximum term for an option granted to an
optionee who immediately before the grant of such option owns more than 10%
of the total combined voting power of all classes of stock of the Company
or any parent or subsidiary is five years. No option may be exercised by
any person after its term expires.

(g) Option Not Transferable. An option is nontransferable by the optionee
other than by will or the laws of descent and distribution. An option is
exercisable during the optionee's lifetime only by the optionee and in the
event of the optionee's death, by a person who acquires the right to
exercise the option by bequest or inheritance or by reason of the death of
the optionee.

(h) Acceleration of Options. In the event of a sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the option shall be assumed or an
equivalent option substituted by the successor corporation unless the
administrator decides to accelerate the vesting of the option to make it
exercisable as to some or all of the shares subject to the option. In the
event of such acceleration of the option, the optionee shall have 30 days
from the date of notice of the option's acceleration to exercise all or a
portion of the option.

(i) Other Provisions. The option agreement may contain other terms,
provisions and conditions as may be determined by the Administrator as long
as they are consistent with the 1988 Stock Option Plan.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

In the event any change such as a stock split or dividend is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price and in the
number of shares subject to each option, as well as in the number of shares
available for issuance under the 1988 Stock Option Plan. In the event of the
proposed dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action unless otherwise
provided by the Administrator. The Administrator may declare that any option
shall terminate as of a date fixed by the Administrator and give each optionee
the right to exercise his or her option as to all or any part of the shares
subject to the option, including shares as to which the option would not
otherwise be exercisable.

A-1-3
<PAGE>

AMENDMENT AND TERMINATION OF THE PLAN

The Board may amend the 1988 Stock Option Plan at any time or from time to
time or may terminate it without approval of the stockholders, except that
stockholder approval is required for any amendment to the 1988 Stock Option
Plan that increases the number of shares which may be issued under the 1988
Stock Option Plan, modifies the standards of eligibility, changes the
limitation on grants to employees or effects other changes which would require
stockholder approval to qualify options granted under the 1988 Stock Option
Plan as performance-based compensation under Section 162(m) of the Code.
However, no action by the Board or stockholders may alter or impair any option
previously granted under the 1988 Stock Option Plan, unless mutually agreed
otherwise between the optionee and the Board in a writing signed by the
optionee and the Company. The 1988 Stock Option Plan shall terminate in April
1998. Any options outstanding at that time under the 1988 Stock Option Plan
shall remain outstanding until they expire their own terms.

PLAN BENEFITS

During the fiscal year ended December 31, 1997, (i) options to purchase
387,500 shares of Common Stock were granted pursuant to the 1988 Stock Option
Plan to all current executive officers (including directors who are executive
officers) as a group (8 persons), (ii) options to purchase 20,000 shares of
Common Stock were granted to all current directors who are not executive
officers as a group (7 persons), and (iii) options to purchase 207,325 shares
of Common Stock were granted to all employees, including current officers who
are not executive officers, as a group.

The following table sets forth information with respect to the stock options
granted and unexercised to the Named Executive Officers, all current executive
officers as a group and all employees and consultants (including all current
officers who are not executive officers) as a group under the 1988 Stock
Option Plan as of December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF SHARES SUBJECT TO WEIGHTED AVERAGE
OPTIONS GRANTED UNDER EXERCISE PRICE
NAME THE 1988 STOCK OPTION PLAN PER SHARE
---- --------------------------- ----------------
<S> <C> <C>
Kenneth J. Orton (1).............. 270,000 $2.40
James J. Hornthal (1)............. 215,000 $2.44
Roy F. Walkenhorst (2)............ 27,500 $5.11
John M. Petrone................... 70,000 $3.61
Barrie Seidenberg................. 70,000 $4.09
All current executive officers as
a group (8 persons).............. 912,500 $3.45
David S. Pottruck (1)............. 20,000 $6.50
All current directors who are not
executive officers as a group
(7 persons)...................... 20,000 $6.50
All employees (including all
current officers who are not
executive officers).............. 324,807 $5.57
</TABLE>
- --------
(1) Nominee for election as a director.
(2) Mr. Walkenhorst resigned from his position as President of the News Travel
network effective March 31, 1998.

A-1-4
<PAGE>

1997 STOCK OPTION PLAN

GENERAL

The 1997 Stock Option Plan was adopted by the Board of Directors (the
"Board") in October 1997 and approved by the stockholders in November 1997. A
total of 1,500,000 shares of Common Stock has been reserved for issuance under
the 1997 Stock Option Plan. As of April 15, 1998, options to purchase an
aggregate of 416,400 shares of Common Stock were outstanding under the 1997
Stock Option Plan at a weighted average exercise price of $11.38 per share,
and no shares had been issued upon exercise of previously granted options.

The 1997 Stock Option Plan provides for grants to employees of the Company
and any subsidiary of the Company (including officers and employee directors)
of "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and for grants of non-
statutory options ("NSOs") to employees (including officers and employee
directors) and consultants (including non-employee directors) of the Company
or any affiliate of the Company. See "Federal Income Tax Aspects of the 1997
Stock Option Plan" below for information concerning the tax treatment of
incentive stock options and nonstatutory options.

The 1997 Stock Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Code, and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").

