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Sample Business Contracts

Employment Agreement - Cheap Tickets Inc. and Jason D. Horstman

Employment Forms

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  • Executive Employment Agreement. Companies may offer their business executives a contract that is different from the one provided to their regular employees. Executive employment agreements may be more complex because the compensation structure may include a combination of salary and commissions, provide for bonuses based on sales, stock or other financial targets, and include non-compete, confidentiality and severance provisions.
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                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT, dated as of January 24, 2000, is entered into by
and between CHEAP TICKETS, INC., a Delaware corporation (the "Company"), and
JASON D. HORSTMAN ("Executive").

                                    RECITAL
                                    -------

     The Company desires to employ Executive, and Executive desires to be
employed by the Company, as a senior executive of the Company, in accordance
with and subject to the terms and conditions set forth herein.

                                   AGREEMENT
                                   ---------

     Accordingly, the parties hereby agree as follows:

     1.  Employment Term.  Subject to Section 4, the Company hereby employs
         ---------------              ---------
Executive, and Executive hereby accepts employment by the Company, to render
services on behalf of the Company and all existing and future Affiliated
Companies (as defined in Section 2.1) in the position and with the duties and
                         -----------
responsibilities described in Section 2 for the period commencing on the date of
                              ---------
this Agreement and ending upon the fifth anniversary hereof (the "Initial
Term").  Unless either party notifies the other party of its intention to
terminate this Agreement, at its sole and absolute discretion, within thirty
(30) days prior to the expiration of the Initial Term, this Agreement shall
continue indefinitely on a yearly basis (each extended yearly term referred to
as an "Additional Term"), subject to termination by either party, at its sole
and absolute discretion, upon thirty (30) days' notice prior to the expiration
of any such Additional Term.  The Initial Term and all Additional Terms as set
forth above shall be referred to as the "Employment Term."  Subject to Section
                                                                       -------
4, the Company shall pay Executive the compensation to which Executive is
-
entitled under Section 3.1(a), and reimburse Executive for any business expenses
               --------------
properly incurred by Executive pursuant to Section 3.3, through the end of the
                                           -----------
Employment Term, and thereafter Company's obligations hereunder shall terminate.
Each party shall have the right to terminate the Employment Term pursuant to

Section 4 with or without Cause (as defined therein), subject to the
---------
consequences set forth therein.

     2.  Position, Duties, Responsibilities.
         -----------------------------------

         2.1.  Position.  Executive shall be employed by the Company as Vice
               --------
President, Business Development (or in such other position(s) as the Board of
Directors of the Company (the "Board") shall designate in consultation with
Executive, provided that such position shall have authority commensurate with
the position of a senior executive officer of the Company). Executive shall
devote Executive's best efforts and Executive's full time and attention to the
performance of the services customarily incident to such office, including,
without limitation, to the Company's and any Affiliated Company's operations,
strategic planning and to such other services as may be reasonably requested by
the Board (collectively, the "Services"). The term

                                       1
<PAGE>

"Affiliated Company" as used in this Agreement means any corporation or other
business entity that, now or hereafter, directly or indirectly, controls, is
controlled by or is under common control with the Company. The Company shall
retain full direction and control of the means and methods by which Executive
performs the Services. Executive shall be based in Honolulu, Hawaii or such
other place(s) as mutually agreed between the Company and Executive.

         2.2.  Other Activities. Executive, during the Employment Term, shall
               ----------------
not (i) accept any other employment, or (ii) engage, directly or indirectly, in
any other business activity (whether or not pursued for pecuniary advantage)
that is or may be competitive with, or that might place Executive in a competing
position to that of the Company or any Affiliated Company. Notwithstanding the
foregoing, Executive may (a) with the written consent of the Board, serve on one
or more boards of directors of other corporations, (b) serve on civic or
charitable boards or committees, and (c) manage personal investments; provided
that any such activity shall not significantly interfere with Executive's
performance of his duties and responsibilities hereunder.

     3.  Compensation, Benefits, Expenses.
         --------------------------------

         3.1.  Compensation. In consideration of the Services to be rendered
               ------------
hereunder, including, without limitation, Services to any Affiliated Company,
Executive shall receive:

              (a)  Salary.  An annual salary in the amount of One Hundred
                   ------
Seventy-Five Thousand Dollars ($175,000), payable in twenty-four (24) equal
installments at the time and pursuant to the procedures regularly established,
and as they may be amended, by the Company during the course of this Agreement.
The Board shall review Executive's salary annually and in light of such review
may, in its sole and absolute discretion, increase such salary taking into
account any change in Executive's then responsibilities, increases in the cost
of living, performance by Executive, performance of the Company and other
pertinent factors.

              (b)  Bonus. Upon attainment by the Company and Executive of
                   -----
financial and operational goals determined annually in advance by the Board in
consultation with Executive, an annual bonus in the amount of twenty-five
percent (25%) of the annual salary, payable at the time and pursuant to the
procedures regularly established, and as they may be amended, by the Company
during the course of this Agreement. If the Company and Executive exceed such
financial and operational goals, the bonus shall be at an increased percentage
of the annual salary, not to exceed fifty percent (50%) thereof, on a graduated
scale, as determined annually in advance by the Board in consultation with
Executive.

              (c)  Stock Options. A grant of stock options representing seventy-
                   -------------
five thousand (75,000) shares of Common Stock of the Company, in accordance with
and subject to the terms and conditions of that certain Stock Option Award
Agreement (the "Stock Option Award Agreement") of even date herewith between the
Company and Executive, a copy of which is attached hereto as Exhibit A and
                                                             ---------
incorporated by reference herein.

             (d)  Loan. A loan, bearing no stated interest until maturity, in
                  ----
the amount of Two Hundred Thousand Dollars ($200,000), to be evidenced by a
Promissory Note

                                       2
<PAGE>

made by Executive in favor of the Company (the "Note"), a form of which is
attached hereto as Exhibit B. At each of the first three (3) anniversaries of
                   ---------
the Note, one-third (1/3) of the principal amount payable by Executive under the
Note shall be forgiven by the Company, provided that Executive is employed with
the Company on such anniversary. Notwithstanding the foregoing, Executive shall
be entitled to forgiveness of one-third (1/3) of the principal amount payable by
Executive under the Note on any of the three (3) anniversaries if in the year
preceding such anniversary, Executive was employed with the Company for at least
six (6) months. Executive agrees to use at least 75% of the loan amount for the
purposes of purchasing a residence in Honolulu, Hawaii.

