PREVIEW TRAVEL INC, S-1, 1998-04-08

PREVIEW TRAVEL INC
S-1, 1998-04-08
TRANSPORTATION SERVICES

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 8, 1998
REGISTRATION NO. 333-

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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PREVIEW TRAVEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 4724 94-2965892
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NUMBER)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION) ---------------
747 FRONT STREET
SAN FRANCISCO, CA 94111
(415) 439-1200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
KENNETH J. ORTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
747 FRONT STREET
SAN FRANCISCO, CA 94111
(415) 439-1200
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

---------------
COPIES TO:
MARK A. MEDEARIS JAMES N. STRAWBRIDGE
GLEN R. VAN LIGTEN JOSE F. MACIAS
VENTURE LAW GROUP WILSON SONSINI GOODRICH & ROSATI,
A PROFESSIONAL CORPORATION PROFESSIONAL CORPORATION
2800 SAND HILL ROAD 650 PAGE MILL ROAD
MENLO PARK, CA 94025 PALO ALTO, CA 94304
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $0.001......... 4,025,000 Shares $34.75 $139,868,750 $41,262
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</TABLE>
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(1) Includes 525,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.

(2) Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Company's Common Stock as reported on The Nasdaq National Market on April
6, 1998 in accordance with Rule 457 under the Securities Act of 1933.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998

PROSPECTUS

3,500,000 SHARES

[LOGO OF PREVIEW TRAVEL, INC.]
PREVIEW TRAVEL, INC.

COMMON STOCK

Of the 3,500,000 shares of Common Stock offered hereby, 1,500,000 are being
sold by the Company and 2,000,000 are being sold by the Selling Stockholders.
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholders. See "Principal and Selling Stockholders."

The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol PTVL. On April 7, 1998, the last reported sale price of the Common Stock
was $34.75 per share. See "Price Range of Common Stock."

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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==============================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share......... $ $ $ $
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Total (3)......... $ $ $ $
==============================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $500,000.

(3) The Company granted to the Underwriters a 30-day option to purchase up to
525,000 additional shares of Common Stock solely to cover over-allotments,
if any. If all such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ , $ and $ , respectively. See "Underwriting."

-----------

The shares of Common Stock are offered by the several Underwriters subject to
prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1998, at the offices of the agent of Hambrecht
& Quist LLC in New York, New York.

HAMBRECHT & QUIST

BANCAMERICA ROBERTSON STEPHENS

NATIONSBANC MONTGOMERY
SECURITIES LLC

PAINEWEBBER INCORPORATED

, 1998
<PAGE>

[PREVIEW TRAVEL LOGO] [AOL LOGO]

[EXCITE LOGO]

Preview Travel is a leading provider of branded online travel services for
leisure and small business travelers and a producer of travel-related
programming for broadcast and cable television. In addition to its own Web
sites, the Company operates co-branded travel web sites with Excite and Lycos
and the primary travel service on America Online, both under strategic
distribution agreements that expire in 2002, 2002 and 2000, respectively, or
earlier, under certain circumstances.

TRAVEL ON YOUR TERMS

Preview Travel's easy-to-use online travel services empower consumers with
the information and tools they need to plan and purchase their own travel 24
hours a day, seven days a week. The Company's online services are enhanced by
round-the-clock customer service and personalized communications.

[GRAPHICS DEPICTING THREE SCREENS ON PREVIEW TRAVEL WEB SITE]

Online Travel Reservations

Preview Travel provides its customers with real-time access to schedule,
pricing and availability information for over 500 airlines, access to rooms at
more than 13,000 hotels worldwide and access to rental cars from all the major
agencies. Complete vacation packages, cruises and specialty tours are also
available. The Company's services are designed to enable customers to make
informed choices about their travel purchases.

Award-Winning Content

Preview Travel's destination information features award-winning editorial
content supported by a wide variety of multimedia. The Company's travel experts
constantly search for the latest travel trends and bargains and produce a wide
range of news and feature articles for online distribution, updated each
business day. Much of this content is provided by Preview Travel's broadcast
subsidiary, News Travel Network, which produces travel-related television
programs and maintains an extensive travel video library.

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

Preview Travel, Farefinder, Preview Vacations and Travel Update are
trademarks and service marks of the Company. This Prospectus also contains the
trademarks of other companies.

2
<PAGE>

PROSPECTUS SUMMARY

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements and from the results
historically experienced. Factors that may cause or contribute to such
differences include, but are not limited to, those under "Risk Factors" and
elsewhere in this Prospectus. The following summary is qualified in its
entirety by the more detailed information, including "Risk Factors" and the
Consolidated Financial Statements and Notes thereto, appearing elsewhere in
this Prospectus.

THE COMPANY

Preview Travel, Inc. ("Preview Travel" or the "Company") is a leading
provider of branded online travel services for leisure and small business
travelers. The Company operates its own Web sites (www.previewtravel.com,
www.reservations.com and www.vacations.com), the primary travel service on
America Online, Inc. ("AOL") (AOL keyword: previewtravel) and co-branded travel
Web sites with Excite, Inc. ("Excite") (City.Net) and with Lycos, Inc.
("Lycos"). The Company offers one-stop travel shopping and reservation
services, providing reliable, real-time access to schedule, pricing and
availability information for over 500 airlines, 13,000 hotels and all major car
rental companies. The Company's proprietary technology and user-friendly
interface enable customers to easily and quickly access travel information 24
hours a day, seven days a week, to make informed choices about their travel
purchases. In addition to its reservation and ticketing service, the Company
offers vacation packages, discounted and promotional fares, travel news and
destination content, including content licensed from Fodor's Travel
Publications, Inc. ("Fodor's"). The Company complements its compelling content
and user-friendly interface with a high level of customer service.

To broaden its online presence and build brand recognition, the Company has
entered into various strategic relationships. In 1997 the Company entered into
long-term agreements with AOL, the leading online service provider with over
eleven million members, and Excite, a leading search engine provider with over
two million visitors per day. The Company is AOL's primary and preferred
provider of online travel services and the exclusive provider of travel
reservations services on Excite's Travel Channel (City.Net). In February 1998,
the Company launched its Destinations Guides feature created with content
licensed from Fodor's. In March 1998, the Company entered into a two-year
agreement with Lycos, another leading search engine provider, under which the
Company will be the exclusive multiservice provider of travel reservations on
Lycos' Travel Web Guide and Travel Network. Through such strategic agreements,
the Company's travel services are prominently featured on the AOL, Excite and
Lycos travel channels and contextually integrated throughout the AOL, Excite
and Lycos services.

Preview Travel's objective is to be the leading provider of branded online
travel services for leisure and small business travelers. The Company plans to
attain this goal by delivering compelling value to customers, building customer
loyalty and brand recognition, enhancing and expanding strategic relationships
and broadening existing offerings.

Since launching its online booking service in May 1996, the Company has
experienced significant growth in its gross bookings. As of December 31, 1997,
2.6 million users had registered on the Company's online site, and over $100
million in gross bookings of travel services had been purchased by
approximately 168,000 customers in over 297,000 transactions.

Through its News Travel Network, Inc. division ("NTN"), Preview Travel
produces entertainment programming for broadcast and cable television and the
in-flight market. NTN also produces 90-second news inserts for local television
station newscasts. NTN has compiled an extensive library of over 6,000 hours of
proprietary, broadcast quality footage featuring over 2,000 destinations around
the world.

Preview Travel, Inc. (formerly Preview Media, Inc.) was incorporated in
California in March 1985 and was reincorporated in Delaware in November 1997.
The Company's principal corporate offices are located at 747 Front Street, San
Francisco, California 94111. Its telephone number is (415) 439-1200. As used in
this Prospectus, the "Company" refers to Preview Travel, Inc. and its
subsidiaries.

3
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Common Stock offered by the Company............... 1,500,000 shares
Common Stock offered by the Selling Stockholders.. 2,000,000 shares
Common Stock to be outstanding after the offering. 12,837,000 shares (1)
Use of proceeds................................... Working capital, payment
of obligations and general
corporate purposes. See
"Use of Proceeds."
Nasdaq National Market symbol..................... PTVL
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED
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MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1996 1997 1997 1997 1997 1997
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<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Online revenues........ $ 579 $ 2,573 $ 6,010 $ 1,496 $ 1,174 $ 1,556 $ 1,784
Television revenues.... 9,564 9,801 7,634 2,023 2,033 1,845 1,733
-------- ------- -------- ------- ------- ------- -------
Total revenues....... 10,143 12,374 13,644 3,519 3,207 3,401 3,517
Gross profit........... 672 3,066 4,245 1,223 851 1,042 1,129
Loss from operations... (4,667) (5,501) (10,432) (1,526) (1,540) (2,514) (4,852)
Net loss............... $ (4,933) $(5,592) $(10,168) $(1,505) $(1,542) $(2,532) $(4,589)
Basic and diluted net
loss per share (2).... $ (4.02) $ (3.43) $ (3.54) $ (0.88) $ (0.90) $ (1.44) $ (0.73)
Weighted average
shares used in net
loss per share
calculation (2)....... 1,228 1,631 2,869 1,702 1,712 1,753 6,306
SUPPLEMENTAL FINANCIAL
DATA (UNAUDITED):
Gross bookings (3)..... $ 2,043 $20,263 $ 80,389 $14,117 $17,816 $22,074 $26,383
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED (4)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................. $27,912 $76,879
Total assets.......................................... 42,785 91,752
Long-term obligations (5)............................. 1,614 1,614
Total stockholders' equity............................ 35,365 84,332
</TABLE>
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(1) Based on shares outstanding as of December 31, 1997. Excludes as of
December 31, 1997 (a) 1,300,612 shares issuable upon exercise of
outstanding options at a weighted average exercise price of $4.18 per
share, (b) 31,666 shares issuable upon exercise of outstanding warrants at
a weighted average exercise price of $5.97 per share as of such date, and
(c) an aggregate of 2,206,600 shares available for future issuance under
the Company's 1988 Stock Option Plan, 1997 Stock Option Plan, 1997
Directors' Stock Option Plan and 1997 Employee Stock Purchase Plan. See
"Management--Stock Plans" and Note 11 of the Notes to Consolidated
Financial Statements.
(2) The loss per share information was computed applying the requirements of
recently effective Statement of Financial Accounting Standards No. 128 and
SEC Staff Accounting Bulletin No. 98.
(3) Represents the total purchase price of all travel services booked through
the Company's online reservation system. This presentation of gross
bookings does not affect the Company's operating results, and gross
bookings are not included in revenues. Management believes that gross
bookings provide a more consistent comparison between historical periods
than do online revenues. Gross bookings are not required by generally
accepted accounting principles ("GAAP") and should not be considered in
isolation or as a substitute for other information prepared in accordance
with GAAP, and period-to-period comparisons of gross bookings are not
necessarily meaningful as a measure of the Company's revenues due to, among
other things, changes in commission rates, and, as with operating results,
should not be relied upon as an indication of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(4) As adjusted to reflect the sale of 1,500,000 shares of Common Stock offered
by the Company at an assumed public offering price of $34.75 per share
after deduction of the estimated underwriting discount and offering
expenses payable by the Company. See "Use of Proceeds" and
"Capitalization."
(5) Long-term obligations include capital lease obligations, long-term notes
payable, line of credit, subordinated convertible notes payable,
subordinated notes payable and bank equipment note.

-------

Except as otherwise noted herein, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option. See "Underwriting."

4
<PAGE>

RISK FACTORS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results and timing of certain events could
differ materially from those discussed in the forward-looking statements as a
result of certain factors, including those set forth below and elsewhere in
this Prospectus. The following risk factors should be considered carefully in
evaluating the Company and an investment in the shares of Common Stock offered
hereby.

Limited Operating History of Online Business; History of Net Operating
Losses; Accumulated Deficit. The Company incurred net losses of $4.9 million,
$5.6 million and $10.2 million in 1995, 1996 and 1997, respectively. As of
December 31, 1997, the Company had an accumulated deficit of approximately
$25.8 million. The Company's television programming operations, which
represented 56% of its revenues for 1997, have incurred net operating losses
in each of the last three years, and the Company anticipates that its
television programming operations will continue to incur net operating losses
for the foreseeable future. As a result, the Company believes that its future
success depends on its ability to significantly increase revenues from its
Internet and commercial online service operations, for which it has a limited
operating history. The Company initiated its online operations in 1994, first
recognized revenues from its online operations in the first quarter of 1995
and booked its first airline ticket reservations online in the second quarter
of 1996. Accordingly, the Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in an
early stage of development, particularly companies engaged in new and rapidly
evolving markets such as online commerce. There can be no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, operating
results and financial condition.

Anticipated Losses and Negative Cash Flow. The Company believes that its
success will depend in large part on, among other things, its ability to
generate sufficient sales volume to achieve profitability and effectively
maintain existing relationships and develop new relationships with travel
suppliers, strategic partners and advertising customers. Accordingly, the
Company intends to expend significant financial and management resources on
brand development, marketing and promotion, site and content development,
strategic relationships and technology and operating infrastructure. As a
result, the Company expects to incur additional losses and continued negative
cash flow from operations for the foreseeable future, and such losses are
anticipated to increase significantly from current levels. There can be no
assurance that the Company's revenues will increase or even continue at their
current level or that the Company will achieve or maintain profitability or
generate cash from operations in future periods. In view of the rapidly
evolving nature of the Company's business and its limited operating history in
the online business, the Company believes that period-to-period comparisons of
its operating results are not necessarily meaningful and should not be relied
upon as an indication of future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Unpredictability of Future Revenues; Fluctuations in Quarterly Results. As a
result of the Company's limited operating history in online commerce and the
emerging nature of the markets in which the Company competes, the Company is
unable to accurately forecast its revenues. The Company's current and future
expense levels are based predominantly on its operating plans and estimates of
future revenues and are to a large extent fixed. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues would likely
have an immediate material adverse effect on the Company's business, operating
results and financial condition. Further, the Company currently intends to
substantially increase its operating expenses to develop and offer new and
expanded travel services, to fund increased sales and marketing, including
obligations under its distribution agreements, and customer service
operations, and to develop its technology and transaction-processing systems.
To the extent such expenses precede or are not subsequently followed by
increased revenues, the Company's operating results will fluctuate and net
anticipated losses in a given quarter may be greater than expected.

5
<PAGE>

The Company expects that it will experience seasonality in its business,
reflecting seasonal fluctuations in the travel industry, Internet and
commercial online service usage and advertising expenditures. The Company
anticipates that travel bookings will typically increase during the second
quarter in anticipation of summer travel and will typically decline during the
fourth quarter. Internet and commercial online service usage and the rate of
growth of such usage may be expected typically to decline during the summer.
In addition, advertising sales in traditional media, such as broadcast and
cable television, generally decline in the first and third quarters of each
year. Depending on the extent to which the Internet and commercial online
services are accepted as an advertising medium, seasonality in the level of
advertising expenditures could become more pronounced for Internet-based
advertising. Seasonality in the travel industry, Internet and commercial
online service usage and advertising expenditures are likely to cause
quarterly fluctuations in the Company's operating results and could have a
material adverse effect on the Company's business, operating results and
financial condition.

The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of other factors, many of which
are outside the Company's control. Factors that may adversely affect the
Company's quarterly operating results include, but are not limited to, (i) the
Company's ability to retain existing customers, attract new customers at a
steady rate and maintain customer satisfaction, (ii) changes in inventory
availability from third party suppliers or commission rates paid by travel
suppliers, such as the reduction in commissions paid by major airlines for
online bookings implemented during 1997 and the first half of 1998, (iii) the
announcement or introduction of new or enhanced sites, services and products
by the Company or its competitors, (iv) general economic conditions and
economic conditions specific to the Internet, online commerce or the travel
industry, (v) the level of use of online services and consumer acceptance of
the Internet and commercial online services for the purchase of consumer
products and services such as those offered by the Company, (vi) the Company's
ability to upgrade and develop its systems and infrastructure and to attract
new personnel in a timely and effective manner, (vii) the level of traffic on
the Company's online sites, (viii) technical difficulties, system downtime or
Internet brownouts, (ix) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations and
infrastructure, (x) governmental regulation and (xi) unforeseen events
affecting the travel industry.

Gross margins may be impacted by a number of different factors, including
the mix of television revenues versus online revenues, the mix of online
commission revenues versus online advertising revenues, the mix of travel
services sold, the mix of revenues from AOL, Excite, Lycos and the Company's
Web site, the mix of airline ticket commissions (which vary from airline to
airline) and the amount of override commissions. The Company typically
realizes higher gross margins on advertising revenues than commission
revenues, higher commissions on vacation packages than hotel rooms and car
rentals, higher commissions on hotel rooms and car rentals than airline
tickets, higher gross margins on advertising revenues from the Company's own
Web site than through AOL, Excite or Lycos, higher commissions from certain
airlines than others and higher gross margins in periods of higher overrides.
Any change in one or more of the foregoing factors could materially adversely
affect the Company's gross margins and operating results in future periods.

As a result of the foregoing factors, the Company's annual or quarterly
operating results may be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock would likely
be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Dependence on the Travel Industry. The Company derives a significant portion
of its revenues directly or indirectly from the travel industry, and the
Company's future growth is dependent on the travel industry. The travel
industry, especially leisure travel, which is dependent on personal
discretionary spending levels, is sensitive to changes in economic conditions
and tends to decline during general economic downturns and recessions. The
travel industry is also highly susceptible to unforeseen events, such as
political instability, regional hostilities, fuel price escalation, travel-
related accidents, unusual weather patterns or other adverse occurrences. Any
event that results in decreased travel generally would likely have a material
adverse effect

6
<PAGE>

on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Uncertain Acceptance of the Preview Travel Brand; Dependence on Increased
Bookings. The Company believes that establishing, maintaining and enhancing
the Preview Travel brand is a critical aspect of its efforts to attract and
expand its online traffic. The number of Internet sites that offer competing
services, many of which already have well-established brands in online
services or the travel industry generally, increase the importance of
establishing and maintaining brand name recognition. Promotion of the Preview
Travel brand will depend largely on the Company's success in providing a high-
quality online experience supported by a high level of customer service, which
cannot be assured. In addition, to attract and retain online users, and to
promote and maintain the Preview Travel brand in response to competitive
pressures, the Company may find it necessary to increase substantially its
financial commitment to creating and maintaining a strong brand loyalty among
customers. If the Company is unable to provide high-quality online services or
customer support, or otherwise fails to promote and maintain its brand, or if
the Company incurs excessive expenses in an attempt to promote and maintain
its brand, the Company's business, operating results and financial condition
would be materially adversely affected.

The Company's future success, and in particular its revenues and operating
results, depends upon its ability to successfully execute several key aspects
of its business plan. The Company must increase the dollar volume of
transactions booked through its online sites, either by generating
significantly higher and continuously increasing levels of traffic to its
online sites or by increasing the percentage of visitors to its online sites
who purchase travel services, or through some combination thereof. The Company
must also increase the number of repeat purchasers of travel services through
its online sites. In addition, the Company must deliver a high level of
customer service and compelling content in order to attract users with
demographic characteristics valuable to advertisers. Although the Company has
implemented strategies designed to accomplish these objectives, including its
relationships with AOL, Excite, Lycos and Fodor's, and advertising the
Company's services in online and traditional media, there can be no assurance
that these strategies will be effective in increasing the dollar volume of
transactions booked through its online sites, increasing traffic to its online
sites, increasing the percentage of visitors who purchase travel services,
increasing the number of repeat purchasers or increasing its advertising
revenues. The failure to do one or more of the foregoing would likely have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Reliance on Distribution Agreements with America Online, Excite and
Lycos. The Company has entered into agreements with AOL, Excite and Lycos
establishing the Company as the primary and preferred provider of travel
services on AOL, the exclusive provider of travel reservations services on
Excite's Travel Channel (City.Net) until September 2002 and the exclusive
multiservice provider of travel reservations on Lycos' Travel Web Guide and
Travel Network until March 2001. Under these agreements, AOL, Excite and Lycos
are obligated to promote the Company and to deliver minimum numbers of annual
page views or impressions to the online areas featuring the Company's travel
services. In addition, the Company is eligible to receive payments from Excite
and Lycos representing a share of advertising revenues received by Excite and
Lycos 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. During the terms of these agreements, the Company is obligated
to make minimum payments totaling $60.3 million to AOL, Excite and Lycos as
well as pay to AOL, Excite and Lycos a percentage of certain commissions
earned by the Company in excess of specified thresholds. The Company is also
obligated to share certain advertising revenues with each of AOL, Excite and
Lycos, as specified in their respective agreements. Moreover, the Company's
agreement with AOL is conditioned upon the Company achieving specified levels
of travel services bookings, which will require the Company to significantly
increase such bookings from current levels. There can be no assurance that the
Company will achieve sufficient online traffic, travel bookings or commissions
to realize economies of scale that justify the Company's significant fixed
financial obligations to AOL, Excite and Lycos or that the Company will
satisfy the minimum levels of travel services bookings required to maintain
the AOL agreement, and

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failure to do so would likely have a material adverse effect on the Company's
business, operating results and financial condition. In addition, the
agreements with AOL, Excite and Lycos do not provide the Company with renewal
rights upon expiration of their respective terms. The AOL agreement provides
AOL with the right to renew the AOL agreement for successive one-year terms on
a non-exclusive basis during which period AOL would continue to receive a
percentage of commissions and share in advertising revenues, but the Company
would not be obligated to make any additional minimum payments. There can be
no assurance that such agreements will be renewed on commercially acceptable
terms, or at all.

In addition, the Company is a party to a database services agreement with
AOL to develop and manage a travel-related destinations database for AOL with
content that is reasonably satisfactory to AOL. The Company has committed to
an aggressive schedule to develop and maintain the destinations database which
will require significant efforts and resources on the Company's part. There
can be no assurance that the Company will be able to fulfill its commitments
to AOL on the agreed upon schedule, and failure to do so could result in a
breach of the distribution agreement with AOL, as well as the database
services agreement, which would likely have a material adverse effect on the
Company's business, operating results and financial condition.

Furthermore, the Company's significant investment in the AOL, Excite and
Lycos relationships is based on the continued positive market presence,
reputation and anticipated growth of AOL, Excite and Lycos, as well as the
commitment by each of AOL, Excite and Lycos to deliver specified numbers of
annual page views or impressions. Any decline in the significant market
presence, business or reputation of AOL, Excite or Lycos, or the failure of
AOL, Excite or Lycos to deliver the specified numbers of annual page views,
will reduce the value of these strategic agreements to the Company and will
likely have a material adverse effect on the business, operating results and
financial condition of the Company. In addition, while the Company and both
Lycos and Excite have agreed to cooperate on advertising, AOL and the Company
have the right to separately pursue and sell advertising in the Company's
content areas distributed through AOL. There can be no assurance that the
Company and AOL will not compete for limited travel supplier advertising
revenues. Travel services sold through the AOL Network accounted for 89%, 77%,
67% and 62% of the Company's online revenues for the three months ended March
31, 1997, June 30, 1997, September 30, 1997, and December 31, 1997,
respectively. Travel services sold through Excite accounted for 8%, 13% and
15% of the Company's online revenues for the three months ended June 30, 1997,
September 30, 1997 and December 31, 1997, respectively. The Company's
arrangements with AOL and Excite are expected to continue to represent
significant distribution channels for the Company's travel services, and the
Lycos arrangement is expected to represent a significant distribution channel
in the future. Any termination of any or all of the Company's agreements with
AOL, Excite and Lycos would likely have a material adverse effect on the
Company's business, operating results and financial condition.

Except for its arrangements with AOL, Excite and Lycos, the Company has no
other long-term distribution arrangements with any other service provider on
the Internet or commercial online services and accordingly must rely on search
engines, directories and other navigational tools which significantly affect
traffic to the Company's online sites. There can be no assurance that such
cooperation will be available to the Company on acceptable commercial terms or
at all or that such relationships will not already be established with the
Company's competitors. If the Company is unable to maintain satisfactory
relationships with AOL, Excite or Lycos, or if the Company is unable to
develop and maintain satisfactory relationships with additional third parties
on acceptable commercial terms, or if the Company's competitors are better
able to leverage such relationships, the Company's business, operating results
and financial condition could be materially adversely affected. See
"Business--Strategic Relationships" and Notes 7 and 16 of Notes to
Consolidated Financial Statements.

Risk of Termination of Distribution Agreement with America Online. The
Company's future success depends in part upon its ability to maintain its
distribution agreement with AOL. The Company's distribution agreement with AOL
may be terminated by AOL in the event that the Company fails to make certain
minimum payments to AOL, fails to achieve specified levels of travel services
bookings or breaches its

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database services agreement with AOL pursuant to which the Company is required
to develop and manage a travel-related destinations database for AOL. In
particular, the Company's ability to achieve such specified annual levels of
travel services bookings will require the Company to significantly increase
such bookings from current levels, with the first annual measurement date
occurring in September 1998. There can be no assurance that the Company will
be able to meet its significant financial obligations to AOL, achieve the
specified minimum levels of travel services bookings, or deliver satisfactory
content to the database. Failure to do any of the foregoing could result in
the termination by AOL of the Company's distribution agreement with AOL, which
would likely have a material adverse effect on the Company's business,
operating results and financial condition. See "--Reliance on Distribution
Agreements with America Online, Excite and Lycos."

Reliance on Travel Suppliers; Potential Adverse Changes in Commission
Payments. The Company is dependent on airlines, hotels and other providers of
travel services ("travel suppliers") in order to offer its customers
comprehensive access to travel services and products. Consistent with industry
practices, the Company currently has no agreements with its travel suppliers
that obligate such suppliers to sell services or products through the Company.
In addition, travel suppliers may be unable or choose not to make their
inventory of services and products available through online distribution,
including those services offered by the Company. Accordingly, travel suppliers
could elect to sell exclusively through other sales and distribution channels
or to restrict the Company's access to their inventory, which could
significantly decrease the amount or breadth of the Company's inventory of
available travel offerings and could have a material adverse effect on the
Company's business, operating results and financial condition.

In addition, a substantial majority of the Company's online revenue is
dependent on the commissions customarily paid by travel suppliers for bookings
made through the Company's online travel service. Consistent with industry
practices, these travel suppliers are not obligated to pay any specified
commission rate for bookings made through the Company or to pay commissions at
all. Accordingly, travel suppliers can reduce current industry commission
rates or eliminate such commissions entirely, which would likely have a
material adverse effect on the Company's business, operating results and
financial condition.

For example, in 1995, most of the major airlines placed a cap on per-ticket
commissions payable to all travel agencies for domestic airline travel. In
September 1997, the major U.S. airlines reduced the commission rate payable to
traditional travel agencies from 10% to 8%.

In 1997, the major U.S. airlines reduced the commission rate payable for
online reservations from approximately 8% to approximately 5%, which had a
material adverse affect on the Company's results of operations for the three
months ended June 30, 1997, September 30, 1997 and December 31, 1997. In
addition, in the first half of 1998 one major airline reduced its fixed rate
commission structure for online roundtrip ticket sales to ten dollars and a
second major airline further reduced its cap (the maximum amount of
commissions paid per ticket) on per-roundtrip ticket commissions payable for
online ticket sales to ten dollars. The Company expects that its weighted
average commission on online transaction revenue will decline as a result of
these reductions. There can be no assurance that airlines or other of the
Company's travel suppliers will not further reduce the amount of compensation
payable to the Company and other online service providers.