PURPOSE

The purposes of the 1997 Stock Option Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to give
employees and consultants of the Company a greater personal stake in the
success of the Company's business, to provide additional incentive to the
employees and consultants of the Company to continue and advance in their
employment and service to the Company and to promote the success of the
Company's business.

ADMINISTRATION

The 1997 Stock Option Plan is administered by the Company's Board of
Directors or a committee of the Board (the "Administrator"). The 1997 Stock
Option Plan is currently being administered by the Board of Directors, except
that, with respect to executive officers of the Company (including executive
officers who are also directors), the 1997 Stock Option Plan is being
administered exclusively by the Compensation Committee of the Board of
Directors. The Administrator may determine the terms of the options granted,
including the exercise price, the number of shares subject to each option and
the exercisability of the option. The Administrator also has the full power to
select the individuals to whom options will be granted and to make any
combination of grants to any participants. The Administrator's interpretation
and construction of any provision of the 1997 Stock Option Plan are final and
binding upon all participants.

Members of the Board receive no additional compensation for their services
in connection with the administration of the 1997 Stock Option Plan. All
directors currently hold office until the annual meeting of stockholders of
the Company following their election, or until their successors are duly
elected and qualified. Directors may be removed from office by the vote or
written consent of the majority of outstanding shares pursuant to the
provisions of Section 141(k) of the Delaware General Corporation Law.

ELIGIBILITY

The 1997 Stock Option Plan provides that incentive stock options may be
granted only to employees (including officers and employee directors) of the
Company or any subsidiary of the Company, while nonstatutory stock options may
be granted not only to employees (including officers and employee directors),
but also consultants (including non-employee directors) of the Company or any
subsidiary of the Company.

A-1-5
<PAGE>

The 1997 Stock Option Plan sets neither a maximum nor minimum number of
shares of Common Stock that may be granted under options to any person, other
than the annual per employee limitation set forth in "Limitation on Grants to
Employees," below. However, no employee may be granted incentive stock options
that first become exercisable (i.e., that vest) in any calendar year for
Common Stock having a total fair market value, determined at time of grant, in
excess of $100,000. To the extent options have been issued to a person that
exceed the $100,000 limit, such excess options are treated as nonstatutory
options. See "Federal Income Tax Aspects of the 1997 Stock Option Plan" below.

TERMS AND CONDITIONS OF OPTIONS

Each option is evidenced by a stock option agreement between the Company and
the optionee, and is subject to the following terms and conditions:

(b) Exercise Price and Consideration. The option exercise price may not
be less than 100% of the fair market value of the Common Stock on the date
of grant; provided, however, that NSO's may be granted to persons other
than the Company's Chief Executive Officer or its other four most highly
compensated officers whose compensation is required to be reported to
stockholders under the Exchange Act at exercise prices of not less than 85%
of the fair market value on the date the option is granted. In the case of
an ISO granted to a person who at the time of the grant owns more than 10%
of the total combined voting power of all classes of stock of the Company
or any parent or subsidiary, the option exercise price for each share
covered by such option may not be less than 110% of the fair market value
of a share of Common Stock on the date of grant of such option.

The Administrator of the 1997 Stock Option Plan determines the fair
market value of the Common Stock. As long as the Common Stock of the
Company is trading on the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") (as of the
date of this Prospectus, the Common Stock was traded on the Nasdaq National
Market), the fair market value of a share of Common Stock of the Company
shall be the closing sales price for such stock as quoted on such system on
the date of determination (or, if for a given day no sales were reported,
the closing bid on that day shall be used), as such price is reported in
The Wall Street Journal or such other source the Administrator deems
reliable.

The consideration to be paid for shares issued on exercise of options
granted under the 1997 Stock Option Plan, including the method of payment,
is determined by the Administrator (in the case of ISOs, such determination
shall be made at the time of grant) and may consist entirely of cash,
check, promissory note or shares of Common Stock which have been
beneficially owned by the optionee for at least six months or which were
not acquired, directly or indirectly, from the Company, having a fair
market value on the exercise date equal to the aggregate exercise price of
the shares purchased. The Administrator may also authorize payments by any
combination of the above methods or any other consideration and method of
payment permitted by law.

A-1-6
<PAGE>

option is granted) and may not be made later than the date of expiration of
the term of the option as set out in the option agreement.

(e) Death. If an optionee should die while employed or serving as a
consultant to the Company, the optionee's estate or a person who has
acquired the right to exercise the option by bequest or inheritance may
exercise the option at any time within six months (or such other period of
time, not exceeding twelve months, as is determined by the Administrator,
with such determination in the case of an ISO being made at the time of
grant of the option) after the date of death (but not later than the date
of expiration of the term of the option as set out in the option
agreement). The option shall be exercisable to the extent that the right to
exercise would have accrued had the optionee continued living and working
as an employee of or consultant to the Company for another three months (or
such other period of time as is determined by the Administrator) beyond the
date of death.

(g) Limitation on Grants to Employees. Subject to adjustment as provided
in the 1997 Stock Option Plan, the maximum number of shares which may be
subject to options granted to any one employee under the 1997 Stock Option
Plan during any fiscal year of the Company is 1,500,000 shares.

