Employment Agreement - Internet Travel Network and Kenneth R. Pelowski


 
                            Internet Travel Network
                              445 Sherman Avenue
                             Palo Alto, CA 94306

                                March 25, 1999

Mr. Kenneth R. Pelowski
3 Brady Place
Menlo Park, CA 94025

Dear Ken:

          Internet Travel Network (the "Company") is pleased to offer you
employment on the following terms:

          1.   Position. You will serve in a full-time capacity as Chief
Operating Officer and Chief Financial Officer of the Company. You will report to
the Company's Chief Executive Officer. By signing this letter agreement, you
represent and warrant to the Company that you are under no contractual
commitments inconsistent with your obligations to the Company.

          2.   Salary and Bonus. You will be paid a salary at the annual rate of
$175,000, payable in semi-monthly installments in accordance with the Company's
standard payroll practices for salaried employees. This salary will be subject
to adjustment pursuant to the Company's employee compensation policies in effect
from time to time. You will also have the opportunity to earn a cash bonus of up
to $50,000 per year.

          3.   Stock Options. Subject to the approval of the Company's Board of
Directors or its Compensation Committee, you will be granted a nonstatutory
stock option to purchase 500,000 shares of the Company's Common Stock. The
exercise price per share will be equal to $1.00. The option will be subject to
the terms and conditions applicable to options granted under the Company's 1996
Stock Incentive Plan (the "Plan"), as described in the Plan and the applicable
stock option agreement. The option will be immediately exercisable, but the
purchased shares will be subject to repurchase by the Company at the exercise
price in the event that your service terminates before you vest in the shares.
Except as provided in Paragraph 4 below, you will vest in 12.5% of the option
shares when you complete the sixth month of continuous service and the balance
will vest in equal monthly installments over the next 42 months of continuous
service, as described in the applicable stock option agreement. You may pay the
exercise price of the option with a full-recourse promissory note secured by the
option shares. The note will have a five-year term (but will be due 180 days
after your employment terminates, if earlier), will bear interest at the
Applicable Federal Rate and will provide for principal and interest to be
payable in a lump sum on the due date.

          4.   Accelerated Vesting After Change in Control. If the Company is
subject to a Change in Control (as defined in the Plan) before your service with
the Company

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 2

terminates, and if you are subject to an involuntary discharge within 18 months
after that Change in Control, then all of your option shares will be vested. For
purposes of this Paragraph 4, you will be deemed to have been discharged by the
Company if you resign within 18 months after a Change in Control and after the
Company has notified you that your annual base salary will be materially
reduced, that there will be a material adverse change in your title or duties,
or that your principal place of employment will be relocated by more than 35
miles. For purposes of this Paragraph 4, you will also be deemed to have been
discharged by the Company if you resign within 18 months after a Change in
Control because James J. Hornthal is serving as a member of the board of
directors or an officer of the Company, of its parent corporation or of the
successor corporation in a merger with the Company.

          5.   Internet Purchasing Opportunity. As you know, you and I had
discussed prior to my joining the Company the possibility of our launching a
separate company focused on internet purchasing. I am aware that you had devoted
time to pursuing the opportunity after I joined the Company and that your
joining the Company will prevent you from independently pursuing the
opportunity. You have agreed that in connection with your joining the Company
you will not continue to pursue this opportunity. In addition, you have agreed
that you will assign to the Company any intellectual property that you
independently developed relating to the opportunity. You will transfer to the
Company any of such intellectual property relating to the internet purchasing
company that you have independently developed in consideration of 125,000
unvested shares of the Company's Common Stock. The details of this purchase are
described in Exhibit A attached hereto.

          6.   Parachute Excise Tax Gross-Up. If you become subject to the
excise tax applicable to excess parachute payments under section 4999 of the
Internal Revenue Code of 1986, as amended, then the Company will reimburse you
for that tax (subject to certain limitations). The details of the gross-up
payment are described in Exhibit B attached hereto.

          7.   Proprietary Information and Inventions Agreement. Like all
Company employees, you will be required, as a condition to your employment with
the Company, to sign the Company's standard Proprietary Information and
Inventions Agreement, a copy of which is attached hereto as Exhibit C.

          8.   Period of Employment. Your employment with the Company will be
"at will," meaning that either you or the Company will be entitled to terminate
your employment at any time and for any reason, with or without cause. Any
contrary representations which may have been made to you are superseded by this
offer. This is the full and complete agreement between you and the Company on
this term. Although your job duties, title, compensation and benefits, as well
as the Company's personnel policies and procedures, may change from time to
time, the "at will" nature of your employment may only be changed in an express
written agreement signed by you and a duly authorized officer of the Company.

          9.   Outside Activities. While you render services to the Company, you
will not engage in any other gainful employment, business or activity without
the written consent of

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 3

the Company. While you render services to the Company, you also will not assist
any person or organization in competing with the Company, in preparing to
compete with the Company or in hiring any employees of the Company.

          10.  Withholding Taxes. All forms of compensation referred to in this
letter are subject to reduction to reflect applicable withholding and payroll
taxes.

          11.  Indemnification. The Company hereby indemnifies you in the event
that Preview Travel, Inc. ("Preview") asserts any claim against you with respect
to your employment with the Company, provided that you comply with (a) this
letter agreement, (b) the Proprietary Information and Inventions Agreement
between you and the Company and (c) the Employee Proprietary Information
Agreement between you and Preview. The Company, at its discretion, may either at
its own expense engage counsel to defend you in any legal action brought by
Preview that is covered by this Paragraph 11 or reimburse you for the reasonable
fees and costs of counsel whom you retain to defend you in any legal action
brought by Preview that is covered by this Paragraph 11.