In addition, certain travel suppliers have initiated direct online
distribution channels and, in some cases, have offered negotiated rates
directly to major corporate customers. Further, the Company's travel service
offerings are limited to those travel suppliers whose services and products
are available through the global distribution services ("GDS") systems
accessed by the Company, namely, the Apollo GDS system ("Apollo") operated by
Galileo International Partnership ("Galileo") for airlines and car rentals and
the GDS system operated by Pegasus Systems, Inc. ("Pegasus") for hotel
reservations. For example, Southwest Airlines is currently unavailable in the
Apollo GDS system, and, therefore, the Company is unable to offer access to
Southwest Airline's inventory. There can be no assurance that the Company's
current travel suppliers will continue to sell services or products through
Apollo or Pegasus on current terms with adequate compensation to the Company,
or at all, or that the Company will be able to establish new or extend current
travel supplier relationships to ensure uninterrupted access to a
comprehensive supply of the travel services. The Company's

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<PAGE>

failure to do so would likely result in a material adverse effect on its
business, operating results and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Reliance on Third Party Systems. The Company is dependent upon certain third
party service providers, including, without limitation, the following: AOL and
WorldCom, Inc.'s ANS Communications subsidiary (which was acquired by
WorldCom, Inc. from AOL in February 1998), which provides AOL customers with
access to the Company's online services; GeoNet Communications, which provides
the Company with a T3 data communication line for Internet access; Pegasus,
which provides the Company with access to a global hotel reservation system
and which operates an online travel service competitive with the Company; and
Galileo, which provides the Company with access to the Apollo GDS system.

The Company is dependent on these third party providers to continue to offer
and maintain these services. Any discontinuation of such services, or any
reduction in performance that requires the Company to replace such services,
would be disruptive to the Company's business. In particular, if the Company
were required to replace services provided by the Apollo GDS system, the
Company believes it could take up to one year and require substantial
expenditures to fully transition the Company's travel services to an
alternative service provider. In the past, these third party providers have
experienced interruptions or failures in their systems or services, which have
temporarily prevented the Company's customers from accessing or purchasing
certain travel services through the Company's online sites. Any reduction in
performance, disruption in Internet or online access or discontinuation of
services provided by AOL, ANS Communications, GeoNet Communications or any
other Internet service provider, or any disruption in the Company's ability to
access the Apollo GDS system, Pegasus or any other travel reservation systems,
could have a material adverse effect on the Company's business, operating
results and financial condition. In addition, the Company is dependent on
Apollo and Pegasus to ensure that all software used in connection with their
GDS systems will manage and manipulate data involving the transition of dates
from 1999 to 2000 without functional or data abnormality and without
inaccurate results related to such dates. Any failure by Galileo or Pegasus to
ensure that such software complies with year 2000 requirements could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company's agreements with its third party service
providers have terms of, or expire within, one year or less and in some cases
are subject to cancellation for any reason or no reason upon short notice.
Specifically, the Company does not have a written agreement with Pegasus, and
its agreements with ANS Communications and GeoNet Communications are currently
on a month-to-month basis. Any cancellation of services, or failure to renew
such services upon expiration, by any of such third party providers without
notice sufficient to allow the Company to transition to a new service provider
in a timely and cost-effective manner would have a material adverse effect on
the Company's business, operating results and financial condition. See "--Year
2000 Compliance," "Business--Strategic Relationships" and "--Technology."

Competition. The online travel services market is new, rapidly evolving and
intensely competitive, and the Company expects such competition to intensify
in the future. The Company competes primarily with traditional travel agency
and online travel reservation services. In the online travel services market,
the Company competes with other entities that maintain similar commercial Web
sites, such as Expedia (operated by Microsoft Corporation), Travelocity
(operated by SABREGroup Holdings Inc., a majority-owned subsidiary of American
Airlines), Cendant Corporation, TravelWeb (operated by Pegasus), Internet
Travel Network, Biztravel.com, and TheTrip.com, among others. Several
traditional travel agencies, including larger travel agencies such as American
Express Travel Related Services Co. Inc., Uniglobe Travel and Carlson Wagonlit
Travel, have established, or may establish in the future, commercial Web sites
offering online travel services.

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<PAGE>

eliminating the need to pay commissions to third parties such as the Company.
The Company is unable to anticipate which other companies are likely to offer
competitive services in the future. There can be no assurance that the
Company's online operations will compete successfully with any current or
future competitors.

In the television and in-flight programming markets, the Company's News
Travel Network division competes for airtime for its programs with news and
entertainment programming produced by local stations, broadcast and cable
networks, infomercial producers and third party syndicators. NTN competes for
national advertising sales with networks, national advertising firms and
syndicators.

Many of the Company's current and potential competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the
Company and may enter into strategic or commercial relationships with larger,
more established and well-financed companies. Certain of the Company's
competitors may be able to secure services and products from travel suppliers
on more favorable terms, devote greater resources to marketing and promotional
campaigns and devote substantially more resources to Web site and systems
development than the Company. In addition, new technologies and the expansion
of existing technologies may increase competitive pressures on the Company. In
particular, Microsoft Corporation has publicly announced its intent to invest
heavily in the area of travel technology and services. Increased competition
may result in reduced operating margins, as well as loss of market share and
brand recognition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company could have a material adverse effect on the
Company's business, operating results and financial condition. See "Business--
Competition."

Dependence on Continued Growth of Online Commerce. The Company's future
revenues and any future profits are substantially dependent upon the
widespread acceptance and use of the Internet and commercial online services
as an effective medium of commerce by consumers. For the Company to be
successful, these consumers must accept and utilize novel ways of conducting
business and exchanging information. Convincing consumers to purchase travel
services online may be particularly difficult, as such consumers have
traditionally relied on travel agents for advice and recommendations as to
destinations and accommodations as well as bookings, and are accustomed to a
high degree of human interaction in purchasing travel services. Rapid growth
in the use of and interest in the Web, the Internet and commercial online
services is a recent phenomenon, and there can be no assurance that acceptance
and use will continue to develop or that a sufficiently broad base of
consumers will adopt, and continue to use, the Internet and commercial online
services as a medium of commerce, particularly for purchases of travel
services.

Demand for recently introduced services and products over the Internet and
commercial online services is subject to a high level of uncertainty and there
exist few proven services and products. The development of the Internet and
commercial online services as a viable commercial marketplace is subject to a
number of factors, including continued growth in the number of users of such
services, concerns about transaction security, continued development of the
necessary technological infrastructure and the development of complementary
services and products. If the Internet and commercial online services do not
become a viable commercial marketplace, the Company's business, operating
results and financial condition would be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risks Associated with Advertising Revenues. During 1996 and 1997,
approximately 58% and 36%, respectively, of the Company's total revenues were
derived from the sale of advertising in connection with its television
programming and, to a lesser extent, its online sites. The Company expects
that revenues derived from the sale of advertising on its online sites will
increase in future periods in terms of absolute dollars. The Company's
advertising customers may terminate their advertising commitments at any time
without penalty. Consequently, the Company's advertising customers may move
their advertising to competing online sites or television programs or to other
traditional media quickly and at low cost, thereby increasing the Company's

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<PAGE>

exposure to competitive pressures and fluctuations in net revenues and
operating results. In particular, to support its television operations, which
are substantially dependent on advertising revenues that historically have
been derived from a very limited customer base, the Company must overcome
significant competition from national syndicators and broadcast stations and
cable networks to obtain advertising commitments. If the Company loses
advertising customers, fails to attract new customers or is forced to reduce
advertising rates in order to retain or attract advertising customers, the
Company's business, operating results and financial condition could be
materially adversely affected. In particular, the Company currently
anticipates that Best Buy Co., Inc. ("Best Buy") will account for an
increasing percentage of the Company's television advertising revenues in
future periods. As is common in the television industry, the Company does not
have a long-term contract or arrangement with Best Buy that guarantees
advertising revenues from Best Buy. As a result, if advertising revenues from
Best Buy do not materialize to the extent anticipated by the Company or if
such advertising revenues materialize and Best Buy then phases out its
sponsorship of the Company's television programming, overall revenues from the
Company's television operations would be materially and adversely affected,
which could adversely affect the Company's business operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business--Marketing and Sales."

Management of Potential Growth. The Company has rapidly and significantly
expanded its operations, and anticipates that further significant expansion
will be required to address potential growth in its customer base and market
opportunities. The Company has also recently added a number of key managerial
and technical employees, and the Company expects to add additional key
personnel in the future. This expansion has placed, and is expected to
continue to place, a significant strain on the Company's management,
operational and financial resources. To manage the expected growth of its
operations and personnel, the Company will be required to improve existing and
implement new transaction-processing, operational, customer service and
financial systems, procedures and controls, implement a formal disaster
recovery program and expand, train and manage the Company's growing employee
base. The Company also will be required to expand its finance, administrative
and operations staff. Further, the Company's management will be required to
maintain and expand its relationships with various travel service suppliers,
other Web sites and other Web service providers, Internet and commercial
online service providers and other third parties necessary to the Company's
business. There can be no assurance that the Company's current and planned
personnel, systems, procedures and controls will be adequate to support the
Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that the Company's
management will be able to successfully identify, manage and exploit existing
and potential market opportunities. If the Company is unable to manage growth
effectively, its business, operating results and financial condition could be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Employees" and
"Management."

Dependence on Attraction and Retention of Key Employees. The Company's
performance is substantially dependent on the continued services and on the
performance of its senior management and certain other key personnel. The loss
of the services of any of its executive officers or other key employees could
have a material adverse effect on the Company's business, operating results
and financial condition. The Company does not have long-term employment
agreements with any of its key personnel. The Company's future success also
depends on its ability to identify, attract, hire, train, retain and motivate
other highly skilled technical, managerial, editorial, marketing and customer
service personnel. Competition for such personnel is intense, and there can be
no assurance that the Company will be able to successfully attract, assimilate
or retain sufficiently qualified personnel. In particular, the Company may
encounter difficulties in attracting a sufficient number of qualified software
developers for its online services and transaction-processing systems, and
there can be no assurance that the Company will be able to retain and attract
such developers. The failure to retain and attract necessary technical,
managerial, editorial, merchandising, marketing and customer service personnel
could have a material adverse effect on the Company's business, operating
results and financial condition.

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<PAGE>

Although none of the Company's employees is represented by a labor union, it
is common for employees in the television industry to belong to a union, and
there can be no assurance that the Company's employees will not join or form a
labor union or that the Company, for certain purposes, will not be required to
become a union signatory. See "Business--Employees" and "Management."

Risk of Capacity Constraints; Reliance on Internally Developed Systems;
System Development Risks. The Company's revenues depend on the number of
customers who use its online travel sites to book their travel reservations.
Accordingly, the satisfactory performance, reliability and availability of the
Company's online sites, transaction-processing systems and network
infrastructure are critical to the Company's operating results, as well as its
ability to attract and retain customers and maintain adequate customer service
levels. Any system interruptions that result in the unavailability of the
Company's online sites or reduced performance of the reservation system would
reduce the volume of reservations and the attractiveness of the Company's
service offerings, which could have a material adverse effect on the Company's
business, operating results and financial condition.

The Company uses an internally developed system for its online sites and
substantially all aspects of transaction processing, including customer
profiling, making reservations, credit card verification and confirmations.
The Company has experienced periodic system interruptions, which it believes
will continue to occur from time to time. Any substantial increase in the
volume of traffic on the Company's online sites or the number of reservations
made by customers will require the Company to expand and upgrade further its
technology, transaction-processing systems and network infrastructure. The
Company has experienced and expects to continue to experience temporary
capacity constraints due to sharply increased traffic during "fare wars" or
other promotions, which may cause unanticipated system disruptions, slower
response times, degradation in levels of customer service, impaired quality
and speed of reservations and confirmations and delays in reporting accurate
financial information.

There can be no assurance that the Company's transaction-processing systems
and network infrastructure will be able to accommodate such increases in
traffic in the future, or that the Company will, in general, be able to
accurately project the rate or timing of such increases or upgrade its systems
and infrastructure to accommodate future traffic levels on its online sites.
In addition, there can be no assurance that the Company will be able in a
timely manner to effectively upgrade and expand its transaction-processing
systems or to successfully integrate any newly developed or purchased modules
with its existing systems. Any inability to do so could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business--Technology."

Risk of System Failure; Single Site. The Company's success, in particular
its ability to successfully receive and fulfill orders online and provide
high-quality customer service, largely depends on the efficient and
uninterrupted operation of its computer and communications hardware systems.
Substantially all of the Company's computer and communications systems are
located at a single facility in San Francisco, California. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and
similar events. The Company currently does not have redundant systems or a
formal disaster recovery plan and does not carry sufficient business
interruption insurance to compensate it for losses that may occur. Despite the
implementation of network security measures by the Company, its servers are
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and confirm customer reservations. The occurrence of any
of the foregoing risks could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--
Technology" and "--Facilities."

Risks Associated with Television Operations. The Company's ability to
generate revenues from its television operations, as well as its ability to
use its television and in-flight programming to promote and enhance its online
services and brand recognition, depends upon its ability to reflect in its
programming the changing tastes of consumers, news directors and program
directors, and to secure and maintain distribution

13
<PAGE>

for its television and in-flight programming on acceptable commercial terms
through local stations, domestic and international cable and broadcast
networks and airlines. These syndication agreements typically have durations
of one year or less, and there can be no assurance that such stations,
networks and airlines will continue to renew syndication agreements for the
Company's programs. In addition, the Company's ability to cost effectively
update and expand its film library is essential to its ability to continue to
offer compelling content.

Although the Company maintains a back-up of its film library in offsite
storage, both the film library and the back-up library are vulnerable to
damage from fire, flood, break-ins, earthquake and similar events. Loss of
access to the Company's film library for an extended period of time could have
a material adverse effect on the Company's business, operating results and
financial condition.

Although the Company's television operations have had positive cash flow
from operations in the past, the Company experienced negative cash flow from
television operations in 1997 and expects to experience negative cash flow
from television operations for the foreseeable future. The Company must
generate substantial revenues from sales of its television programs, and, in
particular, advertising sales for such programs, in order to offset the
significant fixed costs associated with its television operations. The Company
historically has derived advertising revenues from a limited customer base. In
particular, a single customer, MCI Telecommunications Corporation ("MCI"),
accounted for 49% and 58% of the Company's television advertising revenues in
1995 and 1996, respectively. Commencing in the first quarter of 1997, MCI
began to phase out its sponsorship of the Company's television programming,
which phase-out was completed in the quarter ended September 30, 1997. MCI
continues to advertise in the Company's in flight programming. Revenues
attributable to MCI comprised 30% and 10% of the Company's total television
revenues for the year and the quarter, respectively, ended December 31, 1997.
However, because the Company does not expect to receive any additional
revenues from MCI for television sponsorships, the Company expects revenues
attributable to MCI to decrease significantly from historical periods. In
addition, the Company faces significant competition from national syndicators
and broadcast and cable networks in its efforts to replace MCI's sponsorship,
expand its customer base and obtain sufficient levels of advertising sales to
achieve profitability in its television operations. In certain market
conditions, the Company could be required to substantially lower its
advertising rates in order to sell its available inventory of television time
and Web advertising space. The Company expects revenues from its television
operations to decline in 1998 relative to 1997. There can be no assurance that
the Company will generate sufficient revenues from the licensing of its
television programs and sale of advertising to achieve profitability, and the
failure to do so could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Preview
Travel Television Operations."

Rapid Technological Change. The Internet and the online commerce industry
are characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing online sites and
proprietary technology and systems obsolete. The emerging nature of these
products and services and their rapid evolution will require that the Company
continually improve the performance, features and reliability of its online
services, particularly in response to competitive offerings. The Company's
success will depend, in part, on its ability to enhance its existing services,
to develop new services and technology that address the increasingly
sophisticated and varied needs of its prospective customers and to respond to
technological advances and emerging industry standards and practices on a
cost-effective and timely basis. The development of online sites and other
proprietary technology entails significant technical and business risks and
requires substantial expenditures and lead time. There can be no assurance
that the Company will successfully use new technologies effectively or adapt
its online sites, proprietary technology and transaction-processing systems to
customer requirements or emerging industry standards. If the Company is
unable, for technical, legal, financial or other reasons, to adapt in a timely
manner in response to changing market conditions or customer requirements, its
business, operating results and financial condition could be materially
adversely affected. See "Business--Technology."

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Online Commerce and Database Security Risks. A fundamental requirement for
online commerce and communications is the secure transmission of confidential
information over public networks. The Company relies on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. In addition, the Company
maintains an extensive confidential database of customer profiles and
transaction information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments will not result in a compromise or breach of the algorithms used
by the Company to protect customer transaction and personal data contained in
the Company's customer database. If any such compromise of the Company's
security were to occur, it could have a material adverse effect on the
Company's reputation, business, operating results and financial condition. A
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
operations. The Company may be required to expend significant capital and
other resources to protect against such security breaches or to alleviate
problems caused by such breaches. Concerns over the security of transactions
conducted on the Internet and commercial online services and the privacy of
users may also inhibit the growth of the Internet and commercial online
services, especially as a means of conducting commercial transactions. To the
extent that activities of the Company or third-party contractors involve the
storage and transmission of proprietary information, such as credit card
numbers or other personal information, security breaches could expose the
Company to a risk of loss or litigation and possible liability. There can be
no assurance that the Company's security measures will prevent security
breaches or that failure to prevent such security breaches will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business--Technology."

Need for Additional Capital. The Company requires substantial working
capital to fund its business and expects to use a portion of the net proceeds
of this offering to fund its operating losses. In the last two years, the
Company has experienced negative cash flow from operations and expects to
continue to experience significant negative cash flow from operations for the
foreseeable future. The Company currently anticipates that the net proceeds of
this offering, together with its existing capital resources, will be
sufficient to meet the Company's capital requirements through the year 2000.
Thereafter, the Company may be required to raise additional funds, in part to
fund its financial obligations to AOL, Excite and Lycos. There can be no
assurance that such financing will be available in sufficient amounts or on
terms acceptable to the Company, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

Risks Associated with Offering New Services. The Company plans to introduce
new and expanded services and to enter into new relationships with third
parties in order to generate additional revenues, attract more consumers and
respond to competition. For example, the Company may offer travel insurance,
travel financing services and travel-related merchandise. There can be no
assurance that the Company would be able to offer such services in a cost-
effective or timely manner or that any such efforts would be successful.
Furthermore, any new service launched by the Company that is not favorably
received by consumers could damage the Company's reputation or its brand name.
Expansion of the Company's services in this manner would also require
significant additional expenses and development and may strain the Company's
management, financial and operational resources. The Company's inability to
generate revenues from such expanded services or products sufficient to offset
their cost could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business--Strategy."

Liability for Internet and Television Content. As a publisher and
distributor of online and television content, the Company faces potential
liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that the Company publishes or distributes. Such claims have been brought, and
sometimes successfully pressed, against online services. In addition, the
Company does not and cannot practically screen all of the content generated by
its users on the bulletin board system on the Company's online sites, and the
Company could be exposed to liability with

15
<PAGE>

respect to such content. Although the Company carries general liability
insurance, the Company's insurance may not cover claims of these types or may
not be adequate to indemnify the Company for all liability that may be
imposed. Any imposition of liability, particularly liability that is not
covered by insurance or is in excess of insurance coverage, could have a
material adverse effect on the Company's reputation and its business,
operating results and financial condition.

Uncertain Protection of Intellectual Property; Risks of Third Party
Licenses. The Company regards its copyrights, service marks, trademarks, trade
dress, trade secrets and similar intellectual property as critical to its
success, and relies on trademark and copyright law, trade secret protection
and confidentiality and/or license agreements with the Company's employees,
customers, partners and others to protect its proprietary rights. The Company
pursues the registration of certain of its key trademarks and service marks in
the United States and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which the Company's products and services are made available online. The
Company has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. While the Company attempts to ensure that the
quality of its brand is maintained by such licensees, there can be no
assurance that such licensees will not take actions that might materially
adversely affect the value of the Company's proprietary rights or reputation,
which could have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate
or that third parties will not infringe or misappropriate the Company's
copyrights, trademarks, trade dress and similar proprietary rights. In
addition, there can be no assurance that other parties will not assert
infringement claims against the Company. The Company may be subject to legal
proceedings and claims from time to time in the ordinary course of its
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by the Company and its
licensees. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources. See "Business--
Legal Proceedings."

The Company also intends to continue to strategically license certain
content for its online sites from third parties, such as it did with Fodor's,
including content which is integrated with internally developed content and
used on the Company's online sites to provide key services. There can be no
assurance that these third party content licenses will be available to the
Company on commercially reasonable terms or that the Company will be able to
successfully integrate such third party content. Such content licenses may
expose the Company to increased risks, including risks associated with the
assimilation of new content, the diversion of resources from the development
of the Company's content, the inability to generate revenues from new content
sufficient to offset associated acquisition costs and the maintenance of
uniform, appealing content. The inability to obtain any of these licenses
could result in delays in site development or services until equivalent
content can be identified, licensed and integrated. Any such delays in site
development or services could have a material adverse effect on the Company's
business, operating results and financial condition.

Governmental Regulation and Legal Uncertainties. Certain segments of the
travel industry are heavily regulated by the United States and international
governments, and accordingly, certain services offered by the Company are
affected by such regulations. For example, the Company is subject to United
States Department of Transportation ("DOT") regulations prohibiting unfair and
deceptive practices. In addition, DOT regulations concerning the display and
presentation of information that are currently applicable to the GDS services
accessed by the Company could be extended to the Company in the future, as
well as other laws and regulations aimed at protecting consumers accessing
online travel services or otherwise. In California, under the Seller of Travel
Act, the Company is required to register as a seller of travel, comply with
certain disclosure requirements and participate in the State's restitution
fund. The television industry is also subject to extensive regulation at
federal, state and local levels, including the Federal Communications Act and
rules and regulations of the Federal Communications Commission. In addition,
legislative and regulatory proposals under ongoing consideration by Congress
and federal agencies may materially affect the television industry and the
Company's ability to obtain distribution for its television programming.

16
<PAGE>

The Company is also subject to regulations applicable to businesses
generally and laws or regulations directly applicable to access to online
commerce. Although there are currently few laws and regulations directly
applicable to the Internet and commercial online services, it is possible that
a number of laws and regulations may be adopted with respect to the Internet
or commercial online services covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality
of products and services. Furthermore, the growth and development of the
market for online commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies
conducting business online. The adoption of any additional laws or regulations
may decrease the growth of the Internet or commercial online services, which
could, in turn, decrease the demand for the Company's products and services
and increase the Company's cost of doing business, or otherwise have a
material adverse effect on the Company's business, operating results and
financial condition.

Moreover, the applicability to the Internet and commercial online services
of existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject the Company to
additional state sales and income taxes. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and commercial online services
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Governmental Regulation."

Risks Associated with International Expansion. A key component of the
Company's strategy is to expand its operations into international markets. The
Company anticipates that it will expend significant financial and management
resources to establish local offices overseas, create localized user
interfaces and comply with local customs and regulations. If the revenues
generated by these international operations are insufficient to offset the
expense of establishing and maintaining such operations, the Company's
business, operating results and financial condition could be materially
adversely affected. To date, the Company has no experience in developing
localized versions of its online sites and marketing and distributing its
travel services internationally. There can be no assurance that the Company
will be able to successfully market or sell its services in these
international markets. In addition to the uncertainty as to the Company's
ability to expand its international presence, there are certain risks inherent
in conducting business on an international level, such as unexpected changes
in regulatory requirements, tariffs and other trade barriers, difficulties in
staffing and managing foreign operations, political instability, currency rate
fluctuations, seasonality in leisure travel in certain countries and
potentially adverse tax consequences. There can be no assurance that one or
more of the foregoing factors will not have a material adverse effect on the
Company's future international operations and, consequently, on its business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Risks Associated with Potential Acquisitions. The Company's current strategy
is to broaden the scope and content of its online sites through the
acquisition of existing online services and businesses specializing in travel-
related content, as well as through internally developed new travel services
offerings. Although no such acquisitions are currently being negotiated, any
future acquisitions would expose the Company to increased risks, including
risks associated with the assimilation of new operations, sites and personnel,
the diversion of resources from the Company's existing businesses, sites and
technologies, the inability to generate revenues from new sites or content
sufficient to offset associated acquisition costs, the maintenance of uniform
standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of any integration of
new management personnel. Acquisitions may also result in additional expenses
associated with amortization of acquired intangible assets or potential
businesses. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with
such acquisitions, and its inability to overcome such risks could have a
material adverse effect on the Company's business, operating results and
financial condition.

17
<PAGE>

Year 2000 Compliance. The Company believes that its internal computer
systems are Year 2000 compliant and does not anticipate that it will incur
significant expenditures to ensure that such systems will function properly
with respect to dates in the Year 2000 and beyond. The Company is in the early
stages of conducting an audit of its significant suppliers and other third
parties to ensure that those parties have appropriate plans to remedy Year
2000 issues where their systems interface with the Company's systems or
otherwise impact its operations. There can be no assurance that a failure of
systems of third parties on which the Company's systems and operations rely to
be Year 2000 compliant will not have a material adverse affect on the
Company's business, financial condition or operating results.

Volatility of Stock Price. The offering price for Common Stock to be sold by
the Company will be determined by negotiations among the Company and the
Underwriters and may bear no relationship to the price at which the Common
Stock will trade after completion of this offering. See "Underwriting" for
factors to be considered in determining such offering price. The market price
of the Common Stock has fluctuated significantly to date. See "Price Range of
Common Stock." In addition, the market price of the Common Stock could be
subject to significant fluctuations in response to quarter-to-quarter
variations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, and other
events or factors. For example, a shortfall in revenue or net income, or
increase in losses from levels expected by securities analysts, could have an
immediate and significant adverse effect on the market price of the Company's
Common Stock. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have particularly affected the
market prices of many high technology companies and that have often been
unrelated or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price for the Common Stock. Furthermore, substantially all
of the Company's outstanding Common Stock will be eligible for sale in the
public market upon the expiration of certain lock-up agreements, subject in
some cases to the volume and other restrictions of Rule 144 and Rule 701 under
the Securities Act of 1933 (the "Securities Act"). These lock-up agreements
were entered into between the Underwriters and certain stockholders in
connection with the Company's initial public offering in November 1997, which
agreements expire on May 19, 1998, and between the Underwriters and the
Selling Stockholders in this offering, which agreements expire 90 days after
the effective date of the registration statement filed in connection with this
offering. There can be no assurance that sales of Common Stock by such
stockholders upon expiration of the lock-up agreements will not adversely
affect the market price of the Common Stock. See "--Shares Eligible for Future
Sale, " "Price Range of Common Stock" and "Shares Eligible for Future Sale."

Antitakeover Effect of Certain Charter Provisions. The Board of Directors
has the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock may be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change of control of
the Company without further action by the stockholders and may adversely
affect the voting and other rights of the holders of Common Stock, which could
have an adverse impact on the market price of the Common Stock. The Company
has no present plans to issue shares of Preferred Stock. Further, certain
provisions of the Company's charter documents, including provisions
eliminating the ability of stockholders to take action by written consent and
limiting the ability of stockholders to raise matters at a meeting of
stockholders without giving advance notice, may have the effect of delaying or
preventing changes in control or management of the Company, which could have
an adverse effect on the market price of the Company's Common Stock. See
"Description of Capital Stock."

Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market or the anticipation of such sales could have a
material adverse effect on then-prevailing market prices. All of the 3,500,000
shares offered hereby will be immediately tradable without restriction.
Furthermore, the 2,500,000 shares sold in the Company's initial public
offering in November 1997, as well as approximately

18
<PAGE>

119,500 additional shares are currently eligible to be resold immediately in
the public market. Beginning May 19, 1998, upon expiration of pre-existing
lock-up agreements and lock-up agreements between the representatives of the
underwriters in the initial public offering and officers, directors and
certain stockholders of the Company, approximately shares of the
Company's Common Stock will be eligible for resale pursuant to Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), subject in some
cases to compliance with the volume limitations and other restrictions under
Rule 144 and, under certain circumstances, Rule 701 under the Securities Act.
As a result of lock-up agreements that were entered into by the Selling
Stockholders and the Underwriters in connection with this offering,
approximately shares will not be available for sale in the public
market until the expiration of the 90 day period following the effective date
of this offering, subject in some cases to the volume and other restrictions
of Rule 144 and Rule 701 under the Securities Act. Any early release of the
lock-up agreement by the Underwriters, which, if granted, could permit sales
of a substantial number of shares and could adversely affect the trading price
of the Company's shares, may not be accompanied by an advance public
announcement by the Company. In addition, certain holders of Common Stock have
the right to include their shares in any future registration of securities
effected by the Company and to require the Company to register their shares
for future sale, subject to certain exceptions. The Company has filed a
registration statement on Form S-8 under the Securities Act that registered
3,508,273 shares of Common Stock issuable under the Company's 1997 Employee
Stock Purchase Plan, 1997 Directors' Stock Option Plan and 1988 and 1997 Stock
Option Plans. See "Description of Capital Stock" and "Shares Eligible for
Future Sale."

