PRICELINE COM INC, S-1/A, 1999-08-02

PRICELINE COM INC
S-1/A, 1999-08-02
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1999

REGISTRATION NO. 333-83513

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

PRICELINE.COM INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 4541 06-1528493
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) No.)
</TABLE>

FIVE HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06905
(203) 705-3000
(Address, Including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
--------------------------

MELISSA M. TAUB, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
PRICELINE.COM INCORPORATED
FIVE HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06905
(203) 705-3000
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent For Service)
--------------------------

COPIES TO:

PATRICIA MORAN CHUFF, ESQ. ALAN DEAN, ESQ.
Skadden, Arps, Slate, Meagher & Flom Davis Polk & Wardwell
LLP 450 Lexington Avenue
One Rodney Square New York, New York 10017
Wilmington, Delaware 19801 (212) 450-4000
(302) 651-3000

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

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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number 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. / /
--------------------------

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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE

This registration statement contains three separate prospectuses. Two
prospectuses relate to a public offering of our common stock, par value $0.008
per share. One of the common stock prospectuses will be used in connection with
a United States and Canadian offering and the other will be used in a concurrent
international offering. The two common stock prospectuses will be identical,
except for the front cover page. The form of the U.S. common stock prospectus is
included in this registration statement and the form of the cover page for the
international common stock prospectus follows the front cover page of the U.S.
prospectus. The third prospectus relates to a concurrent offering of %
convertible subordinated notes due 2006. We intend to file final forms of each
prospectus with the Securities and Exchange Commission pursuant to section
424(b) of the Securities Act of 1933, as amended.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JULY 30, 1999

5,500,000 SHARES

[LOGO]

COMMON STOCK

PRICELINE.COM INCORPORATED IS SELLING 2,000,000 SHARES OF COMMON STOCK AND THE
SELLING STOCKHOLDERS ARE SELLING 3,500,000 SHARES OF COMMON STOCK. PRICELINE.COM
WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF COMMON STOCK BY
THE SELLING STOCKHOLDERS.

CONCURRENT WITH THIS OFFERING, PRICELINE.COM IS OFFERING $250,000,000 AGGREGATE
PRINCIPAL AMOUNT OF ITS % CONVERTIBLE SUBORDINATED NOTES DUE 2006. THE NOTES
WILL BE CONVERTIBLE AT THE OPTION OF THE HOLDER INTO SHARES OF OUR COMMON STOCK.
THE NOTE OFFERING WILL BE MADE PURSUANT TO A SEPARATE PROSPECTUS. CLOSING OF THE
NOTE OFFERING IS NOT A CONDITION TO THE CLOSING OF THIS OFFERING.

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

THE COMMON STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"PCLN." ON JULY 29, 1999, THE LAST REPORTED SALE PRICE FOR THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET WAS $80.50 PER SHARE.

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.

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

PRICE $ A SHARE

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

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS PRICELINE.COM STOCKHOLDERS
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE........................... $ $ $ $
TOTAL............................... $ $ $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE SELLING STOCKHOLDERS HAVE GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP
TO AN ADDITIONAL 825,000 SHARES OF COMMON STOCK TO COVER OVER-ALLOTMENTS. MORGAN
STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE SHARES OF COMMON STOCK TO
PURCHASERS ON AUGUST , 1999.

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

MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.

ALLEN & COMPANY INCORPORATED

BANCBOSTON ROBERTSON STEPHENS

DONALDSON, LUFKIN & JENRETTE

MERRILL LYNCH & CO.

, 1999
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JULY 30, 1999

5,500,000 SHARES

[LOGO]

COMMON STOCK

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.

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

PRICE $ A SHARE

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

MORGAN STANLEY DEAN WITTER GOLDMAN SACHS INTERNATIONAL
ALLEN & COMPANY INCORPORATED
BANCBOSTON ROBERTSON STEPHENS INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH INTERNATIONAL

, 1999
<PAGE>
DESCRIPTION OF ARTWORK:

[At the top of the page, a picture of a person using the Internet in the
middle of the following text: BUYER-DRIVEN COMMERCE]

[On the right side of the page, a page screen shot of the priceline.com
homepage, including a button menu of the various services offered by the
priceline.com service. Below the priceline.com homepage, four smaller cascading
page screen shots with textual descriptions of the various services offered and
steps involved in the priceline.com process; the following captions flow below
the smaller cascading screen shots]

"Priceline.com's name-your-price process was carefully designed to be fast
and easy to use."

"In just a few minutes, and at no cost, a consumer can name a guaranteed
ready-to-buy price for a flexible range of goods. Priceline.com then searches
for a seller who wants the sale."

On the left side of the page, the following text:

A UNIQUE E-COMMERCE SYSTEM WHERE BUYERS NAME THEIR PRICE, AND PRICELINE.COM
"COLLECTS" INCREMENTAL DEMAND FOR SELLERS TO CONSIDER.

Priceline.com is a multi-category pricing system which uses a simple and
compelling consumer proposition--name your price. Subject to the buyer's agreed
range of product flexibility, we find a seller willing to accept the buyer's
offer. Buyers get the price they want and sellers get incremental sales.

[The button menu of services that the priceline.com service offers is
duplicated from the page screen shot of the priceline.com homepage, with each
button bearing an icon depicting the textual description on the button:

[Icon of an airplane with the text] "Domestic Airline Tickets"

[Icon of an airplane with the text] "International Airline Tickets"

[Icon of a suitcase with the text] "Hotel Rooms"

[Icon of a car with the text] "New Cars (N.Y. Metro)"

[Icon of a house with the text] "Home Mortgages"

[Icon of a house with the text] "Home Refinancing"

[Icon with a house with the dollar sign on it with the text] "Home Equity
Loans"

Underneath the button menu, the following text:

As of July 1999, six consumer services are available through priceline.com.
Currently available services are in two broad categories; travel and financial
services. Our seventh service, new cars, is being tested in the New York
metropolitan area and is priceline.com's first service in the automotive
category.

priceline.com(SM)

priceline.com and the priceline.com logo are service marks of priceline.com
Incorporated.

The gatefold consists of four sections, each with visual page screen shots
and textual descriptions of each of the categories available through the
priceline.com service: airline tickets, hotel rooms, home financing or new cars.

On right side, top half of the first page of the gatefold, a picture of an
airline, with the following heading flowing around it:

priceline.com(SM) airline tickets

2
<PAGE>
Below the heading, three page screen shots with textual descriptions of the
airline tickets services offered by priceline.com with the following caption:

"Airline Tickets. . . Priceline.com's inaugural name-your-price service was
launched on April 6, 1998. During the second quarter of 1999, priceline.com sold
over 440,000 airline tickets."

On the left side, top half of the first page of the gatefold, the first two
buttons in the button menu of services that the priceline.com service offers are
duplicated:

[Icon of an airplane with the text] "Domestic Airline Tickets"

[Icon of an airplane with the text] "International Airline Tickets"

Below the buttons, the following text:

AIRLINE TICKETS

Name your price for leisure travel on a major airline. . .

With priceline.com's airline ticket service, a leisure traveler names his
price and dates of travel and agrees to accept non-changeable tickets at any
time of the day, on any major airline that agrees to his price.

On right side, bottom half of the first page of the gatefold, a picture of a
hotel, with the following heading flowing around it:

priceline.com(SM) hotel rooms

Below the heading, three page screen shots with textual descriptions of the
hotel rooms services offered by priceline.com with the following caption:

"Hotel Rooms . . . Priceline.com's second travel service was initially
launched in October 1998 and was launched nationally in April 1999."

On the left side, bottom half of the first page of the gatefold, the third
button in the button menu of services that the priceline.com service offers is
duplicated:

[Icon of a suitcase with the text] "Hotel Rooms"

Below the button, the following text:

HOTEL ROOMS

Name your price for a hotel room in over 1100 U.S. cities. . .

With priceline.com's hotel room service, a traveler names his price, quality
rating and geographic zone in any of over 1100 U.S. cities. The buyer agrees to
stay in any major hotel that accepts his price.

priceline.com(SM)

On the right side, top half of the second page of the gatefold, a picture of
a house, with the following heading flowing around it:

priceline.com(SM) home financing

Below the heading, three page screen shots with textual descriptions of the
home financing services offered by priceline.com with the following caption:

"Home Financing. . . Priceline.com introduced three home financing services
in the first quarter of 1999. Consumers can name their own interest rate and
points on mortgages, home equity loans and home refinancings.

3
<PAGE>
On the left side, top half of the second page of the gatefold, the last
three buttons in the button menu of services that the priceline.com service
offers are duplicated:

[Icon of a house with the text] "Home Mortgages"

[Icon of a house with the text] "Home Refinancing"

[Icon with a house with the dollar sign on it with the text] "Home Equity
Loans"

Below the buttons, the following text:

HOME FINANCING

Name your interest rate and points for a mortgage, refinancing or home
equity loan. . .

With priceline.com's home financing services, the consumer names his
interest rate and points for any of three home financing services. Priceline.com
works to find a lender who agrees to the consumer's offer.

On the right side, bottom half of the second page of the gatefold, a picture
of a car, with the following heading flowing around it:

priceline.com(SM) new cars

Below the heading, three page screen shots with textual descriptions of the
new cars services offered by priceline.com with the following caption:

"New Cars. . . Priceline.com introduced its new car service in the New York
market as a test in the third quarter of 1998. Unlike other Internet services,
priceline's service is not a lead-generating system and is open to all
factory-authorized dealers with no up-front fees or exclusivity."

On the left side, bottom half of the second page of the gatefold, the third
button in the button menu of services that the priceline.com service offers is
duplicated:

[Icon of a car with the text] "New Cars (N.Y. Metro)"

Below the button, the following text:

NEW CARS

Name your price for the exact car you want and let priceline.com get a
dealer to agree. . .

With priceline.com's new car service, the buyer names his price for the
exact car he wants. The buyer never talks to a car salesman until AFTER
priceline finds a local factory-authorized dealer who agrees to the buyer's
price in writing.

priceline.com(SM)

4
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 4
Special Note Regarding Forward-Looking
Statements................................... 25
Use of Proceeds................................ 26
Price Range of Common Stock.................... 26
Dividend Policy................................ 26
Capitalization................................. 27
Dilution....................................... 28
Selected Financial Data........................ 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 30

<CAPTION>
PAGE
-----
<S> <C>
Business....................................... 45
Management..................................... 69
Certain Transactions........................... 85
Principal and Selling Stockholders............. 88
Certain United States Federal Tax Consequences
To Non-U.S. Investors........................ 91
Description of Capital Stock................... 93
Shares Eligible for Future Sale................ 95
Underwriters................................... 97
Legal Matters.................................. 100
Experts........................................ 100
Additional Information......................... 100
Index to Financial Statements.................. F-1
</TABLE>

Our principal executive offices are located at Five High Ridge Park,
Stamford, Connecticut 06905, and our telephone number is (203) 705-3000. Our
World Wide Web site is www.priceline.com. The information on our Web site is not
incorporated by reference into this prospectus.

In this prospectus, the terms "company," "priceline.com," "we," "us" and
"our" refer to priceline.com Incorporated and, unless the context otherwise
requires, "common stock" refers to the common stock, par value $0.008 per share,
of priceline.com. Our financial statements as of and for the periods ended
December 31, 1997 and December 31, 1998 (restated) are presented on a combined
basis with the financial statements of Priceline Travel, Inc., previously a
separate company owned by Mr. Jay S. Walker, our Founder and Vice Chairman.
Priceline Travel, which owned our travel agency license, was merged with and
into priceline.com as of March 24, 1999.

This prospectus includes statistical data regarding our company, the
Internet and the industries in which we compete. Such data are based on our
records or are taken or derived from information published or prepared by
various sources, including International Data Corporation, a provider of market
and strategic information for the information technology industry, and a market
research organization that we retain from time to time to measure consumer
awareness of our brand and services and of other leading Internet brands and
their products.

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
which is contained in this prospectus. We are offering to sell shares of common
stock and seeking offers to buy shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of the common stock.

Unless otherwise indicated, all information in this prospectus (1) reflects
a 1.25 for one stock split of our common stock on March 26, 1999 and the
conversion of all outstanding shares of our convertible preferred stock into
38,907,728 shares of common stock on March 29, 1999; (2) reflects the
consummation of the merger between priceline.com and Priceline Travel, Inc. as
of March 24, 1999; (3) assumes that all 967,183 shares eligible to be sold in
the option exercise program described under "Certain Transactions Other
Transactions" are sold pursuant to such program; and (4) assumes no exercise of
the underwriters' over-allotment option in this offering or the concurrent note
offering. See "Description of Capital Stock."

i
<PAGE>
PROSPECTUS SUMMARY

Priceline.com has pioneered a unique e-commerce pricing system known as a
"demand collection system" that enables consumers to use the Internet to save
money on a wide range of products and services while enabling sellers to
generate incremental revenue. Using a simple and compelling consumer
proposition--"name your price"--we collect consumer demand, in the form of
individual customer offers guaranteed by a credit card, for a particular product
or service at a price set by the customer. We then either communicate that
demand directly to participating sellers, or access participating sellers'
private databases to determine whether we can fulfill the customer's offer on
the basis of the pricing information and rules established by the sellers.
Consumers agree to hold their offers open for a specified period of time and,
once fulfilled, offers cannot be canceled. By requiring consumers to be flexible
with respect to brands, sellers and/or product features, we enable sellers to
generate incremental revenue without disrupting their existing distribution
channels or retail pricing structures.

We commenced the priceline.com service on April 6, 1998 with the sale of
leisure airline tickets. Since that time, our business has grown significantly
and the priceline.com service now includes the following products and services:

- leisure airline tickets, provided by six domestic and 16 international
airline participants;

- new automobiles, which was launched on a test basis in the New York
metropolitan area in July 1998;

- hotel room reservations, which was launched in October 1998, offers hotel
rooms in substantially all major United States markets and includes as
participants more than 10 leading national hotel chains; and

- home financing services, which was launched in January 1999 with home
mortgage services and now also includes home equity loans and refinancing
services.

Through the innovative use of "adaptive marketing programs," we also market
customer acquisition programs for third parties. These programs facilitate the
completion of a higher percentage of successful transactions through the
priceline.com service while generating fee income for us.

We generate revenues in a variety of ways depending on the product or
service sold. With respect to our airline ticket and hotel room reservation
services, we recognize as revenue the customer's named price, net of taxes, and
record as the cost of revenue the fare or rate charged by the seller. With
respect to our automobile service, we earn a fixed fee from both the customer
and the seller after the transaction is consummated. With respect to our home
financing service, we receive marketing fees equal to a percentage of the net
revenue generated by the service, which is operated in conjunction with
LendingTree, Inc. With respect to our adaptive marketing programs, we recognize
as revenue the fees due to us from our adaptive marketing partners.

We believe that the priceline.com service already has achieved significant
consumer acceptance and widespread brand awareness. During the period from
launch through June 30, 1999, we collected guaranteed offers for approximately
5.1 million airline tickets, representing approximately $1.1 billion in total
consumer demand. This demand resulted in sales of approximately 762,000 airline
tickets, representing approximately $165.2 million in revenue. We intend to
continue to leverage the priceline.com brand by expanding our product offerings
to include other leisure travel products and other financial services products
and by expanding our new car sales service to the entire U.S. market. We also
are exploring expansion of our core "name your price" business model to other
areas of e-commerce, such as retail merchandise and the consumer-to-consumer
market.
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered......................... 5,500,000 shares
2,000,000 shares by priceline.com
3,500,000 shares by the selling stockholders

Common stock offered in

United States offering................. 4,400,000 shares

International offering................. 1,100,000 shares

Common stock to be outstanding after the
offering................................... 146,810,939 shares(a)

Use of proceeds.............................. For working capital and general corporate
purposes. See "Use of Proceeds."