(h) Option Not Transferable. An option is nontransferable by the optionee
other than by will or the laws of descent and distribution; provided,
however, that certain nonstatutory options may be transferable. An option
is exercisable during the optionee's lifetime only by the optionee (or
permitted transferee) and in the event of the optionee's death, by a person
who acquires the right to exercise the option by bequest or inheritance or
by reason of the death of the optionee (or permitted transferee).

(i) Acceleration of Options. In the event of a sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the option shall be assumed or an
equivalent option substituted by the successor corporation unless the
administrator decides to accelerate the vesting of the option to make it
exercisable as to some or all of the shares subject to the option. In the
event of such acceleration of the option, the optionee shall have 30 days
from the date of notice of the option's acceleration to exercise all or a
portion of the option.

(j) Other Provisions. The option agreement may contain other terms,
provisions and conditions as may be determined by the Administrator as long
as they are consistent with the 1997 Stock Option Plan.

A-1-7
<PAGE>

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

In the event any change such as a stock split or dividend is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the exercise price and in the
number of shares subject to each option, as well as in the number of shares
available for issuance under the 1997 Stock Option Plan. In the event of the
proposed dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action unless otherwise
provided by the Administrator. The Administrator may declare that any option
shall terminate as of a date fixed by the Administrator and give each optionee
the right to exercise his or her option as to all or any part of the shares
subject to the option, including shares as to which the option would not
otherwise be exercisable.

AMENDMENT AND TERMINATION OF THE PLAN

The Board may amend the 1997 Stock Option Plan at any time or from time to
time or may terminate it without approval of the stockholders, except that
stockholder approval is required for any amendment to the 1997 Stock Option
Plan that increases the number of shares which may be issued under the 1997
Stock Option Plan, modifies the standards of eligibility, changes the
limitation on grants to employees or effects other changes which would require
stockholder approval to qualify options granted under the 1997 Stock Option
Plan as performance-based compensation under Section 162(m) of the Code.
However, no action by the Board or stockholders may alter or impair any option
previously granted under the 1997 Stock Option Plan, unless mutually agreed
otherwise between the optionee and the Board in a writing signed by the
optionee and the Company. The 1997 Stock Option Plan shall terminate in
October 2007. Any options outstanding at that time under the 1997 Stock Option
Plan shall remain outstanding until they expire their own terms.

PLAN BENEFITS

During the fiscal year ended December 31, 1997, no options were granted to
any current executive officers (including directors who are executive
officers) under the 1997 Stock Option Plan, and options to purchase 43,400
shares of Common Stock were granted to all employees, including current
officers who are not executive officers, as a group.

A-1-8
<PAGE>

1997 DIRECTORS' STOCK OPTION PLAN

GENERAL

The Company's Directors' Stock Option Plan was adopted by the Board of
Directors in October 1997 and approved by the stockholders effective as of
November 1997. A total of 250,000 shares (as adjusted to reflect the
reincorporation of the Company in Delaware) of Common Stock have been reserved
for issuance under the Directors' Stock Option Plan. As of the date of this
Prospectus, no options to purchase shares under the Directors' Stock Option
Plan have been granted.

Options granted under the Directors' Stock Option Plan are non-statutory
options and do not qualify as "incentive stock options," as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). See the
section below entitled "Federal Income Tax Aspects of the Directors' Stock
Option Plan" for information concerning the tax treatment of non-statutory
stock options.

The Directors' Stock Option Plan is not a qualified deferred compensation
plan under Section 401(a) of the Code and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA").

PURPOSE

The purposes of the Directors' Stock Option Plan are to attract and retain
the best available personnel for service as directors of the Company, to
provide additional incentive to the nonemployee directors of the Company to
serve as directors, and to encourage their continued service on the Board.

ADMINISTRATION

The Directors' Stock Option Plan is designed to work automatically, without
administration. However, to the extent administration is necessary, it will be
provided by the Board of Directors. The interpretation and construction of any
provision of the Directors' Stock Option Plan by the Board of Directors shall
be final and conclusive.

Members of the Board of Directors receive no additional compensation for
their services in connection with the administration of the Directors' Stock
Option Plan. All directors currently hold office until the annual meeting of
stockholders of the Company following their election, or until their
successors are duly elected and qualified. Directors may be removed from
office by the vote or written consent of the majority of outstanding shares
pursuant to the provisions of Section 141(k) of the Delaware General
Corporation Law.

ELIGIBILITY

The Directors' Stock Option Plan provides for the grant of non-statutory
options to nonemployee directors of the Company. Each such director shall be
automatically granted an option to purchase 20,000 shares of Common Stock (the
"First Option") on the date on which such person first becomes a non-employee
director, whether through election by the stockholders or appointment by the
Board of Directors to fill a vacancy. In addition, each nonemployee director
shall automatically be granted an option to purchase 5,000 shares of Common
Stock on the date of each Annual Meeting of the Company's stockholders
following which such director is serving on the Board, provided he or she
shall have served on the Board for at least six months prior to the date of
such Annual Meeting (an "Annual Option").

In the event any automatic grant(s) would cause the aggregate number of
shares to exceed the authorized pool of shares available for issuance under
this Plan, then such automatic grant(s) will be adjusted by dividing the
remaining shares available pro rata among such automatic grant(s).