Dilution. The assumed public offering price is substantially higher than the
book value per share of the outstanding Common Stock. Investors purchasing
shares of Common Stock in the offering at an assumed offering price of $34.75
will therefore incur immediate, substantial dilution in the amount of $28.18
per share. In addition, investors purchasing shares of Common Stock in the
offering will incur additional dilution to the extent outstanding options are
exercised. See "Dilution."

19
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company (after deducting underwriting discounts and
estimated offering expenses) from the sale of the 1,500,000 shares of Common
Stock offered by the Company hereby at the assumed public offering price of
$34.75 per share are estimated to be $48,966,625 ($66,279,943 if the
Underwriters' over-allotment option is exercised in full).

The principal purpose of this offering is to obtain additional capital. The
Company intends to use a portion of the net proceeds to pay a portion of its
obligations to AOL, Excite and Lycos pursuant to the Company's agreements with
AOL, Excite and Lycos, which require the Company to make minimum payments to
AOL, Excite and Lycos totaling approximately $52.9 million over the next five
years. In addition, the Company may, when the opportunity arises, use a
portion of the net proceeds to license and acquire content for its online
sites, to establish additional distribution channels, to expand into
international markets and to acquire or invest in complementary businesses,
products, services or technologies. The Company has no specific plan for use
of the remaining proceeds and expects to use such proceeds for general
corporate purposes, including working capital to fund anticipated operating
losses and capital expenditures. Pending such uses, the Company intends to
invest such funds in short-term, investment grade, interest-bearing
obligations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

PRICE RANGE OF COMMON STOCK

The Common Stock of the Company commenced trading publicly on the Nasdaq
National Market on November 19, 1997 and is traded under the symbol PTVL. The
following table sets forth the high and low sales prices of the Company's
Common Stock as reported by the Nasdaq National Market for the periods
indicated.

<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
FISCAL 1997
Fourth Quarter (from November 19, 1997).................... $ 11.94 $ 6.88
FISCAL 1998
First Quarter ............................................. $ 33.13 $ 7.50
Second Quarter (through April 7, 1998)..................... $38.13 $31.25
</TABLE>

On April 7, 1998, the last reported sale price of the Common Stock on the
Nasdaq National Market was $34.75 per share. As of April 7, 1998, there were
approximately 242 holders of record of the Company's Common Stock.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock or other securities. The Company currently anticipates that its will
retain all of its future earnings for use in the expansion and operation of
its business and does not anticipate paying cash dividends in the foreseeable
future. Under the terms of the Company's current bank line of credit, the
Company's ability to pay dividends is disallowed without prior approval from
the bank. See Note 6 of Notes to Consolidated Financial Statements.

20
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997 (i) on an actual basis, and (ii) as adjusted to give effect
to the sale by the Company of 1,500,000 shares of Common Stock offered hereby
at an assumed offering price of $34.75 per share and the application of the
estimated proceeds therefrom as set forth in "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements and
the Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
---------------------------
ACTUAL AS ADJUSTED
----------- --------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, 5,000,000 shares authorized, none
issued or outstanding, actual and as adjusted.... $ -- $ --
Common Stock, 50,000,000 shares authorized,
11,337,205 shares issued and outstanding, actual,
12,837,205 shares issued and outstanding, as
adjusted......................................... 11 13
Additional paid-in capital........................ 61,676 110,641
Other............................................. (539) (539)
Accumulated deficit............................... (25,783) (25,783)
----------- -----------
Total stockholders' equity...................... 35,365 84,332
----------- -----------
Total capitalization.......................... $ 35,365 $ 84,332
=========== ===========
</TABLE>
- ---------------------
(1) Excludes as of December 31, 1997 (a) 1,300,612 shares issuable upon
exercise of outstanding options at a weighted average exercise price of
$4.18 per share, (b) 31,666 shares issuable upon exercise of outstanding
warrants at a weighted average exercise price of $5.97 per share, and (c)
an aggregate of 2,206,600 shares available for future issuance under the
Company's 1988 Stock Option Plan, 1997 Stock Option Plan, 1997 Directors'
Stock Option Plan and 1997 Employee Stock Purchase Plan. See "Management--
Stock Plans" and Note 11 of Notes to Consolidated Financial Statements.

21
<PAGE>

DILUTION

As of December 31, 1997, the Company had a historical net tangible book
value of approximately $35,365,000 or $3.12 per share of Common Stock. Net
tangible book value represents total tangible assets less total liabilities
divided by the number of shares of Common Stock outstanding at that date.
After giving effect to the receipt by the Company of the net proceeds from the
sale of the 1,500,000 shares of Common Stock offered by the Company hereby at
the assumed public offering price of $34.75 per share, the net tangible book
value at December 31, 1997 would have been approximately $84,332 or $6.57 per
share. This represents an immediate increase in net tangible book value of
$3.45 per share to existing stockholders and an immediate dilution of $28.18
per share to new investors purchasing shares of Common Stock in this offering.
The following table illustrates this per share dilution:

<TABLE>
<S> <C>
Assumed public price per share..................................... $34.75
Net tangible book value per share after the offering............. 6.57
------
Dilution per share to new investors.............................. $28.18
======
</TABLE>

The following table summarizes, as of December 31, 1997, the differences
between the number of shares of Common Stock purchased from the Company, the
aggregate consideration paid and the average price per share paid by existing
stockholders and new investors purchasing shares of Common Stock in this
offering:

<TABLE>
<CAPTION>
SHARES
PURCHASED TOTAL CONSIDERATION
-------------- ----------------------
NUMBER PERCENT AMOUNT PERCENT AVERAGE PRICE PER SHARE
------ ------- ----------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders
(1).................... 11,337 88.3% $ 61,687 54.2% $ 5.44
New investors (1)....... 1,500 11.7 52,125 45.8 34.75
------ ----- ----------- --------
Total............... 12,837 100.0% $ 113,812 100.0%
====== ===== =========== ========
</TABLE>
- ---------------------
(1) Excludes as of December 31, 1997 (a) 1,300,612 shares issuable upon
exercise of outstanding options at a weighted average exercise price of
$4.18 per share, (b) 31,666 shares issuable upon exercise of outstanding
warrants at a weighted average exercise price of $5.97 per share, and (c)
an aggregate of 2,206,600 shares available for future issuance under the
Company's 1988 Stock Option Plan, 1997 Stock Option Plan, 1997 Directors'
Stock Option Plan and 1997 Employee Stock Purchase Plan. See "Management--
Stock Plans" and Note 11 of Notes to Consolidated Financial Statements.

22
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data for the four years ended
December 31, 1997, have been derived from the Company's consolidated financial
statements included elsewhere in this Prospectus which have been audited by
Coopers & Lybrand L.L.P., independent public accountants, whose report thereon
is also included elsewhere in this Prospectus. The following selected
consolidated financial data for the year ended December 31, 1993 have been
derived from the audited consolidated financial statements of the Company. The
following information is qualified by reference to, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
CONSOLIDATED STATEMENT OF
OPERATIONS DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Online........................... $ -- $ -- $ 579 $ 2,573 $ 6,010
Television....................... 12,309 9,598 9,564 9,801 7,634
------- ------- ------- ------- --------
Total revenues................. 12,309 9,598 10,143 12,374 13,644
Cost of revenues:
Online........................... -- -- 1,078 2,308 3,648
Television....................... 9,972 9,103 8,393 7,000 5,751
------- ------- ------- ------- --------
Total cost of revenues......... 9,972 9,103 9,471 9,308 9,399
------- ------- ------- ------- --------
Gross profit...................... 2,337 495 672 3,066 4,245
Operating expenses:
Marketing and sales.............. -- 2,759 2,687 4,373 8,668
Research and development......... -- -- 626 1,314 1,825
General and administrative....... -- 1,162 2,026 2,880 4,184
Loss on canceled programming
(1)............................. -- 2,166 -- -- --
------- ------- ------- ------- --------
Total operating expenses (2)... 2,617 6,087 5,339 8,567 14,677
------- ------- ------- ------- --------
Loss from operations............... (280) (5,592) (4,667) (5,501) (10,432)
Interest income (expense) (2)...... -- (246) (264) (89) 266
------- ------- ------- ------- --------
Loss before income taxes........... (280) (5,838) (4,931) (5,590) (10,166)
Income tax benefit (expense)....... (23) 420 (2) (2) (2)
------- ------- ------- ------- --------
Net loss........................... $ (303) $(5,418) $(4,933) $(5,592) $(10,168)
======= ======= ======= ======= ========
Basic and diluted net loss per
share........................... $ (0.28) $ (4.75) $ (4.02) $ (3.43) $ (3.54)
======= ======= ======= ======= ========
Shares used in computation of net
loss per share calculation........ 1,076 1,140 1,228 1,631 2,869
SUPPLEMENTAL FINANCIAL DATA
(UNAUDITED):
Gross bookings (3)................ $ -- $ -- $ 2,043 $20,263 $ 80,389
======= ======= ======= ======= ========
<CAPTION>
DECEMBER 31,
--------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
CONSOLIDATED BALANCE SHEET DATA: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 765 $ 138 $ 1,064 $ 6,016 $ 27,912
Total assets...................... 13,011 8,593 9,066 12,554 42,785
Long-term obligations (4)......... 6,197 6,164 4,993 4,656 2,496
Total stockholders' equity........ 4,336 (1,027) 1,249 4,411 35,365
</TABLE>
- ---------------------
(1) Effective September 30, 1994, the Company canceled all further development
of environmental-related programming, primarily IMPACT Environmental
Reports, a series of daily 90-second environmental news inserts licensed
to local broadcast television stations.

(2) Prior to 1994, the Company did not classify operating expenses, interest
income or interest expense. As a result, only total operating expenses
(including interest income and interest expense) are presented for 1993.

(3) Represents the total purchase price of all travel services booked through
the Company's online reservation system. This presentation of gross
bookings does not affect the Company's operating results, and gross
bookings are not included in revenues. Management believes that gross
bookings provide a more consistent comparison between historical periods
than do online revenues. Gross bookings are not required by GAAP and
should not be considered in isolation or as a substitute for other
information prepared in accordance with GAAP, and period-to-period
comparisons of gross bookings are not necessarily meaningful as a measure
of the Company's revenues due to, among other things, changes in
commission rates, and, as with operating results, should not be relied
upon as an indication of future performance. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

(4) Long-term obligations include capital lease obligations, long-term notes
payable, line of credit, subordinated convertible notes payable,
subordinated notes payable and bank equipment note.

23
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This prospectus contains forward-looking statements made within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Act") and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates," and similar expressions identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those expressed or forecasted. Factors that might cause
such a difference include, but are not limited to, those discussed in the
section entitled "Risk Factors."

OVERVIEW

Preview Travel is a leading provider of branded online travel services for
leisure and small business travelers. Since its inception in 1985, the Company
has operated as a producer of travel-related programming for broadcast
television stations and cable networks around the world. In 1994, the Company
began offering travel services by developing television programs
("infomercials") designed to generate interest in vacation packages offered by
the Company. The Company sold these vacation packages directly to consumers by
telephone. At the time, the commercial online services industry was beginning
to develop as a new medium to entertain, inform and transact with consumers.
In response to strong interest in travel from its television audience and in
recognition of new opportunities presented by the online market, the Company
adopted a new business model to address this demand in a more cost-effective
manner. Consequently, the Company shifted its business focus and resources
from infomercials to online travel services. The Company launched its online
service on AOL in January 1995 and on the Web in December 1995, providing
users with access to travel information and the ability to book travel
services by telephone. In May 1996, the Company launched its online airline
reservation service and, in the first half of 1997, enhanced its online
reservation service to include hotels and car rentals. In April 1997, the
Company launched its co-branded Web site for Excite's Travel Channel
(City.Net). In the third quarter of 1997, the Company expanded and extended
its relationships with Excite and AOL, respectively, by entering into new
five-year distribution agreements. In February 1998, the Company launched its
Destinations Guides feature created with content licensed from Fodor's. In
March 1998, the Company entered into an agreement with Lycos, under which the
Company will be the exclusive multiservice provider of travel reservation
services for Lycos' Travel Web Guide and Travel Network.

Overview of Television Operations. From inception through 1994, the Company
derived all of its revenues from its television operations. In 1995, 1996 and
1997, the Company's television operations accounted for approximately 94%, 79%
and 56% of the Company's total revenues, respectively. Television revenues are
derived primarily from fees associated with sales of advertising time and the
licensing of travel-related news and entertainment programming. Program
license revenues are recognized when all of the following conditions are met:
(i) the license period begins, (ii) the license fee and the production costs
are known and (iii) the program has been accepted by the licensee and is
available for telecast. Advertising revenues are recognized when all the terms
of the advertising agreement are met, and advertising is shown on various
media as designated by the agreement.

The Company produces travel-related news inserts and news and entertainment
programs that are syndicated in exchange for either cash or commercial
advertising time. The Company also syndicates third party news inserts. The
local commercial advertising time earned for providing these programs is
aggregated and sold to advertisers seeking to reach a national audience. To
fulfill such advertisers' requirements to reach a national audience, the
Company from time to time purchases commercial advertising time for resale in
selected markets. In addition, the Company produces in-flight programs,
primarily for Northwest Airlines. In 1996, the Company discontinued its
practice of exchanging commercial advertising time on its news and
entertainment programming for travel services such as airline tickets, hotel
rooms and car rentals ("travel inventory"). During the year ended December 31,
1996, the Company significantly reduced its travel inventory and wrote off the
remaining balance of unused travel inventory.

In 1995 and 1996, advertising revenue from MCI comprised 49% and 58%,
respectively, of the Company's total television revenues. Commencing in the
first quarter of 1997, MCI began to phase out its sponsorship of the Company's

24
<PAGE>

television programming, which phase-out was completed in the quarter ended
September 30, 1997. MCI continues to advertise in the Company's in flight
programming. Revenues attributable to MCI comprised 30% and 10% of the
Company's total television revenues for the year and the quarter,
respectively, ended December 31, 1997. However, because the Company does not
expect to receive any additional revenues from MCI for television
sponsorships, the Company expects revenues attributable to MCI to decrease
significantly from historical periods.

Although the Company's television operations have had positive operating
cash flow in the past, the Company experienced negative operating cash flow
from television operations in 1997 and expects to experience negative
operating cash flow from television operations for the foreseeable future. As
a result of the amortization of the Company's film library as well as
depreciation and other factors, the Company's television operations incurred a
net operating loss in 1997, and the Company anticipates that its television
operations will continue to incur net operating losses for the foreseeable
future. As a result of these losses and the Company's anticipated increase in
operating expenses primarily for its online operations, the Company believes
that its future success depends on its ability to maintain its current level
of television revenues and to significantly increase revenues from its online
operations, for which it has a limited operating history. See "Risk Factors--
Limited Operating History of Online Business; History of Net Operating Losses;
Accumulated Deficit," "--Anticipated Losses and Negative Cash Flow," "--
Dependence on the Travel Industry," "--Uncertain Acceptance of the Preview
Travel Brand; Dependence on Increased Bookings," "--Dependence on Continued
Growth of Online Commerce," "--Risks Associated with Advertising Revenues,"
"--Management of Potential Growth," "--Risks Associated with Television
Operations" and "--Risks Associated with International Expansion."

Overview of Online Operations. The Company's online revenues are
predominantly comprised of commissions paid by airlines, hotels, rental car
agencies, cruise lines and vacation packagers (collectively, "travel
suppliers") for travel services booked through the Company and the sale of
advertisements on the Company's online sites. In addition, certain travel
suppliers pay performance-based compensation known as "override commissions."
Commission revenues for air travel, hotel rooms, car rentals and vacation
packages, net of allowances for cancellations, are recognized upon the
confirmation of the reservation. Overrides are recognized on an accrual basis
once the amount has been confirmed with the travel supplier, which generally
reflects the performance for a prior quarterly period.

The Company's online travel services have experienced substantial growth
since the Company first enabled customers to book travel services online in
May 1996. Gross bookings of travel services online increased from
approximately $2.8 million in the second quarter of 1996 to $26.4 million in
the fourth quarter of 1997, which resulted in online revenues of approximately
$424,000 and $1.8 million, respectively, for the corresponding periods. The
commission rates paid by travel suppliers, in addition to overrides, are
determined by individual travel suppliers and are subject to change.
Historically, typical standard base commission rates paid by travel suppliers
have been approximately 10% for hotel reservations and car rentals and 10% to
15% for cruises and vacation packages. During the quarter ended June 30, 1997,
the commissions paid by most of the major airlines for online reservations was
changed from a typical base rate of approximately 8% to approximately 5%
(excluding overrides). In addition, in a continuation of this trend, in the
first half of 1998, one major airline reduced its fixed rate commission
structure for online roundtrip ticket sales to ten dollars and a second major
airline further reduced its cap (the maximum amount of commissions paid per
ticket) on per-roundtrip ticket commissions payable for online ticket sales to
ten dollars. The Company expects that its weighted average commission on
online transaction revenue will decline as a result of these reductions.
Travel suppliers can further reduce current industry commission rates or
eliminate such commissions entirely, which would likely have a material
adverse effect on the Company's revenues and operating results. See "Risk
Factors--Reliance on Travel Suppliers; Potential Adverse Changes in Commission
Payments."

Travel services sold through the AOL Network accounted for 89%, 77%, 67% and
62% of the Company's online revenues for the three months ended March 31,
1997, June 30, 1997, September 30, 1997 and December 31, 1997, respectively.
Travel services sold through Excite accounted for 8%, 13% and 15% of the

25
<PAGE>

Company's online revenues for the three months ended June 30, 1997, September
30, 1997 and December 31, 1997, respectively. The Company's arrangements with
AOL and Excite are expected to continue to represent significant distribution
channels for the Company's travel services, and the Lycos agreement is
expected to represent a significant distribution channel in the future. Any
termination of any or all of the Company's agreements with AOL, Excite or
Lycos would likely have a material adverse effect on the Company's business,
operating results and financial condition. Since launching its online
operations, the Company's cost of revenues and operating expenses have grown
substantially and are expected to continue to grow substantially in absolute
dollars for the foreseeable future. In particular, the Company's new
agreements with AOL, Excite and Lycos require minimum aggregate payments of
approximately $60.3 million during the terms of such agreements in exchange
for their providing distribution, marketing and other services. There can be
no assurance that the Company will achieve sufficient online traffic, travel
bookings or commissions to realize economies of scale that justify the
Company's significant fixed financial obligations to AOL, Excite and Lycos.
Further, there can be no assurance that the Company will satisfy the minimum
levels of travel services bookings, or provide satisfactory content on the
specified time schedule, required to maintain the AOL and Excite agreements.
Failure to do either of the foregoing would likely have a material adverse
effect on the Company's business, operating results and financial condition.
See "Risk Factors--Reliance on Distribution Agreements with America Online,
Excite and Lycos" and "--Risk of Termination of Distribution Agreement with
America Online."

Gross Margins. Gross margins may be impacted by a number of different
factors, including the mix of television revenues versus online revenues, the
mix of online commission revenues versus online advertising revenues, the mix
of travel services sold, the mix of revenues from AOL, Excite, Lycos and the
Company's Web site, the mix of airline ticket commissions (which vary from
airline to airline) and the amount of override commissions. The Company
typically realizes higher gross margins on advertising revenues than
commission revenues, higher commissions on vacation packages than hotel rooms
and car rentals, higher commissions on hotel rooms and car rentals than
airline tickets, higher gross margins on advertising revenues from its own Web
site than through AOL, Excite or Lycos, higher commissions from certain
airlines than others, and higher gross margins in periods of higher overrides.
Any change in one or more of the foregoing factors could materially adversely
affect the Company's gross margins and operating results in future periods.
See "Risk Factors--Unpredictability of Future Revenues; Fluctuations in
Quarterly Results."

Anticipated Losses. The Company has incurred significant operating losses
and, as of December 31, 1997, had an accumulated deficit of $25.8 million. The
Company believes that its success will to a large part depend on its ability
to greatly increase sales volume to realize economies of scale. The Company
expects to continue to incur significant operating losses on a quarterly and
annual basis for the foreseeable future, and the rate at which such losses
will be incurred is expected to increase significantly from current levels,
resulting in corresponding decreases in working capital, total assets and
stockholders' equity. In particular, the Company's operating expenses are
expected to increase substantially in 1998 as compared to 1997, primarily due
to commencement of the Company's payment obligations to AOL, Excite, Lycos,
Fodor's and promotional and marketing expenses for the Company's online travel
services, resulting in corresponding increases in operating losses and
decreases in working capital, total assets and stockholders' equity. See "Risk
Factors--Limited Operating History of Online Business; History of Net
Operating Losses; Accumulated Deficit" and "--Anticipated Losses and Negative
Cash Flow."

26
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's consolidated statement of
operations to total revenues, except as indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Revenues:
Online.......................................... 5.7 % 20.8 % 44.0 %
Television...................................... 94.3 79.2 56.0
------- ------- -------
Total revenues................................ 100.0 100.0 100.0
Cost of revenues:
Online.......................................... 10.6 18.7 26.7
Television...................................... 82.8 56.6 42.2
------- ------- -------
Total cost of revenues........................ 93.4 75.3 68.9
------- ------- -------
Gross profit...................................... 6.6 24.7 31.1
Operating expenses:
Marketing and sales............................. 26.4 35.3 63.5
Research and development........................ 6.2 10.6 13.4
General and administrative...................... 20.0 23.3 30.7
------- ------- -------
Total operating expenses...................... 52.6 69.2 107.6
------- ------- -------
Loss from operations.............................. (46.0) (44.5) (76.5)
Interest income (expense), net.................... (2.6) (0.7) 2.0
------- ------- -------
Loss before income taxes.......................... (48.6) (45.2) (74.5)
Income tax........................................ -- -- --
------- ------- -------
Net loss.......................................... (48.6)% (45.2)% (74.5)%
======= ======= =======
AS A PERCENTAGE OF RELATED REVENUES:
Cost of online revenues........................... 186.2 % 89.7 % 60.7 %
Cost of television revenues....................... 87.8 % 71.4 % 75.3 %
</TABLE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

Revenues

Online Revenues. In 1995, online revenues consisted entirely of the sale of
vacation packages by telephone. In May 1996, the Company began to book airline
tickets through its online services, and commissions from these bookings
constituted the majority of online revenues for the year. As a result, online
revenues during 1996 included only five months of airline commissions and no
commissions on hotels or car rentals. Online revenues increased from $579,000
in 1995 to $2.6 million in 1996 due to the introduction of online airline
reservations. In 1997, online revenues increased from $2.6 million in 1996 to
$6.0 million due primarily to greater bookings and the offering of new online
services. Online advertising revenues were $235,000 and $580,000 in 1996 and
1997, respectively. Gross bookings increased from $20.3 million in 1996 to
$80.4 million in 1997 as a result of the expansion of the Company's travel
service offerings, strategic relationships and customer base, as well as
repeat purchases by existing customers. The Company's database of customer
profiles grew from approximately 735,000 profiles as of December 31, 1996 to
over 2.6 million profiles as of December 31, 1997. In 1996, the Company
marketed its travel services primarily through AOL. During 1997, the Company
expanded its online presence beyond AOL by marketing its own Web site and by
entering into a strategic relationship with Excite. The Company's gross
bookings from Excite and the Web comprised approximately 25.7% of the
Company's total gross bookings for 1997.

27
<PAGE>

Television Revenues. From 1995 to 1996 television revenues increased 3% to
$9.8 million. In 1997, revenues decreased 22% to $7.6 million primarily due to
the phase-out of MCI as an advertising sponsor for the Company's television
programming in 1997, lower international revenue, price reductions for
programs licensed to cable networks and reduced advertising revenues from the
Company's in flight programs. The reduction in advertising revenues in 1997
from the Company's in flight programs was caused by a reduction by Northwest
Airlines in the number of flights on which such programs were shown. Further,
during 1997, the Company reduced the price for its television programming
licensed to The Travel Channel. As a result of the foregoing factors, the
Company expects television revenues to continue to decline in 1998 relative to
1997. Advertising revenues constitute a majority of the Company's television
revenues and comprised 75%, 73% and 63% of television revenues in 1995, 1996
and 1997, respectively.

Cost of Revenues

Cost of Online Revenues. Cost of online revenues includes equipment and
staffing costs associated with operating the Company's transaction system and
customer reservation center, GDS charges, printing and delivery costs for
tickets and other documents and costs associated with errors in ticket
fulfillment. Cost of online revenues increased from $1.1 million in 1995 to
$2.3 million in 1996, due to the increased volume of transactions in 1996. As
a percentage of online revenues, cost of online revenues fell from 186% in
1995 to 90% in 1996, due to start-up costs incurred in 1995 and efficiencies
associated with the increased transaction volume in 1996. In 1997, cost of
online revenues increased to $3.6 million, but decreased as a percentage of
online revenues to 61%. The reduction in 1997, as a percentage of the related
revenue, reflected a continuation of efficiencies associated with increased
transactions and allocation of fixed costs over a larger revenue base.

Cost of Television Revenues. Cost of television revenues includes
advertising agency commissions, staffing costs, costs of custom productions
that have a limited useful life, amortization costs relating to the Company's
film library and the costs of purchasing commercial advertising time to
fulfill advertiser requirements. Cost of television revenues decreased from
$8.4 million in 1995 to $7.0 million in 1996 and decreased to $5.8 million in
1997. As a percentage of television revenues, cost of television revenues fell
from 88% in 1995 to 71% in 1996, and increased to 75% in 1997. From 1995 to
1996, the decrease in the cost of television revenues was a result of lower
film library amortization in 1996 and decreased purchases of media
advertisement time in 1995. Film library amortization was $1.7 million, $1.5
million and $1.3 million in 1995, 1996 and 1997, respectively. The increase in
the cost of revenues in 1997 as a percentage of the related revenue was due to
allocation of fixed personnel costs over lower revenues.

Operating Expenses

Marketing and Sales. Marketing and sales expenses consist primarily of
payroll and related expenses, consulting fees, advertising, public relations
and promotional expenditures and costs relating to the development and
acquisition of content and distribution for the Company's online sites.
Marketing and sales expenses increased 63% from $2.7 million in 1995 to $4.4
million in 1996. In 1997, marketing and sales expenses increased 98% to $8.7
million. As a percentage of total revenues, marketing and sales expenses rose
from 26% in 1995 to 35% in 1996 and to 64% in 1997. The increase in marketing
and sales expenses from 1995 to 1997 was attributable primarily to expenses
associated with the Company's online operations, including the hiring of
additional personnel for development of online content and expenditures
related to the Company's strategic agreements with AOL and Excite. The Company
continues to pursue an aggressive branding and marketing campaign, including
significant advertising expenditures. In addition, the Company is obligated to
make minimum payments totaling $56 million to AOL and Excite over the term of
its agreements with AOL and Excite, and $4.3 million to Lycos over the two-
year term of its agreement with Lycos, which payments will be accounted for as
marketing and sales expense. As a result, the Company expects marketing and
sales expenses to increase significantly in absolute dollars in future
periods.