     3.2.  Benefits.  The Company shall provide Executive with the right to
           --------
participate in and to receive benefits from all present and future life,
accident, disability, medical, pension, stock and savings plans and all similar
benefits made available generally to senior executive officers of the Company.
Executive shall be entitled to three (3) weeks of vacation per year, exclusive
of Company holidays.  The amount and extent of benefits to which Executive is
entitled shall be governed by the specific benefit plan, as it may be amended
from time to time.

     3.3.  Expenses. The Company shall reimburse Executive for reasonable travel
           --------
and other business expenses incurred by Executive in the performance of his
duties hereunder in accordance with the Company's general policies, as they may
be amended from time to time during the course of this Agreement. In addition,
the Company shall reimburse (or pay on behalf of Executive) for the following
expenses:

           (a)  Moving Expenses. Reimbursement of up to Forty Thousand Dollars
                ---------------
($40,000) incurred by Executive in relocating himself and his family from Apple
Valley, Minnesota to Honolulu, Hawaii. Executive agrees to provide appropriate
documentation to the Company evidencing such relocation expenses.


           (b)  Temporary Lodging Expenses. Prior to Executive's relocation from
                --------------------------
Apple Valley, Minnesota to Honolulu, Hawaii, reimbursement of up to Three
Thousand Dollars ($3,000) per month for Executive's temporary lodging expenses
in Honolulu, Hawaii (e.g., hotels or other suitable housing selected by
Executive) for a period not to exceed six (6) months from the date hereof.
Executive agrees to provide documentation to the Company evidencing such
temporary lodging expenses.

           (c)  Automobile Allowance. Reimbursement of up to Five Hundred
                --------------------
Dollars ($500) per month, including reasonable costs for maintenance and
insurance.

4.  Termination of Employment.
    -------------------------

    4.1.  By Death.  The Employment Term shall terminate automatically upon the
          --------
death of Executive.  The Company shall pay to Executive's beneficiaries or
estate, as appropriate, the compensation to which Executive is entitled pursuant
to Section 3.1(a) (including any accrued vacation), and reimburse Executive for
   --------------
any expenses properly incurred by Executive pursuant to Section 3.3, in each
                                                        -----------
case through the end of the month in which death occurs.  Thereafter, the
Company's obligations hereunder shall terminate.  Nothing in this Section shall
affect any entitlement of Executive's heirs to the benefits of any life
insurance plan.

                                       3
<PAGE>

     4.2.  By Disability.  If, in the sole and reasonable opinion of the Board,
           -------------
Executive shall be prevented from properly performing his duties hereunder by
reason of any physical or mental incapacity for a period of more than ninety
(90) days in the aggregate in any twelve-month (12-month) period, then, to the
extent permitted by law, the Employment Term shall terminate on, and the Company
shall pay to Executive the compensation to which Executive is entitled pursuant
to Section 3.1(a) (including any accrued vacation), and reimburse Executive for
   --------------
any expenses properly incurred by Executive pursuant to Section 3.3, in each
                                                        -----------
case through the last day of the month in which the 90th day of incapacity
occurs, and thereafter the Company's obligations hereunder shall terminate.
Nothing in this Section shall affect Executive's rights under any disability
plan in which he is a participant.

     4.3.  By the Company with Cause. The Company may terminate, without
           -------------------------
liability, the Employment Term with Cause (as defined below) solely pursuant to
this Section 4.3.  In the event the Company intends to terminate Executive with
     -----------
Cause, the Company shall give Executive notice thereof, such notice to state in
reasonable detail the particular act(s) or failure(s) that constitute the
grounds on which the proposed termination with Cause is based.  Executive shall
have ten (10) days after the date that such notice has been given to Executive
to cure such act(s) or failure(s), to the extent such act(s) or failure(s) are
capable of being cured.  If Executive fails to cure such act(s) or failure(s),
or such cure is not possible, the Company may thereupon terminate Executive's
employment with Cause immediately upon notice to Executive.  In such event, the
Company shall (i) pay Executive the compensation to which Executive is entitled
pursuant to Section 3.1(a) (including any accrued vacation); and (ii) reimburse
            --------------
Executive for any expenses properly incurred by Executive pursuant to Section
                                                                      -------
3.3, in each case through the end of the day on which the Company terminates
---
Executive.

          Termination shall be "with Cause" if:

         (a)  in the reasonable opinion of the Board, Executive refuses or fails
to act in accordance with any lawful direction or order of the Board;

         (b)  Executive exhibits, in the reasonable opinion of the Board,
unfitness or unavailability for service (other than disability, as provided for
in Section 4.2), unsatisfactory performance, misconduct, dishonesty, habitual
   -----------
neglect, or incompetence in the management of the affairs of the Company or
any Affiliated Company;

         (c)  Executive is convicted of a felony crime or a crime involving
moral turpitude; or

         (d)  Executive materially breaches any term of this Agreement.

     4.4. By Executive For Good Reason. Executive may terminate, without
          ----------------------------
liability, the Employment Term for Good Reason (as defined below) solely
pursuant to this Section 4.4. In the event Executive intends to terminate
                 -----------
Executive's employment for Good Reason, Executive shall give the Company notice
thereof, such notice to state in reasonable detail the particular act(s) or
failure(s) that constitute the grounds on which the proposed termination for
Good Reason is based. The Company shall have ten (10) days after the date that
such notice has been given to the Company to cure such act(s) or failure(s), to
the extent such

                                       4
<PAGE>

act(s) or failure(s) are capable of being cured. If the Company fails to cure
such act(s) or failure(s), or such cure is not possible, Executive may thereupon
terminate Executive's employment for Good Reason immediately upon notice to the
Company. In such event, the Company shall: (i) pay Executive the compensation
to which Executive is entitled pursuant to Section 3.1(a) (including any
                                           -------------
accrued vacation) through the end of the day on which Executive terminates
Executive's employment; (ii) reimburse Executive for any expenses properly
incurred by Executive pursuant to Section 3.3 through the end of the day on
                                  ------------
which Executive terminates Executive's employment; and (iii) pay Executive the
severance payment as set forth in Section 5. Thereafter the Company's
                                  ---------
obligations hereunder shall terminate.