Nasdaq National Market symbol................ PCLN
</TABLE>

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

(a) Excludes 46,778,635 shares of common stock issuable upon the exercise of
outstanding options and warrants and the shares of common stock issuable
upon conversion of the % convertible subordinated notes due 2006, to be
offered concurrent with this offering. See "Capitalization."

CONCURRENT CONVERTIBLE NOTE OFFERING

Concurrent with this offering, we are making a public offering of $250.0
million aggregate principal amount of our % convertible subordinated notes due
2006. The convertible subordinated notes will be convertible, at the option of
the holder, at any time, into shares of our common stock at a conversion
price of $ per share, subject to adjustment in accordance with their terms.
The note offering will be made pursuant to a separate prospectus. Closing of the
note offering is not a condition to the closing of this offering.

2
<PAGE>
SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
JULY 18, 1997
(INCEPTION)
TO YEAR ENDED SIX MONTHS
DECEMBER 31, DECEMBER 31, ENDED
1997 1998 JUNE 30, 1999
------------- --------------- ---------------
<S> <C> <C> <C>
RESTATED(A)
STATEMENT OF OPERATIONS DATA:(B)
Revenues.................................................. $ -- $ 35,236,860 $ 160,974,391
Cost of revenues:
Product costs........................................... -- 33,495,745 144,323,527
Supplier warrant costs(c)............................... -- 3,029,014 761,518
------------- --------------- ---------------
Total cost of revenues.................................... -- 36,524,759 145,085,045
------------- --------------- ---------------
Gross profit (loss)..................................... -- (1,287,899) 15,889,346
Expenses:
Supplier start-up warrant costs(c)...................... -- 57,978,678 --
Sales and marketing..................................... 441,479 24,388,061 34,871,086
General and administrative.............................. 1,011,600 18,004,585(d) 9,169,869
Systems and business development........................ 1,060,091 11,131,650 5,652,423
------------- --------------- ---------------
Total expenses.......................................... 2,513,170 111,502,974 49,693,378
------------- --------------- ---------------
Operating loss............................................ (2,513,170) (112,790,873) (33,804,032)
Interest income (expense), net............................ (312) 548,374 2,387,104
------------- --------------- ---------------
Net loss.................................................. (2,513,482) (112,242,499) (31,416,928)
Accretion on preferred stock(e)........................... -- (2,183,424) (8,353,973)
------------- --------------- ---------------
Net loss applicable to common shareholders................ $ (2,513,482) $ (114,425,923) $ (39,770,901)
------------- --------------- ---------------
------------- --------------- ---------------
Per share basic and diluted net loss applicable to common
stockholders............................................ $ (0.05) $ (1.41) $ (0.29)
------------- --------------- ---------------
------------- --------------- ---------------
Weighted average common shares outstanding................ 50,833,756 81,231,425 137,436,399
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(F)
-------------- --------------
BALANCE SHEET DATA(B):
Cash and cash equivalents...................................................... $ 142,803,134 $ 539,602,330
Working capital................................................................ 150,043,651 546,842,847
Total assets................................................................... 204,794,892 609,719,754
Total liabilities.............................................................. 33,485,681 283,485,681
Total stockholders' equity..................................................... 171,309,211 326,234,073
</TABLE>

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

(a) As restated, see Note 13 to the 1998 combined financial statements.

(b) Presented on a combined basis with Priceline Travel, Inc. as of and for the
periods ended December 31, 1997 and December 31, 1998. Priceline Travel,
which previously owned our travel agency license, was merged into
priceline.com as of March 24, 1999.

(d) Includes a non-cash charge of $6,500,000 with respect to 8,125,000 shares of
common stock issued as executive compensation.

(e) Represents amortization of the beneficial conversion feature on the Series B
preferred stock that ceased upon conversion of the Series B preferred stock
into common stock on March 29, 1999.

(f) As adjusted to reflect the receipt by priceline.com of the estimated net
proceeds of (x) $153,508,166 from the sale of the 2,000,000 shares of common
stock offered by priceline.com in this offering (after deducting the
estimated offering expenses and underwriting discounts and commissions),
based upon an assumed public offering price of $80.50 per share; (y)
$1,416,696 from the exercise of warrants to purchase 1,523,329 shares of
common stock by Delta Airlines at an exercice price of $0.93 per share; and
(z) $241,874,334 from the sale of $250.0 million aggregate principal amount
of % convertible subordinated notes in the concurrent note offering
(after deducting estimated offering expenses and underwriting discounts and
commissions).

3
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT DECISION. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO
ANY OF THESE RISKS, AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT. YOU ALSO
SHOULD REFER TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING
OUR FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THESE STATEMENTS RELATE
TO FUTURE EVENTS OR FUTURE FINANCIAL PERFORMANCE. IN SOME CASES, YOU CAN
IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "COULD," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES," "ESTIMATES,"
"PREDICTS," "POTENTIAL," OR "CONTINUE" OR THE NEGATIVE OF SUCH TERMS AND OTHER
COMPARABLE TERMINOLOGY. THESE STATEMENTS ARE ONLY PREDICTIONS. IN EVALUATING
THESE STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS FACTORS, INCLUDING
THE RISKS OUTLINED BELOW. THESE FACTORS MAY CAUSE OUR ACTUAL RESULTS TO DIFFER
MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS."

OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT

Priceline.com was formed in July 1997 and began operations on April 6, 1998.
As a result, we have only a limited operating history on which you can base an
evaluation of our business and prospects. Our prospects must be considered in
the light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets, such as online commerce, using
new and unproven business models. To address these risks and uncertainties, we
must, among other things:

- attract leading sellers and consumers to the priceline.com service;

- maintain and enhance our brand, and expand our product and service
offerings;

- attract, integrate, retain and motivate qualified personnel; and

- adapt to meet changes in our markets and competitive developments.

We may not be successful in accomplishing these objectives.

WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES

We have incurred net losses of $88.1 million during the period from July 18,
1997 (inception) through June 30, 1999, before giving effect to $68.6 million of
non-cash charges arising from equity issuances to a number of our participating
airlines, our chief executive officer and other parties, which resulted in total
net losses of $156.7 million for such period. We have not achieved profitability
and expect to continue to incur losses for at least the next two years. The
principal causes of our losses are likely to continue to be significant brand
development costs, marketing and promotion costs and technology and systems
development costs.

Almost all of our revenues to date have been derived from airline ticket
sales, hotel room reservations and related adaptive marketing programs. In order
to increase airline, hotel room and adaptive marketing revenues, build a record
of successful transactions and enhance the priceline.com brand, we have sold a
substantial portion of our airline tickets and hotel room reservations below
cost. In addition, as our business model evolves, we have introduced and expect
to continue to introduce a number of new products and services. With respect to
both current and future product and service offerings, we expect to increase
significantly our operating expenses in order to increase our customer base,
enhance our brand image and support our growing infrastructure. For us to make a
profit, our revenues and gross profit margins will need to increase sufficiently
to cover these and other future costs. Otherwise, we may never achieve
profitability.

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WE ARE DEPENDENT ON ADAPTIVE MARKETING PROGRAMS

Our adaptive marketing programs permit consumers to increase the amount of
their offers at no additional cost by participating in sponsor promotions during
the process of making an offer through the priceline.com service. The fees paid
to us by sponsors offering the promotions generate significant revenues. Since
these fees historically have involved no direct costs, they have had a
disproportionately positive impact on our gross profit margins. A significant
reduction in consumer acceptance of our adaptive marketing programs, costs that
we may incur in connection with adaptive marketing programs, reductions in fees
paid to us in connection with such programs or any material decline in such
programs could result in a material reduction in our revenues and our gross
profit. We may not be able to replace such revenues through other programs or
through product sales.

During 1998 and the first two quarters of 1999, a substantial majority of
our adaptive marketing revenues were derived from fees paid by credit card
issuers for qualifying credit card applications submitted over the priceline.com
service in connection with customer offers for airline tickets. Through May 1,
1999, almost all of our adaptive marketing revenues were derived from fees
related to a credit card adaptive marketing program with Capital One Bank. In
May 1999, we replaced Capital One Bank with First USA Bank, a leading national
credit card issuer. Since that time, our credit card adaptive marketing program
revenues have been attributable to our adaptive marketing relationship with
First USA.

Both the Capital One and First USA adaptive marketing programs enable our
customers to increase the amount of their offers by a specified amount by
applying online for a credit card. However, the fee structure of the First USA
program is based on different factors than the factors that were applicable
under the Capital One program. For example, under the Capital One program we
received fees based upon the submission of qualifying applications, while the
First USA program ties a portion of our fees to account activation and usage.
However, since the First USA program only recently commenced, we have no method
of accurately predicting such activation and usage rates. In addition, unlike
the Capital One program, a portion of the fees earned under the First USA
program is required to be reinvested in program incentives. Accordingly, the
First USA program may or may not generate revenues or gross profits comparable
to those previously generated under the Capital One program. The First USA
agreement has a term of five years, subject to certain earlier termination and
repricing rights of First USA. For example, subject to priceline.com's rights of
renegotiation, First USA has the right to terminate the agreement after one year
(and earlier under certain circumstances) if its financial returns under the
adaptive marketing program are not at least equivalent to certain agreed upon
levels. The full financial statement impact of the shift from the Capital One
adaptive marketing program to the First USA adaptive marketing program will not
be known until completion of future periods.

In addition to our credit card adaptive marketing program with First USA, we
have an adaptive marketing program with E*TRADE for online brokerage services
and expect to commence adaptive marketing programs with Discover Financial
Services, Inc. for credit cards, Sprint Communications Company L.P. for long
distance telecommunications services and Earthlink Network, Inc. for the
provision of Internet services. Our adaptive marketing program with E*TRADE is
based on an oral agreement which may be terminated at any time and most of our
other adaptive marketing programs may be terminated on short notice.

We cannot guarantee that any of our adaptive marketing programs will
continue beyond their initial terms or, even if continued, that they will be
successful. If they are not successful, our gross profit and results of
operations could be adversely affected.

POTENTIAL FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKES FINANCIAL FORECASTING
DIFFICULT

We expect our revenues and operating results to vary significantly from
quarter to quarter. As a result, quarter to quarter comparisons of our revenues
and operating results may not be meaningful. In addition, due to our limited
operating history and our new and unproven business model, we cannot predict our

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future revenues or results of operations accurately. It is likely that in one or
more future quarters our operating results will fall below the expectations of
securities analysts and investors. If this happens, the trading price of our
common stock would almost certainly be materially and adversely affected.

Our business has no backlog and almost all of our revenues for a particular
quarter are derived from transactions that are both initiated and completed
during that quarter. Our current and future expense levels are based largely on
our investment plans and estimates of future revenues and are, to a large
extent, fixed. Accordingly, we may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall, and any significant
shortfall in revenues relative to our planned expenditures could have an
immediate adverse effect on our business and results of operations.

Our limited operating history and rapid growth makes it difficult for us to
assess the impact of seasonal factors on our business. Nevertheless, we expect
our business to be subject to seasonal fluctuations, reflecting a combination of
seasonality trends for the products and services offered by the priceline.com
service and seasonality patterns affecting Internet use. For example, with
regard to our travel products, demand for leisure travel may increase over
summer vacations and holiday periods, while Internet usage may decline during
the summer months. Our results also may be affected by seasonal fluctuations in
the inventory made available to the priceline.com service by participating
sellers. Airlines, for example, typically enjoy high demand for tickets through
traditional distribution channels for travel during Thanksgiving and the
year-end holiday period. As a result, during those periods, airlines may have
less excess inventory to offer through the priceline.com service at discounted
prices. Our business also may be subject to cyclical variations for the products
and services offered; for example, leisure travel and home mortgage financing
tend to decrease in economic downturns.

WE ARE DEPENDENT ON THE AIRLINE INDUSTRY AND CERTAIN AIRLINES

Our near term, and possibly long term, prospects are significantly dependent
upon our sale of leisure airline tickets. Sales of leisure airline tickets
represented approximately 83.7% of total revenue for the six months ended June
30, 1999. Leisure travel, including the sale of leisure airline tickets, is
dependent on personal discretionary spending levels. As a result, sales of
leisure airline tickets and other leisure travel products tend to decline during
general economic downturns and recessions. Unforeseen events, such as political
instability, regional hostilities, increases in fuel prices, travel-related
accidents and unusual weather patterns also may adversely affect the leisure
travel industry. As a result, our business also is likely to be affected by
those events. Significantly reducing our dependence on the airline and travel
industries is likely to take a long time and there can be no guarantee that we
will succeed in reducing that dependence.

Sales of airline tickets from priceline.com's four largest airline
suppliers, exclusive of Continental Airlines, Inc., which joined the
priceline.com service in July 1999, accounted for approximately 92.0% of airline
ticket revenue for the six months ended June 30, 1999. As a result, currently we
are substantially dependent upon the continued participation of these four
airlines in the priceline.com service in order to maintain and continue to grow
our total airline ticket revenues. We currently have 22 participating airlines.
However, our airline participation agreements:

- do not require the airlines to make tickets available for any particular
routes;

- do not require the airlines to provide any specific quantity of airline
tickets;

- do not require the airlines to provide particular prices or levels of
discount;

- do not require the airlines to deal exclusively with us in the public sale
of discounted airline tickets; and

- generally, can be terminated upon relatively short notice.

These agreements also outline the terms and conditions under which ticket
inventory provided by the airlines may be sold.

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Our agreement with Delta, subject to various exceptions, requires Delta's
approval of the addition of new carriers to the priceline.com service, restricts
the routes for which tickets may be offered by specified carriers through the
priceline.com service and imposes limitations on the code share arrangements of
specified carriers. Delta also may require the exclusion of specific markets in
order for certain other airlines to participate. These provisions could limit
our ability to expand our airline ticket service. In addition, our ability to
transfer or license our intellectual property to other travel providers is
limited in the manner set forth in the agreement.

It is possible that, as the priceline.com service grows and becomes a
significant channel of distribution for airline tickets and as other carriers
seek participation in the priceline.com service, these competitively restrictive
provisions of the Delta agreement could raise issues under federal and state
antitrust laws. If that happened, either a federal or state government agency or
private party could initiate litigation seeking to enjoin us and Delta from
enforcing these provisions or seeking to collect treble damages. The outcome of
any such litigation would be uncertain. If, however, such a lawsuit resulted in
an injunction or subjected us to damages, our business and financial condition
could suffer.

Due to our dependence on the airline industry, we could be severely affected
by changes in that industry, and, in many cases, we will have no control over
such changes or their timing. For example, if the Federal Aviation
Administration grounded a popular aircraft model, excess seat capacity could be
dramatically reduced and, as a result, our source of inventory could be
significantly curtailed. In addition, given the concentration of the airline
industry, particularly in the domestic market, major airlines that are not
participating in the priceline.com service could exert pressure on other
airlines not to supply us with tickets. Alternatively, the airlines could
attempt to establish their own buyer-driven commerce service or other similar
service to compete with us. We also could be materially adversely affected by
the bankruptcy, insolvency or other material adverse change in the business or
financial condition of one or more of our airline participants.