28
<PAGE>

Research and Development. Research and development expenses consist
principally of personnel and equipment expenses and consulting fees for
development and enhancement of the Company's transaction processing system and
online services such as its Destinations Guides with Fodor's, costs of content
development in connection with the Company's strategic relationships with
Excite, AOL and Lycos, and costs associated with network operations, systems
and telecommunications infrastructure. Research and development expenses
increased 110% from $626,000 in 1995 to $1.3 million in 1996. In 1997,
research and development expenses increased 39% to $1.8 million. As a
percentage of total revenues, research and development expenses rose from 6%
in 1995 to 11% in 1996 and to 13% in 1997. The increases in 1996 and 1997 were
attributable primarily to increased staffing and consulting fees, as well as
increased costs related to enhancing the features, content and functionality
of the Company's online services and enhancing or updating transaction-
processing systems. The Company believes that continued investment in research
and development is critical to attaining the Company's strategic objectives
and, as a result, expects research and development expenses to increase
significantly in absolute dollars in future periods.

General and Administrative. General and administrative expenses consist of
payroll and related expenses for management, accounting and administrative
personnel, recruiting, professional services, facilities and other general
corporate expenses. General and administrative expenses increased 42% from
$2.0 million in 1995 to $2.9 million in 1996 and increased 45% to $4.2 million
in 1997. As a percentage of total revenues, general and administrative
expenses rose from 20% in 1995 to 23% in 1996 and to 31% in 1997. The
increases in general and administrative expenses in 1996 and 1997 were due
primarily to increased salaries and expenses associated with the hiring of
personnel related to the Company's online operations. The Company expects
general and administrative expenses to increase in absolute dollars in future
periods as the Company expands its staff and incurs additional costs related
to the growth of its business and being a public company.

Deferred Compensation. The Company grants stock options to hire and retain
employees. With respect to the grant of certain stock options to employees in
1997, the Company recorded aggregate deferred compensation of $571,000 in
1997. Deferred compensation is recorded as a reduction of stockholders' equity
and is amortized ratably over the vesting period of the applicable options,
generally four years. Amortization of deferred compensation recorded in 1997
for options granted was $70,000. The Company currently expects to record
amortization of deferred compensation for options granted of approximately
$143,000, $143,000, $143,000 and $71,000 for 1998, 1999, 2000 and 2001,
respectively. The amortization of deferred compensation will be recorded as
operating expenses in such periods.

Interest Income (Expense). Interest expense, net of interest income, was
approximately $264,000 and $89,000 in 1995 and 1996 respectively. The decrease
in net interest expense from 1995 to 1996 was attributable to a reduction in
borrowings under the Company's line of credit and interest income earned on
higher cash balances in 1996, primarily from an equity financing completed in
June 1996. For 1997, interest income, net of expense, was approximately
$266,000. The change from 1996 to 1997 was due primarily to a reduction on
borrowings under the Company's line of credit and interest income earned on
higher cash balances in 1997, primarily from an equity financing completed in
September 1997 and net proceeds from the Company's initial public offering in
November 1997.

29
<PAGE>

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated statement of
operations data for the four quarters ended December 31, 1997, as well as such
data expressed as a percentage of the Company's total revenues (except as
indicated) for the periods indicated. This data has been derived from
unaudited consolidated financial statements that, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information when read
in conjunction with the Company's annual audited consolidated financial
statements and notes thereto.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Online.............................. $ 1,496 $ 1,174 $ 1,556 $ 1,784
Television.......................... 2,023 2,033 1,845 1,733
------- ------- ------- -------
Total revenues..................... 3,519 3,207 3,401 3,517
Cost of revenues:
Online.............................. 910 853 909 976
Television.......................... 1,386 1,503 1,450 1,412
------- ------- ------- -------
Total cost of revenues............. 2,296 2,356 2,359 2,388
------- ------- ------- -------
Gross profit......................... 1,223 851 1,042 1,129
Operating expenses:
Marketing and sales................. 1,335 1,181 2,024 4,128
Research and development............ 405 296 501 623
General and administrative.......... 1,009 914 1,031 1,230
------- ------- ------- -------
Total operating expenses........... 2,749 2,391 3,556 5,981
------- ------- ------- -------
Loss from operations................. (1,526) (1,540) (2,514) (4,852)
Interest income (expense), net....... 21 (1) (17) 263
------- ------- ------- -------
Loss before income taxes............. (1,505) (1,541) (2,531) (4,589)
Income taxes......................... -- (1) (1) --
------- ------- ------- -------
Net loss............................. $(1,505) $(1,542) $(2,532) $(4,589)
======= ======= ======= =======
Basic and diluted net loss per share. $ (0.88) $ (0.90) $ (1.44) $ (0.73)
======= ======= ======= =======
Weighted average shares used in net
loss per share calculation.......... 1,702 1,712 1,753 6,306
SUPPLEMENTAL FINANCIAL DATA:
Gross bookings (1)................... $14,117 $17,816 $22,074 $26,382
======= ======= ======= =======
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
-----------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Online.............................. 42.5 % 36.6 % 45.8 % 50.7 %
Television.......................... 57.5 63.4 54.2 49.3
------- ------- ------- -------
Total revenues..................... 100.0 100.0 100.0 100.0
Cost of revenues:
Online.............................. 25.9 26.6 26.7 27.7
Television.......................... 39.4 46.9 42.6 40.2
------- ------- ------- -------
Total cost of revenues............. 65.3 73.5 69.3 67.9
Gross profit......................... 34.7 26.5 30.7 32.1
Operating expenses:
Marketing and sales................. 37.9 36.8 59.5 117.4
Research and development............ 11.5 9.2 14.7 17.7
General and administrative.......... 28.7 28.5 30.3 35.0
------- ------- ------- -------
Total operating expenses........... 78.1 74.5 104.5 170.1
------- ------- ------- -------
Loss from operations................. (43.4) (48.0) (73.8) (138.0)
Interest income (expense), net....... 0.6 0.0 (0.5) 7.5
------- ------- ------- -------
Loss before income taxes............. (42.8) (48.0) (74.3) (130.5)
Income taxes......................... -- -- -- --
------- ------- ------- -------
Net loss............................. (42.8)% (48.0)% (74.3)% (130.5)%
======= ======= ======= =======
<CAPTION>
AS A PERCENTAGE OF RELATED REVENUES:
<S> <C> <C> <C> <C>
Cost of online revenues.............. 60.8 % 72.7 % 58.4 % 54.7 %
Cost of television revenues.......... 68.5 % 73.9 % 78.6 % 81.5 %
</TABLE>
- ---------------------
See footnotes on following page.

30
<PAGE>

(1) Represents the total purchase price of all travel services booked through
the Company's online reservation system. This presentation of gross
bookings does not affect the Company's operating results, and gross
bookings are not included in revenues. Management believes that gross
bookings provide a more consistent comparison between historical periods
than do online revenues. Gross bookings are not required by GAAP and
should not be considered in isolation or as a substitute for other
information prepared in accordance with GAAP, and period-to-period
comparisons of gross bookings are not necessarily meaningful as a measure
of the Company's revenues due to, among other things, changes in
commission rates, and, as with operating results, should not be relied
upon as an indication of future performance. See Note 1 of Notes to
Consolidated Financial Statements.

The Company's gross bookings have increased significantly in all quarters
presented due to expansion of the Company's distribution channels, travel
services and customer base and due to repeat purchases by existing customers
and increased customer acceptance of electronic commerce. Online revenues grew
in conjunction with the growth of gross bookings except for the second quarter
of 1997, which was negatively impacted by the reduction in the commission rate
paid by most of the major airlines for online bookings. Television revenues
continued to be adversely impacted during 1997 due to the phase-out of MCI as
a sponsor for the Company's television programming. Operating expenses have
fluctuated in absolute dollars on a quarter-to-quarter basis, but have
generally increased from the first quarter of 1997 to the fourth quarter of
1997, reflecting increased spending on developing the Company's online
operations and expanding its AOL and Excite relationships.

As a result of the Company's limited operating history in online commerce
and the emerging nature of the markets in which the Company competes, the
Company is unable to accurately forecast its revenues. The Company's current
and future expense levels are based predominantly on its operating plans and
estimates of future revenues and are to a large extent fixed. The Company may
be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in
revenues would likely have an immediate material adverse effect on the
Company's business, operating results and financial condition. Further, the
Company currently intends to substantially increase its operating expenses to
develop and offer new and expanded travel services, to fund increased sales
and marketing and customer service operations and to develop its technology
and transaction-processing systems. To the extent such expenses precede or are
not subsequently followed by increased revenues, the Company's operating
results will fluctuate and anticipated net losses in a given quarter may be
greater than expected.

The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of other factors, many of which
are outside the Company's control. Factors that may adversely affect the
Company's quarterly operating results include, but are not limited to (i) the
Company's ability to retain existing customers, attract new customers at a
steady rate and maintain customer satisfaction, (ii) changes in inventory
availability from third party suppliers or commission rates paid by travel
suppliers, such as the reduction in commissions paid by major airlines for
online bookings implemented during the first nine months of 1997, (iii) the
announcement or introduction of new or enhanced sites, services and products
by the Company or its competitors, (iv) general economic conditions and
economic conditions specific to the Internet, online commerce or the travel
industry, (v) the level of use of online services and consumer acceptance of
the Internet and commercial online services for the purchase of consumer
products and services such as those offered by the Company, (vi) the Company's
ability to upgrade and develop its systems and infrastructure and to attract
new personnel in a timely and effective manner, (vii) the level of traffic on
the Company's online sites, (viii) technical difficulties, system downtime or
Internet brownouts, (ix) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations and
infrastructure, (x) governmental regulation and (xi) unforeseen events
affecting the travel industry.

In addition, the Company expects that it will experience seasonality in its
business, reflecting seasonal fluctuations in the travel industry, Internet
and commercial online service usage and advertising expenditures. The Company
anticipates that travel bookings will typically increase during the second
quarter in anticipation

31
<PAGE>

of summer travel and will typically decline during the fourth quarter.
Internet and commercial online service usage and the rate of growth of such
usage may be expected typically to decline during the summer. In addition,
advertising sales in traditional media, such as broadcast and cable
television, generally decline in the first and third quarters of each year.
Depending on the extent to which the Internet and commercial online services
are accepted as an advertising medium, seasonality in the level of advertising
expenditures could become more pronounced for Internet-based advertising.
Seasonality in the travel industry, Internet and commercial online service
usage, and advertising expenditures is likely to cause fluctuations in the
Company's operating results and could have a material adverse effect on the
Company's business, operating results and financial condition.

Due to the foregoing factors, quarterly revenues and operating results are
difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as an indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will
not meet the expectations of security analysts or investors. In such event,
the price of the Company's Common Stock would likely be materially and
adversely affected. See "Risk Factors--Unpredictability of Future Revenues;
Fluctuations in Quarterly Results."

LIQUIDITY AND CAPITAL RESOURCES

In November 1997, the Company completed an initial public offering of its
common stock, resulting in net proceeds to the Company of approximately $24.6
million. Previously, the Company had financed its operations primarily through
private sales of common stock, convertible preferred stock, and convertible
notes, which totaled $34.7 million in aggregate net proceeds through 1997. As
of December 31, 1997, the Company also had a $2.0 million line of credit, of
which approximately $1.0 million was available at December 31, 1997, based on
80% of the Company's accounts receivable. See Note 6 of Notes to Consolidated
Financial Statements.

Cash used in operating activities in 1995 of $2.3 million was attributable
primarily to a net loss of $4.9 million and a decrease in accounts payable and
accrued liabilities, partly offset by decreases in accounts receivable, travel
inventory and other assets and deferred revenues associated with normal
operating activities, as well as depreciation of $671,000 and amortization of
film library of $1.7 million. For 1996, cash used in operating activities of
$1.3 million was primarily attributable to a net loss of $5.6 million and
increases in accounts receivable associated with increased revenue, partly
offset by an increase in accounts payable and accrued liabilities associated
with expansion of the Company's business and decreases in other assets and
travel inventory as the Company terminated acquisition of travel inventory, as
well as depreciation of $828,000 and amortization of film library of $1.5
million. Net cash used by operating activities in 1997 of $12.8 million was
attributable primarily to a net loss of $10.2 million, increases in accounts
receivables and other assets and a decrease in accounts payable, partly offset
by depreciation of $1.0 million and film library amortization of $1.3 million.

Cash used in investing activities was $1.9 million in 1995, $977,000 in 1996
and $2.2 million in 1997. Cash used in investing activities in all periods was
primarily for acquisition of equipment and additions to the film library.

In 1995, cash provided by financing activities of $5.1 million consisted
primarily of proceeds from the issuance of preferred stock, warrants and
equipment financing notes, as well as proceeds from the exercise of stock
options, partly offset by repayment of long-term debt and payments under
capital leases. In 1996, cash provided by financing activities totaled $7.2
million consisting primarily of proceeds from the issuance of preferred stock
and a convertible note, partly offset by repayment of long-term debt and
payments under capital leases. In 1997, cash provided by financing activities
of $37.0 million consisted primarily of net proceeds from the issuance by the
Company of Common Stock in its initial public offering and sales of preferred
stock in a private placement transaction, partly offset by repayment of an
equipment lease line and payment of obligations under capital leases.

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As of December 31, 1997, the Company had $28.7 million of cash, cash
equivalents and marketable securities. As of that date, the Company's
principal commitments consisted of obligations outstanding under the
agreements with AOL, Excite and Fodor's and lease obligations. See Note 7 of
Notes to Consolidated Financial Statements for a summary of the principal
terms of these commitments. Although the Company has no material commitments
for capital expenditures, it anticipates an increase in its capital
expenditures and lease commitments consistent with anticipated growth in
operations, infrastructure and personnel. The Company may establish additional
operations as it expands globally. In addition, pursuant to its arrangement
with AOL, the Company is obligated to make minimum payments totaling $32
million to AOL, of which $6.9 million has been paid as of December 31, 1997,
as well as pay a percentage of commissions earned by the Company in excess of
certain thresholds. Pursuant to its arrangement with Excite, 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. Pursuant to its arrangement with Lycos, the Company is obligated
to make minimum payments totaling $4.25 million to Lycos, as well as pay a
percentage of commissions earned by the Company in excess of certain
thresholds. In addition, the Company is required to develop content areas
featured on AOL, Excite and Lycos sponsored primarily by advertising revenues,
of which the Company will be entitled to receive a share. However, there can
be no assurance that the Company will receive significant revenues, if any,
from such payments. See "Risk Factors--Reliance on Distribution Agreements
with America Online, Excite and Lycos," "--Risk of Termination of Distribution
Agreement with AOL" and Notes 7 and 16 of Notes to Consolidated Financial
Statements.

The Company believes that the net proceeds from this Offering, together with
its current cash and cash equivalents, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures through
2000. If cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek to sell additional
equity or debt securities or to obtain additional credit facilities. The sale
of additional equity or convertible debt securities could result in additional
dilution to the Company's stockholders. There can be no assurance that
financing will be available in sufficient amounts or on terms acceptable to
the Company, if at all. See "Risk Factors--Need for Additional Capital."

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, SFAS No. 128, "Earnings Per Share," was issued and is
effective for the Company's year ending December 31, 1997. As a result, the
Company's earnings per share ("EPS") data for prior periods have been restated
in the accompanying financial statements to conform with SFAS No. 128. In
March 1997, SFAS No. 129, "Disclosure of Information About Capital Structure,"
was issued and is effective for the Company's year ending December 31, 1998.
In June 1997, the FASB issued SFAS No. 130, "Comprehensive Income," and SFAS
No. 131, "Disclosures About Segments of an Enterprise". The Company is
required to adopt these statements effective for 1998. The Company is
considering additional disclosures, if any, which will be required by these
pronouncements.

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BUSINESS

OVERVIEW

Preview Travel, Inc. ("Preview Travel" or the "Company") is a leading
provider of branded online travel services for leisure and small business
travelers. The Company operates its own Web sites (www.previewtravel.com,
www.reservations.com and www.vacations.com), the primary travel service on
America Online, Inc. ("AOL") (AOL keyword: previewtravel), a co-branded travel
Web site with Excite, Inc. ("Excite") (City.Net) and a travel reservation
service and co-branded Web site with Lycos, Inc. ("Lycos"). The Company offers
one-stop travel shopping and reservation services, providing reliable, real-
time access to schedule, pricing and availability information for over 500
airlines, 13,000 hotels and all major car rental companies. The Company's
proprietary technology and user-friendly interface enable customers to easily
and quickly access travel information 24 hours a day, seven days a week, to
make informed choices about their travel purchases. In addition to its
reservation and ticketing service, the Company offers vacation packages,
discounted and promotional fares, travel news and destination content,
including content licensed from Fodor's Travel Publications ("Fodor's"). The
Company complements its compelling content and user-friendly interface with a
high level of customer service.

To broaden its online presence and build brand recognition, the Company has
entered into various strategic relationships. In 1997, the Company entered
into long-term agreements with AOL, the leading online service provider with
over eleven million members, and Excite, a leading search engine provider with
over two million visitors per day. The Company is AOL's primary and preferred
provider of online travel services and the exclusive provider of travel
reservations services on Excite's Travel Channel (City.Net). In February 1998,
the Company launched its Destinations Guides feature created with content
licensed from Fodor's. In March 1998, the Company entered into a two-year
agreement with Lycos, another leading search engine provider, under which the
Company will be the exclusive multi-service provider of travel reservations on
Lycos' Travel Web Guide and Travel Network. Through such strategic agreements,
the Company's travel services are prominently featured on the AOL, Excite and
Lycos travel channels and contextually integrated throughout the AOL, Excite
and Lycos services.

Through its News Travel Network, Inc. division ("NTN"), Preview Travel
produces entertainment programming for broadcast and cable television and the
in-flight market. NTN also produces 90-second news inserts for local
television station newscasts. NTN has compiled an extensive library of over
6,000 hours of proprietary, broadcast quality footage featuring over 2,000
destinations around the world.

INDUSTRY BACKGROUND

Growth of the Internet and Online Commerce

The Internet and commercial online services such as AOL are emerging as
significant global communications media enabling millions of people to share
information and conduct business electronically. A number of factors have
contributed to the growth in the Internet and commercial online services
usage, including the large and growing installed base of advanced personal
computers in the home and workplace, improvements in network infrastructure,
easier, faster and cheaper access to the Internet and commercial online
services, the introduction of alternative Internet access devices and
increased awareness of the Internet and commercial online services among
consumer and business users. International Data Corporation ("IDC")

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estimates that the number of World Wide Web (the "Web") users will grow from
approximately 38 million in 1996 to approximately 170 million by 2000.

The functionality and accessibility of the Internet and commercial online
services have made them an increasingly attractive commercial medium by
providing features that historically have been unavailable through traditional
channels. For example, the Internet and commercial online services provide
users with convenient access to large volumes of dynamic data to support their
investment, purchase and other decisions. Online retailers are able to
communicate effectively with customers by providing frequent updates of
featured selections, content, pricing and visual presentations and provide
tailored services by capturing valuable data on customer tastes, preferences,
shopping and buying patterns. Unlike most traditional distribution channels,
online retailers do not have the burden of managing and maintaining numerous
local facilities to provide their services on a global scale. In contrast,
online retailers benefit from the relatively low cost of reaching and
electronically serving customers worldwide from a central location. Because of
these advantages, an increasingly broad base of products and services are
being sold online, including books, brokerage services, computers and music,
as well as travel services. Jupiter Communications estimates that the total
value of services and products sold over the Web by retailers, catalogers and
online merchants grew from $707 million in 1996 to approximately $2.6 billion
in 1997, and will increase to approximately $24.5 billion by 2000.

Moreover, as the number of online content, commerce and service providers
has expanded, strong brand recognition and strategic alliances have become
critical to the success of such companies. Brand development is especially
important for online retailers due to the need to establish trust and loyalty
among consumers in the absence of face-to-face interaction. In addition, some
online retailers have begun to establish long-term strategic partnerships and
alliances with content, commerce and service providers to rapidly build brand
recognition and trust, enhance their service offerings, stimulate traffic,
build repeat business, take advantage of cross-marketing opportunities and
create barriers to entry.

The Traditional Travel Industry

The travel industry is large and growing, with travelers in the United
States spending over $470 billion on travel and tourism in 1996, according to
the Travel Industry Association of America. Historically, airlines, hotels,
rental car agencies, cruise lines and vacation packagers (collectively,
"travel suppliers") have relied on internal sales departments and travel
agencies as their primary distribution channels. According to the American
Society of Travel Agents ("ASTA"), travel agency sales in the United States
grew from $86 billion in 1991 to $101 billion in 1995, of which approximately
half was spent on leisure travel. The traditional travel agency channel is
highly fragmented, with few nationally recognized brands. According to ASTA,
there are over 23,000 travel agencies operating in more than 33,000 locations
in the United States, with the average travel agency generating less than $3
million in annual gross bookings per location. Furthermore, in 1995, the top
50 travel agencies accounted for less than 33% of all airline bookings.

Travel agents are compensated primarily through commissions paid by travel
suppliers on services booked. Some travel agencies also charge service fees to
their customers. Traditionally, typical standard base commission rates paid by
travel suppliers to travel agents have been approximately 10% for airline
tickets (subject to a maximum of $25 and $50 for one-way and roundtrip
tickets, respectively), 10% for hotel reservations and car rentals, and 10% to
15% for cruises and vacation packages. In addition, travel agencies can earn
significant performance-based incentive compensation ("override commissions")
from travel suppliers, which can substantially impact financial performance.
These commission rates and override commissions are determined by travel
suppliers and are subject to frequent change. For example, in a move to lower
distribution costs, in September 1997, the major U.S. airlines reduced the
commission rate payable to traditional travel agencies from approximately 10%
to approximately 8%, following a similar move by the major U.S. airlines in
the first nine months of 1997 reducing the commission rate payable to online
travel services from approximately 8% to approximately 5%. In addition, in a
continuation of this trend, in the first half of 1998 one major airline
reduced its fixed rate commission structure for online roundtrip ticket sales
to ten dollars and a second major airline further reduced its cap on per-
roundtrip ticket commissions payable for

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online ticket sales to ten dollars. The Company expects that its weighted
average commission on online transaction revenue will decline as a result of
these reductions. Due to the limited profitability of many traditional travel
agencies, the Company believes that the downward pressure on commission rates
paid to traditional travel agencies, such as the recent reduction imposed by
most major airlines, may cause these agencies to charge service fees to their
customers, shift their focus to higher margin non-air travel services or
reduce the level of customer service in an effort to lower costs.

Travel agencies typically book reservations through electronic global
distribution services ("GDS") such as Galileo International Partnership's
Apollo system ("Apollo") and SABREGroup Holdings Inc.'s SABRE system
("SABRE"), which provide real-time access to voluminous data on fares,
availability and other travel information. The GDS data is constantly
changing, with as many as one million airfare changes being made daily.
Customers traditionally have relied on travel agents to access and interpret
such rapidly changing information via complex and proprietary interfaces to
GDS systems. As a result, the ability of customers to obtain the most
favorable schedules and fares has been subject to the skill and experience of
individual travel agents, whose availability may be limited.

The Online Travel Opportunity

Recent trends in the traditional travel industry have contributed to a need
for a more effective and efficient means of purchasing and distributing travel
services to address the changing needs of consumers and travel suppliers. The
increasing complexity and time-sensitivity of pricing structures for travel
services have generally outpaced traditional means of delivering accurate and
reliable information to customers. Moreover, at a time when many traditional
travel agencies may be experiencing pressure to reduce levels of service as a
result of recent reductions in commission rates, many customers are demanding
greater convenience and flexibility in how, where and when they shop for
travel services. In an effort to reduce their distribution costs and develop
more direct relationships with their customers, travel suppliers seek ways to
distribute their services outside of the traditional travel agency channel. In
addition, the fragmentation of the travel agency channel often limits the
ability of travel suppliers to quickly implement effective marketing programs
targeted to specific customer segments.

As a result of these trends, the Internet and commercial online services
have emerged as an attractive medium through which travel services can be
purchased. According to Jupiter Communications, online travel bookings were
$274 million in 1996 and are expected to grow from $816 million in 1997 to
$8.6 billion in 2002, representing a projected compounded annual growth rate
of 77% for the period 1996 through 2002. The electronic nature of the online
medium enables participants to automate the processing and confirmation of
travel reservations, thus facilitating lower cost fulfillment of services and
reducing the need for investment in local facilities. The online medium also
provides travel suppliers with an effective advertising and promotional
vehicle. According to Competitive Media Reporting, in 1995 the travel industry
purchased over $2.3 billion in advertising through traditional vehicles such
as broadcast and cable television, radio, print and outdoor media to reach and
influence customers. Jupiter Communications reported that advertising revenue
on online travel-related sites was $2.3 million in 1996 and is expected to
grow from $11.0 million in 1997 to $281.5 million in 2002, representing a
projected compounded annual growth rate of 129% for the period 1996 through
2002.

Notwithstanding the attractive opportunities presented by the online travel
service market, significant barriers exist which make it increasingly
difficult to cost-effectively enter the online travel marketplace. In order to
succeed in the online travel service industry, entrants must establish broad
distribution to drive online traffic and achieve economies of scale to
overcome the following barriers: (1) required investments in technology and
technical infrastructure, (2) reduced level of commissions paid by travel
suppliers on bookings made online, (3) cost of building a brand, and (4)
challenges of creating compelling content. Further, the Company believes that
the largest traditional travel agencies that sell services through franchisee
or representative networks may be hesitant to engage in online sales of travel
services, which would directly compete with their networks and result in lower
average commissions.

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PREVIEW TRAVEL SOLUTION

Preview Travel is a leading provider of branded online travel services for
leisure and small business travelers, offering one-stop travel shopping for
airline tickets, hotel rooms, car rentals and vacation packages. The Company
operates its own Web sites (www.previewtravel.com, www.reservations.com and
www.vacations.com), the primary travel service on America Online (AOL keyword:
previewtravel) and co-branded travel Web sites with Excite and Lycos. Preview
Travel has already become one of the most widely known, used and cited online
services for travel. As of December 31, 1997, 2.6 million users had registered
on the Company's online site, and over $100 million in gross bookings of
travel services had been purchased by approximately 168,000 customers in over
297,000 transactions.

Preview Travel's online reservation service was launched in May 1996 to
respond to its customers' needs for consistent and more immediate access to
rapidly changing travel-related information, and to capitalize on
opportunities created by the emergence of online commerce and the existing
inefficiencies of the traditional travel industry. The Company's full-featured
reservations and ticketing services enable customers to book their own travel
arrangements 24 hours a day, seven days a week. Preview Travel provides
reliable, real-time access to relevant schedule, pricing and availability
information for over 500 airlines, 13,000 hotels worldwide and all major car
rental companies. The Company's technology and proprietary interface enable
customers to easily and quickly access this information to make informed
choices about their travel purchases. Customers also can find extensive
destination information, photos, streaming video and Web links, providing them
with valuable resources for planning their travel.

The Company believes that, in addition to benefiting consumers, its online
travel services benefit travel suppliers by providing them with an efficient
channel to reach travel-oriented consumers. In effect, Preview Travel creates
an electronic marketplace that matches the purchasing needs of consumers with
the available inventory of travel suppliers. Travel suppliers also can realize
cost savings from distributing their services through the Company. In the
airline industry, for example, a higher percentage of tickets booked online
are issued as electronic tickets, representing a substantial savings in
transaction costs for the airlines. Through customer profiles, the Company
compiles demographic and behavioral data about its customers, which data can
be analyzed and used in cooperation with the Company's travel supplier
partners to develop personalized marketing and services for individual
customers and groups of customers.

Key features of the Preview Travel solution include:

Easy-to-Find. The Company's online travel services can be accessed through
AOL as well as the Web 24 hours a day, seven days a week, enabling customers
to shop for and purchase travel services at their convenience. Through its
long-term agreements with AOL, the leading online service provider with over
eleven million members, and with Excite and Lycos, two leading search engine
providers, the Company's travel services are prominently featured on the AOL,
Excite and Lycos travel channels and also contextually integrated throughout
the AOL, Excite and Lycos services.