          Good Reason shall exist under any of the following events (unless
Executive has consented to the occurrence of such event):

              (a)  There is an assignment to Executive of any duties materially
inconsistent with or which constitute a material change in Executive's position,
duties, responsibilities, or status with the Company, or a material change in
Executive's reporting responsibilities, title, or offices, or removal of
Executive from or failure to re-elect Executive to any of such positions, except
in connection with the termination of the Employment Term with Cause, or due to
disability, early or normal retirement as defined by the Company's pension plan,
death, or termination of the Employment Term by Executive other than for Good
Reason.

              (b)  The Company acts in any way that would adversely affect
Executive's participation in or materially reduce Executive's benefit under any
benefit plan of the Company in which Executive is participating or would deprive
Executive of any material fringe benefit enjoyed by Executive, except those
changes generally affecting similarly situated senior executive officers of the
Company.

              (c)  The Company materially breaches the terms of this Agreement.

    4.5. At Will.  At any time, either the Company or Executive may terminate,
         -------
without liability, the Employment Term for any reason, with or without Cause, by
giving fifteen (15) days' advance written notice to the other party.  If
Executive terminates Executive's employment pursuant to this Section 4.5, the
                                                             -----------
Company shall have the option, in its sole discretion, to terminate Executive
immediately without the running of the notice period.  In the event that
Executive's employment is terminated by either party pursuant to this Section
                                                                      -------
4.5, the Company shall:  (i) pay Executive the compensation to which Executive
---
is entitled pursuant to Section 3.1(a) (including any accrued vacation) through
                        --------------
the end of the day on which Executive's employment is terminated; and (ii)
reimburse Executive for any expenses properly incurred by Executive pursuant to
Section 3.3 through the end of the day on which Executive's employment is
-----------
terminated.  In the event that Executive's employment is terminated by the
Company pursuant to this Section 4.5, the Company shall also pay Executive the
                         -----------
severance payment as set forth in Section 5.  Thereafter the Company's
                                  ---------
obligations hereunder shall terminate.  Executive hereby agrees that the Company
may dismiss Executive under this Section 4.5 without regard (i) to any general
                                ------------
or specific policies (whether written or oral) of the Company relating to the
employment or termination of its employees, or (ii) to any statements made to
Executive, whether made orally or contained in any document, pertaining to
Executive's relationship with the Company.

                                       5
<PAGE>

     4.6.  Termination Due to Bankruptcy, Receivership. The Employment Term
            ------------------------------------------
shall terminate and the Company's obligations hereunder shall cease (including
without limitation the obligation to pay Executive's compensation under Section
                                                                        -------
3.1(a)) upon the occurrence of: (i) the appointment of a receiver, liquidator,
-------
or trustee for the Company by decree of competent authority in connection with
any adjudication or determination by such authority that the Company is bankrupt
or insolvent; (ii) the filing by the Company of a petition in voluntary
bankruptcy, the making of an assignment for the benefit of its creditors, or the
entering into of a composition with its creditors; or (iii) any formal action of
the Board to te rminate the Company's existence or otherwise to wind up the
Company's affairs.

     4.7.  Termination of Obligations.
           --------------------------
           (a)  Executive hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records, reports,
notes, contracts, lists, blueprints, and other documents, or materials, or
copies thereof, Proprietary Information (as defined in Section 7.1), and
                                                       -----------
equipment furnished to or prepared by Executive in the course of or incident to
his employment, including, without limitation, records and any other materials
pertaining to Invention Ideas (as defined below), belong to the Company and
shall be promptly returned to the Company upon termination of the Employment
Term. Following termination, Executive will not retain any written or other
tangible material containing any Proprietary Information.

           (b)  Upon termination of the Employment Term, Executive shall be
deemed to have resigned from all offices and directorships, if any, then held
with the Company or any Affiliated Company.

           (c)  Executive's obligations under Sections 4.7 and 7 shall survive
                                              ------------
termination of the Employment Term and the expiration of this Agreement.

5.  Severance.  In the event Executive's employment with the Company is
    ---------
terminated either by the Company without Cause or by Executive for Good Reason,
the Company shall pay and provide to Executive a severance in an amount equal to
the annual salary set forth in Section 3.1(a), as applicable at the time of
                               --------------
termination, payable over a period of twelve (12) months from the effective date
of termination, in twenty-four (24) equal semi-monthly installments.

6.  Existing Obligations of Executive. Executive represents and warrants
    ---------------------------------
that Executive has not entered into any agreement prohibiting, restricting or
otherwise limiting Executive's employment with the Company.

7.  Proprietary Information.
    -----------------------

    7.1.  Defined.  "Proprietary Information" is all information and any
          -------
idea in whatever form, tangible or intangible, pertaining in any manner to the
business of the Company or any Affiliated Company, or to its clients,
consultants, or business associates, unless: (i) the information is or becomes
publicly known through lawful means; (ii) the information was rightfully in
Executive's possession or part of his general knowledge prior to his employment
by

                                       6
<PAGE>

the Company; or (iii) the information is disclosed to Executive without
confidential or proprietary restriction by a third party who rightfully
possesses the information (without confidential or proprietary restriction) and
did not learn of it, directly or indirectly, from the Company.

     7.2.  General Restrictions on Use. Executive agrees to hold all Proprietary
           ---------------------------
Information in strict confidence and trust for the sole benefit of the Company
and not to, directly or indirectly, disclose, use, copy, publish, summarize, or
remove from Company's premises any Proprietary Information (or remove from the
premises any other property of the Company), except (i) during the Employment
Term to the extent necessary to carry out Executive's responsibilities under
this Agreement and (ii) after termination of the Employment Term as specifically
authorized in writing by the Board.

     7.3.  Interference with Business; Competitive Activities.  Executive
           --------------------------------------------------
acknowledges that the pursuit of the activities forbidden by this Section 7.3
                                                                  -----------
would necessarily involve the use or disclosure of Proprietary Information in
breach of Section 7.2, but that proof of such breach would be extremely
          -----------
difficult.  To forestall such disclosure, use, and breach, and in consideration
of the employment under this Agreement, Executive agrees that during the
Employment Term and for a period of one (1) year thereafter, Executive shall
not, for Executive or any third party, directly or indirectly

           (a) interfere with the relationship between the Company or an
Affiliated Company (together, the "Corporation") and any employee of the
Corporation engaged in management or sales or any agent or representative of the
Corporation;

           (b)  divert or attempt to divert from the Corporation any business
related to the sale of discount airline tickets to domestic or international
customers or any related business in which the Corporation has been actively
engaged during the Employment Term, nor interfere with the relationships of the
Corporation with customers, dealers, distributors, or sources of supply; or

           (c)  own, manage, operate, control, be employed by, participate in,
or be connected in any manner with the ownership, management, operation or
control of, any business or enterprise other than the Corporation which is
engaged in the business of discount airline ticket sales, hotel reservations or
car rentals to domestic or international customers; provided, however, that
Executive may own Five Percent (5%) or less of a public company so engaged as
long as such ownership is otherwise passive in nature.