          12.  Entire Agreement. This letter and the Exhibits attached hereto
contain all of the terms of your employment with the Company and supersede any
prior understandings or agreements, whether oral or written, between you and the
Company.

          13.  Amendment and Governing Law. This letter agreement may not be
amended or modified except by an express written agreement signed by you and a
duly authorized officer of the Company. The terms of this letter agreement and
the resolution of any disputes will be governed by California law.

          We hope that you find the foregoing terms acceptable. You may indicate
your agreement with these terms and accept this offer by signing and dating both
the enclosed duplicate original of this letter and the enclosed Proprietary
Information and Inventions Agreement and returning them to me. As required by
law, your employment with the Company is also contingent upon your providing
legal proof of your identity and authorization to work in the United States.
This offer, if not accepted, will expire at the close of business on March __,
1999.

          We look forward to having you join us on _________ __, 1999.

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 4


          If you have any questions, please call me at 650.614.6300.

                                         Very truly yours,

                                         Internet Travel Network

                                         By:___________________________________
                                         Chief Executive Officer

I have read and accept this employment offer:


____________________________________________
Signature of Kenneth R. Pelowski

Dated: March __, 1999


Attachments

Exhibit A:  Summary of Stock Purchase and Stock Purchase Agreement
Exhibit B:  Parachute Excise Tax Gross-Up Provisions
Exhibit C:  Proprietary Information and Inventions Agreement

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 5


Exhibit A

             Summary of Stock Purchase and Stock Purchase Agreement

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 6


Exhibit B

                   Parachute Excise Tax Gross-Up Provisions.

          (a)  Gross-Up Payment. If it is determined that any payment or
distribution of any type to or for the benefit of the employee by the Company,
any of its affiliates, any person who acquires ownership or effective control of
the Company or ownership of a substantial portion of the Company's assets
(within the meaning of section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder) or any affiliate of such
person, whether paid or payable or distributed or distributable pursuant to the
terms of this letter or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax and any such interest or
penalties are collectively referred to as the "Excise Tax"), then the employee
shall be entitled to receive an additional payment (a "Gross-Up Payment"). The
amount of the Gross-Up Payment shall be as follows:

          (i)  If the Gross-Up Payment becomes payable in a taxable year of the
     Company in which the Company has no taxable income (after taking into
     account net operating loss carry-forwards), the Gross-Up Payment shall be
     equal to the product of (A) 50% multiplied by (B) an amount calculated to
     ensure that after payment by the employee of all taxes (and any interest or
     penalties imposed with respect to such taxes), including any Excise Tax,
     imposed upon the Gross-Up Payment, the employee retains an amount of the
     Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

          (ii) If the Gross-Up Payment becomes payable in a taxable year of the
     Company in which the Company has taxable income (after taking into account
     net operating loss carry-forwards), the Gross-Up Payment shall be equal to
     the excise tax imposed on the employee by section 4999 of the Code, without
     regard to any taxes payable by the employee with respect to the Gross-Up
     Payment.

          (b)  Determination by Accountant. All determinations and calculations
required to be made under this Exhibit B shall be made by an independent
accounting firm selected by the employee from among the largest five accounting
firms in the United States (the "Accounting Firm"), which shall provide its
determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter, both to the Company and the employee within five days of the termination
of the employee's employment, if applicable, or such earlier time as is
requested by the Company or the employee (if the employee reasonably believes
that any of the Total Payments may be subject to the Excise Tax). If the
Accounting Firm determines that no Excise Tax is payable by the employee, it
shall furnish the employee with a written statement that such Accounting Firm
has concluded that no Excise Tax is payable (including the reasons therefor) and
that the employee has substantial authority not to report any Excise Tax on the
employee's federal income tax return. If a Gross-Up Payment is determined to be
payable, it shall be paid to the employee

 
Mr. Kenneth R. Pelowski                                           March 25, 1999
                                                                          Page 7


within five days after the Determination is delivered to the Company or the
employee. Any determination by the Accounting Firm shall be binding upon the
Company and the employee, absent manifest error. The Company shall pay the fees
and costs of the Accounting Firm.

          (c)  Over- and Underpayments. As a result of uncertainty in the
application of section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made
by the Company should have been made ("Underpayment"), or that Gross-Up Payments
will have been made by the Company which should not have been made
("Overpayments"). In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the amount of such Underpayment shall be promptly paid by the
Company to or for the benefit of the employee. In the case of an Overpayment,
the employee shall, at the direction and expense of the Company, take such steps
as are reasonably necessary (including the filing of returns and claims for
refund), follow reasonable instructions from, and procedures established by, the
Company, and otherwise reasonably cooperate with the Company to correct such
Overpayment.

          (d)  Limitation on Parachute Payments. Any other provision of this
Exhibit B notwithstanding, if the Excise Tax could be avoided by reducing the
Total Payments by $45,000 or less, then the Total Payments shall be reduced to
the extent necessary to avoid the Excise Tax and no Gross-Up Payment shall be
made. If the Accounting Firm determines that the Total Payments are to be
reduced under the preceding sentence, then the Company shall promptly give the
employee notice to that effect and a copy of the detailed calculation thereof.
The employee may then elect, in the employee's sole discretion, which and how
much of the Total Payments are to be eliminated or reduced (as long as after
such election no Excise Tax will be payable) and shall advise the Company in
writing of the employee's election within 10 days of receipt of notice. If no
such election is made by the employee within such 10-day period, then the
Company may elect which and how much of the Total Payments are to be eliminated
or reduced (as long as after such election no Excise Tax will be payable) and
shall notify the employee promptly of such election.