The sale of shares of common stock by the selling stockholders in this
offering is being made pursuant to the "piggyback" registration rights contained
in the registration rights agreement. Priceline.com obtained from parties to the
registration rights agreement that hold shares (or presently exercisable
warrants to purchase shares) of common stock available for sale in this offering
a waiver of a 30-day notice period under the agreement and a consent to the
assignment of registration rights by Messrs. Jay Walker and Richard Braddock,
each of whom chose to sell less than his pro rata number of shares in this
offering. Priceline.com did not obtain such waiver and consent from certain
other parties to the registration rights agreement (comprised of certain airline
participants) because they do not have shares (or presently exercisable warrants
to purchase shares) of common stock available for sale in this offering.
Priceline.com believes that no damages arise as a result of the failure to
obtain such waiver and consent since such airline participants do not have
shares (or presently exercisable warrants to purchase shares) of common stock
available for sale. Nevertheless, if a disagreement with such airline
participants were to arise, priceline.com can not be certain as to the effect,
if any, that it could have on its relationship with such airline participants or
whether damages or other remedies could be imposed.

OUR BUSINESS MODEL IS NOVEL AND UNPROVEN

The priceline.com service is based on a novel and unproven business model.
We will be successful only if consumers and sellers actively use the
priceline.com service. Prior to the launch of the priceline.com service,
consumers and sellers had never bought and sold products and services through a
demand collection system over the Internet. Therefore, it is impossible to
predict the degree to which consumers and sellers will use the priceline.com
service.

Many of the factors influencing consumers' and sellers' willingness to use
the priceline.com service are outside our control. For example, a labor dispute
that disrupts airline service or an airline accident could make consumers
unwilling to use a service like priceline.com that does not permit the customer
to

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designate the airline on which the customer purchases a ticket. In addition, a
breach of security on the Internet, even if we were not involved, could make
consumers unwilling to guarantee orders online with a credit card. Consequently,
it is possible that consumers and sellers will never utilize the priceline.com
service to the degree necessary for us to achieve profitability.

WE NEED TO SELL NEW PRODUCTS AND SERVICES

We are unlikely to make significant profits unless we make new or
complementary products and services and a broader range of existing products and
services available through the priceline.com service. We will incur substantial
expenses and use significant resources in trying to expand the type and range of
the products and services that we offer. However, we may not be able to attract
sellers and other participants to provide such products and services or
consumers to purchase such products and services through the priceline.com
service. In addition, if we launch new products or services and they are not
favorably received by consumers, our reputation and the value of the
priceline.com brand could be damaged.

Almost all of our experience to date is in the travel industry. The travel
industry is characterized by "expiring" inventories. For example, if not used by
a specific date, an airline ticket or hotel room reservation has no value. The
expiring nature of the inventory creates incentives for airlines and hotels to
sell seats or room reservations at reduced rates. Because we have only limited
experience in selling "non-expiring" inventories on the priceline.com service,
such as new cars or financial services, we cannot predict whether the
priceline.com business model can be successfully applied to such products and
services.

TWO NEW BUSINESSES WE ARE EVALUATING MAY NOT BE SUCCESSFUL

In addition to broadening the products and services offered through the
priceline.com service, we may expand our current "name your price" business
model into other areas of e-commerce. We currently are evaluating the licensing
of our business model to two new companies. One of these companies is developing
a consumer-to-consumer business in which buyers would make conditional purchase
offers to acquire goods from other consumers. The other would enable consumers
to use the Internet to name the price that they are willing to pay for retail
merchandise, which they would pick up from participating retailers. However, we
have not determined the structure of our relationship with these companies,
which may include, among other things, our licensing of the priceline.com brand
and "name your price" business model and investment in such entities. These new
businesses may not be launched and, if launched, may not be successful. If these
new businesses are not favorably received by consumers, the association of our
brand name and business model with these new entities may adversely affect our
business and reputation and may dilute the value of our brand name. In addition,
to the extent that we may need to invest funds and/or management resources for
the development of these entities, our core business may suffer.

Expansion of our core business model would expose us to additional risks not
currently applicable to our existing operations. For example, expansion into
retail products would give rise to operational challenges not applicable to our
existing products, such as consumer pick-up arrangements. Moreover, a
consumer-to-consumer service would create risks that we do not face currently,
such as deceptive or fraudulent activities conducted by users on the Web site.
The additional risks associated with an expansion of our core business could
have a material adverse effect on our business generally.

OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED

We believe that broader recognition and a favorable consumer perception of
the priceline.com brand are essential to our future success. Accordingly, we
intend to continue to pursue an aggressive brand-enhancement strategy, which
will include mass market and multimedia advertising, promotional programs and
public relations activities. These initiatives will involve significant expense.
If our brand enhancement

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strategy is unsuccessful, these expenses may never be recovered and we may be
unable to increase future revenues. Successful positioning of the priceline.com
brand will largely depend on:

- the success of our advertising and promotional efforts;

- an increase in the number of successful transactions on the priceline.com
service; and

- the ability to continue to provide high quality customer service.

We believe that consumers currently associate the priceline.com brand
primarily with the sale of discount airline tickets. To grow our business, we
will need to expand awareness of the priceline.com brand to a wide range of
products and services.

Sales and marketing expense was $34.9 million during the six months ended
June 30, 1999. To increase awareness of the priceline.com brand and expand it to
a wide range of products and services, we will need to continue to spend
significant amounts on advertising and promotions. These expenditures may not
result in a sufficient increase in revenues to cover such advertising and
promotions expenses. In addition, even if brand recognition increases, the
number of new users or the number of transactions on the priceline.com service
may not increase. Also, even if the number of new users increases, those users
may not use the priceline.com service on a regular basis.

WE FACE POTENTIAL CONFLICTS OF INTEREST RELATING TO WALKER DIGITAL

Because of our relationship with Walker Digital and our interlocking
directors, officers and stockholders, we are likely to face potential conflicts
of interest relating to Walker Digital.

The priceline.com service and the business model and related intellectual
property rights underlying the priceline.com service were developed in part by
executives, employees and/or consultants associated with Walker Digital
Corporation, a technology research and development company that was founded and
is controlled by Mr. Jay S. Walker, who is the Founder and Vice Chairman of
priceline.com. These individuals assigned all of their intellectual property
rights relating to the priceline.com service to Walker Digital's affiliate,
Walker Asset Management Limited Partnership. Walker Asset Management,
subsequently transferred the patent rights relating to the priceline.com service
and other related intellectual property rights to us. We, in turn, granted
Walker Digital a perpetual, non-exclusive, royalty-free right and license to use
certain intellectual property related to the priceline.com service for
non-commercial internal research and development purposes.

Walker Digital also provides us with, among other things, a right to
purchase at fair market value any intellectual property that is in process or
has been fully developed and that is owned and subsequently acquired, developed
or discovered by Walker Digital or Walker Asset Management that will provide
significant value in the use or commercial exploitation of the initially
transferred patent and related intellectual property rights. Conflicts of
interest may arise from time to time between Walker Digital and us with respect
to the potential purchase by us of additional intellectual property rights at
fair market value and the pursuit of overlapping corporate opportunities.

Walker Digital currently owns assets and intellectual property related to
two new areas of e-commerce into which we may expand our "name your price"
business model, one involving consumer-to-consumer sales and the other involving
the sale of retail merchandise. We may license our brand name and "name your
price" business model to two new companies formed to develop these businesses.
Walker Digital may contribute assets and intellectual property to these
companies in return for an equity interest in these companies.

Walker Digital owns the intellectual property rights underlying the
technology associated with our adaptive marketing programs. Walker Digital has
licensed to priceline.com the right to use these intellectual property rights
under a perpetual, non-exclusive, royalty-free license agreement. Walker Digital
has pending several United States patent applications directed to different
aspects of the processes and technology supporting our adaptive marketing
programs.

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Walker Digital also provides us with various services, including (1)
research and development assistance; (2) patent planning, maintenance and
prosecution; and (3) other intellectual property services, including technical
support. Walker Digital also subleases a portion of its Stamford, Connecticut
facilities to us on a month-to-month basis. Priceline.com, in turn, provides
Walker Digital with various management and administrative services, for which
Priceline.com collects fees from Walker Digital. We also have guaranteed Walker
Digital's obligations under a lease whereby it leases office space that is used
by both companies.

Certain of our executive officers and other key employees also are
directors, officers, employees or serve on advisory boards of Walker Digital and
either own, or hold an option to purchase, equity securities of Walker Digital.
Accordingly, because we have interlocking directors and officers and board level
advisors with Walker Digital, there may be inherent conflicts of interest
between Walker Digital and us. If a conflict arises between the management
decisions of priceline.com and Walker Digital, we could lose valuable management
input from our directors and officers who have conflicting obligations.

Additionally, many of the options granted to employees and consultants of
priceline.com under our 1997 Omnibus Plan entitle holders of such options to
continue to vest options for the then current vesting period during which their
employment or consulting arrangement with priceline.com terminates if such
individuals continue to perform services, throughout the remainder of such
vesting period, for another entity controlled by Mr. Jay S. Walker.
Consequently, we could lose valuable personnel to an entity controlled by Mr.
Walker, while such personnel continue to vest options granted to them by
priceline.com for up to one vesting period.

We have not adopted any formal plan or arrangement to address these
potential conflicts of interest with Walker Digital or other entities controlled
by Mr. Walker. We intend to review all related-party transactions and any
potential conflicts with Walker Digital and these other entities on a
case-by-case basis.

Walker Digital owns directly approximately 5.2% of the outstanding common
stock of priceline.com. Additionally, Walker Digital has established an option
plan for its officers and employees that provides for the grant of options to
purchase priceline.com stock owned by Walker Digital.

Mr. Jay S. Walker, as the Founder of Walker Digital and as our Founder, has
performed an essential role in the establishment and development of the
priceline.com service. Mr. Walker also serves as Chairman of Walker Digital and
as non-executive Chairman of NewSub Services, Inc., a direct marketing company
also co-founded by him. Mr. Walker devotes, and expects to continue to devote, a
substantial portion of his time to Walker Digital. Mr. Walker also expects to
devote a considerable portion of his time developing and implementing the
consumer-to-consumer and retail merchandise Internet businesses. Mr. Walker has
not committed to devote any specific percentage of his business time to us. In
July 1998, Mr. Richard S. Braddock replaced Mr. Walker as our Chairman and Chief
Executive Officer, and in July 1999, Mr. Daniel H. Schulman joined priceline.com
as our President and Chief Operating Officer. As a result, Mr. Walker's role
with priceline.com has been reduced, and we expect that Mr. Walker will continue
to reduce his involvement with us over time. Mr. Walker's skills and experience
have benefitted, and continue to benefit, us significantly. Priceline.com could
lose valuable management expertise as Mr. Walker further reduces his day-to-day
involvement with priceline.com.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR RAPID GROWTH

We have rapidly and significantly expanded our operations and anticipate
that further expansion will be required to realize our growth strategy. Our
rapid growth has placed significant demands on our management and other
resources which, given our expected future growth rate, is likely to continue.
To manage our future growth, we will need to attract, hire and retain highly
skilled and motivated officers and employees and improve existing systems and/or
implement new systems for: (1) transaction processing; (2) operational and
financial management; and (3) training, integrating and managing our growing
employee base.

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IF WE LOSE OUR KEY PERSONNEL OR CANNOT RECRUIT ADDITIONAL PERSONNEL, OUR
BUSINESS MAY SUFFER

Competition for personnel with experience in Internet commerce is intense.
If we do not succeed in attracting new employees or retaining and motivating our
current and future employees, our business could suffer significantly.

Since our formation in July 1997, we have expanded from 10 to 263 full-time
employees as of July 29, 1999. We also have employed many key personnel since
our launch in April 1998, including our Chairman and Chief Executive Officer and
our President and Chief Operating Officer, and a number of key managerial,
marketing, planning, financial, technical and operations personnel. We expect to
continue to add additional key personnel in the near future. We do not have "key
person" life insurance policies on any of our key personnel.

We believe our performance is substantially dependent on:

- our ability to retain and motivate our senior management and other key
employees; and

- our ability to identify, attract, hire, train, retain and motivate other
highly skilled technical, managerial, marketing and customer service
personnel.

CAPACITY CONSTRAINTS AND SYSTEM FAILURES COULD HARM OUR BUSINESS

If our systems cannot be expanded to cope with increased demand or fail to
perform, we could experience:

- unanticipated disruptions in service;

- slower response times;

- decreased customer service and customer satisfaction; or

- delays in the introduction of new products and services;

any of which could impair our reputation, damage the priceline.com brand and
materially and adversely affect our revenues. Publicity about a service
disruption also could cause a material decline in our stock price.

We use internally developed systems to operate the priceline.com service,
including transaction processing and order management systems that were designed
to be scalable. However, if the number of users of the priceline.com service
increases substantially, we will need to significantly expand and upgrade our
technology, transaction processing systems and network infrastructure. We do not
know whether we will be able to accurately project the rate or timing of any
such increases, or expand and upgrade our systems and infrastructure to
accommodate such increases in a timely manner.

Our ability to facilitate transactions successfully and provide high quality
customer service also depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. The priceline.com service has
experienced periodic system interruptions, which we believe will continue to
occur from time to time. Our systems and operations also are vulnerable to
damage or interruption from human error, natural disasters, power loss,
telecommunication failures, break-ins, sabotage, computer viruses, intentional
acts of vandalism and similar events. While we currently maintain redundant
servers at our Stamford, Connecticut premises to provide limited service during
system disruptions at our production site hosted by Exodus Communications, Inc.,
we do not have fully redundant systems, a formal disaster recovery plan or
alternative providers of hosting services. In addition, we do not carry
sufficient business interruption insurance to compensate for losses that could
occur. Any system failure that causes an interruption in service or decreases
the responsiveness of the priceline.com service could impair our reputation,
damage our brand name and materially adversely affect our revenues.

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WE RELY ON THIRD-PARTY SYSTEMS

We rely on certain third-party computer systems or third-party service
providers, including:

- the computerized central reservation systems of the airline and hotel
industries to satisfy demand for airline tickets and hotel room
reservations;

- the computer systems of LendingTree, Inc. to satisfy offers for home
financing services;

- Exodus Communications to host our systems infrastructure, web and database
servers; and

- CallTech Communications Incorporated to operate our call center.

Any interruption in these third-party services, or a deterioration in their
performance, could be disruptive to our business. We currently do not have any
contractual arrangement with Exodus Communications and our agreements with
CallTech Communications and LendingTree are terminable upon short notice. In the
event our arrangement with any of such third parties is terminated, we may not
be able to find an alternative source of systems support on a timely basis or on
commercially reasonable terms.

INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE

The markets for the products and services offered on the priceline.com
service are intensely competitive. We compete with both traditional distribution
channels and online services. Increased competition could diminish our ability
to become profitable or result in loss of market share and damage the
priceline.com brand.

We currently or potentially compete with a variety of companies with respect
to each product or service we offer. With respect to travel products, these
competitors include:

- Internet travel agents such as Travelocity, Preview Travel and Microsoft's
Expedia;

- traditional travel agencies;

- consolidators and wholesalers of airline tickets and other travel
products, including online consolidators such as Cheaptickets.com;

- individual airlines, hotels, rental car companies, cruise operators and
other travel service providers; and

- operators of travel industry reservation databases such as Worldspan and
Sabre.

Our current or potential competitors with respect to new automobiles include
traditional and online auto dealers, including newly developing auto superstores
such as AutoNation, Auto-by-Tel and Microsoft's CarPoint. With respect to
financial service products, our competitors include:

- banks and other financial institutions;

- online and traditional mortgage and insurance brokers, including
mortgage.com, Quicken Mortgage, E-Loan and iOwn, Inc.; and

- insurance companies.