     8.  Assignment; Successors and Assigns. Each party agrees that such party
         ----------------------------------
will not assign, sell, transfer, delegate or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any rights or obligations
under this Agreement, nor shall such party's rights be subject to encumbrance or
the claims of creditors. Any purported assignment, transfer, or delegation shall
be null and void. Nothing in this Agreement shall prevent the consolidation of
the Company with, or its merger into, any other corporation, or the sale by the
Company of all or substantially all of its properties or assets, or the
assignment by the Company of this Agreement and the performance of its
obligations hereunder to any successor in interest or any Affiliated

                                       7
<PAGE>

Company. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any
person or entity other than those enumerated above.

     9.  Notices. Unless otherwise agreed to, all notices, requests,
         -------
instructions or other documents to be given hereunder shall be in writing or by
written telecommunication, and shall be deemed to have been duly given if

        (a)  delivered personally (effective upon delivery);

        (b)  mailed by certified mail, return receipt requested, postage prepaid
(effective five (5) business days after dispatch);

        (c)  sent by a reputable, established courier service that guarantees
next business day delivery (effective the next business day); or

        (d)  sent by telecopier followed within 24 hours by confirmation by one
of the foregoing methods (effective upon receipt of the telecopy in complete,
readable form), addressed to the party to be notified at the address indicated
for such party on the signature page hereof, or at such other address as such
party may designate by ten (10) days' advance notice to the other parties.

     All notices and other documents hereunder shall be given to the Company at:
        Cheap Tickets, Inc.
        1440 Kapiolani Boulevard, Suite 800
        Honolulu, Hawaii  96814
        Attn:  Sam E. Galeotos
        Fax:  (808) 946-3844

     with a copy to:
        Morrison & Foerster LLP
        555 West Fifth Street, Suite 3500
        Los Angeles, California  90013-1024
        Attn:  Henry M. Fields, Esq.
        Fax:  (213) 892-5454

     and to Executive at:
        Jason D. Horstman
        13545 Glasgow Lane
        Apple Valley, Minnesota  55124

Notice of change of address shall be effective only when done in accordance with
this Section 9.
     ---------

     10.  Governing Law; Conciliation and Arbitration.
          -------------------------------------------

          10.1.  Governing Law. The validity, interpretation, enforceability,
                 -------------
and performance of this Agreement, the Stock Option Award Agreement and the Note
shall be

                                       8
<PAGE>

governed by and construed in accordance with the law of the State of Hawaii,
without giving effect to its conflict of laws rules.

          10.2.  Conciliation and Arbitration.
                 ----------------------------
                 (a)  In the event of any dispute, controversy or claim arising
out of or relating in any manner to the employment or termination of Executive,
or any provision of this Agreement, the Stock Option Award Agreement or the
Note, or the interpretation, enforceability, performance, breach, termination or
validity hereof or thereof, including, without limitation, this Section 10.2
                                                                ------------
(a "Dispute"), the parties shall attempt, in good faith, to amicably resolve the
Dispute. Either party may give the other party written notice of any Dispute not
resolved in the normal course of business. Within five (5) business days after
receipt of said notice, the Chief Executive Officer of the Company (or a
reasonable substitute therefor) and Executive shall negotiate in good faith to
resolve the Dispute for a period of thirty (30) days.

                 (b)  Except as specifically stated in Sections 10.2(a) and
                                                       --------------------
10.2(f), all Disputes shall be resolved by arbitration. Disputes shall include,
-------
but are not limited to, contract (express or implied) and tort claims of all
kinds, as well as all claims based on any federal, state, or local law, statute,
or regulation, excepting only claims under applicable workers' compensation law
and unemployment insurance claims. By way of example and not in limitation of
the foregoing, Disputes shall include any claims arising under Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, and the California Fair Employment and Housing
Act, as well as any claims asserting wrongful termination, breach of contract,
breach of the covenant of good faith and fair dealing, negligent or intentional
infliction of emotional distress, negligent or intentional misrepresentation,
negligent or intentional interference with contract or prospective economic
advantage, defamation, invasion of privacy, and claims related to disability.
Arbitration shall be final and binding upon the parties and shall be the
exclusive remedy for all Disputes. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY
HAVE TO TRIAL BY JURY IN REGARD TO ANY DISPUTE.

                 (c)  Arbitration of Disputes shall be in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association
("AAA Employment Rules"), except as provided otherwise in this Agreement.
Arbitration shall be initiated by providing written notice to the other party
with a statement of the claim(s) asserted, the facts upon which the claim(s) are
based, and the remedy sought. The burden of proof in any arbitration shall be
allocated as provided by applicable law, unless otherwise specified in this
Agreement. Either party may bring an action in court to compel arbitration under
this Agreement, the Stock Option Award Agreement or the Note and to enforce an
arbitration award. Otherwise, neither party shall initiate or prosecute any
lawsuit or administrative action in any way related to any Dispute. All
arbitration hearings under this Agreement, the Stock Option Award Agreement or
the Note shall be conducted in Honolulu, Hawaii. The Federal Arbitration Act
shall govern the interpretation and enforcement of this Section 10.2, if
                                                        ------------
applicable; otherwise, this Section 10.2 shall be governed, interpreted and
                            ------------
enforced under Chapter 658 of the Hawaii Revised Statutes.

                                       9
<PAGE>

                 (d)  All Disputes shall be decided by a single arbitrator. The
arbitrator shall be selected by mutual agreement of the parties within thirty
(30) days of the effective date of the notice initiating the arbitration. If the
parties cannot agree on an arbitrator, then the complaining party shall notify
the AAA and request selection of an arbitrator in accordance with the AAA
Employment Rules. The arbitrator shall have only such authority to award
equitable relief, damages, costs, and fees as a court would have for the
particular claim(s) asserted. The fees and expenses of any arbitration
(including the fees and expenses of the arbitrator, attorneys and expert
witnesses) shall be paid by the losing party, as identified by the arbitrator.
The arbitrator shall have exclusive authority to resolve all Disputes,
including, but not limited to, any claim or allegation that all or any part of
this Agreement, the Stock Option Award Agreement or the Note is void or
unenforceable.