A-1-9
<PAGE>

TERMS AND CONDITIONS OF OPTIONS

Options granted under the Directors' Stock Option Plan have a term of 10
years. Each option is evidenced by a stock option agreement between the
Company and the director to whom such option is granted and is subject to the
following additional terms and conditions:

(a) Rule 16b-3. Options granted to directors must comply with the
applicable provisions of Rule 16b-3 or any successor thereto and shall
contain such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with
respect to Directors' Stock Option Plan transactions.

(b) Exercise of the Option. The First Option shall become exercisable in
cumulative installments of 25% of the shares subject to the option on each
of the first, second, third and fourth anniversaries of the date of grant
of the First Option. Each Annual Option shall become exercisable for 100%
of the shares subject to the Annual Option on the first anniversary of the
date of grant of each such Annual Option.

An option is exercised by giving written notice of exercise to the
Company, specifying the number of full shares of Common Stock to be
purchased and tendering payment to the Company of the purchase price. The
consideration to be paid for shares issued upon exercise of options granted
under the Directors' Stock Option Plan, including the method of payment,
shall consist entirely of: 1) cash; 2) check; 3) other shares of Common
Stock having a fair market value on the date of surrender equal to the
aggregate exercise price of the shares for which the option is being
exercised (provided, however, that if the shares being surrendered were
acquired from the Company, they must have been held for at least six
months); or 4) any combination of the foregoing methods of payment and/or
any other consideration or method of payment as shall be permitted under
applicable corporate law.

(c) Exercise Price. The exercise price shall be equal to 100% of the fair
market value of the Company's Common Stock on the date of grant of the
option. If there is a public market for the Common Stock, the fair market
value per share shall be the mean of the bid and asked prices of the Common
Stock in the over-the-counter market on the date of grant, as reported in
The Wall Street Journal or, if not so reported, as otherwise reported by
the National Association of Securities Dealers Automated Quotation System
("Nasdaq"). If the Common Stock is listed on a stock exchange or the Nasdaq
National Market the fair market value of a share of Common Stock shall be
the closing price on such exchange or system on the date of grant of the
option (or, in the event that the Common Stock is not traded on such date,
on the immediately preceding trading date), as reported in The Wall Street
Journal. In the absence of an established market for the Common Stock, the
fair market value shall be determined by the Board of Directors in its
discretion.

(d) Termination of Status as a Director. The Directors' Stock Option Plan
provides that if the optionee ceases to serve as a director of the Company,
the option may be exercised within 90 days after the date he or she ceases
to be a director as to all or part of the shares that the director was
entitled to exercise at the date of such termination. Notwithstanding the
foregoing, in no event may an option be exercised after its 10-year term
has expired. To the extent that the director was not entitled to exercise
an option at the date of such termination, or does not exercise an option
that he or she was entitled to exercise within the time specified, the
option shall terminate.

(e) Death. Notwithstanding the provisions of paragraph (d) above, if an
optionee should die while serving as a director of the Company and has been
in continuous status as a director since the date of grant of the option,
the optionee's estate or a person who has acquired the right to exercise
the option by bequest or inheritance may exercise the option at any time
within six months after the date of death (but not later than the date of
expiration of the term of the option as set out in the option agreement).
The option shall be exercisable to the extent that the right to exercise
would have accrued had the optionee continued living and serving as a
director of the Company for another six months beyond the date of death.

If an optionee should die within three months after the termination of
his or her service as a director of the Company, the optionee's estate or
person who has acquired the right to exercise the option may likewise

A-1-10
<PAGE>

exercise the option by bequest or inheritance at any time within six months
after the date of death, but not later than the date of expiration of the
term of the option as set out in the option agreement. However, in this
case, the option shall be exercisable only to the extent it was exercisable
at the date of termination.

(f) Disability. Notwithstanding the provisions of paragraph (d) above, if
an optionee is unable to continue his or her service as a director of the
Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), the director may, but only within
six months from the date of his or her termination, exercise his or her
option to the extent he or she was entitled to exercise it at the date of
such termination. Notwithstanding the foregoing, in no event may an option
be exercised after its 10-year term has expired. To the extent that the
director was not entitled to exercise the option at the date of
termination, or if he or she does not exercise such option (which he or she
was entitled to exercise) within the time specified, the option shall
terminate.

(g) Suspension or Termination of Options. No option is exercisable by any
person after the expiration of 10 years from the date the option was
granted. If the President of the Company or his or her designee reasonably
believes that an optionee has committed an act of misconduct, the President
may suspend the director's right to exercise any option pending a
determination by the Board of Directors (excluding the director accused of
such misconduct). If the Board of Directors (excluding the director accused
of such misconduct) determines a non-employee director has committed an act
of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company
rules resulting in loss, damage or injury to the Company, or if an optionee
makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company, or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the director nor his or her
estate shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the director accused of
such misconduct) shall act fairly and shall give the director an
opportunity to appear and present evidence on the director's behalf at a
hearing before the Board of Directors or a committee of the Board of
Directors.

(h) Nontransferability of Options. An option is not transferable by the
optionee, other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relation order, and is exercisable only by
an optionee during his or her lifetime or, in the event of death, by a
person who acquires the right to exercise the option by bequest or
inheritance.