Easy-to-Use. The Company has developed a graphical user interface with a
unique "look and feel" emphasizing ease of use. The Company continually
enhances its interface based on feedback from regularly conducted focus groups
and market research conducted on the Company's behalf. In addition, the
Company provides online help and assistance designed to ensure that consumers
get the full benefit of Preview Travel's services, including tips on how to
find the best available rates and fares. The Company's customer service
center, staffed by travel professionals, provides toll-free telephone support
and fulfillment services seven days a week.

Comprehensive, Up-to-Date Selection. The Company provides comprehensive,
accurate and timely travel information to enable customers to prioritize among
price, convenience and services without going through a traditional travel
agent intermediary. Through a computerized search and retrieval process,
customers are presented with a wide array of travel service options available
in the GDS systems accessed by

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the Company, updated on a real-time basis. For example, the Company's
Farefinder service presents the lowest fares available in the Apollo GDS
system for round-trip airline travel to key cities selected by the user.

Personalized Service. By compiling a profile of each online customer who
purchases travel services from the Company and tracking the preferences and
behavioral patterns of its customers, the Company obtains key customer
information that enables Preview Travel to tailor value-added services for its
customers, such as e-mail notifications for schedule changes and flight
cancellations, last-minute travel opportunities and other targeted marketing
programs developed in conjunction with travel suppliers.

Compelling Content. The Company produces and acquires compelling content for
its online areas, including developing an easy-to-use interface with a
customer-oriented "look and feel" and links to numerous other travel-related
sites. In addition, through the Company's agreement with Fodor's, destination
information from Fodor's Gold Guides series is prominently featured in its
online areas, currently providing travel information for 87 destination sites.

Transaction Security. The Company believes that account and transaction
security are critical factors in the success of the online travel industry.
The Company uses a combination of proprietary and industry-standard encryption
and authentication measures designed to protect its customers' information. As
an added level of protection for its customers, the Company neither retains
credit card information nor sells the information in its customer database to
third parties.

STRATEGY

Preview Travel's objective is to be the leading provider of branded online
travel services for leisure and small business travelers. The Company plans to
attain this goal through the following key strategies:

Deliver Compelling Value to Customers. The Company seeks to deliver
comprehensive, accurate and easily accessible information, innovative tools
and high levels of personalized service to enable customers to make informed
purchases of travel services based on their preferred combination of
convenience, price, class of service and amenities. In addition, the Company
seeks to offer its customers a high-quality online experience through
relevant, informative and entertaining content, as well as simple and
efficient navigation and search capabilities.

Build Customer Loyalty and Brand Recognition. By focusing on customer
service and striving to deliver the highest-quality online experience to its
customers, the Company seeks to expand its customer base and build strong
customer loyalty. The Company also seeks to build global brand recognition by
combining world-class customer service with the Company's distinctive online
presence, as well as by employing a variety of marketing and promotional
efforts, including public relations activities, targeted advertising across a
variety of electronic and print media and strategic distribution arrangements.
In addition, the Company intends to continue promoting its online services
through its national television programs.

Enhance and Expand Strategic Relationships. The Company intends to continue
to leverage its strategic relationships with AOL, Excite, Fodor's, Lycos and
travel suppliers to increase awareness of the Company's online travel services
through a variety of joint marketing programs, including targeted e-mail,
online promotions, booking incentives and interactive advertising. The Company
also intends to broaden its online visibility and expand its customer base by
entering into relationships with additional domestic and international
Internet access providers, content and commerce providers, search engines and
other Web sites.

Broaden Existing Offerings and Pursue Incremental Revenue Opportunities. The
Company intends to capitalize on its brand, online commerce experience,
operating infrastructure and customer base to broaden its online travel
offerings to include a broader selection of hotels and cruises, vacation
packages and special interest tours. The Company plans to aggressively pursue
media sales to targeted advertisers based on

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increased traffic to its online sites. The Company also plans to offer
additional services and products to meet its customers' needs, such as travel
insurance, travel financing services and travel-related merchandise.

Leverage Travel Programming and Television Relationships. The Company
leverages the editorial, syndication and advertising resources of its
television operations to enhance its online sites. Consistent with this
strategy, Preview Travel sells online advertising bundled with television
advertising to targeted sponsors, promotes its online travel services on its
television programs and adapts television content for the Company's online
sites.

Continue Investment in Technology. The Company uses scaleable, industry-
standard hardware and software that enable rapid deployment of additional
capacity. In addition, the Company intends to continue to invest substantial
resources in developing, acquiring and implementing technology-driven
enhancements to its online services and sites, including continuing to make
its user interface faster, more user-friendly and intuitive, providing
increasingly valuable personalized information and incorporating multimedia
content.

Expand into International Markets. The Company intends to expand its brand,
operating infrastructure and strategic relationships globally. To achieve this
objective, the Company intends to localize the user interface and its customer
service operations to offer native language capability, travel services and
content that complies with local regulations and customs.

PREVIEW TRAVEL ONLINE SERVICE

Through the Company's Web sites or on AOL, customers can easily access the
wide selection of Preview Travel online travel services in order to shop for
and book airline tickets, car rentals and hotel reservations.

The Preview Travel Experience. Visitors to the Company's online sites are
presented with a wide variety of travel information, including airline ticket
prices for popular destinations (Farefinder), destination information, travel
news and specials, vacation packages and contests. To use the Company's
reservation services or purchase an airline ticket, each customer completes a
profile that includes required information such as name, street address, e-
mail address and telephone number, as well as optional information such as
preferred home airport, seating assignment, special meals, airline, car and
hotel preferences, club memberships and frequent flier information. This
information is stored in the Company's database and is used solely by the
Company to customize its services.

By completing personal travel profiles, customers can automatically access
the Company's reservation system on subsequent visits, thus expediting the
reservation process. Once a customer accesses the reservation system, fares
and schedules of over 500 airlines, 13,000 hotels and the major car rental
companies may be searched and reservations booked through the Company's
system. Guided by an easy-to-use interface, the customer selects travel
options such as departure and destination cities, airline preference, class of
service and hotel and car selection. A key feature of the Company's service is
the ability to shop and compare many combinations of prices and schedules,
enabling customers to maximize their travel dollar. For domestic air travel,
the Company's Farefinder service automatically finds the lowest published
fares available in the Apollo GDS system on the dates of travel selected by
the customer.

To complete a purchase of an airline ticket, the customer enters a credit
card number, which is validated and transmitted to the GDS system. The
customer receives an e-mail confirmation soon thereafter. Depending on the
departure date and method of ticketing, airline tickets and itineraries are
sent to the customer at no additional charge by express delivery or through
regular mail. Upon returning from his or her trip, first time customers
automatically receive another e-mail that includes a thank-you message and a
customer satisfaction survey.

Online Travel Services Content. In addition to accessing the Company's
reservation services, customers can use the following travel-related services
to make better informed travel purchase decisions:

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. Destination Guides. This feature, launched in February 1998, currently
provides comprehensive destination guides for 87 cities with content
from Fodor's Travel Publications. Users can access Fodor's reviews and
picks for restaurants and hotels, research information on sights and
attractions or create their own customized travel mini-guide.

. Farefinder. This service provides quick and easy access to the lowest
airfares available in the Apollo GDS system from a customer's home city
to destinations around the world. Farefinder searches the Apollo GDS
system four times daily to update the posted fares.

. Business Travel Center. This service, launched in February 1998, offers
access to travel information and resources of particular interest to the
small business and home office market. The center features a travel
newswire targeted to business travelers, as well as links to small-
business travel resources, hotel and restaurant finders and reservation
services.

. Travel Newswire. This feature provides customers with timely information
on the latest travel bargains by highlighting daily listings of
discounted airfares, special hotel rates and car rental offers.

. Vacations. This service offers complete vacation packages (airline,
hotel and car rental), cruises and specialty tours, with an emphasis on
providing value to customers. Customers can also find extensive
destination information, photos, video and links to relevant Web sites.

. Find-a-Trip. This feature allows the customer to select from a variety
of vacation packages matching the customer's preferences as to
activities, location and price. In addition, Find-a-Trip provides the
customer with extensive information about hotels and destinations, which
in many instances is illustrated by photos and streaming video.

Customer Service. The Company has invested and will continue to invest in
systems, personnel and training to maintain a premier in-house customer
service operation, which the Company believes is essential to establishing and
maintaining long-term customer relationships. In addition to extensive online
help, Preview Travel's customers have access to e-mail support and toll-free
telephone support seven days per week to help them with any problems or
changes before, during or after their travel.

STRATEGIC RELATIONSHIPS

Preview Travel pursues strategic relationships to increase its access to
online customers, to build brand recognition and to expand the Company's
online presence. To date, the Company has established the following alliances,
among others, for distribution and product enhancement:

America Online. Preview Travel and America Online, the leading Internet
online service provider with over eleven million members, have entered into an
agreement establishing Preview Travel as AOL's primary and preferred provider
of travel services through a Preview Travel content area on the AOL Network
and AOL's Web site (aol.com) (the "AOL Online Area"). The Company's original
agreement with AOL was entered into in November 1995 and was restated to
expand the relationship in September 1997. In addition to establishing the
Company as AOL's primary and preferred provider of travel services, 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 Preview Travel. Over the five year term of the restated
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 thresholds. The Company has also agreed to
deliver content through the AOL Online Area, provide travel services that are
competitive in price and performance and manage, operate and support such
content and travel services. 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 arrangement.
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

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advertising revenues thereafter. See "Certain Transactions" for a description
of the Company's relationship with AOL.

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. In particular,
the Company's ability to achieve such specified annual levels of travel
services bookings will require the Company to significantly increase such
bookings from current levels, with the first annual measurement date occurring
in September 1998. Travel services sold through the AOL Network accounted for
89%, 77%, 67% and 62% of the Company's total online revenues for the three
months ended March 31, 1997, June 30, 1997, September 30, 1997 and December
31, 1997, respectively. Accordingly, the AOL arrangement represents a
significant distribution channel for the Company's travel services and any
termination of the Company's agreements with AOL would likely have a material
adverse effect on the Company's business, operating results and financial
condition. See "Risk Factors--Reliance on Distribution Agreements with America
Online, Excite and Lycos."

Excite. In September 1997, Preview Travel and Excite, a leading search
engine provider with over two million visitors a day, entered into an
agreement under which Preview Travel became the exclusive provider of travel
reservations services for Excite's Travel Channel (City.Net) in the U.S. and
on the WebCrawler 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. The Company's arrangement with Excite expires in September
2002, or earlier in the event of a material breach. If the Company enters into
a third party Internet co-branding agreement with substantially the same scope
as its agreement with Excite and on terms which, taken as a whole, are more
favorable for such third party than the terms of the Excite agreement, then
the Company is required to offer such terms to Excite. Travel services sold
through Excite accounted for 8%, 13% and 15% of the Company's online revenues
for the three months ended June 30, 1997, September 30, 1997 and December 31,
1997, respectively. Accordingly, the Excite arrangement is expected to
represent a significant distribution channel for the Company's travel
services, and any termination of the Company's agreement with Excite would
likely have a material adverse affect on the Company's business, operating
results and financial condition. See "Risk Factors--Reliance on Distribution
Agreements with America Online, Excite and Lycos."

Lycos. In March 1998, Preview Travel and Lycos, a leading search engine
provider, entered into an agreement pursuant to which Preview Travel will be
the exclusive travel service provider of travel reservation services for
Lycos' Travel Web Guide and Travel Network. In addition, Preview Travel and
Lycos will create a co-branded Web site that will be promoted throughout the
Lycos Web site, and Lycos has agreed to deliver a minimum number of annual
impressions to promote the co-branded site. In addition, the Company is
eligible to receive payments from Lycos representing a share of advertising
revenues received by Lycos in connection with the co-branded site; however,
there can be no assurance that such payments, if any, will be significant.
Over the two-year term of the agreement, the Company is obligated to make
minimum payments

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totaling $4.25 million to Lycos, as well as pay a portion of commissions
earned by the Company through the co-branded website in excess of certain
thresholds. In addition, the Company has committed to purchase an aggregate of
approximately $500,000 in advertising on Lycos' sites, which it may resell to
third parties. The Lycos arrangement is expected to represent a significant
distribution channel for the Company's travel services, and any termination of
the Company's agreement with Lycos would likely have a material adverse affect
on the Company's business, operating results and financial condition. See
"Risk Factors--Reliance on Distribution Agreements with America Online, Excite
and Lycos."

Fodor's. Preview Travel has entered into a nonexclusive agreement with
Fodor's Travel Publications, Inc. ("Fodor's"), a leading travel guide book
publisher, to license content from Fodor's Gold Guide series and other
guidebook series. In February 1998, the Company launched its Destinations
Guides feature created with the Fodor's content. The Destination Guides
feature is available on the Company's sites on America Online, Excite, Lycos
and the Web. Under the agreement, the Company created and operates a co-
branded Web site (www.fodors.previewtravel.com) that offers links to both
Fodor's and Preview Travel's websites. Under the terms of the agreement, the
name of the co-branded Web site will appear on the outside front covers of all
1999 Gold Guide editions. The agreement also requires that Fodor's include a
promotional page for Preview Travel in each of the 1999 and 2000 Gold Guide
editions published by Fodor's.

There can be no assurance that the Company will achieve sufficient online
traffic, travel bookings or commissions to realize economies of scale that
justify the Company's significant fixed financial obligations to AOL, Excite,
and Lycos or that the Company will satisfy the minimum levels of travel
services bookings required to maintain the AOL and Excite agreements and
content delivery required to maintain the AOL, Excite and Lycos agreements,
and failure to do so would likely have a material adverse effect on the
Company's business, operating results and financial condition. See "Risk
Factors--Reliance on Distribution Agreements with America Online, Excite and
Lycos."

The Company is aggressively pursuing other strategic relationships for both
distribution, marketing and content that could generate additional significant
financial obligations over the next several years. There can be no assurance
that the Company will be successful in establishing such additional strategic
relationships. See "Risk Factors--Reliance on Distribution Agreements with
America Online, Excite and Lycos."

MARKETING AND SALES

Preview Travel's marketing strategy is to strengthen the Company's brand
name, enhance customer awareness, develop loyalty programs to better serve the
Company's customers, continue to add new customers to the Company's database
and pursue complementary revenue opportunities by leveraging the Company's
distribution capabilities, compelling content and extensive customer database.
The Company's sales strategy is focused in part on generating advertising and
promotional revenue from sponsors who seek a cost-effective way to reach a
travel-oriented audience online.

The Company maintains a proprietary customer database comprised of
demographic profiles, customer preferences, shopping and buying patterns and
other key customer attributes. This data enables the Company to create and
quickly implement marketing programs targeted to specific customer segments.
In addition, the Company regularly communicates with its customers through
targeted, relevant e-mail.

The Company also employs a variety of traditional media programs and
promotional activities to enhance the effectiveness of the Company's marketing
initiatives:

Advertising. To supplement its strategic relationships with AOL, Excite and
Lycos, the Company invests in online advertising to drive traffic to its
online sites. By placing advertisements on selected high volume sites, as well
as purchasing targeted keywords on several popular search engines such as
Yahoo!, Alta Vista, Infoseek and others, the Company seeks to cost-effectively
generate traffic to the Preview Travel online

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site. The Company may also advertise from time to time in traditional media
such as print, radio and broadcast to increase the awareness of its service.

Public Relations. Preview Travel proactively pursues public relations
opportunities to build brand awareness. The Company targets traditional print,
radio, syndicated news services and broadcast outlets with its public
relations programs and has been covered widely by the travel, business,
technology and consumer press. The Company also pursues coverage by online
publications, search engines and directories. More than 1,000 independent Web
sites have hyperlinks to the Company's Web sites, helping to increase brand
awareness and generate traffic to its online sites. Preview Travel also
actively participates in industry events and conferences.

Co-marketing/Promotions. The Company has established a number of significant
co-marketing relationships to promote its service and to sponsor contests that
offer travel-related prizes. These programs typically involve participation
with airlines, hotels, car rental agencies and online service providers. The
Company intends to enter into additional co-marketing relationships in support
of its marketing strategy.

From time to time, the Company offers various incentives and awards to its
customer base. These incentives are designed to increase customer loyalty and
awareness of Preview Travel's brand and travel services. For example, the
Company has provided customers with bonus frequent flier miles and special
companion fares during targeted promotional periods. The Company also engages
in promotional programs with hotels and car rental agencies.

Online Media Sales. The Company believes that the sale of online advertising
will become an increasingly important source of revenue. Accordingly, the
Company intends to increase its investment in media sales that target key
advertisers who seek to reach a travel-oriented online audience. Client
advertisements are incorporated into the Company's online sites in the form of
banners, links and buttons that encourage viewers to click through for
additional information. In addition, Preview Travel can develop extensive
editorial and marketing content to support the various marketing initiatives
of sponsors. In conjunction with the NTN media sales team, the Company offers
integrated media programs that incorporate presence on the Company's online
sites, participation in targeted e-mail programs and advertising time in the
Company's broadcast television and in-flight programs. Recent online
advertisers include AT&T, American Tourister Luggage, AVIS Rental Car,
SportsLine USA, Celebrity Cruises, Caribbean Tourism Organization and
MasterCard.

TECHNOLOGY

The Company's transaction-processing system automates the processing of
customer orders, interacts with the systems of third party travel suppliers,
searches and filters travel information and provides real-time operational
reports to management. The Company has developed proprietary applications that
interact with third party systems such as GDS systems to present an integrated
easy-to-use interface to the Company's customers, accessible by either
standard Web browsers or AOL client software to access travel reservation
information and make purchases. In addition, the Company's systems support
automated e-mail communications with customers to facilitate confirmations of
orders, provide customer support, obtain customer feedback and engage in
targeted marketing programs. The Company's online sites also utilize a number
of proprietary search, screen-scraping and database tools. While the system is
built on a combination of proprietary and commercial software and hardware,
the Company seeks to utilize industry-standard technology whenever possible
and focuses its development efforts on creating and enhancing proprietary
software that is unique to its business, as well as enhancing its existing
service offerings and creating new products.

Preview Travel maintains a relational database containing information
compiled from customer profiles, shopping patterns and sales data. The Company
has developed, and continues to develop, techniques for analyzing the
information in this database to develop targeted marketing programs, to
provide personalized

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<PAGE>

and enhanced customer service and to take advantage of short-term
opportunities in the travel marketplace. The Company does not retain credit
card information from its customers and has committed to its customers not to
sell or rent customer data to third parties. The Company's complex database
was designed to be scaleable to permit large transaction volumes with no
significant software changes. In most circumstances, capacity is increased
through the addition of new servers or the addition of processing boards to
existing servers. The Company believes that the scaleability of its
architecture has been demonstrated by serving over 2.6 million registered
users since May 1996.

Internet users are linked to the Company's servers through a T3 data
communication line from the Company's Internet access provider, GeoNet
Communications, and AOL users are linked to the servers through a single T1
line. Additional 56 Kbp leased lines are used for data communications between
the servers and systems run by third party reservation systems such as
Galileo's Apollo GDS system and the global hotel reservation system operated
by Pegasus. The Company has significantly expanded its data communications
capacities in recent months and anticipates continuing to do so in the future
to support increased growth. The Company maintains an Internet firewall to
protect its internal systems and all credit card transactions are processed
using encryption and authentication technology, including public key
cryptography technology and secure socket layer technology. There can be no
assurance that the Company's security measures will prevent security breaches
or that failure to prevent such security breaches will not have a material
adverse effect on the Company's business, operating results and financial
condition. See "Risk Factors--Online Commerce and Database Security Risks."

Any reduction in performance, disruption in the Internet access or
discontinuation of services provided by AOL, GeoNet Communications, any other
Internet service provider, or telecommunications provider or any disruption in
the Company's ability to access the systems of Galileo, Pegasus or any other
travel reservation systems, could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company's transaction-processing systems and network
infrastructure will be able to accommodate increases in traffic in the future,
or that the Company will, in general, be able to accurately project the rate
or timing of such increases or upgrade its systems and infrastructure to
accommodate future traffic levels on its online sites. In addition, there can
be no assurance that the Company will be able in a timely manner to
effectively upgrade and expand its transaction-processing systems or to
successfully integrate any newly developed or purchased modules with its
existing systems. See "Risk Factors--Risk of Capacity Constraints; Reliance on
Internally Developed Systems; System Development Risk." There can be no
assurance that the Company will successfully utilize new technologies or adapt
its online sites, proprietary technology and transaction-processing systems to
customer requirements or emerging industry standards. See "Risk Factors--Rapid
Technological Change."

Substantially all of the Company's computer and communications hardware is
located at a single facility in San Francisco, California. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and
similar events. The Company currently does not have redundant systems or a
formal disaster recovery plan and does not carry sufficient business
interruption insurance to compensate it for losses that may occur. Despite the
implementation of network security measures by the Company, its servers are
vulnerable to computer viruses, physical or electrical break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and confirm customer reservations. See "Risk Factors--Risk
of System Failure; Single Site."

PREVIEW TRAVEL TELEVISION OPERATIONS

In addition to its online service, Preview Travel owns and operates its
television programming division, NTN. NTN is an independent producer of
travel-related programming for broadcast and cable television and the in-
flight market. NTN clients include affiliates of all major broadcast networks
in the United States and foreign broadcast, cable and satellite networks. NTN
handles program production, domestic program

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syndication and media sales in-house. Revenues from the Company's television
operations accounted for 79% and 56% of total revenues for the years ended
December 31, 1996 and 1997, respectively.

NTN's film library, built up over 16 years, has grown to over 6,000 hours of
proprietary, broadcast-quality footage of over 2,000 destinations around the
world. Through the efforts of a staff of award-winning producers, writers and
editors, this library is updated and expanded by over 50 new on-location
productions per year. The library has been logged and indexed in a searchable
text database allowing easy access to the library content for use by the
Company.

Program Production. NTN's News Programming group produces five 90-second
travel-related news inserts per week for distribution to local broadcast
stations for use in local newscasts. The Company's Consumer Travel Reports is
shown daily in over 55 markets throughout the United States. In addition, the
News Programming group produces fifty-minute documentaries for the sell-
through video market.

NTN's Entertainment Programming group produces a variety of half-hour
specialty programs for the domestic and international television and in-flight
markets. Included in these programs is a weekly half-hour magazine-style
program called Travel Update that can be seen in over 90 markets throughout
the United States. Travel Update features travel news and destination features
with links to online resources including travelupdate.com to enable users to
easily find additional information online. NTN's international programming
portfolio includes Globe-Trotter, World's Weirdest Places, Earth Journeys, the
e-Report, Holiday USA and Bon Voyage. The Company also licenses certain video
content from its library to third parties for use in non-competitive programs.
In-flight programs include Northwest World Update, On Arrival and Northwest
Network Business Channel, which are produced under an agreement with Northwest
Airlines.

Program Syndication. The Company employs an in-house staff of sales
professionals that syndicates Travel Update and Consumer Travel Reports, as
well as three other news insert series produced by third parties: Dr. Dean
Edell's Medical Reports, CNET Technology Reports and Jack Hanna's Animal
Tales. These news inserts are syndicated to local broadcast television
stations in exchange for either cash or commercial time during their local
newscasts. These local commercial time slots are packaged and sold to national
advertisers. Travel Update is syndicated to local stations in exchange for a
portion of the total commercial time within the program, which is then sold by
the Company to national advertisers. Internationally, programs are licensed
for specific uses and limited times for cash fees negotiated with the
broadcast or cable network.

The Company's ability to generate revenues from its television operations,
as well as its ability to use its television programming to promote and
enhance its online services and brand recognition, depends upon its ability to
reflect in its programming the changing tastes of consumers, news directors
and program directors, and to secure and maintain distribution for its
television programming on acceptable commercial terms through local stations,
and domestic and international cable and broadcast networks. These syndication
agreements typically have durations of one year or less, and there can be no
assurance that such stations and networks will continue to renew syndication
agreements for the Company's programs. In addition, the Company's ability to
cost-effectively update and expand its film library is essential to its
ability to continue to offer compelling content. Although the Company
maintains a back-up of the film library in offsite storage, both the film
library and the back-up library are vulnerable to damage from fire, flood,
break-ins, earthquake and similar events. Loss of access to its film library
for an extended period of time could have a material adverse effect on the
Company's business, operating results and financial condition. See "Risk
Factors--Risks Associated with Television Operations."

COMPETITION

The online travel services market is new, rapidly evolving and intensely
competitive, and the Company expects such competition to intensify in the
future. The Company competes primarily with traditional travel agency
reservation methods and online travel reservation services. In the online
travel services market, the Company competes with other entities that maintain
similar commercial Web sites, such as Expedia (operated

45
<PAGE>

by Microsoft Corporation), Travelocity (operated by SABREGroup Holdings Inc.,
a majority-owned subsidiary of American Airlines), Cendant Corporation,
TravelWeb (operated by Pegasus), Internet Travel Network, Biztravel.com, and
TheTrip.com among others. Several traditional travel agencies, including
larger travel agencies such as American Express Travel Related Services Co.
Inc., Uniglobe Travel and Carlson Wagonlit Travel, have established, or may
establish in the future, commercial Web sites offering online travel services.

In addition to the traditional travel agency channel, most travel suppliers
also sell their services directly to customers, predominantly by telephone. As
the market for online travel services grows, the Company believes that the
range of companies involved in the online travel services industry, including
travel suppliers, traditional travel agencies and travel industry information
providers, will increase their efforts to develop services that compete with
the Company's services. Many airlines and hotels, such as United Airlines,
offer travel services directly through their own Web sites, including travel
services from other travel suppliers, eliminating the need to pay commissions
to third parties such as the Company. The Company is unable to anticipate
which other companies are likely to offer competitive services in the future.
There can be no assurance that the Company's online operations will compete
successfully with any current or future competitors.

Many of the Company's current and potential competitors have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the
Company and may enter into strategic or commercial relationships with larger,
more established and well-financed companies. Certain of the Company's
competitors may be able to secure services and products from travel suppliers
on more favorable terms, devote greater resources to marketing and promotional
campaigns and devote substantially more resources to Web site and systems
development than the Company. In addition, new technologies and the expansion
of existing technologies may increase competitive pressures on the Company. In
particular, Microsoft Corporation has publicly announced its intent to invest
heavily in the area of travel technology and services. Increased competition
may result in reduced operating margins, loss of market share and brand
recognition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, operating results and financial condition. See "Risks
Factors--Competition."

PROPRIETARY RIGHTS

The Company regards its copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to its success,
and relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with the Company's employees,
customers, partners and others to protect its proprietary rights. The Company
pursues the registration of certain of its key trademarks and service marks in
the United States and internationally. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which the Company's products and services are made available online. The
Company has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. While the Company attempts to ensure that the
quality of its brand is maintained by such licensees, there can be no
assurance that such licensees will not take actions that might materially
adversely affect the value of the Company's proprietary rights or reputation,
which could have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be adequate
or that third parties will not infringe or misappropriate the Company's
copyrights, trademarks, trade dress and similar proprietary rights. In
addition, there can be no assurance that other parties will not assert
infringement claims against the Company. The

46
<PAGE>

Company may be subject to legal proceedings and claims from time to time in
the ordinary course of its business, including claims of alleged infringement
of the trademarks and other intellectual property rights of third parties by
the Company and its licensees. Such claims, even if not meritorious, could
result in the expenditure of significant financial and managerial resources.
See "Business--Legal Proceedings."

The Company also intends to continue to strategically license certain
content for its online sites from third parties, such as it did with Fodors,
including content which is integrated with internally developed content and
used on the Company's online sites to provide key services. There can be no
assurance that these third party content licenses will be available to the
Company on commercially reasonable terms or that the Company will be able to
successfully integrate such third party content. Such content licenses may
expose the Company to increased risks, including risks associated with the
assimilation of new content, the diversion of resources from the development
of the Company's content, the inability to generate revenues from new content
sufficient to offset associated acquisition costs and the maintenance of
uniform, appealing content. The inability to obtain any of these licenses
could result in delays in site development or services until equivalent
content could be identified, licensed and integrated. Any such delays in site
development or services could have a material adverse effect on the Company's
business, operating results and financial condition. See "Risk Factors--
Uncertain Protection of Intellectual Property; Risks of Third Party Licenses."