                 (e)  All proceedings and all documents prepared in connection
with any Dispute shall be confidential and, unless otherwise required by law,
the subject matter thereof shall not be disclosed to any person other than the
parties to the proceedings, their counsel, witnesses and experts, the
arbitrator, and, if involved, the court and court staff. All documents filed
with the arbitrator or with a court shall be filed under seal. The parties shall
stipulate to all arbitration and court orders necessary to effectuate fully the
provisions of this subsection concerning confidentiality.

                 (f)  If Executive breaches Section 2.2 or 7, the parties
                                            ----------------
acknowledge that the damage or imminent damage to the Company's business or its
goodwill would be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, notwithstanding any other
provision in this Agreement, the Company shall have the right to pursue a claim
for injunctive relief, damages and attorneys' fees in a court of competent
jurisdiction for Executive's breach of Executive's obligations pursuant to
Section 2.2 or 7 of this Agreement, in addition to any other relief available to
----------------
the Company under this Agreement or under law. If Executive prevails in any such
litigation, Executive shall be entitled to the fees and expenses incurred in
connection with Executive's defense thereunder, including expert witness costs
and attorneys' fees.

     11.  Entire Agreement. The terms of this Agreement are intended by the
          ----------------
parties to be the final expression of their agreement with respect to the
employment of Executive by the Company and may not be contradicted by evidence
of any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.

     12.  Amendments; Waivers.  This Agreement may not be modified, amended, or
          -------------------
terminated except by an instrument in writing, signed by Executive and by a duly
authorized representative of the Company other than Executive.  By an instrument
in writing similarly executed, either party may waive compliance by the other
party with any provision of this Agreement that such other party was or is
obligated to comply with or perform; provided, however, that such waiver shall
not operate as a waiver of, or estoppel with respect to, any other or subsequent
failure.  No failure to exercise and no delay in exercising any right, remedy,
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any

                                       10
<PAGE>

right, remedy, or power hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, or power provided herein or by law
or in equity.

     13.  Severability; Enforcement.  If any provision of this Agreement, or the
          -------------------------
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other persons,
places, and circumstances shall remain in full force and effect.  It is the
intention of the parties that the covenants contained in Section 7 shall be
                                                         ---------
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants.  It being the purpose of this Agreement to govern competition by
Executive anywhere throughout the world, these covenants shall be governed by
and construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.

     14.  Executive Acknowledgment. Executive acknowledges (i) that Executive
          ------------------------
has consulted with or has had the opportunity to consult with independent
counsel of his own choice concerning this Agreement and has been advised to do
so by the Company, and (ii) that Executive has read and understands the
Agreement, is fully aware of its legal effect, and has entered into it freely
based on Executive's own judgment.

     15.  Counterparts. This Agreement may be signed in multiple counterparts,
          ------------
each of which shall be deemed an original but all of which together shall be
deemed one and the same instrument.

                                       11
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Employment
Agreement as of the date first written above.

                                 CHEAP TICKETS, INC.,
                                 a Delaware corporation

                                     /s/ SAM E. GALEOTOS
                                 By:________________________________
                                 Name:  Sam E. Galeotos
                                 Title:  President




                                 /s/ JASON D. HORSTMAN
                                ____________________________________

                                     JASON D. HORSTMAN

                                       12


<PAGE>

                                   Exhibit A
                                   ---------

                          Stock Option Award Agreement

                      [standard Company option agreement]


<PAGE>

                                                                       EXHIBIT A

                 CHEAP TICKETS, INC. 1999 STOCK INCENTIVE PLAN
                          NOTICE OF STOCK OPTION AWARD
                          ----------------------------

     Grantee's Name and Address:  Jason D. Horstman

                                  13545 Glasgow Lane

                                  Apple Valley, Minnesota  55124

     You have been granted an option to purchase shares of Common Stock of the
Company, subject to the terms and conditions of this Notice of Stock Option
Award (the "Notice"), the Plan and the Stock Option Award Agreement (the "Option
Agreement") attached hereto, as follows:

     Award Number:                          83
     Date of Award:                         January 24, 2000
     Vesting Commencement Date:             January 24, 2000
     Exercise Price per Share:              $12.3125
     Total Number of Shares subject
     to the Option:                         75,000
     Total Exercise Price:                  $923,437.50
     Type of Option:                        (X) Incentive Stock Option
                                            ( ) Non-Qualified Stock Option
     Expiration Date:                       January 24, 2006
     Post-Termination Exercise Period:      Three (3) Months

Vesting Schedule:
----------------

     Subject to Grantee's Continuous Service and other limitations set forth in
this Notice, the Plan and the Option Agreement, the Option may be exercised, in
whole or in part, in accordance with the following schedule:

     20% of the Shares subject to the Option shall vest twelve (12) months after
the Vesting Commencement Date, and an additional 20% of the Shares subject to
the Option shall vest on each anniversary of the Vesting Commencement Date
thereafter.

     During any authorized leave of absence, the vesting of the Option as
provided in this schedule shall cease after the leave of absence exceeds a
period of ninety (90) days.  Vesting of the Option shall resume upon the
Grantee's termination of the leave of absence and return to service to the
Company or a Related Entity.

     In the event of the Grantee's change in status from Employee to Consultant,
vesting of the Option shall continue only to the extent determined by the
Administrator as of such change in status.

                                       1

<PAGE>


     In the event of termination of the Grantee's Continuous Service for Cause,
the Grantee's right to exercise the Option shall terminate concurrently with the
termination of the Grantee's Continuous Service.

     IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice
and agree that the Option is to be governed by the terms and conditions of this
Notice, the Plan, and the Option Agreement.

                                 Cheap Tickets, Inc.,
                                 a Delaware corporation

                                 By:
                                    ----------------------------

                                 Title:
                                       -------------------------

THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL
VEST, IF AT ALL, ONLY DURING THE PERIOD OF GRANTEE'S CONTINUOUS SERVICE (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES
HEREUNDER).  THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
NOTICE, THE OPTION AGREEMENT, OR THE COMPANY'S 1999 STOCK INCENTIVE PLAN SHALL
CONFER UPON THE GRANTEE ANY RIGHT WITH RESPECT TO CONTINUATION OF GRANTEE'S
CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE GRANTEE'S CONTINUOUS SERVICE, WITH OR
WITHOUT CAUSE.