(i) Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Directors' Stock Option
Plan as may be determined by the Company's Board of Directors.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION OR CORPORATE TRANSACTIONS

Subject to any required action by the stockholders of the Company, the
number of shares covered by each outstanding option, and the number of shares
which have been authorized for issuance under the Directors' Stock Option Plan
but as to which no options have yet been granted or which have been returned
to the Directors' Stock Option Plan upon cancellation or expiration of an
option, as well as the price per share covered by each such outstanding
option, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the aggregate number of issued shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall
be made by the Board of Directors, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided in the
Director's Stock Option Plan, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares subject to an option.

A-1-11
<PAGE>

In the event of (i) a dissolution or liquidation of the Company, (ii) a sale
of all or substantially all of the Company's assets, (iii) a merger or
consolidation in which the Company is not the surviving corporation, or (iv)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are exchanged, the Company is obligated
to give each optionee, at the time of adoption of the plan for liquidation,
dissolution, sale, merger, consolidation or reorganization, either a
reasonable time thereafter within which to exercise his or her option, prior
to the effectiveness of such liquidation, dissolution, sale, merger,
consolidation or reorganization, at the end of which time the option will
terminate, or the right to exercise the option (or receive a substitute option
with comparable terms) as to an equivalent number of shares of stock of the
corporation succeeding the Company or acquiring its business by reason of such
liquidation, dissolution, sale, merger, consolidation or reorganization.

AMENDMENT AND TERMINATION

The Company's Board of Directors may amend or terminate the Directors' Stock
Option Plan from time to time, but such amendment or termination shall not
adversely affect any stock options then outstanding under the Directors' Stock
Option Plan, without the optionee's consent. To the extent necessary and
desirable to comply with Rule 16b-3 (or any other applicable law or
regulation), the Company will obtain stockholder approval of any amendment to
the Directors' Stock Option Plan in such a manner and to such a degree as
required. Any such amendment or termination of the Directors' Stock Option
Plan shall not affect options already granted and such options shall remain in
full force and effect as if the Directors' Stock Option Plan had not been
amended or terminated unless mutually agreed otherwise between the optionee
and the Board in writing signed by the optionee and the Company. The
Directors' Stock Option Plan will terminate in November 2007, unless earlier
terminated as described above.

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<PAGE>

1997 EMPLOYEE STOCK PURCHASE PLAN

GENERAL

The Company's 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
was adopted by the Board of Directors in October 1997 and approved by the
stockholders in November 1997. A total of 500,000 shares of Common Stock are
reserved for issuance under the 1997 Purchase Plan. As of April 15, 1998, no
shares of Common Stock have been issued under the 1997 Purchase Plan. The 1997
Purchase Plan, and the right of participants to make purchases thereunder, is
intended to qualify under Section 423 of the Code. See "1997 Employee Stock
Purchase Plan" of Appendix 2. The 1997 Purchase Plan is not a qualified
deferred compensation plan under Section 401(a) of the Code, and is not
subject to the provisions of ERISA.

PURPOSE

The purpose of the 1997 Purchase Plan is to provide employees of the Company
(and any of its subsidiaries that is designated by the Board of Directors) who
participate in the 1997 Purchase Plan with an opportunity to purchase Common
Stock of the Company through payroll deductions.

ADMINISTRATION

The 1997 Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors. Initially, the Purchase Plan
will be administered by the Board of Directors, except that with respect to
executive officers (including executive officers who are also directors), the
Purchase Plan will be administered exclusively by the Compensation Committee.
All questions of interpretation of the 1997 Purchase Plan are determined by
the Board of Directors or its committee, and its decisions are final and
binding upon all participants. Members of the Board of Directors or its
committee who are eligible employees are permitted to participate in the 1997
Purchase Plan, provided that any such eligible member may not vote on any
matter affecting the administration of the 1997 Purchase Plan or serve on a
committee appointed to administer the 1997 Purchase Plan. No charges for
administrative or other costs may be made against the payroll deductions of a
participant in the 1997 Purchase Plan. Members of the Board of Directors
receive no additional compensation for their services in connection with the
administration of the 1997 Purchase Plan. All directors currently hold office
until the annual meeting of stockholders of the Company following their
election, or until their successors are duly elected and qualified.

ELIGIBILITY

Any person who is employed by the Company (or any of its majority-owned
subsidiaries) for at least twenty hours per week and more than five months in
a calendar year is eligible to participate in the 1997 Purchase Plan, provided
that the employee is employed on the first day of an offering period and
subject to certain limitations imposed by Section 423(b) of the Code.

OFFERING DATES

The 1997 Purchase Plan will be implemented in a series of offering periods
of 24 months duration with new offering periods commencing on or about
February 1 and August 1 of each year. Each offering period will consist of
four consecutive purchase periods of six months duration, with the last day of
each such period being designated a purchase date. The first offering period
commenced November 20, 1997, and the first purchase date will occur on July
31, 1998. The Board of Directors may alter the duration of the offering
periods without stockholder approval.

PARTICIPATION IN THE PLAN

Eligible employees become participants in the 1997 Purchase Plan by
delivering to the Company a subscription agreement authorizing payroll
deductions prior to the applicable offering date, unless a later time

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<PAGE>

for filing the subscription agreement has been set by the Board of Directors
for all eligible employees with respect to a given offering.