We also potentially face competition from a number of large online services
that have expertise in developing online commerce and in facilitating Internet
traffic. These potential competitors include Amazon.com, America Online,
Microsoft, and Yahoo! who could choose to compete with us either directly or
indirectly through affiliations with other e-commerce companies. Other large
companies with strong brand recognition, technical expertise and experience in
online commerce and direct marketing could also seek to compete in the
buyer-driven commerce market. In addition, as we expand our business through the
introduction of new products and services, we will face competition from
established providers of these products and services. For example, if we expand
into the consumer-to-consumer market either directly or

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through a licensing arrangement, we will face competition from established web
site operators such as eBay.

Many of our competitors have significant competitive advantages. For
example, airlines, hotels, financial institutions and other suppliers also sell
their products and services directly to consumers and have established Web
sites. Internet directories, search engines and large traditional retailers have
significantly greater operating histories, customer bases, technical expertise,
brand recognition and/or online commerce experience than us. In addition,
certain competitors may be able to devote significantly greater resources than
us to:

- marketing and promotional campaigns;

- attracting traffic to their Web sites;

- attracting and retaining key employees; and

- Web site and systems development.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY

We have developed a comprehensive program for securing and protecting rights
in patentable inventions, trademarks, trade secrets and copyrightable materials.
If we are not successful in protecting our intellectual property, there could be
a material adverse effect on our business.

PATENTS

We currently hold one issued United States patent directed to a unique
Internet-based buyer-driven commerce method and system underlying our business
model. We also hold one issued United States patent directed to a method and
system for pricing and selling airline ticket options and one issued United
States patent directed to methods and systems for generating airline-specified
time tickets. In addition, we have pending 25 United States and four
international patent applications directed to different aspects of our
technology and business processes. We also have instituted an invention
development program to identify and protect new inventions and a program for
international filing of selected patent applications. Nevertheless, it is
possible that:

- our core buyer-driven commerce patent and any other issued patents could
be successfully challenged by one or more third parties, which could
result in our loss of the right to prevent others from exploiting the
buyer-driven commerce system claimed in the patent or the inventions
claimed in any other issued patents;

- because of variations in the application of our business model to each of
our products and services, our core buyer-driven commerce patent may not
be effective in preventing one or more third parties from utilizing a
copycat business model to offer the same product or service in one or more
categories;

- our ability to practice our core buyer-driven commerce patent through
offering one or more of our products or services could be successfully
prevented if one or more third parties prevail in an interference action
in the U.S. Patent and Trademark Office and thereby obtain priority of
invention for the subject matter claimed in our core buyer-driven commerce
patent;

- newly discovered prior art could diminish the value of or invalidate an
issued patent;

- our pending patent applications may not result in the issuance of patents;
and

- current and future competitors could devise new methods of competing with
our business that are not covered by our issued patents or patent
applications.

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While our core patent is directed to a unique buyer-driven commerce system
and method, it does not necessarily prevent competitors from developing and
operating Internet commerce businesses that use customer-offer based business
models. It is possible for a competitor to develop and utilize a business model
that appears similar to our patented buyer-driven commerce system, but which has
sufficient distinctions that it does not fall within the scope of our patent.
For example, we are aware of Internet travel services that appear to use
customer-offer based transaction models, but based on the information we have
obtained to date, may not infringe our patent.

PENDING INTERFERENCE ACTION

On January 6, 1999, we received notice that a third party patent applicant
and patent attorney, Thomas G. Woolston, purportedly had filed in December 1998
with the United States Patent and Trademark Office a request to declare an
"interference" between a patent application filed by Woolston describing an
electronic market for used and collectible goods and our core buyer-driven
commerce patent. We have received a copy of a Petition for Interference from
Woolston, the named inventor in at least three United States Patent applications
titled "Consignment Nodes," one of which has issued as a patent (U.S. Patent
Number: 5,845,265). We currently are awaiting information from the Patent Office
regarding whether it will initiate an interference proceeding concerning
Woolston's patent application and our core buyer-driven commerce patent. An
interference is an administrative proceeding instituted in the Patent Office to
determine questions of patentability and priority of invention between two or
more parties claiming the same patentable invention. There is no statutory
period within which the Patent Office must act on an interference request. If an
interference is declared and proceeds through a final hearing in the Patent
Office, a final judgment is made by the Patent Office as to inventorship.
Following such final judgment, appeals could be made in Federal court. While
there can be no certainty as to time periods, interference proceedings typically
take years to resolve.

As a threshold to the initiation of an interference proceeding, Woolston
must show that his patent application supports claims that he copied from our
core buyer-driven commerce patent. In order to make this showing, he would have
to prove, among other things, that he invented the subject matter of the
priceline.com claims before the inventors of our patent. If the Patent Office
were to find that Woolston's patent application supported the copied
priceline.com claims, it would resolve the interference by awarding inventorship
to the party with the earliest proven date of invention. Woolston announced in
February 1999 an agreement to license his issued patent and pending patent
applications to the owner of a competing Internet travel service.

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priority of invention would be made by the Patent Office after considering facts
provided by each party during the interference proceeding. If an interference is
declared and thereafter resolved in favor of Woolston, such resolution could
result in an award of some or all of the disputed patent claims to Woolston. If,
following such award, Woolston were successful in a patent infringement action
against us, including prevailing over all defenses available to us, such as
those of non-infringement and invalidity, this could require us to obtain
licenses from Woolston and pay damages from the date such patent issued at a
cost which could significantly adversely affect our business. If Woolston
prevailed in both an interference and an infringement action, then we could be
enjoined from conducting business through the priceline.com service to the
extent covered by the patent claims awarded to Woolston. In addition, defense of
the interference action may be expensive and may divert management attention
away from our business.

TRADEMARKS, COPYRIGHTS AND TRADE SECRETS

We regard the protection of our copyrights, service marks, trademarks, trade
dress and trade secrets as critical to our future success. We rely on a
combination of laws and contractual restrictions, such as confidentiality
agreements, to establish and protect our proprietary rights. However, laws and
contractual restrictions may not be sufficient to prevent misappropriation of
our technology or deter others from developing similar technologies. We also
attempt to register our trademarks and service marks in the United States and
internationally. However, effective trademark, service mark, copyright and trade
secret protection may not be obtainable and/or available in every country in
which our services are made available online.

PENDING LITIGATION

On January 19, 1999, a complaint was filed in the United States District
Court for the Northern District of California by Marketel International, Inc., a
California corporation, under the caption Marketel International Inc. v.
Priceline.com et. al., No. C-99-1061 (N.D. CA 1999), against priceline.com,
Priceline Travel, Walker Asset Management, Walker Digital, Mr. Jay S. Walker,
our Founder and Vice Chairman, and Mr. Andre Jaeckle, an individual who made a
$1.0 million loan to us bearing interest at a rate of 6% per year and, in
connection with the loan, received warrants, which have subsequently been fully
exercised, to purchase 62,500 shares of our common stock. On February 22, 1999,
Marketel filed an amended complaint, and on March 17, 1999, Marketel filed a
second amended complaint. The second amended complaint includes as defendants,
Mr. Timothy G. Brier, our Executive Vice President, Travel, Mr. Bruce Schneier,
an individual and consultant to Walker Digital, and Mr. James Jorasch, an
individual and employee of Walker Digital, and alleges causes of action for,
among other things, misappropriation of trade secrets, breach of contract,
conversion, breach of confidential relationship, copyright infringement, fraud,
unfair competition and false advertising, and seeks injunctive relief and
damages in an unspecified amount. In its second amended complaint, Marketel
alleges, among other things, that the defendants conspired to misappropriate
Marketel's business model, which it describes as a buyer-driven electronic
marketplace for travel services and its appurtenant techniques, market research,
forms, plans and processes, and which an executive of Marketel allegedly
provided to Messrs. Walker and Jaeckle in confidence approximately ten years
ago. The second amended complaint also alleges that three former Marketel
employees are the actual sole inventors or co-inventors of priceline.com's core
buyer driven commerce patent (U.S. patent No. 5794207), which was issued on
August 11, 1998 with Messrs. Jay S. Walker, Bruce Schneier and James Jorasch
listed as the inventors and which patent was assigned to Walker Digital and
thereafter assigned to priceline.com. Marketel asks that the patent's
inventorship be corrected accordingly.

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operated a fax-based travel information service which offered consumers, travel
agents and/or consolidators the opportunity to purchase specially printed forms.
These forms, when accompanied by an additional non-refundable fee, allowed
prospective ticket buyers to fax to Marketel credit-card guaranteed bids for
airline travel at a bid price specified by the buyer. We believe that Marketel
has not engaged in any regular commercial activities since ceasing operations in
1992. Based upon publicly available information, Marketel reactivated its status
as a corporation by satisfying its back-due tax obligations to the State of
California shortly after the filing of the original complaint.

On February 5, 1999, February 10, 1999 and March 31, 1999, the defendants
filed their answer, amended answer and answer to second amended complaint,
respectively, in which they denied the material allegations of liability in the
complaints. We and all other defendants strongly dispute the material legal and
factual allegations contained in Marketel's second amended complaint and believe
that the second amended complaint is without merit. We intend to defend
vigorously against the action. Since May 28, 1999, there has been a discovery
stay in effect, which was caused by the withdrawal of Marketel's counsel.
Marketel has retained new counsel, and we now anticipate moving forward with
discovery.

Defending the Marketel litigation may involve significant expense and, due
to the inherent uncertainties of litigation, there can be no certainty as to the
ultimate outcome. Pursuant to the indemnification obligations contained in the
Purchase and Intercompany Services Agreement with Walker Digital, Walker Digital
has agreed to indemnify, defend and hold priceline.com harmless for damages,
liabilities and legal expenses incurred in connection with the Marketel
litigation.

DOMAIN NAMES

We currently hold the Internet domain name "priceline.com," as well as
various other related names. Domain names generally are regulated by Internet
regulatory bodies. The regulation of domain names in the United States and in
foreign countries is subject to change. Regulatory bodies could establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may not
acquire or maintain the "priceline.com" domain name in all of the countries in
which we conduct business.

The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. Therefore, we
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and other proprietary
rights.

LICENSES

In the future, we may license portions of our intellectual property,
including our issued patents, to third parties or to joint ventures or other
entities in which we may have an interest. To date, we have granted a small
business providing online travel services immunity from suit under our core
Internet-based buyer-driven commerce system patent, on the condition that the
nature and scope of such business is not significantly changed. If the nature or
scope of such immunity were disputed, we would need to institute proceedings to
enforce our rights either under the immunity agreement or under the patent.

THE SUCCESS OF OUR BUSINESS WILL DEPEND ON CONTINUED GROWTH OF INTERNET COMMERCE

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recently introduced products and services over the Internet are subject to a
high level of uncertainty, and there are few proven products and services. For
us to grow, consumers who historically have purchased through traditional means
of commerce, such as a travel agent for airline tickets or a branch of a bank
for home financings, will need to elect to purchase online products and
services. Sellers of products and services will need to adopt or expand use of
the Internet as a channel of distribution.

The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Our success
will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security, and the
timely development of complementary products, such as high-speed modems, for
providing reliable Internet access and services.

The Internet has experienced a variety of outages and other delays as a
result of damage to portions of its infrastructure and could face such outages
and delays in the future. Outages and delays are likely to affect the level of
Internet usage generally, as well as the processing of transactions on the
priceline.com Web site. It is unlikely that the level of orders lost in those
circumstances could be made up by increased phone orders. In addition, the
Internet could lose its viability due to delays in the development or adoption
of new standards to handle increased levels of activity or due to increased
government regulation. The adoption of new standards or government regulation
may, however, require us to incur substantial compliance costs.

WE MAY NOT BE ABLE TO KEEP UP WITH THE RAPID TECHNOLOGICAL AND OTHER CHANGES

The markets in which we compete are characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
announcements, introductions and enhancements and changing consumer demands. We
may not be able to keep up with these rapid changes. In addition, these market
characteristics are heightened by the emerging nature of the Internet and the
apparent need of companies from many industries to offer Internet-based products
and services. As a result, our future success will depend on our ability to
adapt to rapidly changing technologies, to adapt our services to evolving
industry standards and to continually improve the performance, features and
reliability of our service in response to competitive service and product
offerings and the evolving demands of the marketplace. In addition, the
widespread adoption of new Internet, networking or telecommunications
technologies or other technological changes could require us to incur
substantial expenditures to modify or adapt our services or infrastructure.

YEAR 2000 RISKS MAY HARM OUR BUSINESS

The risks posed by Year 2000 issues could adversely affect our business in a
number of significant ways. Although we believe that our internally developed
systems and technology are Year 2000 compliant, our information technology
systems nevertheless could be substantially impaired or cease to operate due to
Year 2000 problems. Additionally, we rely on information technology supplied by
third parties, and our participating sellers also are heavily dependent on
information technology systems and on their own third party vendors' systems.
Year 2000 problems experienced by us or any of such third parties could
materially adversely affect our business. Additionally, the Internet could face
serious disruptions arising from the Year 2000 problem.

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We are evaluating our internal information technology systems and contacting
our information technology suppliers and participating sellers to ascertain
their Year 2000 status. However, we cannot guarantee that our own systems will
be Year 2000 compliant in a timely manner, that any of our participating sellers
or other Web site vendors will be Year 2000 compliant in a timely manner, or
that there will not be significant interoperability problems among information
technology systems. We also cannot guarantee that consumers will be able to
visit our Web site without serious disruptions arising from the Year 2000
problem. Given the pervasive nature of the Year 2000 problem, we cannot
guarantee that disruptions in other industries and market segments will not
adversely affect our business. Further, the costs related to Year 2000
compliance could be significant. Moreover, participating sellers in
priceline.com services could experience substantial slow-downs in business if
consumers avoid products and services such as air travel both before and after
January 1, 2000 arising from concerns about reliability and safety because of
the Year 2000 issue.

ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS

The secure transmission of confidential information over the Internet is
essential in maintaining consumer and supplier confidence in the priceline.com
service. Substantial or ongoing security breaches on our system or other
Internet-based systems could significantly harm our business. We currently
require buyers to guarantee their offers with their credit card, either online
or through our toll-free telephone service. We rely on licensed encryption and
authentication technology to effect secure transmission of confidential
information, including credit card numbers. It is possible that advances in
computer capabilities, new discoveries or other developments could result in a
compromise or breach of the technology used by us to protect customer
transaction data.

We incur substantial expense to protect against and remedy security breaches
and their consequences. However, we cannot guarantee that our security measures
will prevent security breaches. A party that is able to circumvent our security
systems could steal proprietary information or cause interruptions in our
operations. Security breaches also could damage our reputation and expose us to
a risk of loss or litigation and possible liability. Our insurance policies
carry low coverage limits, which may not be adequate to reimburse us for losses
caused by security breaches.

We also face risks associated with security breaches affecting third parties
conducting business over the Internet. Consumers generally are concerned with
security and privacy on the Internet and any publicized security problems could
inhibit the growth of the Internet and, therefore, the priceline.com service as
a means of conducting commercial transactions.

OUR STOCK PRICE IS HIGHLY VOLATILE

The market price of our common stock is highly volatile and is likely to
continue to be subject to wide fluctuations in response to factors such as the
following, some of which are beyond our control:

- quarterly variations in our operating results;

- operating results that vary from the expectations of securities analysis
and investors;

- changes in expectations as to our future financial performance, including
financial estimates by securities analysts and investors;

- changes in market valuations of other Internet or online service
companies;

- announcements of technological innovations or new services by us or our
competitors;

- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;

- loss of a major seller participant, such as an airline or hotel chain;

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- changes in the status of our intellectual property rights;

- loss of a major adaptive marketing partner;

- announcements by third parties of significant claims or proceedings
against us or adverse developments in pending proceedings;

- additions or departures of key personnel;

- future sales of our common stock; and

- stock market price and volume fluctuations.