     The Grantee acknowledges receipt of a copy of the Plan and the Option
Agreement, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts the Option subject to all of the terms
and provisions hereof and thereof.  The Grantee has reviewed this Notice, the
Plan, and the Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Notice, and fully
understands all provisions of this Notice, the Plan and the Option Agreement.
The Grantee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under this Notice, the Plan or the Option Agreement.  The Grantee further agrees
to notify the Company upon any change in the residence address indicated in this
Notice.

Dated:                               Signed:
      ------------------------              -------------------------
                                                 Jason D. Horstman


                                       2

<PAGE>

                                                               Award Number:  83


                 CHEAP TICKETS, INC. 1999 STOCK INCENTIVE PLAN
                          STOCK OPTION AWARD AGREEMENT
                          ----------------------------

     1.  Grant of Option.  Cheap Tickets, Inc., a Delaware corporation (the
         ---------------
"Company"), hereby grants to Jason D. Horstman (the "Grantee") named in the
Notice of Stock Option Award (the "Notice"), an option (the "Option") to
purchase the Total Number of Shares of Common Stock subject to the Option (the
"Shares") set forth in the Notice, at the Exercise Price per Share set forth in
the Notice (the "Exercise Price") subject to the terms and provisions of the
Notice, this Stock Option Award Agreement (the "Option Agreement") and the
Company's 1999 Stock Incentive Plan (the "Plan") adopted by the Company, which
are incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option
Agreement.

     If designated in the Notice as an Incentive Stock Option, the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code.  However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of Shares subject to Options designated as Incentive
Stock Options which become exercisable for the first time by the Grantee during
any calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares covered
thereby in excess of the foregoing limitation, shall be treated as Non-Qualified
Stock Options.  For this purpose, Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the date the Option with respect to such
Shares is awarded.

     2.  Exercise of Option.
         ------------------

         (a)  Right to Exercise.  The Option shall be exercisable during its
              -----------------
term in accordance with the Vesting Schedule set out in the Notice and with the
applicable provisions of the Plan and this Option Agreement. The Option shall be
subject to the provisions of Section 11 of the Plan relating to the
                             ----------
exercisability or termination of the Option in the event of a Corporate
Transaction, Change in Control or Related Entity Disposition. No partial
exercise of the Option may be for less than the lesser of five percent (5%) of
the total number of Shares subject to the Option or the remaining number of
Shares subject to the Option. In no event shall the Company issue fractional
Shares.

         (b)  Method of Exercise.  The Option shall be exercisable only by
              ------------------
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
                                            ---------
election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, such other representations and agreements as to
the holder's investment intent with respect to such Shares and such other
provisions as may be required by the Administrator. The Exercise Notice shall be
signed by the Grantee and shall be delivered in person or by certified mail to
the Secretary of the Company accompanied by payment of the Exercise Price. The
Option shall be deemed to be

                                       1


<PAGE>

exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price, which, to the extent selected, shall be deemed to be satisfied
by use of the broker-dealer sale and remittance procedure to pay the Exercise
Price provided in Section 3(d) below.
                  ------------

         No Shares will be issued pursuant to the exercise of the Option unless
such issuance and such exercise shall comply with all Applicable Laws.  Assuming
such compliance, for income tax purposes, the Shares shall be considered
transferred to the Grantee on the date on which the Option is exercised with
respect to such Shares.

         (c)  Taxes.  No Shares will be delivered to the Grantee or other person
              -----
pursuant to the exercise of the Option until the Grantee or other person has
made arrangements acceptable to the Administrator for the satisfaction of
foreign, federal, state and local income and employment tax withholding
obligations.

     3.  Method of Payment. Payment of the Exercise Price shall be by any of the
         -----------------
following, or a combination thereof, at the election of the Grantee; provided,
however, that such exercise method does not then violate any Applicable Laws
and, provided further, that the portion of the Exercise Price equal to the par
value of the Shares must be paid in cash or other legal consideration permitted
by the Delaware General Corporation Law:

         (a)  cash;

         (b)  check;

         (c)  surrender of Shares or delivery of a properly executed form of
attestation of ownership of Shares as the Administrator may require (including
withholding of Shares otherwise deliverable upon exercise of the Option) which
have a Fair Market Value on the date of surrender or attestation equal to the
aggregate Exercise Price of the Shares as to which the Option is being exercised
(but only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price); or

         (d)  through a broker-dealer sale and remittance procedure pursuant to
which the Grantee (A) shall provide written instructions to a Company designated
brokerage firm to effect the immediate sale of some or all of the purchased
Shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased Shares and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction.

     4.  Restrictions on Exercise.  The Option may not be exercised if the
         ------------------------
issuance of the Shares subject to the Option upon such exercise would constitute
a violation of any Applicable Laws. In addition, the Option, if an Incentive
Stock Option, may not be exercised until such time as the Plan has been approved
by the stockholders of the Company.

     5.  Termination or Change of Continuous Service. In the event the Grantee's
         -------------------------------------------
Continuous Service terminates, other than for Cause, the Grantee may, to the
extent otherwise so

                                       2


<PAGE>


entitled at the date of such termination (the "Termination Date"), exercise the
Option during the Post-Termination Exercise Period. In the event of termination
of the Grantee's Continuous Service for Cause, the Grantee's right to exercise
the Option shall, except as otherwise determined by the Administrator, terminate
concurrently with the termination of the Grantee's Continuous Service. In no
event shall the Option be exercised later than the Expiration Date set forth in
the Notice. In the event of the Grantee's change in status from Employee,
Director or Consultant to any other status of Employee, Director or Consultant,
the Option shall remain in effect and, except to the extent otherwise determined
by the Administrator, continue to vest; provided, however, with respect to any
Incentive Stock Option that shall remain in effect after a change in status from
Employee to Director or Consultant, such Incentive Stock Option shall cease to
be treated as an Incentive Stock Option and shall be treated as a Non-Qualified
Stock Option on the day three (3) months and one (1) day following such change
in status. Except as provided in Sections 6 and 7 below, to the extent that the
                                 ----------------
Grantee is not entitled to exercise the Option on the Termination Date, or if
the Grantee does not exercise the Option within the Post-Termination Exercise
Period, the Option shall terminate.