PURCHASE PRICE

The purchase price per share at which shares are sold under the 1997
Purchase Plan is the lower of 85% of the fair market value of the Common Stock
on the applicable date of commencement of the offering period or on the
applicable purchase date. The fair market value of the Common Stock on a given
date shall be the closing price of the Common Stock as reported on The Nasdaq
National Market as of such date. If the fair market value of the Common Stock
on a purchase date is less than the fair market value at the beginning of the
offering period, a new 24-month offering period will automatically begin on
the first business day following the purchase date with a new fair market
value.

PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS

The purchase price of the shares is accumulated by payroll deductions during
the offering period. The deductions may be up to 15% of a participant's
eligible compensation received on each pay day during the offering period.
Eligible compensation consists of the regular straight time gross earnings,
and excludes payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other cash compensation. Payroll
deductions shall commence on the first payday following the offering date, and
shall continue at the same rate until the end of the offering period unless
sooner terminated as provided in the 1997 Purchase Plan.

A participant may discontinue his or her participation in the 1997 Purchase
Plan at any time during an offering period. A participant may, on one occasion
only during any particular offering period, decrease the rate of his or her
contributions during such offering period by completing and filing with the
Company a new subscription agreement. The change in rate generally shall be
effective as of the beginning of the next calendar month following the date of
filing of the new subscription agreement.

All payroll deductions are credited to the participant's account under the
1997 Purchase Plan and are deposited with the general funds of the Company.
All payroll deductions received or held by the Company may be used by the
Company for any corporate purpose. No interest accrues on the payroll
deductions of a participant in the 1997 Purchase Plan.

PURCHASE OF STOCK; EXERCISE OF OPTION

By executing a subscription agreement to participate in the 1997 Purchase
Plan, the participant is entitled to have shares placed under option. The
maximum number of shares placed under option to a participant in any calendar
year is that number determined by dividing $25,000 by the fair market value of
one share on the offering date; provided, however, that the participant's
actual purchase will be limited to the number of shares determined by dividing
the amount of the participant's total payroll deductions accumulated during
each six-month purchase period by the lower of (i) 85% of the fair market
value of the Common Stock at the beginning of the offering period, or (ii) 85%
of the fair market value of the Common Stock on the applicable purchase date.
Unless the participant's participation is discontinued, each participant's
option for the purchase of shares will be exercised automatically at the end
of the purchase period at the applicable price.

Notwithstanding the foregoing, no participant shall be permitted to
subscribe for shares under the 1997 Purchase Plan if immediately after the
grant of the option the participant would own five percent or more of the
voting power or value of all classes of stock of the Company or of a parent or
of any of its subsidiaries (including stock that may be purchased under the
1997 Purchase Plan or pursuant to any other options), nor shall any
participant be granted an option that would permit the participant to buy
pursuant to the 1997 Purchase Plan more than $25,000 worth of stock
(determined at the fair market value of the shares at the time the option is
granted) in any calendar year. Furthermore, if the number of shares that would
otherwise be placed under option

A-1-14
<PAGE>

at the beginning of an offering period exceeds the number of shares then
available for issuance under the 1997 Purchase Plan, a pro rata allocation of
the available shares shall be made in as equitable a manner as is practicable.

WITHDRAWAL

While each participant in the 1997 Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest may be decreased once during any given offering period by completing
and filing a new subscription agreement with the Company. In addition, a
participant's interest may be terminated in whole, but not in part, by signing
and delivering to the Company a notice of withdrawal from the 1997 Purchase
Plan. Such withdrawal may be elected at any time prior to the end of the
applicable six-month period prior to a purchase date under the Plan.

Any withdrawal by the participant of accumulated payroll deductions for a
given offering period automatically terminates the participant's interest in
that offering period. In effect, the participant is given an option, for a
maximum number of shares, which may or may not be exercised at the end of each
six-month purchase period. However, unless the participant actively withdraws
from the offering period, the option will be exercised automatically at the
end of each purchase period, and the maximum number of full shares purchasable
(within the limits of the 1997 Purchase Plan) with the participant's
accumulated payroll deductions will be purchased for that participant at the
applicable price.

A participant's withdrawal from an offering period does not have an effect
upon such participant's eligibility to participate in subsequent offering
periods under the 1997 Purchase Plan; however, the participant may not re-
enroll in the same offering period after withdrawal.

TERMINATION OF EMPLOYMENT

Termination of a participant's employment for any reason, including
retirement or death, prior to any purchase date cancels his or her
participation in the 1997 Purchase Plan immediately. In such event, the
payroll deductions credited to the participant's account during the offering
period but not yet used to exercise the option will be returned to such
participant, or in the case of death, to the person or persons entitled
thereto as specified in the participant's subscription agreement.

CAPITAL CHANGES

In the event any change, such as a stock split of stock dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt of consideration
by the Company, appropriate adjustments will be made in the shares subject to
an option and in the purchase price per share, as well as in the number of
shares available for issuance under the 1997 Purchase Plan.

NONASSIGNABILITY

No rights or accumulated payroll deductions of a participant under the 1997
Purchase Plan may be pledged, assigned or transferred for any reason and any
such attempt may be treated by the Company as an election to withdraw from the
1997 Purchase Plan.