In addition, the trading prices of Internet stocks in general, including
ours, have experienced extreme price and volume fluctuations in recent months.
These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. The valuations of many Internet
stocks, including ours, are extremely high based on conventional valuation
standards, such as price to earnings and price to sales ratios. The trading
price of our common stock has increased significantly from the initial public
offering price. These trading prices and valuations may not be sustained. Any
negative change in the public's perception of the prospects of Internet or
e-commerce companies could depress our stock price regardless of our results.
Other broad market and industry factors may decrease the market price of our
common stock, regardless of our operating performance. Market fluctuations, as
well as general political and economic conditions, such as a recession or
interest rate or currency rate fluctuations, also may decrease the market price
of our common stock.

In the past, securities class action litigation often has been brought
against a company following periods of volatility in the market price of their
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.

SUBSTANTIAL SALES OF COMMON STOCK ELIGIBLE FOR RESALE COULD ADVERSELY AFFECT OUR
STOCK PRICE

Sales of a substantial number of shares of common stock after the offering
could adversely affect the market price of our common stock by introducing a
large number of sellers to the market. Given the volatility that exists for our
shares, such sales could cause the market price of our common stock to decline.

Upon completion of this offering, we will have outstanding 146,810,939
shares of common stock. Of these shares, the 5,500,000 shares of common stock
sold in this offering, the 10,000,000 shares of common stock in our initial
public offering and the 967,183 shares of common stock eligible to be sold by
employees upon exercise of stock options pursuant to the option exercise program
will be freely tradeable without restriction under the Securities Act of 1933,
as amended, which is commonly referred to as the "Securities Act," unless
purchased by "affiliates" of priceline.com as defined in Rule 144 under the
Securities Act. The shares of common stock issuable upon conversion of the %
convertible subordinated notes sold in the concurrent note offering will be
freely tradeable in a similar manner. In addition, 26,495,062 shares are
issuable upon exercise of outstanding options granted under the 1997 Omnibus
Plan and the 1999 Omnibus Plan. We have filed a registration statement on Form
S-8 covering the shares of common stock issuable upon exercise of such options.
As a result, when the options are exercised, the shares issued will be freely
tradeable after September 25, 1999 under the Securities Act unless purchased by
"affiliates" of priceline.com as defined in Rule 144 under the Securities Act.
The balance of our outstanding shares of common stock and the shares of common
stock issuable upon exercise of outstanding warrants will be "restricted
securities" under the Securities Act, subject to restrictions on the timing,
manner and volume of sales of these shares.

Each of the selling stockholders and Mr. Jay S. Walker who, after this
offering, will own an aggregate of 146,335,223 shares of common stock, including
shares issuable upon exercise of options and warrants owned by them, have
agreed, subject to limited exceptions, for a period of 180 days after the date
of this

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prospectus that they will not, without the prior written consent of Morgan
Stanley & Co. Incorporated, directly or indirectly, offer to sell, sell, pledge
or otherwise dispose of any shares of common stock. In addition, holders who
will own 3,547,311 shares of common stock after this offering and options to
purchase an additional 4,532,504 shares after this offering agreed in connection
with our initial public offering to similar restrictions until after September
25, 1999. In connection with our option exercise program, holders of options to
purchase 5,416,000 shares registered on our Form S-8 entered into lock-up
agreements restricting the exercise of their options and sale of the underlying
shares until 180 days after the date of this prospectus without our prior
written consent.

After giving effect to these contractual restrictions and shares that may be
issued upon exercise of outstanding options and warrants, we estimate that
additional shares of common stock will be available for sale in the public
market as follows:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
SHARES
ELIGIBLE FOR
DATE SALE
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
September 26, 1999................................................................................. 5,140,000
October through November 1999...................................................................... 1,520,000
December 1999 through January 2000................................................................. 11,580,000
Thereafter......................................................................................... 150,650,000
</TABLE>

Since many of these shares were purchased at prices substantially below current
market prices, we believe a significant number of these shares will be sold when
eligible for resale.

Upon consummation of this offering and subject to the foregoing lock-up
agreements, holders of up to 142,153,503 shares of common stock and securities
exercisable for shares of common stock will have various rights to request the
registration of their shares under the Securities Act. Upon the effectiveness of
this registration, all shares covered by such registration statement will be
freely transferable. Walker Digital also owns directly approximately 5.2% of our
outstanding common stock. Walker Digital has established an option plan for its
officers and employees that provides for the grant of options to purchase common
stock held by Walker Digital.

Future sales of our common stock, or the availability of our common stock
for sale, could adversely affect the market price for our common stock or our
ability to raise capital by offering equity securities.

REGULATORY AND LEGAL UNCERTAINTIES COULD HARM OUR BUSINESS

The products and services we offer through the priceline.com service are
regulated by federal and state governments. Our ability to provide such products
and services is and will continue to be affected by such regulations. The
implementation of unfavorable regulations or unfavorable interpretations of
existing regulations by courts or regulatory bodies, could require us to incur
significant compliance costs, cause the development of the affected markets to
become impractical and otherwise adversely affect our financial performance.

TRAVEL SERVICES

We are subject to the laws and regulations of a number of states governing
the offer and/or sale of travel services. For example, priceline.com is
registered as a "seller of travel" under the California Seller of Travel Act and
is a member of the Airlines Reporting Corporation. In addition, a number of
state travel laws and regulations require compliance with specific disclosure,
bond and/or other requirements.

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NEW CAR SALES

A number of states have laws and regulations governing the registration and
conduct of automobile dealers and brokers. Such laws generally provide that any
person receiving direct or indirect compensation for selling automobiles or
brokering automobile transactions must register as an automobile broker or
dealer. Registration for automobile dealers/brokers may, among other things,
require the registrant to maintain a physical office in the applicable state, a
dealer lot zoned for automobile sales within the applicable state, and/or a
franchise agreement with the manufacturers of the automobiles to be sold. With
the planned expansion of our new automobile service from the New York
metropolitan area to all 48 contiguous states, priceline.com will attempt to
register as an automobile broker/dealer in the jurisdictions where registration
is required, provided that it can reasonably comply with the requirements for
registration imposed by each jurisdiction. However, we may not be able to
register in all states. For example, we will not be able to register in a
jurisdiction that requires a dealer zoned lot or a franchise agreement with
manufacturers of the automobiles to be sold. We will work with the regulators of
the various jurisdictions to obtain waivers of such requirements, but we may not
be successful in our efforts.

In jurisdictions where we cannot obtain registration, it is possible that
state regulatory bodies could take a strict enforcement position and could
require us to register as an automobile broker/dealer as a condition to offering
our new automobile service in their states. In that case, we may be unable to
continue to make our new automobile services available in those jurisdictions.

HOME FINANCING SERVICES

Most states have laws and regulations governing the registration or
licensing and conduct of persons providing mortgage brokerage services. Such
laws and regulations also typically require certain consumer protection
disclosures and compliance with loan solicitation procedures and a variety of
other practices, throughout the various stages of the mortgage solicitation,
application and approval process.

In addition to state law, mortgage brokerage services are heavily regulated
by federal law. For example, the Real Estate Settlement Procedures Act,
prohibits the payment and receipt of mortgage loan referral fees. The act,
however, does permit persons to be compensated for the fair market value of
non-referral services actually rendered.

We introduced our home financing service in January 1999. LendingTree serves
as the back-end processing system, which presents offers we receive to multiple
mortgage lending institutions for consideration, for all of priceline.com's home
financing services. We provide and are responsible for maintaining the home
financing service on our Web site and develop and purchase all advertising.
LendingTree compensates us for the fair market value of our non-referral
services. We believe that offering the home financing service does not require
our registration under or compliance with the mortgage or similar brokerage laws
of any jurisdiction. However, it is possible that one or more regulatory
authorities could seek to enforce existing laws, or otherwise enact new
legislation, requiring our registration and compliance and could scrutinize our
compensation arrangement with LendingTree under Real Estate Settlement
Procedures Act or other federal or state laws. Such action could severely
interfere with the conduct of our business.

LendingTree provides the back-end processing system, which presents offers
we receive to multiple mortgage lending institutions for consideration, for the
home financing service on our Web site and is responsible for maintaining the
necessary and appropriate state registrations and licenses associated with
LendingTree's mortgage brokerage services. If a state or federal regulatory
authority, or an aggrieved customer, should in the future claim that LendingTree
has failed to comply fully with applicable state or federal law requirements
pertaining to LendingTree's provision of mortgage brokerage services, our home
financing service could be materially and adversely affected and we may be
unable to continue to make our home financing service available.

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We are exploring the possibility of acquiring a minority interest in, and
licensing the priceline.com name and business model to, a newly formed
subsidiary of a federally chartered savings and loan association. This entity
may be known as "priceline.mortgage.com" and also may serve as an entity that
could accept mortgage applications or mortgage qualification loans.

CONSUMER PROTECTION AND RELATED LAWS

All of our services are subject to federal and state consumer protection
laws and regulations prohibiting unfair and deceptive trade practices. We also
are subject to related "plain language" statutes in place in many jurisdictions,
which require the use of simple, easy to read, terms and conditions in contracts
with consumers.

Although there are very few laws and regulations directly applicable to the
protection of consumers in an online environment, it is possible that
legislation will be enacted in this area and could cover such topics as
permissible online content and user privacy, including the collection, use,
retention and transmission of personal information provided by an online user.
Furthermore, the growth and demand for online commerce could result in more
stringent consumer protection laws that impose additional compliance burdens on
online companies. Such consumer protection laws could result in substantial
compliance costs and interfere with the conduct and growth of our business.

BUSINESS QUALIFICATION LAWS

Because our service is available over the Internet in multiple states, and
because we sell to numerous consumers resident in such states, such
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each such state. We are qualified to do business in a
limited number of states, and our failure to qualify as a foreign corporation in
a jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to so qualify and limit our ability to conduct
litigation in such states.

INTERNATIONAL EXPANSION

We intend to explore opportunities for expanding our business into
international markets. It is possible, however, that the priceline.com demand
collection system will not be readily adaptable to the regulatory environments
of certain foreign jurisdictions. In addition, there are various other risks
associated with international expansion. They include language barriers,
unexpected changes in regulatory requirements, trade barriers, problems in
staffing and operating foreign operations, changes in currency exchange rates,
difficulties in enforcing contracts and other legal rights, economic and
political instability and problems in collection.

OUR BUSINESS IS SUBJECT TO TAX UNCERTAINTIES

POTENTIAL FEDERAL AIR TRANSPORTATION TAX LIABILITY

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Due to the uncertainty of how the federal air transportation tax applies to
sales of airline tickets using the priceline.com service, we have submitted a
written request to the United States Internal Revenue Service seeking a
determination of our federal air transportation tax obligations. We recently met
with representatives of the Internal Revenue Service to informally discuss our
submission. We intend to revise and resubmit our request to address certain
factual and legal inquiries raised during our meeting. The actual ruling by the
Internal Revenue Service may not be favorable and may require us to collect the
federal air transportation tax on the total amount paid by consumers for air
travel.

If the determination of the Internal Revenue Service is unfavorable, we
could owe approximately $766,339 in additional taxes as of June 30, 1999. We
have accrued for such potential liability in our condensed balance sheet as of
June 30, 1999 and are providing for such potential liability on an ongoing
basis. We have agreed to indemnify and hold harmless certain of our
participating airlines from any liability with respect to such taxes, as well as
to secure the payment of such taxes by a letter of credit.

STATE TAXES

We file tax returns in such states as required by law based on principles
applicable to traditional businesses. In addition, we do not collect sales or
other similar taxes in respect of transactions conducted through the
priceline.com service (other than the federal air transportation tax referred to
above). However, one or more states could seek to impose additional income tax
obligations or sales tax collection obligations on out-of-state companies, such
as ours, which engage in or facilitate online commerce. A number of proposals
have been made at state and local levels that could impose such taxes on the
sale of products and services through the Internet or the income derived from
such sales. Such proposals, if adopted, could substantially impair the growth of
e-commerce and adversely affect our opportunity to become profitable.

Legislation limiting the ability of the states to impose taxes on
Internet-based transactions recently has been enacted by the United States
Congress. However, this legislation, known as the Internet Tax Freedom Act,
imposes only a three-year moratorium, which commenced October 1, 1998 and ends
on October 21, 2001, on state and local taxes on (1) electronic commerce where
such taxes are discriminatory and (2) Internet access unless such taxes were
generally imposed and actually enforced prior to October 1, 1998. It is possible
that the tax moratorium could fail to be renewed prior to October 21, 2001.
Failure to renew this legislation would allow various states to impose taxes on
Internet-based commerce. The imposition of such taxes could adversely affect our
ability to become profitable.

PAYROLL TAXES RELATED TO OPTION EXERCISES

We currently have outstanding non-qualified stock options to purchase
26,495,062 shares issued to various employees, consultants and directors
pursuant to the 1997 Omnibus Plan and the 1999 Omnibus Plan. The options entitle
the holders to purchase common stock at a weighted average exercise price of
approximately $11.33 per share, subject to adjustment in accordance with the
1997 Omnibus Plan and the 1999 Omnibus Plan. Upon exercise of an option, we will
be required to make payments on behalf of the option holders for certain payroll
related taxes such as Social Security and Medicare. These payroll taxes will
appear as a general and administrative expense on our statement of operations
and will amount to approximately 1.5% to 2.0% of the difference between the
exercise price and the then fair market value of the common stock at the time of
exercise. However, upon exercise of outstanding options, we will be paid the
exercise price of the options that are exercised. We also will be entitled to an
income tax deduction equal to the sum of (1) the difference between the exercise
price of the option and the then fair market value of the common stock at the
time of exercise and (2) the total amount of payroll related tax payments. As
the calculation of this expense is directly dependent upon our stock price and
the exercise of options is in the sole discretion of the holder of the options,
the amount and timing of the expense and the timing of the corresponding income
tax deduction are not currently able to be determined and are not within our
control.

23
<PAGE>
CONCENTRATED CONTROL COULD ADVERSELY AFFECT STOCKHOLDERS

Upon consummation of this offering, Mr. Jay S. Walker, the Founder and Vice
Chairman of priceline.com, and Mr. Richard S. Braddock, Chief Executive Officer
of priceline.com, together with their respective affiliates (including, with
respect to Mr. Walker, Walker Digital) beneficially own approximately 42.5 and
11.9 percent, of our outstanding common stock, subject to certain adjustments.
As a result, if Messrs. Walker and Braddock act together, they will have the
ability to control the outcome on all matters requiring stockholder approval,
including the election and removal of directors and any merger, consolidation or
sale of all or substantially all of our assets, and the ability to control our
management and affairs. Such control could discourage others from initiating
potential merger, takeover or other change of control transactions. As a result,
the market price of our common stock could be adversely affected.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS

Based on our current operating plan, we anticipate that the net proceeds of
our recent initial public offering, this offering and our concurrent offering of
convertible subordinated debt, together with our available funds, will be
sufficient to satisfy our anticipated needs for working capital, capital
expenditures and business expansion for at least the next three years. After
that time, we may need additional capital. Alternatively, we may need to raise
additional funds sooner in order to fund more rapid expansion, to develop new or
enhanced services, or to respond to competitive pressures. If we raise
additional funds by issuing equity or convertible subordinated debt securities,
the percentage ownership of our stockholders will be diluted. Furthermore, any
new securities could have rights, preferences and privileges senior to those of
the common stock.