GOVERNMENT REGULATION

Certain segments of the travel industry are heavily regulated by the United
States and international governments, and accordingly certain services offered
by the Company are affected by such regulations. For example, the Company is
subject to United States Department of Transportation ("DOT") regulations
prohibiting unfair and deceptive practices. In addition, DOT regulations
concerning the display and presentation of information that are currently
applicable to the GDS services accessed by the Company could be extended to
the Company in the future, as well as other laws and regulations aimed at
protecting consumers accessing online travel services or otherwise. In
California, under the Seller of Travel Act, the Company is required to
register as a seller of travel, comply with certain disclosure requirements
and participate in the State's restitution fund. The television industry is
also subject to extensive regulation at the federal, state and local levels,
including the Federal Communications Act and rules and regulations of the
Federal Communications Commission. In addition, legislative and regulatory
proposals under ongoing consideration by Congress and federal agencies may
materially affect the television industry and the Company's ability to obtain
distribution for its television programming.

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<PAGE>

services could have a material adverse effect on the Company's business,
operating results and financial condition. See "Risk Factors--Governmental
Regulation and Legal Uncertainties."

EMPLOYEES

As of December 31, 1997, the Company employed a total of 181 people, of whom
132 where involved in online travel service operations and 49 were involved in
television operations. The Company's ability to attract and retain highly
qualified employees will be the principal determinant of its success in
maintaining online leadership. The Company has a policy of using equity-based
compensation programs to reward and motivate significant contributors among
its employees. Competition for qualified personnel in the Company's industry
is intense. There can be no assurance that the Company's current and planned
staffing will be adequate to support the Company's future operations or that
management will be able to hire, train, retain, motivate and manage required
personnel. Although none of the Company's employees is represented by a labor
union, it is common for employees in the television industry to belong to a
union, and there can be no assurance that the Company's employees will not
join or form a labor union or that the Company, for certain purposes, will not
be required to become a union signatory. The Company has not experienced any
work stoppages and considers its relations with its employees to be good. See
"Risk Factors--Management of Potential Growth" and "--Dependence on Attraction
and Retention of Key Personnel."

FACILITIES

The Company is headquartered in San Francisco, California, where it leases
an aggregate of approximately 34,000 square feet of space, housing its
principal administrative, sales and marketing, customer service and computer
and communications systems facilities. The Company's lease for such space
expires on June 30, 2001 with an option to renew such lease for an additional
five-year term. The Company anticipates that it will require additional space
within the next 12 months, and there can be no assurance that such additional
space will be available on commercially reasonable terms, if at all.

LEGAL PROCEEDINGS

The Company is not currently subject to any material legal proceedings. The
Company may from time to time become a party to various legal proceedings
arising in the ordinary course of its business.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Executive officers and directors of the Company and their ages as of March
31, 1998 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Kenneth J. Orton............ 46 President, Chief Executive Officer and
Director
James J. Hornthal........... 44 Chairman and Director
Kenneth R. Pelowski......... 38 Executive Vice President of Finance and
Administration and Chief Financial Officer
David E. Lambert............ 45 Executive Vice President and President of
Preview Travel Online, Inc.
Karen S. Askey.............. 38 Senior Vice President of Consumer Marketing
Christopher L. McAndrews.... 34 Senior Vice President of Online Media Sales
John M. Petrone............. 36 Senior Vice President of Technology
Barrie Seidenberg........... 33 Senior Vice President of Online Services
Thomas W. Cardy (1)......... 41 Director
Thomas A. Cullen (1)........ 38 Director
William R. Hearst, III...... 48 Director
Theodore J. Leonsis (2)..... 41 Director
Douglas J. Mackenzie (2).... 38 Director
James E. Noyes.............. 51 Director
David S. Pottruck (2)....... 49 Director
</TABLE>
- ---------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

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.

Kenneth R. Pelowski joined the Company as Executive Vice President of Finance
and Administration, Chief Financial Officer and Secretary in September 1997.
From June 1996 to September 1997, he was Vice President, Corporate Development
of General Instrument Corporation. From May 1995 to June 1996, Mr. Pelowski was
Vice President, Corporate Planning and Development of Quantum Corporation, and
from 1989 to 1995, he was Senior Director, Corporate Planning and Development
at Sun Microsystems, Inc. Mr. Pelowski received B.S.E. and M.B.A. degrees from
the University of Michigan and an M.S.E. degree from Wayne State University.

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<PAGE>

David E. Lambert joined the Company in June 1995 and served as Senior Vice
President of Finance and Administration, Chief Financial Officer, Secretary
and Treasurer until September 1997, when he was appointed Executive Vice
President of the Company and President of Preview Travel Online, Inc., a
wholly owned subsidiary of the Company. From December 1992 to June 1995, Mr.
Lambert was Executive Vice President, Chief Financial Officer, Treasurer and
Secretary of Excalibur Technologies Corp., a software company. From April 1985
to May 1991, he was President and Chief Executive Officer of Grand American
Fare, Inc., a restaurant company, and from October 1981 to April 1985, he
served as Executive Vice President and Chief Operating Officer of Colony
Hotels, Inc., a resort hotel subsidiary of Radisson Hotels. Mr. Lambert serves
as a director of Sunstone Hotel Investors, Inc., a publicly traded real estate
investment trust. Mr. Lambert received a B.A. degree from Occidental College
and an M.B.A. degree from the University of California at Los Angeles.

Karen S. Askey joined the Company as Senior Vice President of Consumer
Marketing in February 1998. From January 1996 to January 1998, Ms. Askey was
Vice President of Marketing and Analysis for Charles Schwab and Co.'s
Electronic Brokerage division and from 1983 to 1996 she held a series of
marketing and management positions with Charles Schwab and Co. Ms. Askey
received a B.A. degree from Stanford University and an M.B.A. degree from the
University of California, Berkeley.

Christopher L. McAndrews joined the Company as Senior Vice President of
Online Media Sales in September 1997. From 1994 to 1997, he held a series of
executive marketing and sales positions, including Vice President of National
Accounts, at International Data Group ("IDG"), an information technology media
and research company. Mr. McAndrews received a B.A. degree from Harvard
University and an M.B.A. degree from Stanford University.

John M. Petrone joined the Company in August 1995 as Vice President of
Technology and in September 1997 was promoted to the position of Senior Vice
President of Technology. From August 1993 to August 1995, he was a Practice
Manager at Oracle Corporation, a database software company, from April 1993 to
August 1993, he was a Consulting Engineer at Lotus Development Corporation, a
software company, and from September 1992 to April 1993, he was a Consulting
Manager with Marathon Systems, a software consulting firm. Mr. Petrone
received a B.S. degree from the University of Maryland.

Barrie Seidenberg joined the Company as Director of Consumer Marketing in
April 1995. In November 1995, she became Vice President of Online Services and
was promoted to the position of Senior Vice President of Online Services in
September 1997. From January 1994 to March 1995, she was an Account Manager at
Epsilon, a database marketing company. From July 1992 to January 1994, she was
a Customer Acquisition Planner at Williams-Sonoma, Inc., a catalog and retail
company. Ms. Seidenberg received a B.A. degree from Yale University and an
M.B.A. degree from Stanford University.

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
communications, 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 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.

William R. Hearst, III has been a director of the Company since February
1995. Since January 1995, Mr. Hearst has served as a general partner of
Kleiner Perkins Caufield & Byers, a venture capital firm. From

50
<PAGE>

May 1995 to July 1995, he was the Chief Executive Officer of At Home
Corporation, an Internet services company. Mr. Hearst has been a director of
At Home Corporation since August 1995 and has served as the Vice Chairman of
its Board of Directors since July 1996. Prior to joining Kleiner Perkins
Caufield & Byers, Mr. Hearst was Editor and Publisher of the San Francisco
Examiner newspaper. Mr. Hearst also serves as a director of Hearst-Argyle
Television, Inc. He is a Fellow of the American Association for the
Advancement of Science and a Trustee of the Carnegie Institute of Washington
and the California Academy of Sciences. Mr. Hearst received an A.B. degree
from Harvard University.

Theodore J. Leonsis has been a director of the Company since June 1985.
Since November 1996, Mr. Leonsis has served as President and Chief Executive
Officer of AOL Studios, an operating division of America Online, Inc., an
online services company ("AOL"), 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 Chairman of Grand Getaways, Inc. Mr. Noyes received
a B.A. degree from Dartmouth College and an M.B.A. degree from Stanford
University.

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.

BOARD COMPOSITION

The Company's Bylaws currently provide for a Board of Directors consisting
of nine members. All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been elected and
qualified. The officers of the Company are appointed annually and serve at the
discretion of the Board of Directors.

BOARD OF DIRECTORS COMMITTEES

The Board of Directors also has an Audit Committee (consisting of Messrs.
Cardy and Cullen), which reviews the results and scope of the audit and other
services provided by the Company's independent accountants.

51
<PAGE>

The Company's Compensation Committee reviews and approves the compensation
and benefits for the Company's executive officers, administers the Company's
stock purchase and stock option plans and make recommendations to the Board of
Directors regarding such matters. The committee is currently composed of
Messrs. Leonsis, Mackenzie and Pottruck. Except as set forth in "Certain
Relationships and Related Transactions," no interlocking relationship exists
between the Company's Board of Directors or Compensation Committee and the
board of directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past. See "Certain Relationships
and Related Transactions."

BOARD COMPENSATION

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 Directors' Stock Option
Plan. See "Stock Plans."

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
was 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 and Chief Executive Officer 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, KPCB VII Founders Fund 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 next five years, 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.

52
<PAGE>

annual page views to the Excite Travel Channel. The Company is obligated to
make minimum payments to Excite totaling $24 million over five years, as well
as to pay a percentage of commissions earned by the Company in excess of
certain thresholds. In addition, the agreement provides for the sharing of
revenues from advertising on co-branded areas of the Excite Travel Channel
and, under certain circumstances, requires the Company to pay a portion of
commissions derived from such co-branded areas. Vinod Khosla, a director of
Excite, is a general partner of KPCB VII Associates. In addition, the KPCB
Funds and AOL are principal shareholders of Excite.

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 the completion of the Company's initial public
offering in November 1997.

See "Certain Relationships and Related Transactions."

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages
for breach of such individual's fiduciary duties as a director except for
liability (i) for any breach of such director's duty of loyalty to the Company
or to its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law or (iv) for
any transaction from which a director derives an improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its officers, employees and other
agents to the full extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross
negligence on the part of an indemnified party. The Company's Bylaws also
permit the Company to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of such
party's status or service as a director, officer, employee or other agent of
the Company upon an undertaking by such party to repay such advances if it is
ultimately determined that such party is not entitled to indemnification.

The Company has entered into separate indemnification agreements with each
of its directors and officers. These agreements require the Company, among
other things, to indemnify such director or officer against expenses
(including attorney's fees), judgments, fines and settlements (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of the Company (other than Liabilities arising from willful misconduct
or conduct that is knowingly fraudulent or deliberately dishonest) and to
advance expenses incurred by such individual in connection with any proceeding
against such individual with respect to which such individual may be entitled
to indemnification by the Company. The Company believes that its Certificate
of Incorporation and Bylaw provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.
The Company also maintains directors' and officers' liability insurance.

At present the Company is not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of the Company in which
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.

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<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth certain compensation awarded to, earned by,
or paid to the Company's Chief Executive Officer and the Company's four other
most highly compensated executive officers whose total cash compensation
exceeded $100,000 during the year ended December 31, 1997 (collectively, the
"Named Executive Officers").

SUMMARY COMPENSATION TABLE

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

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<PAGE>

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.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES PERCENTAGE OF PRICE APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE FOR OPTION 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 2/25/2002 $ 10,775 23,810
105,000 16.8% $2.60 6/3/2002 75,425 166,669
James J. Hornthal....... 25,000 4.0% $2.60 2/25/2002 $ 17,958 39,683
Roy F. Walkenhorst (3).. 12,500 2.0% $8.50 9/15/2002 $ (2,552) 24,604
John M. Petrone......... 5,000 0.8% $2.60 1/28/2002 $ 3,592 7,937
15,000 2.4% $8.50 9/15/2002 (3,063) 29,525
Barrie Seidenberg....... 10,000 1.6% $2.60 1/28/2002 $ 7,183 15,873
20,000 3.2% $6.50 9/15/2002 (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
five-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.

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<PAGE>

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 Officers as of December 31, 1997.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF OPTIONS AT DECEMBER 31, DECEMBER 31,
SHARES VALUE 1997(#) 1997($) (2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth J. Orton........ -- -- 121,042 148,958 $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....... -- -- 20,364 49,636 108,358 153,767
</TABLE>
- ---------------------
(1) The amount set forth represents the difference between the fair market
value of the shares on the date of exercise as determined by the Board of
Directors and the exercise price of the option.
(2) Based on the fair market value 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 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 30,000 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.

STOCK PLANS

1988 Stock Option Plan

The Company's 1988 Stock Option Plan (the "1988 Stock Option Plan") was
adopted by the Board of Directors and approved by the stockholders of the
Company in April 1988. As of December 31, 1997, options to purchase a total of
424,398 shares of Common Stock had been exercised, options to purchase a total
of 1,257,312 shares at a weighted average exercise price of $4.05 per share
were outstanding, and no shares remained available for future option grants.

The 1988 Stock Option Plan provides for the grant to employees of the
Company (including officers and employee directors) of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), for the grant of nonstatutory stock options to
employees, officers, directors and consultants of the Company; provided,
however, that non-employee directors shall not be eligible for option grants
after the effective date of this offering. To the extent an optionee would
have the right in any calendar year to exercise for the first time one or more
incentive stock options for shares having

56
<PAGE>

an aggregate fair market value (under all plans of the Company and determined
for each share as of the date the option to purchase the share was granted) in
excess of $100,000, any such excess options shall be treated as nonstatutory
stock options.

The 1988 Stock Option Plan is administered by the Board of Directors or a
committee of the Board of Directors (the "Administrator"). The Administrator
determines the terms of options granted under the 1988 Stock Option Plan,
including the number of shares subject to the option, exercise price, term and
exercisability. The exercise price of all incentive stock options granted
under the 1988 Stock Option Plan must be at least equal to the fair market
value of the Common Stock of the Company on the date of grant. The exercise
price of any stock option granted to an optionee who owns stock representing
more than 10% of the voting power of the Company's outstanding capital stock
(a "10% Stockholder") must equal at least 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of all nonstatutory
stock options granted to persons who are not 10% Stockholders cannot be less
than 85% of the fair market value of the Common Stock of the Company on the
date of grant. Payment of the exercise price may be made in cash, delivery of
shares of the Company's Common Stock or other consideration determined by the
Administrator. The Administrator determines the term of options. The term of
an incentive stock option granted under the 1988 Stock Option Plan may not
exceed 10 years; provided, however, that the term may not exceed five years
for 10% Stockholders. No option may be transferred by the optionee other than
by will or the laws of descent or distribution. Each option may be exercised
during the lifetime of the optionee only by such optionee. Options granted to
each employee under the 1988 Stock Option Plan prior to March 1995 generally
become exercisable at the rate of 1/36th of the total number of shares subject
to the options monthly following a six-month waiting period after the date of
grant, and options granted after March 1995 generally become exercisable at
the rate of 25% of the total number of shares subject to the options after the
first anniversary following the date of grant, with 2.083% vesting monthly
thereafter.

In the event of certain changes in control of the Company, the 1988 Stock
Option Plan requires that each outstanding option be assumed or an equivalent
option substituted by the successor corporation. In the event that a successor
corporation refuses to assume each option or substitute an equivalent option,
the Administrator shall provide for the optionee to have the right to exercise
the option as to all of the shares covered by the option, including shares as
to which the option would not otherwise be exercisable, in which case each
option will be exercisable for 30 days from the date of such determination.
The Administrator has the authority to amend or terminate the 1988 Stock
Option Plan as long as such action does not adversely affect any outstanding
option and provided that stockholder approval shall be required for an
amendment to increase the number of shares subject to the 1988 Stock Option
Plan, or any change in the designation of the class of persons eligible to be
granted options, or a material increase in benefits accruing to participants
under the 1988 Stock Option Plan if the Company is registered under Section 12
of the Exchange Act. If not terminated earlier, the 1988 Stock Option Plan
will terminate in 1998.

1997 Stock Option Plan

The Company's 1997 Stock Option Plan (the "1997 Stock Option Plan") was
adopted by the Board of Directors in October 1997 and was approved by the
stockholders of the Company 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 March 31, 1998, no options to purchase shares of Common Stock had been
exercised, options to purchase a total of 43,400 shares at a weighted average
exercise price of $9.01 per share were outstanding, and 1,456,200 shares
remained available for future option grants.

The 1997 Stock Option Plan provides for the grant to employees of the
Company (including officers and employee directors) of "incentive stock
options" within the meaning of Section 422 of the Code, for the grant of
nonstatutory stock options to employees, officers, directors (including non-
employee directors) and consultants of the Company. To the extent an optionee
would have the right in any calendar year to exercise for the first time one
or more incentive stock options for shares having an aggregate fair market
value (under

57
<PAGE>

all plans of the Company and determined for each share as of the date the
option to purchase the share was granted) in excess of $100,000, any such
excess options shall be treated as nonstatutory options.

The 1997 Stock Option Plan is administered by the Board of Directors or a
committee of the Board of Directors (the "Administrator"). The Administrator
determines the terms of options granted under the 1997 Stock Option Plan,
including the number of shares subject to the option, exercise price, term and
exercisability; provided, however, the maximum number of shares which may be
subject to options granted to any one person for any fiscal year of the
Company shall be 1,500,000. Such limitation shall not take effect until the
earliest date required under Section 162(m) of the Code. The exercise price of
all incentive stock options granted under the 1997 Stock Option Plan must be
at least equal to the fair market value of the Common Stock of the Company on
the date of grant. The exercise price of any incentive stock option granted to
an optionee who owns stock representing more than 10% of the voting power of
the Company's outstanding capital stock (a "10% Stockholder") must equal at
least 110% of the fair market value of the Common Stock on the date of grant.
The exercise price of all nonstatutory stock options cannot be less than 85%
of the fair market value of the Common Stock of the Company on the date of
grant. Payment of the exercise price may be made in cash, delivery of shares
of the Company's Common Stock or other consideration determined by the
Administrator. The Administrator determines the term of options. The term of
an incentive stock option granted under the 1997 Stock Option Plan may not
exceed 10 years; provided, however, that the term may not exceed five years
for 10% Stockholders. An option may not be transferred by the optionee other
than by will or the laws of descent or distribution, provided, however, that
the Administrator may in its discretion grant transferable nonstatutory stock
options. Each option may be exercised during the lifetime of the optionee only
by such optionee or by a permitted transferee. Options granted to each
employee under the 1997 Stock Option Plan generally become exercisable at the
rate of 25% of the total number of shares subject to the options after the
first anniversary following the date of grant, with 2.083% vesting monthly
thereafter.

In the event of certain changes in control of the Company, the 1997 Stock
Option Plan requires that each outstanding option be assumed or an equivalent
option substituted by the successor corporation, unless the Administrator
determines in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the optionee will have the right to exercise
the option as to some or all of the shares covered by the option, including
shares as to which the option would not otherwise be exercisable, in which
case each option will be exercisable for 30 days from the date of such
determination. The Administrator has the authority to amend or terminate the
1997 Stock Option Plan as long as such action does not adversely affect any
outstanding option and provided that stockholder approval shall be required
for an amendment to increase the number of shares subject to the 1997 Stock
Option Plan, or any change in the designation of the class of persons eligible
to be granted options, or an increase in the annual limitation on grants to
employees, or any other amendment requiring stockholder approval under the
federal securities laws. If not terminated earlier, the 1997 Stock Option Plan
will terminate in 2007.

1997 Employee Stock Purchase Plan

The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in October 1997 and was approved by the
stockholders of the Company in November 1997. A total of 500,000 shares of
Common Stock has been reserved for issuance under the Purchase Plan. The
Purchase Plan, which is intended to qualify under Section 423 of the Code,
generally will be implemented in a series of offering periods of 24 months
duration with new offering periods (other than the first offering period)
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 period being designated a purchase date.
However, the first such offering period commenced on or about the date of the
Company's initial public offering and continue through July 31, 1999, with the
first purchase date occurring on July 31, 1998, and subsequent purchase dates
to occur every six months thereafter. The Purchase Plan will be administered
by the Board of Directors or by a committee appointed by the Board of
Directors. Employees (including officers and employee directors) of the
Company, or of any majority owned subsidiary designated

58
<PAGE>

by the Board of Directors, are eligible to participate if they are employed by
the Company or any such subsidiary for at least 20 hours per week and more
than 5 months per year. The Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions, which may not exceed 15% of
an employee's compensation, at a price equal to the lower of 85% of the fair
market value of the Company's Common Stock at the beginning of the offering
period or the purchase 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. Employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on
termination of employment with the Company. In addition, participants may
decrease their level of payroll deductions once during an offering period.

The Purchase Plan provides that in the event of a merger of the Company with
or into another corporation or a sale of substantially all of the Company's
assets, each right to purchase stock under the plan will be assumed or an
equivalent right substituted by the successor corporation unless the Board of
Directors shortens the offering period so that employees' rights to purchase
stock under the plan are exercised prior to the merger or sale of assets. The
Board of Directors has the power to amend or terminate the Purchase Plan as
long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. If not terminated earlier, the Purchase Plan will
have a term of 20 years.

1997 Directors' Stock Option Plan

The 1997 Directors' Stock Option Plan (the "Directors' Plan") was adopted by
the Board of Directors in October 1997 and was approved by the stockholders in
November 1997. A total of 250,000 shares of Common Stock has been reserved for
issuance under the Directors' Plan. The Directors' Plan provides for the
automatic grant of nonstatutory stock options to nonemployee directors of the
Company. The Directors' Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors. The Directors' Plan becomes effective on
the effectiveness of the registration statement relating to this offering.

The Directors' Plan provides that each person who is or becomes a
nonemployee director of the Company shall be granted a nonstatutory stock
option to purchase 20,000 shares of Common Stock (the "First Option") 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 following which a nonemployee director is serving on the Board of
Directors, each nonemployee director (including directors who were not granted
a First Option prior to the date of such annual meeting) shall be granted an
option to purchase 5,000 shares of Common Stock (a "Subsequent Option") if, on
such date, he or she has served on the Company's Board of Directors for at
least six months.

The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any grant and the method
of making a grant. No option granted under the Directors' Plan is transferable
by the optionee other than by will or the laws of descent or distribution or
pursuant to a qualified domestic relations order, and each option is
exercisable, during the lifetime of the optionee, only by such optionee or by
a permitted transferee. The Directors' Plan provides that the First Option
shall become exercisable in installments cumulatively as to 25% of the total
number of shares subject to the First Option on each of the first, second,
third and fourth anniversaries of the date of grant of the First Option; each
Subsequent Option shall become exercisable in full on the first anniversary of
the date of grant of that Subsequent Option. The exercise price of all stock
options granted under the Directors' Plan shall be equal to the fair market
value of a share of the Company's Common Stock on the date of grant of the
option. Options granted under the Directors' Plan have a term of ten years.

In the event of the dissolution or liquidation of the Company, a sale of all
or substantially all of the assets of the Company, the merger of the Company
with or into another corporation in which the Company is not

59
<PAGE>

the surviving corporation or any other capital reorganization in which more
than 50% of the shares of the Company entitled to vote are exchanged, the
Company shall give to each nonemployee director either (i) a reasonable time
within which to exercise the option, including any part of the option that
would not otherwise be exercisable, prior to the effectiveness of any such
transaction at the end of which time the Option shall terminate, or (ii) the
right to exercise the option, including any part of the option that would not
otherwise be exercisable (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 any such
transaction. The Board of Directors may amend or terminate the Directors'
Plan; provided, however, that no such action may adversely affect any
outstanding option, and the provisions regarding the grant of options under
the plan may be amended only once in any six-month period, other than to
comport with changes in the Code or the Employee Retirement Income Security
Act of 1974, as amended. If not terminated earlier, the Directors' Plan will
have a term of ten years.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain stock option grants to directors and executive officers of the
Company are described herein under the caption "Management--Executive
Compensation."

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

<TABLE>
<CAPTION>
SERIES E
PREFERRED
INVESTOR (1) STOCK
------------ ---------
<S> <C>
General Electric Capital Corporation (2)........................... 555,555
U S WEST Interactive Services, Inc. (Thomas A. Cullen) (2)......... 77,777
James J. Hornthal (2) (3).......................................... 590
David S. Pottruck.................................................. 22,222
</TABLE>
- ---------------------
(1) Shares held by affiliated persons and entities have been aggregated. See
"Principal Stockholders."
(2) Holder is a 5% stockholder.
(3) Includes shares held by the Hornthal Living Trust.

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 and Chief Executive Officer 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 next five years, 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

60
<PAGE>

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 $84,000 in 1997.

In August 1997, the Company entered into an agreement with 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, KPCB VII Founders Fund and KPCB Information Sciences
Zaibatsu Fund II (the "KPCB Funds"). In addition, the KPCB Funds and AOL are
principal shareholders of Excite.

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.

The Company has entered into indemnification agreements with 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.

61
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

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 December 31, 1997, including all shares of Common Stock issuable
upon the exercise of outstanding options held as of such date, 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 Named Executive Officers, and (iv) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- NUMBER OF ---------------------
NAME AND ADDRESS NUMBER PERCENT SHARES OFFERED NUMBER PERCENT
---------------- ------------ ---------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Entities affiliated with
Kleiner Perkins 1,231,419 10.9% 1,231,419 9.6%
Caufield & Byers (2)...
2750 Sand Hill Road
Menlo Park, CA 94025
William R. Hearst, III 1,231,419 10.9 1,231,419 9.6
(2)....................
Douglas J. Mackenzie 1,231,419 10.9 1,231,419 9.6
(2)....................
James J. Hornthal (3)... 1,100,000 9.5 1,100,000 8.4
America Online, Inc. 1,001,312 8.8 1,001,312 7.8
(4)....................
8619 Westwood Center
Drive
Vienna, Virginia 22182-
2285
U S WEST Interactive 932,539 8.2 932,539 7.3
Services, Inc..........
9000 East Nichols
Avenue, Suite 100
Englewood, Colorado
80112
Thomas A. Cullen (5).... 932,539 8.2 932,539 7.3
KLAS, Inc............... 635,458 5.6 635,458 5.0
3228 Channel 8 Drive
Las Vegas, NV 89114
General Electric Capital 572,736 5.1 572,736 4.5
Corporation (6)........
60 Long Ridge Road
Stamford, CT 06927
Thomas W. Cardy (7)..... 207,047 1.8 207,047 1.6
Kenneth J. Orton (8).... 270,000 2.3 270,000 2.1
Roy F. Walkenhorst (9).. 97,650 * 97,650 *
Theodore J. Leonsis 78,100 * 78,100 *
(10)...................
James E. Noyes ......... 45,974 * 45,974 *
John M. Petrone (11).... 70,000 * 70,000 *
Barrie Seidenberg (12).. 70,000 * 70,000 *
David S. Pottruck....... 22,222 * 22,222 *
Selling Stockholders
( persons), 2,000,000
All directors and
executive officers as a
group (16 persons)
(13)................... 4,396,682 35.9 4,396,682 32.0
</TABLE>
- ---------------------
*Less than 1%.