AMENDMENT AND TERMINATION OF THE PLAN

The Board of Directors may at any time amend or terminate the 1997 Purchase
Plan, except that such termination shall not affect options previously granted
nor may any amendment make any change in an option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to
the 1997 Purchase Plan without prior approval of the stockholders of the
Company if such approval is necessary to comply with Rule 16b-3 under the
Exchange Act or Section 423 of the Code (or any successor rule or section
thereto).

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<PAGE>

APPENDIX 2

FEDERAL TAX INFORMATION CONCERNING THE
CONSEQUENCES OF PARTICIPATING IN THE
1988 STOCK OPTION PLAN, 1997 STOCK OPTION PLAN,
1997 DIRECTORS' STOCK OPTION PLAN AND
1997 EMPLOYEE STOCK PURCHASE PLAN

The following is only a summary of the effect of United States federal
income taxation upon the participants and the Company under the 1988 Stock
Option Plan, 1997 Stock Option Plan, the 1997 Directors' Option Plan and the
1997 Employee Stock Purchase Plan, and does not purport to be complete.
Reference should be made to the applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). In addition, this summary does not
discuss the income tax laws of any municipality, state or foreign country in
which the participant may reside, or the tax consequences of the participant's
death. It is advisable that a participant consult his own tax advisor
concerning application of these tax laws.

1988 STOCK OPTION PLAN AND 1997 STOCK OPTION PLAN

The following is a brief summary of the United States federal income tax
consequences of transactions under the 1988 Stock Option Plan and the 1997
Stock Option Plan (together the "Stock Option Plans") based on federal
securities and income tax laws in effect as of the date of this Prospectus
(which laws could change at any time hereafter). This summary is not intended
to be exhaustive and does not discuss the tax consequences of a participant's
death or provisions of the income tax laws of any municipality, state or other
country in which an optionee may reside. This summary does not purport to be
complete. The Company advises all optionees to consult their own tax advisors
concerning tax implications of option grants and exercises, and the
disposition of shares acquired upon such exercise, under the Stock Option
Plans.

Options granted under the Stock Option Plans may be either "incentive stock
options," as defined in Section 422 of the Code or nonstatutory stock options.
If an option granted under the Stock Option Plans is an incentive stock
option, the optionee will recognize no income upon grant of the incentive
stock option and incur no regular tax liability upon its exercise, although
the exercise of an incentive stock option may give rise to alternative minimum
tax (see below). The Company will not be allowed a deduction for federal
income tax purposes as a result of the exercise of an incentive stock option
regardless of the applicability of the alternative minimum tax. Upon the sale
or exchange of the shares more than two years after grant of the option and
more than one year after receipt of the shares by the optionee, any gain will
be treated as long-term capital gain. If both of these holding periods are not
satisfied (a "disqualifying disposition"), the optionee will recognize
ordinary income equal to the difference between the exercise price and the
lower of the fair market value of the stock at the date of the option exercise
or the sale price of the stock. The Company will be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Any gain
recognized on such a disqualifying disposition of the shares in excess of the
amount treated as ordinary income will be characterized as long-term capital
gain if the sale occurs more than one year after exercise of the option or as
short-term capital gain if the sale is made earlier. Currently, the tax rate
on long-term capital gain under federal tax laws for Federal income tax and
alternative minimum tax purposes is capped at 28% for shares held more than
one (1) year but not more than eighteen (18) months after the date of exercise
and at 20% for shares held more than eighteen (18) months after the date of
exercise. Capital losses are allowed in full under U.S. tax laws against
capital gains plus $3,000 of other income.

All options which do not qualify as incentive stock options are referred to
as nonstatutory stock options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. However,
upon its exercise, the optionee will recognize ordinary income for tax
purposes measured by the excess of the then fair market value of the shares
over the exercise price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the
optionee is an officer, director or 10%

A-2-1
<PAGE>

stockholder of the Company, the date of taxation may be deferred unless the
optionee files an election with the Internal Revenue Service under Section
83(b) of the Code. The income recognized by an optionee who is also an
employee of the Company will be subject to income and employment tax
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. Upon sale of such shares by the optionee, any difference
between the sales price and the exercise price, to the extent not recognized
as ordinary income as provided above, will be treated as capital gain or loss,
and will qualify for long-term capital gain or loss treatment if the shares
have been held for more than one year.

As noted above, the exercise of an incentive stock option may subject the
optionee to the alternative minimum tax ("AMT") under Section 55 of the Code.
The AMT is calculated for federal tax purposes by applying a tax rate of 26%
to alternative minimum taxable income up to $175,000 ($87,500 for married
taxpayers filing separately) and 28% to alternative minimum income above such
amount. Alternative minimum taxable income for federal tax purposes is equal
to (i) taxable income adjusted for certain items, plus (ii) items of tax
preference less (iii) an exclusion of $45,000 for joint returns and $33,750
for individual returns (with the exclusion amount phased out for upper-income
taxpayers).

In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to a nonstatutory stock option, as described above.
Because the AMT rules are complex and their effects depend upon the personal
circumstances of each taxpayer, an optionee should consult his or her own tax
advisor prior to exercising an incentive stock option. If an optionee pays
AMT, the amount of such AMT may be carried forward as a credit against any
subsequent year's regular tax in excess of the AMT.