We currently do not have any commitments for additional financing. We cannot
be certain that additional financing will be available when and to the extent
required or that, if available, it will be on acceptable terms. If adequate
funds are not available on acceptable terms, we may not be able to fund our
expansion, develop or enhance our products or services or respond to competitive
pressures.

ANTI-TAKEOVER PROVISIONS AFFECTING US COULD PREVENT OR DELAY A CHANGE OF CONTROL

Provisions of our certificate of incorporation and by-laws and provisions of
applicable Delaware law may discourage, delay or prevent a merger or other
change of control that a stockholder may consider favorable. Our board of
directors has the authority to issue up to 150,000,000 shares of preferred stock
par value $0.01 per share, of priceline.com and to determine the price and the
terms, including preferences and voting rights, of those shares without
stockholder approval. Although we have no current plans to issue additional
shares of our preferred stock, any such issuance could:

- have the effect of delaying, deferring or preventing a change in control
of our company;

- discourage bids for our common stock at a premium over the market price;
or

- adversely affect the market price of, and the voting and other rights of
the holders of, our common stock.

We are subject to certain Delaware laws that could have the effect of
delaying, deterring or preventing a change in control of our company. One of
these laws prohibits us from engaging in a business combination with any
interested stockholder for a period of three years from the date the person
became an interested stockholder, unless certain conditions are met. In
addition, certain provisions of our certificate of incorporation and by-laws,
and the significant amount of common stock held by our executive officers,
directors and affiliates, could together have the effect of discouraging
potential takeover attempts or making it more difficult for stockholders to
change management.

24
<PAGE>
OUR MANAGEMENT HAS BROAD DISCRETION OVER USE OF THE PROCEEDS FROM THIS OFFERING

The net proceeds of our sale of 2,000,000 shares of common stock in this
offering are estimated to be approximately $153.5 million and the net proceeds
of our sale of % convertible subordinated notes in the concurrent note
offering are estimated to be approximately $241.9 million, in each case, after
deducting underwriting discounts and commissions and estimated offering
expenses. Our management will retain broad discretion as to the allocation of
the proceeds of this offering and the concurrent note offering.

YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of common stock in this offering will suffer immediate and
substantial dilution. The dilution will be $78.32 per share in the net tangible
book value of the common stock from the assumed public offering price of $80.50
per share. As of July 29, 1999, there are (1) 26,495,062 shares of common stock
issuable upon exercise of options outstanding, with a weighted average exercise
price of approximately $11.33 per share, of which, 7,990,474 shares are not
vested; (2) 17,096,073 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of approximately $0.93 per share; (3)
937,500 shares of common stock issuable upon exercise of outstanding warrants at
an exercise price of $3.20 per share; (4) 1,250,000 shares of common stock
issuable upon exercise of warrants at an exercise price of $6.40 per share; and
(5) 1,000,000 shares of common stock issuable upon exercise of warrants at an
exercise price of $97.41 per share. However, none of the options issued or to be
issued pursuant to the 1997 Omnibus Plan or the 1999 Omnibus Plan may be
exercised until September 26, 1999. If such outstanding options and warrants to
purchase shares of common stock are exercised, there would be further dilution.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any
future results, levels of activity, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, those listed under "Risk Factors" and elsewhere in this prospectus.

In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms or other comparable terminology.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of such
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus.

25
<PAGE>
USE OF PROCEEDS

Priceline.com will not receive any proceeds from the sale of shares of
common stock by the selling stockholders in this offering. The net proceeds to
priceline.com from the sale of the 2,000,000 shares of common stock offered by
it are estimated to be approximately $153.5 million, after deducting estimated
offering expenses of $1.5 million and the underwriting discounts and commissions
payable by priceline.com. The net proceeds to priceline.com from the sale of its
% convertible subordinated notes in the concurrent note offering are estimated
to be approximately $241.9 million, after deducting estimated offering expenses
of $0.6 million and the underwriting discounts and commissions payable by
priceline.com. Priceline.com intends to use the net proceeds, over time, for
general corporate purposes, including working capital, funding of anticipated
operating losses, expenses associated with our advertising campaigns, brand-name
promotions and other marketing efforts, funding of product and service expansion
and capital expenditures. Priceline.com also could use a portion of the net
proceeds, currently intended for general corporate purposes, to invest in joint
ventures or other collaborative arrangements, or to invest in or acquire
businesses, technologies, products or services. In particular, a portion of the
proceeds may be used to make investments in and/or loans to two new business
entities with which priceline.com is exploring the possibility of licensing its
brand name and "name your price" business model.

As of the date of this prospectus, priceline.com cannot specify with
certainty the particular uses for the net proceeds to be received upon the
consummation of this offering. Accordingly, priceline.com's management will have
broad discretion in the application of the net proceeds. Pending such uses,
priceline.com intends to invest the net proceeds from this offering in
short-term, interest-bearing, investment-grade securities. See "Risk Factors--We
May Be Unable to Meet Our Future Capital Requirements" and "Risk Factors--Our
Management Has Broad Discretion Over Use of the Proceeds of this Offering."

PRICE RANGE OF COMMON STOCK

Priceline.com common stock has been quoted on the Nasdaq National Market
under the symbol "PCLN" since priceline.com's initial public offering on March
29, 1999. Prior to such time, there was no public market for the common stock of
priceline.com. The following table sets forth, for the periods indicated, the
high and low closing sales prices per share of the common stock as reported on
the Nasdaq National Market:

<TABLE>
<CAPTION>
1999 HIGH LOW
- ----------------------------------------------------------------------- ---------- -----------
<S> <C> <C> <C> <C>
First Quarter (from March 29, 1999).................................... $ 87 7/8 $ 69
Second Quarter......................................................... 162 3/8 59 7/8
Third Quarter (through July 29, 1999).................................. 112 73 21/32
</TABLE>

On July 29, 1999, the last reported sale price for priceline.com common
stock on the Nasdaq National Market was $80.50 per share.

DIVIDEND POLICY

Priceline.com has not declared or paid any cash dividends on its capital
stock since its inception and does not expect to pay any cash dividends for the
foreseeable future. Priceline.com currently intends to retain future earnings,
if any, to finance the expansion of its business.

26
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of priceline.com as of
June 30, 1999: (1) on an actual basis; and (2) as adjusted to reflect the
receipt by priceline.com of the estimated net proceeds of (x) $153.5 million
from the sale of the 2,000,000 shares of common stock offered by priceline.com
in this offering (after deducting the estimated offering expenses and
underwriting discounts and commissions), based upon an assumed public offering
price of $80.50 per share; (y) $1.4 million from the exercise of warrants to
purchase 1,523,329 shares of common stock by Delta Airlines at an exercise price
of $0.93 per share; and (z) $241.9 million from the sale of $250.0 million
aggregate principal amount of % convertible subordinated notes in the
concurrent note offering (after deducting the estimated offering expenses and
underwriting discounts and commissions). This table does not give effect to the
exercise of options pursuant to the option exercise program. This table should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and related
notes thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------------- ---------------
Capital lease obligations--net of current portion.............................. $ 12,248 $ 12,248
% Convertible Subordinated Notes due 2006................................... -- 250,000,000
--------------- ---------------
Total debt................................................................... 12,248 250,012,248

Stockholders' equity:(a)
Common stock, $0.008 par value--authorized, 1,000,000,000 shares; issued and
outstanding, 142,320,427 and 145,843,756 shares, actual and as adjusted,
respectively................................................................. 1,138,564 1,166,750
Additional paid-in capital..................................................... 326,880,953 481,777,629
Accumulated deficit............................................................ (156,710,306) (156,710,306)
--------------- ---------------
Total stockholders' equity................................................... 171,309,211 326,234,073
--------------- ---------------
Total capitalization....................................................... $ 171,321,459 $ 576,246,321
--------------- ---------------
--------------- ---------------
</TABLE>

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

(a) Excludes (1) 27,422,057 shares of common stock issuable upon exercise of
options outstanding as of June 30, 1999, with a weighted average exercise
price of approximately $10.82 per share; (2) 5,827,943 additional shares of
common stock reserved for issuance under the 1997 Omnibus Plan and the 1999
Omnibus Plan; (3) 17,096,073 shares of common stock issuable upon exercise
of outstanding warrants at an exercise price of approximately $0.93 per
share; (4) 937,500 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $3.20 per share; (5) 1,250,000
shares of common stock issuable upon exercise of outstanding warrants at an
exercise price of $6.40 per share; (6) 1,000,000 shares of common stock
issuable upon exercise of outstanding warrants at an exercise price of
$97.41 per share; and (7) the shares issuable on conversion of the %
convertible subordinated notes due 2006 sold in the concurrent note
offering.

27
<PAGE>
DILUTION

The net tangible book value of priceline.com as of June 30, 1999 was $171.3
million, or $1.20 per share. Net tangible book value per share is determined by
dividing the number of outstanding shares of common stock into the net tangible
book value of priceline.com (total tangible assets less total liabilities).
Assuming the sale by priceline.com of the 2,000,000 shares of common stock
offered hereby (after deducting the underwriting discounts and commissions and
estimated offering expenses), the adjusted net tangible book value of
priceline.com as of June 30, 1999 would have been approximately $318.1 million,
or $2.18 per share. This represents an immediate increase in net tangible book
value of $0.98 per share to existing stockholders and an immediate dilution of
$78.32 per share to new investors purchasing shares in this offering. The
following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share................................. $ 80.50
Net tangible book value per share as of June 30, 1999............... $ 1.20
Increase in net tangible book value per share attributable to new
investors......................................................... 0.98
---------
Adjusted net tangible book value per share after the offering........... 2.18
---------
Dilution per share to new investors..................................... $ 78.32
---------
---------
</TABLE>

The foregoing discussion and table exclude (1) 27,422,057 shares of common
stock issuable upon exercise of options outstanding as of June 30, 1999, with a
weighted average exercise price of approximately $10.82 per share; (2) 5,827,943
additional shares of common stock reserved for issuance under the 1997 Omnibus
Plan and the 1999 Omnibus Plan; (3) 17,096,073 shares of common stock issuable
upon exercise of outstanding warrants at an exercise price of approximately
$0.93 per share; (4) 937,500 shares of common stock issuable upon exercise of
outstanding warrants at an exercise price of $3.20 per share; (5) 1,250,000
shares of common stock issuable upon exercise of outstanding warrants at an
exercise price of $6.40 per share; (6) 1,000,000 shares of common stock issuable
upon exercise of outstanding warrants at an exercise price of $97.41 per share;
and (7) the shares of common stock issuable on conversion of the %
convertible subordinated notes due 2006 sold in the concurrent note offering.

28
<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
financial statements and related notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
JULY 18, 1997 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------- --------------
<S> <C> <C> <C>
RESTATED(A)
STATEMENT OF OPERATIONS DATA:(B)
Revenues.............................................. $ -- $ 35,236,860 $ 160,974,391
Cost of revenues:
Product costs....................................... -- 33,495,745 144,323,527
Supplier warrant costs(c)........................... -- 3,029,014 761,518
----------------- ----------------- --------------
Total cost of revenues................................ -- 36,524,759 145,085,045
----------------- ----------------- --------------
Gross profit (loss)................................. -- (1,287,899) 15,889,346
Expenses:
Supplier start-up warrant costs(c).................. -- 57,978,678 --
Sales and marketing................................. 441,479 24,388,061 34,871,086
General and administrative.......................... 1,011,600 18,004,585(d) 9,169,869
Systems and business development.................... 1,060,091 11,131,650 5,652,423
----------------- ----------------- --------------
Total expenses........................................ 2,513,170 111,502,974 49,693,378
----------------- ----------------- --------------
Operating loss........................................ (2,513,170) (112,790,873) (33,804,032)
Interest income (expense), net........................ (312) 548,374 2,387,104
----------------- ----------------- --------------
Net loss.............................................. (2,513,482) (112,242,499) (31,416,928)
Accretion on preferred stock(e)....................... -- (2,183,424) (8,353,973)
----------------- ----------------- --------------
Net loss applicable to common stockholders............ $ (2,513,482) $ (114,425,923) $ (39,770,901)
----------------- ----------------- --------------
----------------- ----------------- --------------
Per share basic and diluted net loss applicable to
common stockholders................................. $ (0.05) $ (1.41) $ (0.29)
----------------- ----------------- --------------
----------------- ----------------- --------------
Weighted average common shares outstanding............ 50,833,756 81,231,425 137,436,399
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(F)
-------------- -------------------
BALANCE SHEET DATA: (B)
Cash and cash equivalents................................................... $ 142,803,134 $539,602,330
Working capital............................................................. 150,043,651 546,842,847
Total assets................................................................ 204,794,892 609,719,754
Long-term debt and capital lease obligation................................. 12,248 250,012,248
Total liabilities........................................................... 33,485,681 283,485,681
Total stockholders' equity.................................................. 171,309,211 326,234,073
</TABLE>

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

(a) As restated, see Note 13 to the 1998 combined financial statements.

(b) Presented on a combined basis with Priceline Travel, Inc. as of and for the
periods ended December 31, 1997 and December 31, 1998. Priceline Travel,
which previously owned priceline.com's travel agency license, was merged
into priceline.com on March 24, 1999.

(d) Includes a non-cash charge of $6,500,000 with respect to 8,125,000 shares of
common stock issued as executive compensation.

(e) Represents amortization of the beneficial conversion feature on the Series B
preferred stock that ceased upon conversion of the Series B preferred stock
into common stock on March 29, 1999.

(f) As adjusted to reflect the receipt by priceline.com of the estimated net
proceeds of (x) $153,508,166 from the sale of the 2,000,000 shares of common
stock offered by priceline.com in this offering (after deducting the
estimated offering expenses and underwriting discounts and commissions),
based upon an assumed public offering price of $80.50 per share; (y)
$1,416,696 from the exercise of warrants to purchase 1,523,329 shares of
common stock by Delta Airlines at an exercise price of $0.93 per share; and
(z) $241,874,334 from the sale of $250.0 million aggregate principal amount
of % convertible subordinated notes in the concurrent note offering
(after deducting the estimated offering expenses and underwriting discounts
and commissions).

29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE
INDICATED IN SUCH FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS." THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF PRICELINE.COM ALSO SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN
THIS PROSPECTUS.

OVERVIEW

Priceline.com has pioneered a unique e-commerce pricing system known as a
"demand collection system" that enables consumers to use the Internet to save
money on a wide range of products and services while enabling sellers to
generate incremental revenue. Using a simple and compelling consumer
proposition--"name your price"--priceline.com collects consumer demand, in the
form of individual customer offers guaranteed by a credit card, for a particular
product or service at a price set by the customer. Priceline.com then either
communicates that demand directly to participating sellers or accesses
participating sellers' private databases to determine whether it can fulfill the
customer's offer on the basis of the pricing information and rules established
by the sellers. Consumers agree to hold their offers open for a specified period
of time and, once fulfilled, offers cannot be canceled. Priceline.com benefits
consumers by enabling them to save money, while at the same time benefitting
sellers by providing them with an effective revenue management tool capable of
identifying and capturing incremental revenues. By requiring consumers to be
flexible with respect to brands, sellers and product features, priceline.com
enables sellers to generate incremental revenue without disrupting their
existing distribution channels or retail pricing structures.