(1) Applicable percentage of beneficial ownership is based on 11,337,205
shares of Common Stock outstanding as of December 31, 1997, together with
applicable options and warrants for such stockholder. The number of
shares beneficially owned by a person includes all shares of Common Stock
subject to options held by that person, including the unvested portions
of such options. 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 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.

62
<PAGE>

(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 limited 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 options outstanding to purchase 215,000 shares, of which 196,250
are exercisable within 60 days of December 31, 1997. 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 and Chief Executive Officer of AOL
Studios, an operating division of AOL. Mr. Leonsis disclaims beneficial
ownership of the shares held by AOL.

(5) 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.

(6) 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.

(7) Includes 20,000 shares held by Mr. Cardy, 2,500 shares held by Eugenia C.
Cardy, 12,047 shares held by Thomas W. Cardy Family Trust. Also includes
172,500 shares held by CEA Preview Investors Ltd. Mr. Cardy is a limited
partner of CEA Preview Investors Ltd. and disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.

(8) Includes options outstanding to purchase 270,000 shares, of which 129,652
are exercisable within 60 days of December 31, 1997.

(9) Includes options outstanding to purchase 27,500 shares, of which 9,877
are exercisable within 60 days of December 31, 1997.

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

(11) Includes options outstanding to purchase 70,000 shares, of which 30,936
are exercisable within 60 days of December 31, 1997.

(12) Includes options outstanding to purchase 70,000 shares, of which 24,737
are exercisable within 60 days of December 31, 1997.

(13) Includes options outstanding to purchase 912,500 shares, of which 438,951
are exercisable within 60 days of December 31, 1997 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.

63
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company will consist of 50,000,000
shares of Common Stock, $0.001 par value, and 5,000,000 shares of Preferred
Stock, $0.001 par value.

COMMON STOCK

As of December 31, 1997, there were 11,337,205 shares of Common Stock
outstanding that were held of record by approximately 206 stockholders. There
will be 12,837,000 shares of Common Stock outstanding (assuming no exercise of
the Underwriters' over-allotment option and no exercise or conversion of
outstanding options after December 31, 1997) after giving effect to the sale
of the shares of Common Stock offered hereby.

The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding Preferred Stock, the holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions available to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable.

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more Series and to determine the
powers, preferences and rights and the qualifications, limitations or
restrictions granted to or imposed upon any wholly unissued series of
undesignated Preferred Stock and to fix the number of shares constituting any
Series and the designation of such series, without any further vote or action
by the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and
other rights of the holders of Common Stock. At present, the Company has no
plans to issue any shares of Preferred Stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

The holders of shares of Common Stock (the "Registrable Securities") or
their transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement between the Company and the holders
of Registrable Securities. Subject to certain limitations in the agreement,
the holders of the Registrable Securities may require, on two occasions at any
time, that the Company use its best efforts to register the Registrable
Securities for public resale, provided that the proposed aggregate offering
price is at least $5,000,000. If the Company registers any of its Common Stock
either for its own account or for the account of other security holders, the
holders of Registrable Securities are entitled to include their shares of
Common Stock in the registration. A holder's right to include shares in an
underwritten registration is subject to the ability of the underwriters to
limit the number of shares included in the offering. All fees, costs and
expenses of such registrations must be borne by the Company and all selling
expenses (including underwriting discounts, selling commissions and stock
transfer taxes) relating to Registrable Securities must be borne by the
holders of the securities being registered.

64
<PAGE>

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

The Company is subject to the provisions of Section 203 of the Delaware Law.
In general, the statute prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date that the person became an interested
stockholder unless (with certain exceptions) the business combination or the
transaction in which the person became an interested stockholder is approved
in a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to
the stockholder, and an "interested stockholder" is a person who, together
with affiliates and associates, owns (or within three years prior, did own)
15% or more of the corporation's outstanding voting stock. This provision may
have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the stockholders. In addition, certain
provisions of the Company's charter documents, including a provision
eliminating the ability of stockholders to take actions by written consent,
may have the effect of delaying or preventing changes in control or management
of the Company, which could have an adverse effect on the market price of the
Company's Common Stock. The Company's stock option and purchase plans
generally provide for assumption of such plans or substitution of an
equivalent option of a successor corporation or, alternatively, at the
discretion of the Board of Directors, exercise of some or all of the options
stock, including non-vested shares, or acceleration of vesting of shares
issued pursuant to stock grants, upon a change of control or similar event.
The Board of Directors has authority to issue up to 5,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further
vote or action by the stockholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company. Furthermore, such Preferred
Stock may have other rights, including economic rights senior to the Common
Stock, and, as a result, the issuance of such Preferred Stock could have a
material adverse effect on the market value of the Common Stock. The Company
has no present plan to issue shares of Preferred Stock.

WARRANTS, CONVERTIBLE SUBORDINATED NOTES AND OTHER RIGHTS

As of December 31, 1997, warrants to purchase 31,666 shares of Common Stock
of the Company at an aggregate exercise price of $188,994 were outstanding.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Company's Common Stock is U. S.
Stock Transfer Corporation.

LISTING

The Company's Common Stock is traded on the Nasdaq National Market under the
trading symbol "PTVL."

65
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have outstanding
12,837,000 shares of Common Stock, assuming no exercise of outstanding
warrants, and no exercise of options after December 31, 1997. Of these shares,
all of the shares sold in the offering will be freely tradeable without
restriction or further registration under the Securities Act unless purchased
by "affiliates" of the Company as that term is defined in Rule 144 of the
Securities Act. In addition, the 2,500,000 shares sold in the Company's
initial public offering in November 1997, as well as approximately 119,500
additional shares are currently eligible to be resold immediately in the
public market.

The remaining 8,717,500 shares outstanding upon completion of the offering
will be "restricted securities" as that term is defined under Rule 144 (the
"Restricted Shares") and may not be sold publicly unless they are registered
under the Securities Act or are sold pursuant to Rule 144 or another exemption
from registration. Beginning May 19, 1998, 180 days after the completion date
of the Company's initial public offering, upon expiration of pre-existing
lock-up agreements and lock-up agreements between the representatives of the
underwriters in the initial public offering and officers, directors and
certain stockholders of the Company, approximately shares of the
Company's Common Stock will be eligible for resale pursuant to Rule 144 under
the Securities Act, subject in some cases to compliance with the volume
limitations and other restrictions under Rule 144 and, under certain
circumstances, Rule 701 under the Securities Act.

As a result of lock-up agreements that were entered into by the Selling
Stockholders and the Underwriters in connection with this offering,
approximately shares will not be available for sale in the public
market until the expiration of the 90 day period following the effective date
of this offering, subject in some cases to the volume and other restrictions
of Rule 144 and Rule 701 under the Securities Act. Any early release of the
lock-up agreement by the Underwriters, which, if granted, could permit sales
of a substantial number of shares and could adversely affect the trading price
of the Company's shares, may not be accompanied by an advance public
announcement by the Company. In addition, certain holders of Common Stock have
the right to include their shares in any future registration of securities
effected by the Company and to require the Company to register their shares
for future sale, subject to certain exceptions.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for
at least one year, including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the number of shares of
Common Stock then outstanding or the average weekly trading volume of the
Common Stock as reported through the Nasdaq National Market during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned for at least two years the shares proposed to be
sold, would be entitled to sell such shares under Rule 144(k) without regard
to the requirements described above.

In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended, in reliance upon Rule 144 but without compliance with
certain restrictions, including the holding period requirements, contained in
Rule 144. The Company has filed a registration statement on Form S-8 under the
Securities Act to register shares of Common Stock issuable under the Company's
1997 Employee Stock Purchase Plan, 1997 Directors' Stock Option Plan and 1988
and 1997 Stock Option Plans. Such registration will permit the resale of
shares so registered by non-affiliates in the public market without
restriction under the Securities Act.

66
<PAGE>

No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market after the lapse of the
restrictions described below could adversely affect the prevailing market
price and the ability of the Company to raise equity capital in the future at
a time and price which it deems appropriate. In addition, after the offering,
the holders of shares of Common Stock (the "Registrable
Securities") will be entitled to certain demand and piggyback rights with
respect to registration of such shares under the Securities Act. Registration
of such shares under the Securities Act would result in such shares becoming
freely tradeable without restriction under the Securities Act (except for
shares purchased by affiliates of the Company) immediately upon the
effectiveness of such registration. See "Description of Capital Stock--
Registration Rights of Certain Holders." If such holders, by exercising their
demand registration rights, cause a larger number of securities to be
registered and sold in the public market, such sales could have an adverse
effect on the market price for the Company's Common Stock. If the Company were
to include in a Company initiated registration any Registrable Securities
pursuant to the exercise of piggyback registration rights, such sales may have
an adverse effect on the Company's ability to raise needed capital.

67
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their representatives, Hambrecht & Quist
LLC, BancAmerica Robertson Stephens, NationsBanc Montgomery Securities LLC and
PaineWebber Incorporated, have severally agreed to purchase from the Company
the following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Hambrecht & Quist LLC..............................................
BancAmerica Robertson Stephens.....................................
NationsBanc Montgomery Securities LLC..............................
PaineWebber Incorporated...........................................
---------
Total.............................................................. 3,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in the Company's business and the receipt of certain
certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Common Stock offered hereby if
any of such shares are purchased.

The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other dealers.
After the offering, the offering price and other selling terms may be changed
by the Representatives. The Representatives have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they
exercise discretionary authority.

The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 525,000
additional shares of Common Stock at the offering price, less the underwriting
discount, set forth on the cover page of this Prospectus. To the extent the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the above
table bears to the total number of shares of Common Stock offered hereby. The
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.

68
<PAGE>

The executive officers and directors who are stockholders of the Company and
certain of the other stockholders of the Company, who own in the aggregate
7,844,070 shares of Common Stock, have agreed, subject to certain exceptions,
that they will not, without the prior written consent of Hambrecht & Quist
LLC, offer, sell or otherwise dispose of any shares of Common Stock, options
or warrants to acquire shares of Common Stock or securities exchangeable for
or convertible into shares of Common Stock owned by them during the 90-day
period following the effective date of this offering. In addition, the Selling
Stockholders, who own in the aggregate shares of Common Stock, have
agreed, subject to certain exceptions, that they will not, without the prior
written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of
any shares of Common Stock, options or warrants to acquire shares of Common
Stock or securities exchangeable for or convertible into shares of Common
Stock owned by them until the date 90 days following the completion of this
offering. The Company has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any
shares of Common Stock, options or warrants to acquire shares of Common Stock
or securities exchangeable for or convertible into shares of Common Stock
during the 90-day period following the date of this Prospectus, except that
the Company may issue shares upon the exercise of options granted prior to the
date hereof, and may grant additional options under its Plans, provided that,
without the prior written consent of Hambrecht & Quist LLC, such additional
options shall not be exercisable during such period.

In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the
Company's Common Stock during the "cooling-off" period immediately preceding
the commencement of sales in this offering. The Commission has, however,
adopted exemptions from these rules that permit passive market making under
certain conditions. These rules permit an Underwriter to continue to make a
market subject to the conditions among others, that its bid not exceed the
highest bid by a market maker not connected with this offering and that its
net purchases on any one trading day not exceed prescribed limits. Pursuant to
these exemptions, certain Underwriters, selling group members (if any) or
their respective affiliates intend to engage in passive market making in the
Common Stock during the "cooling-off" period.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids or effecting syndicate
covering transactions. A stabilizing bid means the placing of any bid or
effecting of any purchase, for the purpose of pegging, fixing or maintaining
the price of the Common Stock. A syndicate covering transaction means the
placing of any bid on behalf of the underwriting syndicate or the effecting of
any purchase to reduce a short position created in connection with the
offering. Such transactions may be effected on the Nasdaq Stock Market, in the
over-the-counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by its counsel, Venture Law Group, A Professional Corporation, 2800
Sand Hill Road, Menlo Park, California 94025. Mark A. Medearis, a director of
Venture Law Group, is the Assistant Secretary of the Company. Mr. Medearis
beneficially owns an aggregate of 904 shares of Common Stock, and certain
attorneys of Venture Law Group beneficially own an aggregate of 1,905 shares
of Common Stock. Certain legal matters will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
650 Page Mill Road, Palo Alto, California 94304. Certain members of Wilson
Sonsini Goodrich & Rosati beneficially own an aggregate of 7,885 shares of
Common Stock.

EXPERTS

The consolidated balance sheets as of December 31, 1996 and 1997 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.

69
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement, of which this Prospectus constitutes a
part, under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement and
the exhibits and schedules thereto for further information with respect to the
Company and the Common Stock offered hereby. Statements contained herein
concerning the provisions of any documents are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. Copies of the Registration Statement, including
exhibits and schedules filed therewith, may be inspected and copied at the
Commission's public reference room at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, as well as the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; 7 World Trade Center, Suite 1300, New York, New York
10048; and 5670 Wilshire Boulevard, Los Angeles, California 90036. Copies of
such materials can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549, upon payment of
the fees prescribed by the Commission. The Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that file
electronically with the Commission. The Company has filed the Registration
Statement, including the exhibits and schedules thereto, electronically with
the Commission via the Commission's Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. The Company intends to distribute to its stockholders
annual reports containing audited financial statements and will make available
copies of quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.

70
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Shareholders' Equity............................. F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Preview Travel,
Inc.:

We have audited the accompanying consolidated balance sheets of Preview
Travel, Inc. and Subsidiaries (the Company) as of December 31, 1996 and 1997
and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Preview Travel, Inc. and Subsidiaries as of December 31, 1996 and 1997 and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.

Coopers & Lybrand L.L.P.

San Francisco, California
January 28, 1998

F-2
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------

ASSETS

<S> <C> <C>
Cash and cash equivalents.................................. $ 6,016 $ 27,912
Marketable securities...................................... -- 750
Accounts receivable, net of allowance for doubtful accounts
of $25 and $40, respectively 1,259 1,990
Other assets............................................... 212 6,087
-------- --------
Total current assets................................. 7,487 36,739
Film library, net of accumulated amortization of $4,823 and
$3,428, respectively...................................... 2,967 2,402
Property and equipment, net of accumulated depreciation of
$2,095 and $2,039, respectively........................... 2,100 3,644
-------- --------
Total assets......................................... $ 12,554 $ 42,785
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable........................................... $ 938 $ 2,189
Accrued liabilities........................................ 1,951 2,480
Deferred revenues.......................................... 598 255
Convertible notes payable.................................. 750 --
Current portion of notes payable and line of credit........ 2,136 --
Current portion of capital lease obligations............... 722 882
-------- --------
Total current liabilities............................ 7,095 5,806
Capital lease obligations, less current portion............ 776 1,614
Notes payable, long term................................... 272 --
-------- --------
Total liabilities.................................... 8,143 7,420
-------- --------
Commitments (Notes 7 and 16)
Shareholders' equity:
Preferred Stock: 1996; $0.001 par value: 6,134,563 shares
authorized, 4,322,666 shares issued and outstanding,
1997; 5,000,000 shares authorized, no shares issued and
outstanding............................................. 5 --
Common Stock, $0.001 par value:
Authorized: 10,000,000 shares in 1996, and 50,000,000 in
1997. Issued and outstanding: 1,701,731 shares in 1996,
and 11,337,205 shares in 1997........................... 2 11
Additional paid-in capital................................. 19,796 61,676
Other shareholders' equity................................. 223 (539)
Accumulated deficit........................................ (15,615) (25,783)
-------- --------
Total shareholders' equity........................... 4,411 35,365
-------- --------
Total liabilities and shareholders' equity............... $ 12,554 $ 42,785
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Revenues:
Online................................... $ 579 $ 2,573 $ 6,010
Television............................... 9,564 9,801 7,634
---------- ---------- -----------
Total revenues.......................... 10,143 12,374 13,644
Costs of revenues:
Online................................... 1,078 2,308 3,648
Television............................... 8,393 7,000 5,751
---------- ---------- -----------
Total cost of revenues.................. 9,471 9,308 9,399
Gross profit............................ 672 3,066 4,245
Operating expenses:
Marketing and sales...................... 2,687 4,373 8,668
Research and development................. 626 1,314 1,825
General and administrative............... 2,026 2,880 4,184
---------- ---------- -----------
Total operating expenses................ 5,339 8,567 14,677
Loss from operations.................... (4,667) (5,501) (10,432)
Interest income (expense), net............ (264) (89) 266
---------- ---------- -----------
Loss before income taxes................ (4,931) (5,590) (10,166)
Income tax expense........................ (2) (2) (2)
---------- ---------- -----------
Net loss.................................. $ (4,933) $ (5,592) $ (10,168)
========== ========== ===========
Basic and diluted net loss per share...... $ (4.02) $ (3.43) $ (3.54)
========== ========== ===========
Weighted average shares outstanding used
in per share calculation................. 1,228 1,631 2,869
========== ========== ===========
SUPPLEMENTAL INFORMATION (UNAUDITED) (NOTE
1)
Gross bookings............................ $ 2,043 $ 20,263 $ 80,389
========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL OTHER ACCUMU- SHAREHOLDERS'
------------------ ------------- PAID-IN SHAREHOLDERS' LATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL EQUITY DEFICIT (DEFICIT)
--------- ------- ------ ------ ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1995.................... 1,874 $ 2 1,197 $ 1 $ 4,141 $ (81) $ (5,090) $ (1,027)
Issuance of common
stock.................. 367 692 692
Repayment of note...... 77 77
Issuance of Series D
preferred stock........ 1,492 2 6,158 6,160
Issuance of common
stock warrants......... 1 1
Issuance of Series D
preferred stock
warrants............... 279 279
Net loss............... (4,933) (4,933)
--------- ------ ------ --- ------- ----- -------- --------
Balance, December 31,
1995.................... 3,366 4 1,564 1 10,991 276 (10,023) 1,249
Issuance of common
stock.................. 138 1 244 (234) 11
Repayment of note...... 8 8
Issuance of Series E
preferred stock........ 956 1 8,561 8,562
Issuance of common
stock warrants......... 11 11
Issuance of Series E
preferred stock
warrants............... 162 162
Net loss............... (5,592) (5,592)
--------- ------ ------ --- ------- ----- -------- --------
Balance, December 31,
1996.................... 4,322 5 1,702 2 19,796 223 (15,615) 4,411
Issuance of common
stock.................. 496 1,065 1,065
Issuance of common
stock--IPO............. 2,500 3 24,616 24,619
Exercise of preferred
stock warrants......... 264 501 (504) (3)
Exercise of Series C
preferred stock
warrants............... 149 406 (4) 402
Issuance of Series E
preferred stock........ 1,563 1 13,973 13,974
Issuance of warrants... 118 118
Conversion of preferred
stock to common stock.. (6,298) (6) 6,298 6 --
Conversion of
subordinated debt to
common stock........... 341 749 749
Unearned compensation
in connection with
issuance of stock
options (net of
amortization of $70)... 570 (500) 70
Repayment of notes
receivable............. 255 255
Issuance of notes
receivable............. (127) (127)
Net loss............... (10,168) (10,168)
--------- ------ ------ --- ------- ----- -------- --------
Balance, December 31,
1997.................... -- $ -- 11,337 $11 $61,676 $(539) $(25,783) $ 35,365
========= ====== ====== === ======= ===== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $(4,933) $(5,592) $(10,168)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization.................... 671 828 1,013
Amortization of film library..................... 1,724 1,527 1,281
Loss on disposal of property and equipment....... -- 188 --
Unearned compensation............................ -- -- 70
Charges related to issuance of warrants.......... -- 172 130
Changes in operating assets and liabilities:
Accounts receivable............................. 486 (330) (731)
Travel inventory................................ 191 602 --
Other assets.................................... 215 664 (5,875)
Accounts payable and accrued liabilities........ (1,090) 886 1,780
Deferred revenue................................ 457 (222) (343)
------- ------- --------
Net cash used in operating activities.......... (2,279) (1,277) (12,843)
------- ------- --------
Cash flows from investing activities:
Acquisition of property and equipment............. (841) (239) (776)
Purchase of marketable securities................. -- -- (750)
Additions to film library......................... (1,072) (738) (716)
------- ------- --------
Net cash used in investing activities.......... (1,913) (977) (2,242)
------- ------- --------
Cash flows from financing activities:
Proceeds from borrowings on long-term debt........ 1,318 100 1,350
Payment of long-term debt......................... (2,700) (718) (3,350)
Proceeds from equipment note...................... 543 -- --
Payments on equipment note........................ -- (135) (408)
Payments on obligations under capital leases...... (596) (623) (725)
Proceeds from repayment of shareholder notes...... 77 8 254
Proceeds from issuance of convertible bridge
loans............................................ -- 1,000 --
Proceeds from issuance of common stock............ 37 11 72
Proceeds from issuance of common stock--IPO....... -- -- 24,619
Proceeds from issuance of preferred stock......... 6,160 7,562 14,487
Proceeds from stock warrant exercises............. 279 1 682
------- ------- --------
Net cash provided by financing activities...... 5,118 7,206 36,981
------- ------- --------
Net increase in cash.......................... 926 4,952 21,896
Cash and cash equivalents, beginning of year....... 138 1,064 6,016
------- ------- --------
Cash and cash equivalents, end of the year......... $ 1,064 $ 6,016 $ 27,912
======= ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Reverse Stock Split:

In November 1997, the Company completed a reincorporation of the Company in
Delaware having the effect of a 1:2 reverse stock split. All share and per
share information in the accompanying consolidated financial statements and
notes thereto have been restated for such stock split.

Use of Estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Preview Travel Online, Inc. and News Travel
Network, Inc. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.

Revenue Recognition:

Online Revenues:

Online revenues consist of transaction revenues and advertising revenues.
Transaction revenues consist of commissions received from travel suppliers for
air travel, hotel rooms, car rentals and vacation packages, net of allowances
for cancellations, which are recognized upon confirmation of the reservation.
Certain travel suppliers also pay performance-based compensation, known as
overrides, which are recognized on an accrual basis once the amount has been
confirmed with the travel supplier, which generally reflects the performance
for a prior quarterly period. In addition, transaction revenues include
segment fees received from GDS suppliers. Advertising revenues are recognized
when all the terms of the advertising agreement are met and advertising is
shown on various media as designated by the agreement.

Television Revenues:

Program license revenues are recognized when all of the following conditions
are met: 1) the license period begins, 2) the license fee and the production
costs are known, and 3) the program has been accepted by the licensee and is
available for telecast. Advertising revenues are recognized when all the terms
of the advertising agreement are met and advertising is shown on various media
as designated by the agreement.

F-7
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Cash and Cash Equivalents:

The Company invests certain of its excess cash in debt instruments of the
U.S. Government, its agencies, and high-quality corporate issuers as well as
money market funds. All highly liquid instruments with an original maturity of
90 days or less are considered cash equivalents; those with original
maturities greater than 90 days and current maturities less than twelve months
from the balance sheet date are considered marketable securities.

Marketable Securities:

Available-for-sale securities are carried at fair value, based on quoted
market prices, with the unrealized gains or losses, net of tax, reported in
shareholders' equity. The amortized cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity, both of which
are included in interest income. Realized gains and losses are recorded using
the specific identification method.

Film Library and Prepaid Production Costs:

Direct costs of producing travel programs and travel film are capitalized.
These costs are amortized on the basis of management's estimate of the
program's or film's useful life in generating future revenue. Such estimates
are revised periodically, and adjustments, if any, are recorded. Based on the
Company's past experience and estimates for future projects, such costs are
currently being amortized over a period of five years. Expenditures relating
to custom travel programs which have a limited useful life are charged to
expense in the same period as revenues are recognized. It is reasonably
possible that these estimates of anticipated gross revenues, remaining
economic life, or both, could be reduced.

Property and Equipment:

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets,
typically five years. Any gains or losses on the disposal of property and
equipment are recorded in the year of disposition.

Long-lived Assets:

The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." SFAS No. 121 requires recognition of impairment of long-
lived assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets. No such impairments have
been identified to date. The Company assesses the impairment of long-lived
assets when events or changes in circumstances indicate that the carrying
value of an asset may not be recoverable.

Income Taxes:

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the temporary
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be
realized. Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.

F-8
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred Revenues:

Deferred revenues primarily represents prepayments by vendors for television
or online advertising.

Supplemental Information (unaudited):

Gross bookings represent the total purchase price of all travel services
booked through the Company's online sites. This information does not affect
the Company's operating results. Disclosure of gross bookings is not required
by generally accepted accounting principles ("GAAP"). Gross bookings are not
included in revenues or operating results, and should not be considered in
isolation or as a substitute for other information prepared in accordance with
generally accepted accounted principles. Management believes that gross
bookings provide more consistent comparison between historical periods than do
online revenues. In addition, management believes that gross bookings are
meaningful because such information and, in particular, year-to-year changes
in such information, are a useful measure of market acceptance.

Business Risk and Credit Concentration:

The Company operates in the online travel services industry, which is new,
rapidly evolving and intensely competitive. The Company competes primarily
with traditional travel agency reservation methods and online travel
reservation services. In the online travel services market, the Company
competes with other entities that maintain similar commercial Web sites. There
can be no assurance that the Company will achieve sufficient online traffic,
travel bookings or commissions to realize economies of scale that justify its
significant commitments to third parties.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of temporary cash investments
(including money market accounts) and accounts receivable. The Company places
its temporary cash investments with two major financial institutions.

The majority of the Company's customers for travel programs and related
productions are located across the United States and are primarily in travel-
related industries and television broadcast businesses. The Company performs
ongoing credit evaluations of customers and generally does not require
collateral. Allowances are maintained for potential credit losses, and such
losses have been within management's expectations. In 1996 and 1997, revenues
from one customer approximated $5.7 million and $2.3 million, respectively,
and accounted for approximately 46% and 17% of total Company revenues,
respectively, and 33% and 9% of accounts receivable as of December 31, 1996
and 1997, respectively. The majority of contracts with this customer have
subsequently been terminated.

Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the carrying value of the
borrowings under the capital lease obligations approximate their fair value.

Recently Issued Accounting Pronouncements:

In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and No. 131, "Disclosure About Segments of
an Enterprise and Required Information," (which are effective for the year
ending December 31, 1998). The Company is considering additional disclosures,
if any, which will be required by these pronouncements.

F-9
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2. OTHER ASSETS:

Other assets are comprised of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
-------------
<S> <C> <C>
Prepaid online distribution expense......................... $ -- $ 5,533
Other....................................................... 212 554
----- -------
$ 212 $ 6,087
===== =======
</TABLE>

3. PROPERTY AND EQUIPMENT:

Property and equipment are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Furniture and fixtures................................... $ 311 $ 661
Production equipment..................................... 1,782 2,255
Leasehold improvements................................... 275 497
Computer equipment....................................... 1,827 2,270
------- -------
4,195 5,683
Less accumulated depreciation and amortization........... (2,095) (2,039)
------- -------
Property and equipment, net.............................. $ 2,100 $ 3,644
======= =======
</TABLE>

Equipment under capital leases included in property and equipment amounted
to $1,264,000 (net of $1,104,000 accumulated amortization) and $2,328,000 (net
of $1,143,000 accumulated amortization) at December 31, 1996 and 1997,
respectively.

4. ACCRUED LIABILITIES:

Accrued liabilities are comprised of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Accrued rent expense........................................ $ 350 $ 394
Accrued employee compensation............................... 605 1,024
Accrued sales commissions................................... 115 175
Accrued trade payables...................................... 390 557
Commission revenue share.................................... 173 56
Other....................................................... 318 274
------ ------
$1,951 $2,480
====== ======
</TABLE>

5. INCOME TAXES:

For the years ended December 31, 1996 and 1997, the provision for income
taxes comprised minimum state tax expense.

F-10
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred tax assets (liabilities) as of December 31, 1996 and 1997 comprise
the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
Film library........................................... $ (264) $ (149)
Property and equipment................................. 86 373
Other.................................................. 55 105
Warrants............................................... 179 27
Deferred rent.......................................... 140 157
Net operating loss carryforwards....................... 5,382 11,502
------- --------
5,578 12,015
Less valuation allowance............................... (5,578) (12,015)
------- --------
-- --
======= ========
</TABLE>

Due to the uncertainty surrounding the realization of the deferred tax asset
in future tax returns, the Company has placed a valuation allowance against
its net deferred tax assets. The valuation allowance increased by $2,130,000
and $6,437,000 during 1996 and 1997, respectively.