     6.  Disability of Grantee.  In the event the Grantee's Continuous Service
         ---------------------
terminates as a result of his or her Disability, the Grantee may, but only
within twelve (12) months from the Termination Date (and in no event later than
the Expiration Date), exercise the Option to the extent he or she was otherwise
entitled to exercise it on the Termination Date; provided, however, that if such
Disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code and the Option is an Incentive Stock Option, such Incentive Stock
Option shall cease to be treated as an Incentive Stock Option and shall be
treated as a Non-Qualified Stock Option on the day three (3) months and one (1)
day following the Termination Date. To the extent that the Grantee is not
entitled to exercise the Option on the Termination Date, or if the Grantee does
not exercise the Option to the extent so entitled within the time specified
herein, the Option shall terminate.

     7.  Death of Grantee.  In the event of the termination of the Grantee's
         ----------------
Continuous Service as a result of his or her death, or in the event of the
Grantee's death during the Post-Termination Exercise Period, the Grantee's
estate, or a person who acquired the right to exercise the Option by bequest or
inheritance, may exercise the Option, but only to the extent the Grantee could
exercise the Option at the date of termination, within twelve (12) months from
the date of such termination (but in no event later than the Expiration Date).
To the extent that the Grantee is not entitled to exercise the Option on the
date of death, or if the Option is not exercised to the extent so entitled
within the time specified herein, the Option shall terminate.

     8.  Transferability of Option.  The Option, if an Incentive Stock Option,
         -------------------------
may not be transferred in any manner other than by will or by the laws of
descent or distribution and may be exercised during the lifetime of the Grantee
only by the Grantee. The Option, if a Non-Qualified Stock Option, may be
transferred by the Grantee in a manner and to the extent acceptable to the
Administrator as evidenced by a writing signed by the Company and the Grantee.
The terms of the Option shall be binding upon the executors, administrators,
heirs and successors of the Grantee.

     9.  Term of Option.  The Option may be exercised no later than the
         --------------
Expiration Date set forth in the Notice or such earlier date as otherwise
provided herein.

                                       3


<PAGE>

     10.  Tax Consequences.  Set forth below is a brief summary as of the date
          ----------------
of this Option Agreement of some of the federal tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.

          (a)  Exercise of Incentive Stock Option.  If the Option qualifies as
               ----------------------------------
an Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as income for purposes of the alternative minimum tax for federal tax
purposes and may subject the Grantee to the alternative minimum tax in the year
of exercise.

          (b)  Exercise of Incentive Stock Option Following Disability.  If the
               -------------------------------------------------------
Grantee's Continuous Service terminates as a result of Disability that is not
total and permanent disability as defined in Section 22(e)(3) of the Code, to
the extent permitted on the date of termination, the Grantee must exercise an
Incentive Stock Option within three (3) months of such termination for the
Incentive Stock Option to be qualified as an Incentive Stock Option.

          (c)  Exercise of Non-Qualified Stock Option.  On exercise of a
               --------------------------------------
Non-Qualified Stock Option, the Grantee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If the Grantee is an Employee or a former Employee, the Company
will be required to withhold from the Grantee's compensation or collect from the
Grantee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.

          (d)  Disposition of Shares.  In the case of a Non-Qualified Stock
               ---------------------
Option, if Shares are held for more than one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes and subject to tax at a maximum rate of twenty percent
(20%). In the case of an Incentive Stock Option, if Shares transferred pursuant
to the Option are held for more than one year after receipt of the Shares and
are disposed more than two years after the Date of Award, any gain realized on
disposition of the Shares also will be treated as capital gain for federal
income tax purposes and subject to the same tax rates and holding periods that
apply to Shares acquired upon exercise of a Non-Qualified Stock Option. If
Shares purchased under an Incentive Stock Option are disposed of prior to the
expiration of such one-year or two-year periods, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the lesser
of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the
sale price of the Shares.

     11.  Entire Agreement: Governing Law.  The Notice, the Plan and this Option
          -------------------------------
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof

                                       4

<PAGE>

and supersede in their entirety all prior undertakings and agreements of the
Company and the Grantee with respect to the subject matter hereof, and may not
be modified adversely to the Grantee's interest except by means of a writing
signed by the Company and the Grantee. These agreements are to be construed in
accordance with and governed by the internal laws of the State of Delaware
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
Delaware to the rights and duties of the parties. Should any provision of the
Notice or this Option Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.

     12.  Headings.  The captions used in the Notice and this Option Agreement
          --------
are inserted for convenience and shall not be deemed a part of the Option for
construction or interpretation.

     13.  Interpretation.  Any dispute regarding the interpretation of the
          --------------
Notice, the Plan, and this Option Agreement shall be submitted by the Grantee or
by the Company forthwith to the Administrator, which shall review such dispute
at its next regular meeting. The resolution of such dispute by the Administrator
shall be final and binding on all persons.

                                       5


<PAGE>


                                   EXHIBIT A
                                   ---------

                 CHEAP TICKETS, INC. 1999 STOCK INCENTIVE PLAN

                                EXERCISE NOTICE
                                ---------------

Cheap Tickets, Inc.
1440 Kapiolani Boulevard, Suite 800
Honolulu, Hawaii  96814

Attention:  Secretary

      1.  Exercise of Option.  Effective as of today, _______________, ________,
          ------------------
the undersigned, Jason D. Horstman (the "Grantee") hereby elects to exercise the
Grantee's option to purchase ____________ shares of the Common Stock (the
"Shares") of Cheap Tickets, Inc. (the "Company") under and pursuant to the
Company's 1999 Stock Incentive Plan (the "Plan") and the [X] Incentive [ ] Non-
Qualified Stock Option Award Agreement (the "Option Agreement") and Notice of
Stock Option Award (the "Notice") dated January 24, 2000.

     2.  Representations of the Grantee.  The Grantee acknowledges that the
         ------------------------------
Grantee has received, read and understood the Notice, the Plan, and the Option
Agreement and agrees to abide by and be bound by their terms and conditions.

     3.  Rights as Stockholder.  Until the stock certificate evidencing such
         ---------------------
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.
                      ----------

     4.   Delivery of Payment.  The Grantee herewith delivers to the Company
          -------------------
the full Exercise Price for the Shares, which, to the extent selected, shall be
deemed to be satisfied by use of the broker-dealer sale and remittance procedure
to pay the Exercise Price provided in Section 3(d) of the Option Agreement.
                                      ------------

     5.   Tax Consultation.  The Grantee understands that the Grantee may suffer
          ----------------
adverse tax consequences as a result of the Grantee's purchase or disposition of
the Shares. The Grantee represents that the Grantee has consulted with any tax
consultants the Grantee deems advisable in connection with the purchase or
disposition of the Shares and that the Grantee is not relying on the Company for
any tax advice.