Priceline.com was formed in July 1997 and its primary activities during the
period prior to launch consisted of recruiting and training employees,
developing its business model, implementing systems to support its business
model, developing relationships with seller participants and developing the
priceline.com brand. Priceline.com commenced operations in April 1998 with the
sale of leisure airline tickets. Since that time, priceline.com's business has
grown significantly and the priceline.com service now includes the following
products and services:

- leisure airline tickets, provided by six domestic and 16 international
airline participants;

- new automobiles, which was launched on a test basis in the New York
metropolitan area in July 1998;

- home financing services, which was launched in January 1999 with home
mortgage services and now also includes home equity loans and refinancing
services.

The number of full-time employees of priceline.com increased from 10 to 261
during the period from inception to June 30, 1999, and as of July 29, 1999
priceline.com had 263 full-time employees.

30
<PAGE>
customer's named price, net of taxes, and records as the cost of revenue the
fare or rate charged by the seller. With respect to its automobile service, it
earns a fixed fee from both the customer and the seller after the transaction is
consummated. With respect to its home financing service, it receives marketing
fees equal to a percentage of the net revenue generated by the service, which is
operated in conjunction with LendingTree, Inc. Priceline.com also generates
revenues through adaptive marketing programs with third parties that pay
priceline.com fees for marketing their customer acquisition programs.
Additionally, priceline.com generates revenues from third party sources,
including airline ticket processing fees from consumers and ancillary
reservation booking fees from the Worldspan reservation system for
priceline.com's booking of airline flight segments and hotel reservations
through the Worldspan system. Consumer fees are payable and recognized only upon
completion of successful transactions.

All offers made through the priceline.com service are guaranteed by a
customer credit card and credit cards are the only form of payment accepted by
priceline.com. The manner in which and time at which revenues are recognized
differs depending on the product or service sold through the priceline.com
service. With respect to airline ticket and hotel room reservation services,
revenues are generated by transactions with customers who make offers to
purchase airline tickets and reserve hotel rooms supplied by participating
sellers. Revenues and related costs are recognized if, and when, priceline.com
accepts the customer's offer and charges the customer's credit card. Because
priceline.com is the merchant of record in these transactions, revenue for these
services includes the offer price paid by the customer, net of certain taxes and
fees. Airline and hotel revenues also may include fees from third parties for
adaptive marketing programs. With respect to automobile services, fees or other
payments payable by the seller and/or the customer are recognized as revenue.
With respect to home financing services, priceline.com receives no fees from
consumers. Priceline.com recognizes revenue from marketing fees paid directly by
LendingTree through the operation of its home financing services. Because
priceline.com acts as an intermediary between the customer and the seller in
auto and home financing transactions, revenues for these products and services
is recorded at the amount of the fee received, and not on the value of the
underlying transaction, when the transaction is completed. Automobile and home
financing services revenues also may include fees from third parties for
adaptive marketing programs.

When making offers through the priceline.com service, consumers are
permitted to make only one offer within a seven day period unless they change
some feature of their itinerary, such as the date on which or the airport from
which they are willing to fly. In April 1999, priceline.com introduced a new
"checkstatus" feature on its Web site that invites consumers whose initial
requests are not satisfied to change a feature of their itinerary and resubmit
revised offers without having to start the offer submission process over again.
Commencing with the second quarter of 1999, priceline.com treats each initial
offer and any resubmitted offer made in response to the checkstatus invitation
as a single offer for purposes of measuring its offer fulfillment rates.

During the period from launch through June 30, 1999, priceline.com collected
guaranteed offers for approximately 5.1 million airline tickets, representing
approximately $1.1 billion in total consumer demand. This demand resulted in
sales of approximately 762,000 airline tickets, representing approximately
$165.2 million in revenue.

Because the priceline.com system does not set minimum offer thresholds, and
consumers are not charged to make offers for airline tickets and other products,
it is expected that priceline.com will receive a significant number of
unreasonable or fantasy offers. Accordingly, priceline.com also analyzes the
percentage of "reasonable" ticket requests that it is able to fill.
Priceline.com considers an offer for an airline ticket to be "reasonable" when
it is no more than 30% lower than the lowest generally available advance-
purchase fare for the same route. Using this standard, the overall percentage of
ticket requests considered reasonable for the six-month period ended June 30,
1999 was approximately 55.3%. The 626,860 tickets sold through priceline.com
during the six-month period represented approximately 34.7% of the combined
reasonable ticket requests for domestic and international flights. For domestic
routes where priceline.com's airline participants have strong coverage, that
percentage was higher, with approximately 40.0%

31
<PAGE>
of all reasonable requests fulfilled for the same six-month period. The
percentage of reasonable offers that priceline.com is able to fill can also vary
depending on the particular route. The following table sets forth, for the
periods presented, data regarding the total percentage of "reasonable" ticket
requests fulfilled by priceline.com:

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999 (1)
--------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Total ticket requests.................................. 492,240 639,089 737,630 1,396,381 1,868,728
"Reasonable" ticket requests........................... 275,186 374,984 425,135 763,600 1,043,227
Tickets sold........................................... 30,678 36,027 68,743 186,521 440,339
"Reasonable" fill rate................................. 11.1% 9.6% 16.2% 24.4% 42.2%
</TABLE>

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

(1) For this period, due to the introduction of the new "checkstatus" feature,
initial offers and any resubmitted offers made in response to this feature
were treated as a single offer; comparisons with other periods may not be
meaningful as resubmitted offers were considered separate offers in prior
periods.

Since its inception, priceline.com has incurred net losses in each fiscal
quarter. Priceline.com incurred net losses of $88.1 million during the period
from July 18, 1997 (inception) through June 30, 1999, before giving effect to
$68.6 million of non-cash charges arising from equity issuances to a number of
our participating airlines, its chief executive officer and other parties, as
more fully described below. As of June 30, 1999, priceline.com had an
accumulated deficit of $156.7 million. Priceline.com believes that its continued
growth will depend in large part on its ability to continue to promote the
priceline.com brand and to apply the priceline.com business model to a wide
range of products and services. Accordingly, priceline.com intends to continue
to invest heavily in marketing and promotion, technology and personnel. As a
result, it expects to incur additional losses for at least the next two years.
See "Risk Factors--We Are Not Profitable and Expect to Continue to Incur
Losses." In addition, priceline.com's limited operating history makes the
prediction of future results of operations difficult, and accordingly, there can
be no assurance that it will achieve or sustain revenue growth or profitability.
See "Risk Factors--Potential Fluctuations in Our Financial Results Makes
Financial Forecasting Difficult."

Priceline.com currently has outstanding non-qualified stock options to
purchase 26,495,062 shares issued to various employees, consultants and
directors pursuant to the 1997 Omnibus Plan and the 1999 Omnibus Plan. The
options entitle the holders to purchase common stock at a weighted average
exercise price of approximately $11.33 per share, subject to adjustment in
accordance with the 1997 Omnibus Plan and the 1999 Omnibus Plan. Upon exercise
of an option, priceline.com will be required to make payments on behalf of the
option holders for certain payroll related taxes such as Social Security and
Medicare. These payroll taxes will appear as a general and administrative
expense on priceline.com's statement of operations and will amount to
approximately 1.5% to 2.0% of the difference between the exercise price and the
then fair market value of the common stock at the time of exercise. However,
upon exercise of outstanding options, priceline.com will be paid the exercise
price of the options that are exercised. Priceline.com also will be entitled to
an income tax deduction equal to the sum of (1) the difference between the
exercise price of the option and the then fair market value of the common stock
at the time of exercise and (2) the total amount of payroll related tax
payments. As the calculation of this expense is directly dependent upon
priceline.com's stock price and the exercise of options is in the sole
discretion of the holder of the options, the amount and timing of the expense
and the timing of the corresponding income tax deduction are not currently able
to be determined and are not within priceline.com's control. Priceline.com
estimates that, in connection with the exercise of outstanding options pursuant
to the option exercise program, in the third quarter of 1999 it will (x) record
expenses of approximately $1.3 million in respect of such payroll related taxes;
(y) increase additional paid-in capital by approximately $944,000 in

32
<PAGE>

respect of the exercise price of such options; and (z) increase common stock by
approximately $7,700 in respect of the par value of the shares purchased upon
exercise of such options.

For the year ended December 31, 1998, priceline.com recorded aggregate
non-cash charges of $67.9 million. Of this amount, $6.5 million related to the
issuance of 8,125,000 shares of common stock to Mr. Richard S. Braddock, the
Chairman and Chief Executive Officer of priceline.com, and $61.1 million related
to the issuance of warrants to purchase 19,744,402 shares of common stock,
including warrants to purchase 19,556,902 shares of common stock issued to a
number of our participating airlines.

In August 1998, priceline.com entered into a warrant agreement with Delta to
purchase up to 18,892,603 shares of common stock at an exercise price of
approximately $0.93 per share. Vesting was contingent upon achievement of
certain predetermined performance thresholds. However, there was no penalty for
failure to provide ticket inventory to satisfy these performance thresholds.
Accordingly, no expense was recorded when the warrant was issued. On December
31, 1998, priceline.com amended its agreement with Delta to eliminate the
vesting contingencies and fix the number of shares subject to the warrant at
18,619,402. The amended warrant issued to Delta will become exercisable at the
earlier of seven years or upon the achievement of certain performance
thresholds. However, the agreement does not require Delta to make any
performance commitments, is non-exclusive and allows Delta to participate in
other programs similar to the priceline.com service. Included in the non-cash
charges described above is approximately $58.7 million reflecting the fair value
of the Delta warrant on December 31, 1998.

During July 1999, priceline.com issued to Continental Airlines a warrant to
purchase common stock that will become exercisable upon the earlier of July 2004
or upon the achievement of certain performance thresholds. However, the
agreement does not require Continental to make any performance commitments.
Accordingly, priceline.com will incur a non-cash charge of approximately $90.0
million during the quarter ending September 30, 1999 representing the fair value
of the warrant on the grant date.

Priceline.com's travel agency license was previously held by Priceline
Travel, a separate company that was owned by Mr. Jay S. Walker, priceline.com's
Founder and Vice Chairman, and all of its airline ticket sales were effected
through Priceline Travel, which was merged with and into priceline.com as of
March 24, 1999. Accordingly, the financial statements of Priceline Travel as of
December 31, 1997 and December 31, 1998 (restated) and for the period July 18,
1997 (Inception) to December 31, 1997 and for the year ended December 31, 1998
(restated) are presented on a combined basis with priceline.com.

RESULTS OF OPERATIONS

Priceline.com was formed in July 1997, but did not commence operations until
April 1998. Accordingly, comparisons with prior periods are not meaningful.

SIX MONTHS ENDED JUNE 30, 1999

REVENUES

Total revenues for the six months ended June 30, 1999 were $161.0 million.
Revenues for the period were comprised primarily of (1) transaction revenues
representing the selling price of airline tickets and hotel room reservations;
(2) fee income from adaptive marketing programs offered in connection with
priceline.com's product offerings; (3) ancillary revenues consisting of
Worldspan reservation booking fees and airline ticket processing fees; and (4)
fee income from priceline.com's home financing and auto programs.

On April 23, 1999, the adaptive marketing program with Capital One ended and
priceline.com commenced its credit card adaptive marketing program with First
USA. The fee structure of the First USA program is based on different factors
and may or may not result in revenues comparable to those under the Capital One
program. For example, under the Capital One program priceline.com's fees were
based upon the submission of qualifying credit card applications, while the
First USA program ties a portion of

33
<PAGE>

priceline.com's fees to account activation and usage. Because, to date, there is
no meaningful activation and usage experience upon which to draw, priceline.com
cannot predict the degree to which revenues ultimately will be recognized under
the First USA program. In addition, priceline.com expects that future
contributions to adaptive marketing revenues from credit card adaptive marketing
programs may decline on a percentage basis, as agreements with new adaptive
marketing suppliers are reached and become operative. At the same time,
increased transaction activity, particularly associated with airline ticket
sales and related processing fees, is likely to provide an increasing portion of
revenues. All of these factors are likely to diminish the proportion of
priceline.com's revenues provided by its credit card adaptive marketing
programs.

During the six months ended June 30, 1999, priceline.com also earned revenue
from its Customer Affinity Share Purchase Program, the first phase of its
adaptive marketing program with E*TRADE. Revenues from this program related
specifically to the referral of priceline.com customers to E*TRADE in connection
with priceline.com's initial public offering and, therefore, are not recurring.
Priceline.com also commenced the second phase of its adaptive marketing program
with E*TRADE under which E*TRADE compensates priceline.com for offering
priceline.com customers the opportunity to open an account with E*TRADE while
visiting or making an offer on the priceline.com Web site. Priceline.com intends
to continue to add adaptive marketing programs so that consumers have a variety
of programs from which to choose and priceline.com has a diversified source of
adaptive marketing revenues. See "Risk Factors--We are Dependent on Adaptive
Marketing Programs."

Priceline.com's ancillary revenues for the six month period increased as a
result of volume driven increases in Worldspan reservation booking fees and a
recently introduced processing fee. Revenues from these sources are linked to
airline ticket sales and, accordingly, will increase or decrease in future
periods in relation to changes in the volume of airline ticket sales. Worldspan
reservation booking fees also are linked to hotel reservations booked through
the Worldspan system.

COST OF REVENUES AND GROSS PROFIT

Cost of revenues for the six months ended June 30, 1999 totaled $145.1
million, consisting of product costs of $144.3 million and supplier warrant
costs of $761,518. Product costs were comprised of the cost of airline tickets
from priceline.com's suppliers, net of the federal air transportation tax,
segment fees and passenger facility charges imposed in connection with the sale
of airline tickets. Product costs also included the cost of hotel rooms from
priceline.com's suppliers, net of hotel tax. Supplier warrant costs represent a
non-cash expense related to the issuance of common stock warrants to one of
priceline.com's airline program participants in January 1999. Priceline.com
anticipates that it will recognize additional supplier warrant costs in the
amount of approximately $381,000 in each of the next six fiscal quarters.

Gross profit, which is comprised of revenues less cost of revenues, was
$15.9 million for the six months ended June 30, 1999. Gross margin was 9.9% for
the period. Excluding the effect of non-cash supplier warrant costs,
priceline.com would have had gross profit of $16.7 million and gross margin of
10.3% for the six months ended June 30, 1999. Gross profit and gross margin are
affected by the price at which priceline.com causes offers to be fulfilled and
by the level of fees generated by adaptive marketing programs. Priceline.com is
able to manage the level of gross margins by controlling the price at which it
will cause offers to be fulfilled. During the first quarter of 1999,
priceline.com chose to sell a substantial number of tickets below its cost in
order to increase airline and adaptive marketing revenues, build a record of
successful transactions and enhance the priceline.com brand. As a result of the
growth of the priceline.com service, priceline.com reduced the percentage of
airline tickets that it chose to sell below cost during the second quarter,
thereby improving gross margins on airline ticket sales. Because the fees
generated by adaptive marketing revenue and ancillary revenues did not involve
separate costs, adaptive marketing revenues and ancillary revenues had a
disproportionately positive impact on total gross margins and made a very
substantial contribution to priceline.com's gross profit for the six months
ended June 30,

34
<PAGE>

1999. If our transaction activity continues to grow, priceline.com expects the
proportion of its gross profit and gross margin attributable to adaptive
marketing revenues to decline.

Gross margins for the six months ended June 30, 1999 also were affected by a
somewhat lower gross margin in the second quarter of 1999 compared to the first
quarter of 1999. See "Quarterly Results of Operations" below. Gross margins for
the second quarter of 1999 were affected by a change in revenue mix, resulting
from a greater percentage of revenues being attributable to transaction revenues
rather than fee based revenues. Fee-based revenues, such as adaptive marketing
revenues, ancillary revenues and revenues from financial services and
automobiles, have higher margins than transaction revenues, which are derived
from the spread between customer offers and the product costs.