1997 DIRECTORS' STOCK OPTION PLAN

Options granted under the 1997 Directors' Stock Option Plan are nonstatutory
stock options. An optionee will not recognize any taxable income at the time
he or she is granted a nonstatutory stock option. However, upon its exercise,
the optionee will recognize ordinary income for tax purposes measured by the
excess of the then fair market value of the shares over the option exercise
price. Because the optionee is a director of the Company, the date of taxation
(and the date of measurement of taxable ordinary income) may be deferred for
up to six months unless the optionee files an election under Section 83(b) of
the Code. Upon resale of such shares by the optionee, any difference between
the sales price and the fair market value of the shares as of the date of
exercise of the option will be treated as capital gain or loss. Currently, the
tax rate on long-term capital gain under federal tax laws for Federal income
tax and alternative minimum tax purposes is capped at 28% for shares held more
than one (1) year but not more than eighteen (18) months after the date of
exercise and at 20% for shares held more than eighteen (18) months after the
date of exercise. Capital losses are allowed in full against capital gains
plus $3,000 of other income.

1997 EMPLOYEE STOCK PURCHASE PLAN

The 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan"), and the
right of participants to make purchases thereunder, is intended to qualify
under the provisions of Sections 421 and 423 of the Code. Under these
provisions, no income will be taxable to a participant until the shares
purchased under the 1997 Purchase Plan are sold or otherwise disposed of. Upon
sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon how long the shares
have been held by the participant. If the shares are sold or otherwise
disposed of more than two years from the first day of the offering period and
more than one year from the purchase date, the participant will recognize
ordinary income measured as the lesser of (a) the excess of the fair market
value of the shares at the time of such sale or disposition over the purchase
price, or (b) an amount equal 15% of the fair market value of the shares as of
the first day of the offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of these holding periods, the participant will recognize
ordinary income

A-2-2
<PAGE>

generally measured as the excess of the fair market value of the shares on the
date the shares are purchased over the purchase price. Any additional gain or
loss on such sale or disposition will be long-term or short-term capital gain
or loss, depending on how long the shares were held by the participant. The
Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income
recognized by a participant upon a sale or disposition of shares prior to the
expiration of the holding periods described above. Currently, the tax rate on
long-term capital gain under federal tax laws for Federal income tax and
alternative minimum tax purposes is capped at 28% for shares held more than
one (1) year but not more than eighteen (18) months after the date of exercise
and at 20% for shares held more than eighteen (18) months after the date of
exercise. Capital losses are allowed in full against capital gains plus $3,000
of other income.

Directors and Officers Subject to Section 16(b) Liability. In the case of an
optionee who is subject to Section 16(b) of the Exchange Act, the Exercise
Date for purposes of calculating such participant's compensation income and
the beginning of the capital gain holding period may be deferred for up to six
months under certain circumstances. Such individuals should consult with their
personal tax advisors prior to participating in the 1997 Purchase Plan or
selling shares issued pursuant to such plan.

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<PAGE>

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

PREVIEW TRAVEL, INC.

1998 ANNUAL MEETING OF STOCKHOLDERS

The undersigned stockholder of Preview Travel, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated April 24, 1998, and hereby appoints
Kenneth J. Orton and Kenneth R. Pelowski, or either of them, as proxies and
attorneys-in-fact with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1998 Annual Meeting
of Stockholders of Preview Travel, Inc. to be held on May 27, 1998, at 10:00
a.m., Pacific time, at the Park Hyatt Hotel, located at 333 Battery Street, San
Francisco, California, and at any adjournment(s) or postponement(s) thereof, and
to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present on the matters set forth below:

[X] Please mark votes as in this example.

PROPOSAL NO. 1 - ELECTION OF DIRECTORS

[_] For all nominees listed below

[_] Withhold authority for all nominees listed below

If you wish to withhold authority for any individual nominee(s), strike a line
through his name or their names in the list below:

- -------------------------------------------------------------------------------
Kenneth J. Orton James J. Hornthal Thomas W. Cardy Thomas A. Cullen
Theodore J. Leonsis Douglas J. Mackenzie James E. Noyes David S. Pottruck

PROPOSAL NO. 2 - APPOINTMENT OF INDEPENDENT AUDITORS

To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending December 31, 1998.

[_] FOR [_] AGAINST [_] ABSTAIN

CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE>

NOTE: This Proxy should be marked, dated, signed by the stockholder(s) exactly
as his or her name appears hereon, and returned in the enclosed envelope.

In their discretion, upon such other matter or matters which may properly come
before the meeting or any postponement(s) or adjournment(s) thereof.

THIS PROXY WILL BE VOTED AS DIRECTED AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING OR ANY POSTPONEMENT(S) OR
ADJOURNMENT(S) THEREOF. WITH RESPECT TO THE ELECTION OF DIRECTORS, IF NO
CONTRARY OBJECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE NOMINEES
LISTED ABOVE.

DATED:____________________________________, 1998

---------------------------------------------------------
Printed name(s) exactly as shown on Stock Certificate

---------------------------------------------------------
(Signature)

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person. THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS LISTED ABOVE AND FOR THE OTHER
PROPOSALS IF NO SPECIFICATION IS MADE.