The difference between the statutory rate of approximately 37% (34% federal
and 3% state, net of federal benefits) and the tax benefit of zero recorded by
the Company is primarily due to the Company's full valuation allowance against
its net deferred tax assets.

At December 31, 1997, the Company had available net operating loss
carryforwards for federal and state income tax purposes of approximately
$31,156,000 and $15,587,000, respectively. These carryforwards expire from
2002 to 2012. Due to changes in the Company's ownership in 1996 and 1997,
future utilization of these net operating loss carryforwards will be subject
to certain limitations on annual utilization as defined by the Tax Reform Act
of 1986.

6. NOTES PAYABLE AND LINE OF CREDIT:

Notes payable and line of credit consist of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- ------
<S> <C> <C>
Line of credit (1)......................................... $ -- $ --
Subordinated convertible shareholder notes payable (2)..... 750 --
Subordinated notes payable (3)............................. 2,000 --
Bank equipment note (4).................................... 407 --
------- ------
$ 3,157 $ --
Less current portion....................................... (2,885) --
------- ------
$ 272 $ --
======= ======
</TABLE>
- ---------------------
(1) The Company has a bank line of credit collateralized by accounts
receivable, equipment and inventories. The line requires monthly payments
of interest only at prime plus 1.5% (9.75% and 8.50% at December 31, 1996
and 1997, respectively), and any unpaid principal and interest will be due
on May 5, 1998. The line has a maximum amount available of $2,000,000 and
limits borrowing to 80% of qualified receivables (as defined). The bank
credit agreement requires the Company's compliance with certain financial
covenants related to tangible net worth and quarterly profitability and
disallows the payment of dividends

F-11
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

without prior approval from the bank. As of December 31, 1996 and 1997, the
Company was in compliance with these financial covenants.
(2) In November 1997 the notes to shareholders were converted into 340,909
shares of common stock at a rate of one share per $2.20 of principal
amount of such notes with the closing of the Company's initial public
offering. The notes bore interest at the rate of 8% per annum payable
semi-annually on June 30 and December 31, starting June 30, 1995.
(3) Subordinated notes payable to various shareholders, trusts and
partnerships at December 31, 1996 required semiannual interest payments at
a rate of 8% per annum beginning July 14, 1993. The entire principal and
remaining interest due on the notes was paid on March 1, 1997. The notes
were collateralized by all Company assets excluding equipment. The notes
were subordinated to the bank line of credit and bank equipment note,
capital lease obligations and the debt described in (2) above, in an
amount not to exceed $5,000,000.
(4) The bank equipment note was payable in equal monthly payments of $11,300
plus interest at 2% over bank's prime rate (8.25% and 8.50% at December
31, 1996 and 1997, respectively) through December 1999. The note was paid
in full October 1997.

7. COMMITMENTS AND CONTINGENCIES:

The Company leases its office space under a non-cancelable operating lease
expiring in 2001. Certain operating expenses and property taxes related to the
leased office space are paid by the Company. The Company also leases certain
production and office equipment and computers under capital leases expiring
through 2001.

Future minimum annual lease payments for both operating and capital leases
are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
--------- -------
<S> <C> <C>
12 months ending December 31:
1998..................................................... $ 473 $1,107
1999..................................................... 536 969
2000..................................................... 580 645
2001..................................................... 300 181
------ ------
Total minimum lease payments............................... $1,889 2,902
======
Less amounts representing interest......................... 406
------
Present value of minimum lease payments.................... $2,496
======
</TABLE>

Total rent expense for office space was $479,000 and $457,000 for the years
ended December 31, 1996 and 1997, respectively.

In September 1997 the Company entered into agreements with AOL, a related
party, and Excite, Inc. ("Excite") under which these companies are obligated
to deliver minimum numbers of annual page views to the Company through the
online areas featuring the Company's travel services. In connection with those
services, the Company made aggregate payments to AOL and Excite totaling $8.5
million in 1997, and is obligated to make aggregate and payments to AOL and
Excite totalling $4.1 million in 1998, $10.9 million in 1999, $12.4 million in
each of 2000 and 2001 and $7.7 million in 2002. The Company is also obligated
to pay a percentage of commissions earned by the Company in excess of certain
thresholds and, to retain the right to be the primary provider of travel
services on AOL, must achieve specified levels of annual travel service
bookings.

F-12
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In November 1997 the Company entered into an agreement with Fodor's Travel
Publications, Inc. ("Fodor's") to license content from Fodor's guidebooks and
to promote the Company's online travel services.

8. PREFERRED STOCK:

In November 1997 all 6,033,686 shares of Series A, B, C, D and E preferred
stock were converted on a one to one basis into common stock of the Company.

In November 1997 the shareholders of the Company approved an amendment to
the Company's certificate of incorporation authorizing 5,000,000 shares of
undesignated preferred stock of which the Board of Directors has the authority
to issue and to determine the rights, preferences and privileges.

9. STOCK WARRANTS:

At December 31, 1997, warrants to purchase 31,666 shares of common stock of
the Company were outstanding at an aggregate exercise price of $188,994,
expiring in November 2002 and in December 2005.

10. OTHER SHAREHOLDERS' EQUITY:

Other shareholders' equity comprise the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Unearned compensation..................................... $ -- $ (500)
Shareholder notes receivable.............................. (234) (106)
Stock warrants............................................ 457 67
------ ------
$ 223 $ (539)
====== ======
</TABLE>

Shareholder notes receivable represent the amounts due from shareholders in
exchange for the issuance of common stock together with accrued interest. The
notes bear interest at rates from 6%-8% and are due five years from the date
of issuance, but may be repaid earlier. The receivables are collateralized by
a pledge of a portion of the underlying common stock issued.

11. STOCK OPTION PLAN:

In 1988, the shareholders of the Company approved the 1988 Stock Option Plan
(the "1988 Plan"), which, as amended, authorized 1,681,750 shares of the
Company's common stock as available for the granting of options. Under the
1988 Plan, the Board of Directors may grant options for common stock to
employees, directors, and consultants either as incentive stock options or
nonstatutory options. Options granted as incentive stock options are at an
exercise price not lower than the fair market value of the stock at the date
the options are granted. Nonstatutory options are issued at between 85% and
100% of fair market value. Options granted generally become exercisable over
four years.

In November 1997, the shareholders of the Company approved the 1997 Stock
Option Plan (the "1997 Plan"), which authorized an additional 1,500,000 shares
of the Company's common stock as available for the granting of options with
terms and conditions substantially similar to those of the 1988 Plan.

In November 1997, the shareholders of the Company approved the 1997
Directors' Stock Option Plan (the "1997 Directors' Plan"), which authorized an
additional 250,000 shares of the Company's common stock

F-13
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

as available for the granting of options. Options granted under the 1997
Directors' Plan are nonstatutory options and will be issued at 100% of fair
market value at the time of grant. Options granted become exercisable over
four years. The 1997 Directors' Plan calls for an initial grant of shares for
each new non-employee member of the Board of Directors in addition to an
automatic annual grant thereafter.

At December 31, 1996 and 1997, 1,306,750 and 2,382,330 shares of common
stock, respectively, were reserved for the exercise of stock options.

The following table summarizes activity under the Company's stock option
plans for the years ended December 31, 1995, 1996 and 1997:

<TABLE>
<CAPTION>
NUMBER AGGREGATE WEIGHTED
OF SHARES OPTION PRICE PRICE AVERAGE
(THOUSANDS) PER SHARE (THOUSANDS) EXERCISE PRICE
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
January 1, 1995........ 196 $0.50 - $2.20 $ 242 $1.22
Granted............... 586 $2.20 1,290 2.20
Exercised............. (70) $0.50 - $2.20 (37) 0.54
Terminated............ (35) $0.50 - $2.20 (73) 2.04
----- ----- ----- ------ -----
Options outstanding at
December 31, 1995...... 677 $0.50 - $2.20 1,422 2.10
Granted............... 277 $2.20 - $2.60 701 2.52
Exercised............. (137) $0.50 - $2.20 (246) 1.78
Terminated............ (82) $0.50 - $2.60 (211) 2.56
----- ----- ----- ------ -----
Options outstanding at
December 31, 1996...... 735 $1.20 - $2.60 1,666 2.28
Granted............... 658 $2.60 - $9.94 3,978 6.05
Exercised............. (65) $1.20 - $2.60 (140) 2.15
Terminated............ (27) $1.20 - $2.60 (64) 2.37
----- ----- ----- ------ -----
Options outstanding at
December 31, 1997...... 1,301 $2.00 - $9.94 $5,440 $4.18
===== ===== ===== ====== =====
</TABLE>

At December 31, 1997, options to purchase 465,504 shares of common stock
were exercisable. At December 31, 1996 and 1997, 212,698 shares and 1,706,600
shares, respectively, remain available for issuance.

The following table summarizes information with respect to stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- --------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT 12/31/97 CONTRACTUAL LIFE EXERCISE AT 12/31/97 EXERCISE
EXERCISE PRICES (THOUSANDS) (YEARS) PRICE (THOUSANDS) PRICE
- --------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.00--$2.40 368 7.46 $2.24 244 $2.22
$2.42--$2.60 495 8.30 $2.53 222 $2.45
$6.50--$9.94 438 9.76 $7.77 -- --
----- ---
1,301 466
===== ===
</TABLE>

The following information concerning the Company's stock option plans is
provided in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation." The Company accounts for such plans in accordance with APB No.
25, "Accounting for Stock Issued to Employees."

F-14
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The fair value of each option grant has been estimated on the date of grant
using the minimum value method for all years ended prior to the initial public
offering, and subsequently through the use of option pricing models, even
though such models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models also
require subjective assumptions, including future stock volatility and expected
time to exercise, which greatly affect the calculated values. The Company's
calculations were made using the minimum value method in 1996 and the Black-
Scholes option pricing model in 1997 with the following weighted average
assumptions used for grants in 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Risk-free interest rate.................................... 6.15% 7.00%
Expected volatility........................................ 0% 50%
Expected life.............................................. 5 years 5 years
Dividends.................................................. 0 0
</TABLE>

The weighted average fair value per option granted in 1996 and 1997 was
$0.64 and $4.46, respectively.

The following pro forma net loss and loss per share information has been
prepared as if the Company had followed the provisions of SFAS No. 123 (in
thousands except per share data):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- --------
<S> <C> <C>
Net loss:
As reported.......................................... $(5,592) $(10,168)
Pro forma............................................ $(5,732) $(10,901)
Basic and diluted net loss per share:
As reported.......................................... $ (3.43) $ (3.54)
Pro forma............................................ $ (3.51) $ (3.80)
</TABLE>

These pro forma amounts may not be representative of the effects on reported
net income (loss) for future years as options vest over several years and
additional awards are generally made each year.

In connection with the completion in November 1997 of the Company's initial
public offering, certain options granted in 1997 have been considered to be
compensatory. Compensation associated with such options as of December 31,
1997 amounted to $570,000. Of that amount, $70,000 has been charged to
operations in the year ended December 31, 1997 and $500,000 will be charged to
operations over the remaining period to 2001.

In November 1997, the stockholders of the Company approved the 1997 Employee
Stock Purchase Plan (the "ESPP") and reserved 500,000 shares of common stock
for sale to employees at a price no less than 85% of the lower of the fair
market value of the common stock at the beginning of the two-year offering
period or the end of each of the six-month purchase periods.

12. EMPLOYEE BENEFIT PLAN:

The Company sponsors a defined contribution 401(k) plan which covers
substantially all employees. Employer contributions are made at the discretion
of the Company. The Company made no contributions to the plan during 1995,
1996 or 1997.

F-15
<PAGE>

PREVIEW TRAVEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the years ended December 31, 1996 and 1997, the Company made cash
payments for interest of approximately $260,000 and $168,000, respectively,
and state franchise taxes of $2,400 for both years.

The following noncash investing and financing transactions occurred during
the years ended December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Property and equipment obtained through capital leases...... $1,039 $1,721
====== ======
Common stock issued for notes and interest receivable....... $ 234 $ 128
====== ======
Common stock issued for services............................ $ -- $ 46
====== ======
Series E preferred stock issued upon conversion of bridge
loans...................................................... $1,000 $ --
====== ======
Common stock issued upon conversion of notes payable........ $ -- $ 750
====== ======
Unearned compensation in connection with the issuance of
stock options.............................................. $ -- $ 570
====== ======
</TABLE>

14. RELATED PARTY TRANSACTION:

During the years ended December 31, 1996 and 1997, the Company recorded
$2,143,000 and $3,595,000, respectively, of online revenues pursuant to an
agreement with AOL, a stockholder of the Company. The Company also recorded
marketing expenses of $108,000 and $2,631,000 for services in connection with
the agreement during 1996 and 1997, respectively.

15. EARNINGS PER SHARE (EPS) DISCLOSURES:

In accordance with the requirements of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," a reconciliation of the numerator and
denominator of basic and diluted EPS is provided as follows (in thousands,
except per share amounts).

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Numerator--Basic and Diluted EPS
Net loss..................................... $(4,933) $(5,592) $(10,168)
======= ======= ========
Denominator--Basic and Diluted EPS
Weighted average common stock outstanding.... 1,228 1,631 2,869
======= ======= ========
Basic and diluted earnings per share........... $ (4.02) $ (3.43) $ (3.54)
======= ======= ========
</TABLE>

16. SUBSEQUENT EVENTS (UNAUDITED):

In March 1998, the Company entered into an agreement with Lycos, a search
engine provider, for distribution and promotion of the Company's online travel
services. Over the two-year term of the agreement, the Company is obligated to
make minimum payments totaling $4.25 million, as well as a portion of
commissions earned by the Company under the agreement in excess of certain
thresholds. In addition, the Company has committed to purchase an aggregate of
approximately $500,000 in advertising on Lycos' sites, which it may resell to
third parties.

F-16
<PAGE>

[GRAPHIC DEPICTING FAREFINDER SCREEN]

SHOPPING FEATURES

[GRAPHIC DEPICTING FIND-A-TRIP SCREEN]

Preview Travel has created several special services designed to help
consumers make better travel decisions. With Farefinder, users have quick and
easy access to the lowest airfares from their home cities to destinations
around the world. With Find-a-Trip, users can locate a vacation package
designed to meet their specific needs and interests and retrieve extensive
hotel and destination information, including photos and streaming video.

EASY-TO-USE AND CONVENIENT SERVICES

[GRAPHICS DEPICTING AIRLINE RESERVATION AND BOOKING SCREENS]

Preview Travel's friendly interface makes it easy for customers to make
their travel plans online. The Company's services are designed to help
consumers shop for travel based on price, convenience and other criteria. In
addition, Preview Travel enables consumers to store personal profiles and
travel preferences, making their travel planning faster and more convenient.

[GRAPHIC DEPICTING E-MAIL SCREEN]

PERSONALIZED COMMUNICATIONS

Each purchase on Preview Travel is followed by a series of personalized e-
mail notifications. Online transactions are confirmed via e-mail and are
followed by Bon Voyage and Welcome Home e-mails, which provide a summary of
the travel itinerary as well as an opportunity to thank customers and solicit
valuable feedback. Preview Travel also delivers targeted newsletters and
notifications to its members on a regular basis.

KNOWLEDGEABLE CUSTOMER SERVICE

Preview Travel is committed to delivering world-class customer service,
including complete online help, free delivery of travel documents, toll-free
customer service seven days a week and e-mail support. Preview Travel's mission
is to fully assist customers before, during and after their travel. The Company
handles all aspects of customer service and fulfillment in-house, with a staff
of cyber-literate travel professionals.

[PICTURE OF CUSTOMER SERVICE CENTER]

www.previewtravel.com AOL keyword: previewtravel
<PAGE>

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

-----------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 20
Price Range of Common Stock............................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Selected Consolidated Financial Data...................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 34
Management................................................................ 49
Certain Relationships and Related Transactions............................ 60
Principal and Selling Stockholders........................................ 62
Description of Capital Stock.............................................. 64
Shares Eligible for Future Sale........................................... 66
Underwriting.............................................................. 68
Legal Matters............................................................. 69
Experts................................................................... 69
Additional Information.................................................... 70
Index to Consolidated Financial Statements................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

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

3,500,000 SHARES

[LOGO OF PREVIEW TRAVEL, INC.]

PREVIEW TRAVEL, INC.

COMMON STOCK

--------------
PROSPECTUS
--------------

HAMBRECHT & QUIST
BANCAMERICA
ROBERTSON STEPHENS
NATIONSBANC MONTGOMERY
SECURITIES LLC
PAINEWEBBER INCORPORATED

, 1998

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates
except the SEC registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID
--------
<S> <C>
SEC Registration Fee.................................................. $ 41,262
NASD Filing Fee....................................................... 14,487
Nasdaq Listing Fee.................................................... 17,500
Printing Fees and Expenses............................................ 150,000
Legal Fees and Expenses............................................... 150,000
Accounting Fees and Expenses.......................................... 50,000
Blue Sky Fees and Expenses............................................ 5,000
Transfer Agent and Registrar Fees..................................... 10,000
Miscellaneous......................................................... 61,751
--------
Total............................................................... $500,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for certain
expenses incurred) arising under the Securities Act of 1933, as amended (the
"Act"). The Registrant's Amended and Restated Certificate of Incorporation
(Exhibit 3.1 hereto) provides for indemnification of its directors and
officers to the maximum extent permitted by the Delaware General Corporation
Law and the Registrant's Bylaws (Exhibit 3.2 hereto) provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. In addition,
the Registrant has entered into Indemnification Agreements (Exhibit 10.1
hereto) with its directors and officers containing provisions which are in
some respects broader than the specific indemnification provisions contained
in the Delaware General Corporation Law. The indemnification agreements may
require the Company, among other things, to indemnify its directors against
certain liabilities that may arise by reason of their status or service as
directors (other than liabilities arising from willful misconduct of culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors'
insurance if available on reasonable terms. Reference is also made to the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Company against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) Since March 31, 1995, the Registrant has issued and sold (without
payment of any selling commission to any person) the following unregistered
securities (as adjusted to reflect the Registrant's reincorporation under the
laws of Delaware and the automatic conversion of its outstanding Preferred
Stock into Common Stock upon completion of this offering):

(1) In connection with the reincorporation of the Registrant under the
laws of Delaware to be effected prior to completion of this offering,
the Registrant exchanged shares of its capital stock for the outstanding
shares of capital stock of Preview Travel, Inc., a California
corporation.

(2) As of December 31, 1997, an aggregate of 424,398 shares of Common
Stock had been issued upon exercise of options under the Registrant's
1988 Stock Option Plan.

II-1
<PAGE>

(3) In May 1996, the Registrant issued to 20 investors convertible
subordinated notes in the aggregate principal amount of $999,959,
which notes were converted into shares of Series E Preferred Stock in
June 1996.

(4) In June 1996, the Registrant issued and sold shares of Series E
Preferred Stock convertible into an aggregate of 955,869 shares of
Common Stock to 21 investors for an aggregate purchase price of
$8,602,821. In September 1997, the Registrant issued and sold to 31
investors additional 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.

(5) In January 1997, the Registrant issued Series C Preferred Stock upon
exercise of warrants held by 13 holders for an aggregate exercise
price of $415,000. Such shares of Series C Preferred Stock are
convertible into an aggregate of 148,214 shares of Common Stock.

(6) The Registrant has issued to America Online, Inc. the following
warrants in connection with certain commercial agreements between the
Registrant and America Online, Inc.: (A) in December 1995, a warrant
to purchase shares of Series D Preferred Stock convertible into
377,619 shares of Common Stock for an aggregate purchase price of
$1,586,000; (B) in June 1996, a warrant to purchase shares of Series E
Preferred Stock convertible into 75,000 shares of Common Stock for an
aggregate purchase price of $675,000; and (C) in January 1995, a
warrant to purchase shares of 160,000 shares of Common Stock for an
aggregate purchase price of $352,000.

(7) The Registrant has issued to an equipment lease provider the following
warrants: (A) in December 1995, a warrant to purchase shares of Series
D Preferred Stock convertible into 20,000 shares of Common Stock for
an aggregate purchase price of $84,000; and (B) in July 1997, a
warrant to purchase shares of Series E Preferred Stock convertible
into 11,666 shares of Common Stock for an aggregate purchase price of
$105,000.

(8) In September 1997 the Registrant issued to a strategic partner a
warrant to purchase shares of Series E Preferred Stock convertible
into 94,500 shares of Common Stock at an aggregate exercise price of
$850,500.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

The issuance described in Item 15(a)(1) was or will be exempt from
registration under Section 2(3) of the Securities Act on the basis that such
transaction did not involve a "sale" of securities. The issuances described in
Items 15(a)(3) through 15(a)(8) were deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) thereof as transactions
by an issuer not involving any public offering. The issuances described in
Items 15(a)(2) were deemed to be exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated thereunder in that they were offered
and sold either pursuant to written compensatory benefit plans or pursuant to
a written contract relating to compensation, as provided by Rule 701. In
addition, such issuances were deemed to be exempt from registration under
Section 4(2) of the Securities Act as transactions by an issuer not involving
any public offering. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends where affixed to the securities issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about the Registrant.

II-2
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1*** Form of Underwriting Agreement.
2.1* Form of Agreement and Plan of Merger between the Registrant and
Preview Travel, Inc., a Delaware corporation.
3.1* Certificate of Incorporation of the Registrant.
3.2* Form of Bylaws of the Registrant.
3.3* Form of Amended and Restated Certificate of Incorporation of the
Registrant.
4.1* Form of the Registrant's Common Stock Certificate.
5.1*** Opinion of Venture Law Group, a Professional Corporation.
10.1* Form of Indemnification Agreement.
10.2* 1988 Stock Option Plan, as amended.
10.3* 1997 Stock Option Plan.
10.4* 1997 Employee Stock Purchase Plan.
10.5* 1997 Directors' Stock Option Plan.
10.6* Third Amended and Restated Registration Rights Agreement, dated June
28, 1996, by and among the Registrant and certain holders of the
Registrant's capital stock.
10.7* Amendment No. 1 to the Third Amended and Restated Registration Rights
Agreement, dated September 26, 1997, by and among the Registrant and
certain holders of the Registrant's capital stock.
10.8+* Travel Channel Agreement, dated September 30, 1997, by and between
the Registrant and Excite, Inc.
10.9+* Interactive Services Agreement, dated September 1, 1997, by and
between the Registrant and America Online, Inc.
10.10+* Subscriber Services Agreement, dated October 1997, by and between the
Registrant and Apollo Travel Partnership.
10.11* Warrant Agreement to Purchase Shares of Series D Preferred Stock,
dated December 15, 1995, by and between the Registrant and Comdisco,
Inc.
10.12* Warrant Agreement to Purchase Shares of Series E Preferred Stock,
dated July 22, 1997, by and between the Registrant and Comdisco, Inc.
10.13* Office Lease, dated September 15, 1990, by and between the Registrant
and Blum's Building Associates.
10.14* Severance Agreement, dated March 1997, by and between the Registrant
and Kenneth Orton.
10.15* Amendment No. 2 to the Third Amended and Restated Registration Rights
Agreement, dated November 17, 1997, by and among the Registrant and
certain holders of the Registrant's capital stock.
10.16*++ Agreement, dated as of March 15, 1998, between the Registrant and
Lycos, Inc.
10.17*++ Restated and Amended Excite Agreement, dated as of March 12, 1998,
between the Registrant and Excite, Inc.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2*** Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see p. II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------------
* Incorporated herein by reference to the exhibit filed with the
Registrant's Registration Statement on Form S-1 (Commission File No. 333-
37183)

** Incorporated herein by reference to the exhibit filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.

*** To be filed by amendment.

+ Confidential treatment has been granted by the Securities and Exchange
Commission with respect to certain information in these exhibits.

++Confidential treatment requested.

II-3
<PAGE>

(b) Financial Statement Schedules

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liaaability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Francisco, State of California, on April 8, 1998.

PREVIEW TRAVEL, INC.

/s/ Kenneth J. Orton
By:
-----------------------------------
KENNETH J. ORTON, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth J. Orton and Kenneth R. Pelowski, and
each one of them, his attorneys-in-fact, each with the power of substitution,
for him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE

/s/ Kenneth J. Orton President, Chief April 8, 1998
- ------------------------------------- Executive Officer
(KENNETH J. ORTON) and Director

/s/ Kenneth R. Pelowski Executive Vice April 8, 1998
- ------------------------------------- President, Finance
(KENNETH R. PELOWSKI) and Administration,
and Chief Financial
Officer (Principal
Financial Officer)

/s/ Bruce Carmedelle Vice President and April 8, 1998
- ------------------------------------- Corporate
(BRUCE CARMEDELLE) Controller
(Principal
Accounting Officer)

/s/ James J. Hornthal Chairman and April 8, 1998
- ------------------------------------- Director
(JAMES J. HORNTHAL)

II-5
<PAGE>

SIGNATURE CAPACITY DATE

/s/ Thomas W. Cardy Director April 8, 1998
- -------------------------------------
(THOMAS W. CARDY)

/s/ Thomas A. Cullen Director April 8, 1998
- -------------------------------------
(THOMAS A. CULLEN)

Director
- -------------------------------------
(WILLIAM R. HEARST, III)

Director
- -------------------------------------
(THEODORE J. LEONSIS)

/s/ Douglas J. Mackenzie Director April 8, 1998
- -------------------------------------
(DOUGLAS J. MACKENZIE)

/s/ James E. Noyes Director April 8, 1998
- -------------------------------------
(JAMES E. NOYES)

Director
- -------------------------------------
(DAVID S. POTTRUCK)

II-6
<PAGE>

EXHIBIT INDEX

** Incorporated herein by reference to the exhibit filed with the
Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.

*** To be filed by amendment.

+ Confidential treatment has been granted by the Securities and Exchange
Commission with respect to certain information in these exhibits.

++Confidential treatment requested.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 (File
No. 333- ) of our report dated January 28, 1998, on our audits of the
consolidated financial statements of Preview Travel, Inc. and Subsidiaries. We
also consent to the references to our firm under the captions "Experts" and
"Selected Financial Data."

COOPERS & LYBRAND L.L.P.

San Francisco, California
April 7, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEETS AT DECEMBER 31, 1996 AND 1997 AND STATEMENTS OF OPERATIONS FOR
THE FISCAL YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 6,016 27,912
<SECURITIES> 0 750
<RECEIVABLES> 1,284 2,030
<ALLOWANCES> (25) (40)
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,487 36,739
<PP&E> 0 0
<DEPRECIATION> (2,095) (2,039)
<TOTAL-ASSETS> 12,554 42,785
<CURRENT-LIABILITIES> 7,095 5,806
<BONDS> 0 0
0 0
5 0
<COMMON> 2 11
<OTHER-SE> 4,404 35,354
<TOTAL-LIABILITY-AND-EQUITY> 12,554 42,785
<SALES> 12,374 13,644
<TOTAL-REVENUES> 12,374 13,644
<CGS> 9,308 9,399
<TOTAL-COSTS> 8,567 14,677
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (89) 266
<INCOME-PRETAX> (5,590) (10,166)
<INCOME-TAX> (2) (2)
<INCOME-CONTINUING> (5,592) (10,168)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,592) (10,168)
<EPS-PRIMARY> (3.43)<F1> (3.54)
<EPS-DILUTED> (3.43) (3.54)
<FN>
<F1>NOTE: EPS FOR 1996 HS BEEN RESTATED TO CONFORM WITH STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 128 AND SECURITIES AND EXCHANGE COMMISSION STAFF
ACCOUNTING BULLETIN NO. 98.
</FN>

</TABLE>