     6.   Taxes.  The Grantee agrees to satisfy all applicable federal, state
          -----
and local income and employment tax withholding obligations and herewith
delivers to the Company the full amount of such obligations or has made
arrangements acceptable to the Company to satisfy such

                                       1

<PAGE>

obligations. In the case of an Incentive Stock Option, the Grantee also agrees,
as partial consideration for the designation of the Option as an Incentive Stock
Option, to notify the Company in writing within thirty (30) days of any
disposition of any shares acquired by exercise of the Option if such disposition
occurs within two (2) years from the Award Date or within one (1) year from the
date the Shares were transferred to the Grantee. If the Company is required to
satisfy any federal, state or local income or employment tax withholding
obligations as a result of such an early disposition, the Grantee agrees to
satisfy the amount of such withholding in a manner that the Administrator
prescribes.

     7.   Successors and Assigns.  The Company may assign any of its rights
          ----------------------
under this Exercise Notice to single or multiple assignees, and this Exercise
Notice shall inure to the benefit of the successors and assigns of the Company.
This Exercise Notice shall be binding upon the Grantee and his or her heirs,
executors, administrators, successors and assigns.

     8.  Headings.  The captions used in this Exercise Notice are inserted for
         --------
convenience and shall not be deemed a part hereof for construction or
interpretation.

     9.  Interpretation.  Any dispute regarding the interpretation of this
         --------------
Exercise Notice shall be submitted by the Grantee or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Administrator shall be final and binding
on all persons.

     10. Governing Law; Severability.  This Exercise Notice is to be construed
         ---------------------------
in accordance with and governed by the internal laws of the State of Delaware
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
Delaware to the rights and duties of the parties. Should any provision of this
Exercise Notice be determined by a court of law to be illegal or unenforceable,
the other provisions shall nevertheless remain effective and shall remain
enforceable.

     11. Notices.  Any notice required or permitted hereunder shall be given in
         -------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

     12. Further Instruments.  The parties agree to execute such further
         -------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent hereof.

                                       2

<PAGE>

     13. Entire Agreement.  The Notice, the Plan, and the Option Agreement are
         ----------------
incorporated herein by reference, and together with this Exercise Notice
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and the Grantee with respect to the subject matter
hereof, and may not be modified adversely to the Grantee's interest except by
means of a writing signed by the Company and the Grantee.

Submitted by:                      Accepted by:

JASON D. HORSTMAN                  CHEAP TICKETS, INC.


                                   By:
--------------------------------      ------------------------------------
      (Signature)                  Title:
                                         ---------------------------------

Address:                           Address:
--------                           -------

--------------------------------   1440 Kapiolani Boulevard, Suite 800
                                   Honolulu, Hawaii  96814
--------------------------------

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

                                       3


<PAGE>


                                   Exhibit B
                                   ---------

                            Form of Promissory Note

                                [see next page]



<PAGE>

                                PROMISSORY NOTE

$200,000.00  ____________________, 2000

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

     1.  FOR VALUE RECEIVED, the undersigned, Jason D. Horstman, an individual
(the "Borrower"), hereby promises to pay to the order of Cheap Tickets, Inc., a
Delaware corporation (the "Lender"), at the Lender's address of 1440 Kapiolani
Boulevard, Suite 800, Honolulu, Hawaii 96814, or at such other place as the
Lender from time to time may designate, in lawful money of the United States and
in immediately available funds, the principal amount of TWO HUNDRED THOUSAND AND
NO/100 DOLLARS ($200,000.00) with no interest thereon from the date the proceeds
of the loan evidenced by this Promissory Note (this "Note") are disbursed until
maturity (whether such maturity is scheduled or accelerated).

     2.  The entire unpaid principal balance and any other sums outstanding
under this Note shall be due and payable upon ____________________, 2003.

     3.  Principal, any interest, and all other sums owed to the Lender under
this Note shall be evidenced by entries in records maintained by the Lender for
such purpose.

     4.  Any interest and fees shall be calculated for actual days elapsed on
the basis of a 365-day year. In no event shall the Borrower be obliged to pay
interest at a rate in excess of the highest rate permitted by applicable law
from time to time in effect.

     5. The Borrower may prepay some or all of the principal under this Note
without penalty or premium.

     6.  From and after maturity of this Note, whether scheduled or accelerated,
all sums then due and payable under this Note, including all principal and all
accrued interest, shall bear interest at a rate of Ten Percent (10%) per annum
until paid in full.

     7.  This Note is issued pursuant to and governed by Section 3.1(d) of that
                                                         --------------
certain Employment Agreement dated as of January 24, 2000, by and between the
Lender and the Borrower (the "Employment Agreement").

     8.  If the Lender delays in exercising or fails to exercise any of its
rights under this Note, that delay or failure shall not constitute a waiver of
any of the Lender's rights, or of any breach, default or failure of condition of
or under this Note. All of the Lender's remedies in connection with this Note or
under applicable law shall be cumulative, and the Lender's exercise of any one
or more of those remedies shall not constitute an election of remedies. The
illegality or unenforceability of any provision of this Note or any related
document shall not in any way affect or impair the legality or enforceability of
the remaining provisions of this Note or any related document.

     9.  This Note inures to and binds the heirs, legal representatives,
successors and assigns the Borrower and the Lender; provided, however, that
the Borrower may not assign


<PAGE>


this Note, or assign or delegate any of its rights or obligations, without the
prior written consent of the Lender in each instance. The Lender in its sole
discretion may transfer this Note without notice to or the consent of the
Borrower.


     10.  This Note is governed by the laws of the State of Hawaii, without
regard to the choice of law rules of that State.

     11.  Any dispute, controversy or claim arising out of or relating in any
manner to this Note or the loan shall be resolved pursuant to Section 10 of the
                                                              ----------
Employment Agreement.



                              By:________________________________________
                              Name:  Jason D. Horstman
                              Address:  1440 Kapiolani Boulevard, Suite 800
                                     Honolulu, Hawaii  96814

NOTEHOLDER:

CHEAP TICKETS, INC.,
a Delaware corporation


By:_________________________
Name:  Sam E. Galeotos
Title:  President

MAILING ADDRESS:

Cheap Tickets, Inc.
1440 Kapiolani Boulevard, Suite 800
Honolulu, Hawaii  96814
Attn:  Sam E. Galeotos