OPERATING EXPENSES

SALES AND MARKETING. Sales and marketing expenses for the six months ended
June 30, 1999 totaled $34.9 million, or 21.7% of revenues. Approximately 65.0%
of sales and marketing expenses were comprised of advertising and promotion
expenses. The remaining expenses consisted primarily of (1) fees payable to a
third party service provider that operates priceline.com's call center; (2)
credit card processing fees; (3) provisions for customer credit card
charge-backs (based upon a percentage reflecting priceline.com's historical
experience); and (4) compensation for priceline.com's sales and marketing
personnel.

GENERAL AND ADMINISTRATIVE. General and administrative expenses for the six
months ended June 30, 1999 totaled $9.2 million, or 5.7% of revenues. General
and administrative expenses for the period were comprised primarily of
compensation for personnel, fees for outside professionals, telecommunications
and other overhead costs, including occupancy expense.

SYSTEMS AND BUSINESS DEVELOPMENT. Systems and business development expenses
for the six months ended June 30, 1999 totaled $5.7 million, or 3.5% of
revenues. Systems and business development expenses for the period were
comprised primarily of compensation to priceline.com's information technology
and product development staff and payments to outside contractors, data
communications and other expenses associated with operating priceline.com's Web
site and, to a lesser extent, depreciation on computer hardware and licensing
fees for computer software.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use." This SOP requires capitalization of
certain costs of computer software developed or obtained for internal use.
Priceline.com adopted this SOP on January 1, 1999 and, during the six-month
period ended June 30, 1999, priceline.com capitalized approximately $5.7 million
of computer software developed or obtained for internal use. Amortization of
such costs aggregated approximately $149,000 during the six month period ended
June 30, 1999.

INTEREST INCOME, NET

Interest income, net for the six months ended June 30, 1999 totaled $2.4
million, reflecting approximately $2.5 million of interest income earned by
priceline.com on its cash balances, net of interest expense for the period. Cash
balances increased during this period due to priceline.com's initial public
offering in April 1999.

SIX MONTHS ENDED JUNE 30, 1998

Priceline.com commenced its service on April 6, 1998 with the sale of
leisure airline tickets. Revenues from the sale of airline tickets during the
six month period ended June 30, 1998 were $7.0 million. Cost of revenues during
this period exceeded such revenues by approximately $900,000. Priceline.com
chose to sell a substantial number of leisure airline tickets below its cost
during this period in order to increase airline revenues, build a record of
successful transactions and enhance the priceline.com brand.

35
<PAGE>

In addition, priceline.com incurred operating expenses of $17.9 million,
consisting of sales and marketing expenses of $7.7 million, general and
administrative expenses of $4.8 million and systems and business development
expenses of $5.4 million. These activities resulted in an operating loss of
$18.9 million and, after consideration of interest income, a net loss of $18.7
million for the six-month period ended June 30, 1998.

YEAR ENDED DECEMBER 31, 1998

RESTATEMENT

Subsequent to the issuance of priceline.com's combined 1998 financial
statements, priceline.com's management determined that the calculation of the
fair value of the Delta warrant, other airline warrants and the beneficial
conversion feature on the Series B preferred stock should be revised. The fair
value of the Delta warrant and the other airline warrants has been revised to
reflect the change in the volatility assumption from 50% to 132%, eliminate the
"large block" and lack of marketability discounts, and consider the warrant's
anti-dilution and exercisability features. As a result, the 1998 combined
financial statements have been restated from the amounts previously reported to
recognize an additional $22.0 million of expense based upon the revised fair
value of the warrants at December 31, 1998, of which $3.0 million is included in
the cost of revenues-supplier warrant costs and $19.0 million is included in
expenses-supplier start-up warrant costs. In addition, the value of the
beneficial conversion feature on the Series B preferred stock has been revised
to calculate such amount based on 22,500,000 shares. As a result, additional
paid-in capital and accumulated deficit have been restated from amounts
previously reported to recognize an additional $883,424 of accretion of
preferred stock based on the revalued beneficial conversion feature.

A summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>
AS PREVIOUSLY
REPORTED AS RESTATED
-------------- ---------------
<S> <C> <C>
At December 31, 1998:
Additional paid-in capital................................................. $ 148,224,070 $ 171,155,186
Accumulated deficit........................................................ (94,008,289) (116,939,405)
For the year ended December 31, 1998:
Cost of revenues-supplier warrant costs.................................... -- 3,029,014
Expenses-supplier start-up warrant costs................................... 38,960,000 57,978,678
Net loss................................................................... (90,194,807) (112,242,499)
Accretion on preferred stock............................................... (1,300,000) (2,183,424)
Net loss applicable to common stockholders................................. (91,494,807) (114,425,923)
Per share basic and diluted loss applicable to common stockholders......... (1.13 (1) (1.41)
</TABLE>

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

(1) Per share basic and diluted loss applicable to common stockholders as
previously reported has been restated for a 1.25 for one stock split.

REVENUES

Total revenues for the year ended December 31, 1998 were $35.2 million.
Since commencement of operations in April 1998, essentially all revenues
consisted of airline ticket sales, hotel room reservations and related adaptive
marketing programs. Approximately $4.0 million of total revenues were
attributable to adaptive marketing programs, all of which were attributable to
priceline.com's third-party credit card marketing program with Capital One Bank.
See "--Cost of Revenues and Gross Profit (Loss)." Priceline.com's automobile
sales service, which was launched on a test basis in the New York metropolitan
area in July 1998, did not contribute materially to revenues during the period.

36
<PAGE>
COST OF REVENUES AND GROSS PROFIT (LOSS)

Cost of revenues for the year ended December 31, 1998 totaled $36.5 million,
consisting of product costs of $33.5 million and supplier warrant costs of $3.0
million. Product costs represent the cost of airline tickets from
priceline.com's suppliers, net of the federal air transportation tax, segment
fees and passenger facility charges imposed in connection with the sale of
airline tickets. Supplier warrant costs represent a non-cash expense related to
the pro-rata amount of the Delta warrant earned prior to December 31, 1998, the
date on which the Delta warrant was amended. Priceline.com anticipates that it
will recognize additional supplier warrant costs in the amount of $1.6 million
in each of 1999 and 2000 in connection with additional warrants issued to a
participating airline in January 1999.

Gross profit (loss), which is comprised of revenues less cost of revenues,
was $(1.3) million for the year ended December 31, 1998. Excluding the effect of
the non-cash supplier warrant costs, priceline.com would have had gross profit
of $1.7 million for the year ended December 31, 1998. Priceline.com is able to
manage the level of gross margins by controlling the price at which it will
cause offers to be fulfilled. Priceline.com has chosen to sell a substantial
number of tickets below its cost in order to increase airline and adaptive
marketing revenues, build a record of successful transactions, and enhance the
priceline.com brand. Because the fees generated by adaptive marketing programs
have historically involved no separate costs, adaptive marketing revenues have
had a disproportionately positive impact on priceline.com's total gross margin.
The Capital One adaptive marketing program accounted for all of priceline.com's
adaptive marketing revenues in 1998.

OPERATING EXPENSES

SUPPLIER START-UP WARRANT COSTS. Supplier start up warrant costs for the
year ended December 31, 1998 totaled $58.0 million, or 164.5% of revenues.
Supplier start up warrant costs consist of a non-cash charge representing the
fair value of warrants issued to certain participating airlines in the
priceline.com service in connection with securing priceline.com's relationship
with those airlines.

SALES AND MARKETING. Sales and marketing expenses for the year ended
December 31, 1998 totaled $24.4 million, or 69.2% of revenues. Approximately 50%
of sales and marketing expenses were comprised of radio and newspaper
advertising expenses. The balance was comprised of (1) fees payable to a third
party service provider, which operates priceline.com's call center, (2) credit
card processing fees, (3) provisions for customer credit card charge-backs
(based upon a percentage reflecting priceline.com's historical experience), and
(4) compensation for priceline.com's sales and marketing personnel.

SYSTEMS AND BUSINESS DEVELOPMENT. Systems and business development expenses
for the year ended December 31, 1998 totaled $11.1 million, or 31.6% of
revenues. Systems and business development expenses are comprised primarily of
compensation to priceline.com's information technology and product development
staff and payments to outside contractors, data communications and other
expenses associated with operating priceline.com's Web site and, to a lesser
extent, depreciation on computer hardware and licensing fees for computer
software.

GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
year ended December 31, 1998 totaled $18.0 million or 51.1% of revenues. General
and administrative expenses consist primarily of compensation for personnel,
fees for outside professionals, telecommunications and other overhead costs,
including occupancy expense. Also included is a one-time non-cash charge of $6.5
million relating to the issuance to Mr. Richard S. Braddock of a profits
interest with respect to 6.5 million units in priceline.com's predecessor,
priceline.com LLC. These units were granted to Mr. Braddock in connection with
his employment by priceline.com, and were subsequently converted into 8,125,000
shares of common stock.

37
<PAGE>
INTEREST INCOME (EXPENSE), NET

Interest income (expense), net for the year ended December 31, 1998 totaled
$548,374, reflecting approximately $633,000 of interest income earned by
priceline.com on its cash balances, net of interest expense for the period.

PERIOD ENDED DECEMBER 31, 1997

During the period from its formation in July 1997 through December 31, 1997,
priceline.com was engaged in start-up activities and incurred $2.5 million of
operating expenses. These operating expenses primarily consisted of investments
in technology and personnel related expenses. No revenues were earned during the
period. As of December 31, 1997, priceline.com had a cumulative net loss of $2.5
million.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth, for the periods presented, data regarding
priceline.com's revenues, cost of revenues and gross profit (loss). Such data
has been derived from priceline.com's unaudited financial statements which, in
the opinion of priceline.com's management, have been prepared on substantially
the same basis as the audited financial statements, subject to normal year end
adjustments. The operating results in any quarter are not necessarily indicative
of the results that may be expected for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999
------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues............................ $ 7,030,913 $ 9,212,820 $ 18,993,127 $ 49,410,542 $ 111,563,849
Cost of revenues:
Product costs..................... 7,951,584 8,842,313 16,701,848 43,659,184 100,664,343
Supplier warrant costs............ -0- -0- 3,029,014 380,759 380,759
------------ ------------- -------------- ------------- --------------
Total cost of revenues............ 7,951,584 8,842,313 19,730,862 44,039,943 101,045,102
------------ ------------- -------------- ------------- --------------
Gross profit (loss)................. (920,671) 370,507 (737,735) 5,370,599 10,518,747
Adjusted gross profit*............ (920,671) 370,507 2,291,279 5,751,358 10,899,506

Gross margin........................ (13.1)% 4.0% (3.9 )% 10.9% 9.4%
Adjusted gross margin*............ (13.1)% 4.0% 12.1% 11.6% 9.8%
</TABLE>

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

* Adjusted Gross Profit and Adjusted Gross Margin reflect the elimination of
non-cash charges associated with the supplier warrants.

Revenues increased in each quarter since the commencement of operations in
April 1998. The increase in each quarter is due primarily to an increase in
airline ticket sales resulting from expanded inventory, improved fill rates and
an expanded customer base due to increased market awareness and acceptance of
the priceline.com service. In addition to the foregoing, (1) the increase in
revenue in the fourth quarter of 1998 is due to the addition of a significant
new airline partner and the inclusion for a full quarter of priceline.com's
Capital One adaptive marketing program, as well as, to a lesser extent, the
introduction of priceline.com's hotel room reservation service in October 1998;
and (2) the increase in revenue in the first and second quarters of 1999 is due
to increased customer offers, an increased supply of airline seats from our
existing airline partners and, to a lesser extent, the national launch of our
hotel room reservation service in March 1999.

Cost of revenues, which consists of product costs and supplier warrant
costs, increased in each quarter of 1998 and the first and second quarters of
1999. Product costs, which are associated primarily with the amounts paid to
priceline.com's airline partners for airline tickets, net of federal air
transportation tax,

38
<PAGE>

segment fees and passenger facility charges imposed in connection with the sale
of airline tickets, also increased each quarter in conjunction with increases in
total revenue. Supplier warrant costs consist of a non-cash expense related to
the pro-rata amount of the Delta warrant earned prior to December 31, 1998, the
date on which the Delta warrant agreement was amended. Excluding the effect of
the non-cash supplier warrant costs, priceline.com's gross profit would have
increased every quarter from the quarter
ended June 30, 1998 to the quarter ended June 30, 1999. The decreases in
adjusted gross margins for the quarters ended March 31, 1999 and June 30, 1999
were primarily due to the more rapid growth of transaction-based revenues
compared to fee-based revenues during those periods. As a result of the
differences in growth rates, our revenue mix changed compared to prior periods
with a greater percentage of revenues being attributable to transaction revenues
rather than fee-based revenues. Fee-based revenues, such as adaptive marketing
revenues, ancillary revenues and revenues from financial services and
automobiles, have higher margins than transaction revenues, which are derived
from the spread between customer offers and the product costs.

Priceline.com's quarterly operating results will be affected by a variety of
factors, many of which are outside its control. Factors that may affect
priceline.com's quarterly operating results include:

- its ability to increase both consumers' and sellers' use of the
priceline.com service;

- its ability to attract new sellers of products and services to participate
in the priceline.com service;

- its ability to expand the products and services offered;

- its ability to increase gross margins on products and services sold while
still increasing sales;

- the fulfillment rate of customers' offers;

- the results of its adaptive marketing programs;

- the exercise of employee stock options that give rise to social security
and medicare payroll taxes;

- the announcement or introduction of new sites, services and products by
its competitors;

- the success of its brand building and marketing campaigns;

- price competition in the sale of products and services offered over the
priceline.com system;

- its ability to upgrade and develop its systems and infrastructure to
accommodate growth;

- its ability to attract new personnel in a timely and effective manner;

- the occurrence of technical difficulties or service interruptions;

- the amount and timing of operating costs and capital expenditures relating
to expansion of its business, operations and infrastructure;

- changes in governmental regulation by federal or local governments; and

- general economic conditions and economic conditions specific to the
Internet and online commerce industries, as well as the individual
industries, for the products and services sold through the priceline.com
system.

As a result of priceline.com's limited operating history and the emerging
nature of the market for online commerce, it is difficult for priceline.com to
forecast its revenues or earnings accurately. In addition, priceline.com has no
backlog, with virtually all of its revenues for a particular quarter being
derived from offers that are made and accepted during that quarter.
Priceline.com's current and future expense levels are based largely on its
investment plans and estimates of future revenues and are, to a large extent,
fixed. Priceline.com may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues relative to priceline.com's

39
<PAGE>
planned expenditures would have an immediate adverse effect on its business,
results of operations and financial condition.

Priceline.com's limited operating history and rapid growth makes it
difficult for it to assess the impact of seasonal factors on its business.
Nevertheless, priceline.com expects its business to be subject to seasonal
fluctuations, reflecting a combination of seasonality trends for the products
and services offered by the priceline.com service and seasonality patterns
affecting Internet use. For example, with regard to priceline.com's travel
products, demand for leisure travel may increase over summer vacations and
holiday periods, while Internet usage may decline during the summer months.
Priceline.com's results also may be affected by seasonal fluctuations in the
inventory made available to the priceline.com service by participating sellers.
Airlines, for example, typically enjoy high demand for tickets through
traditional distribution channels for travel during Thanksgiving and the
year-end holiday period. As a result, during those periods, airlines may have
less excess inventory to offer through priceline.com at discounted prices.
Priceline.com's business also may be subject to cyclical variations for the
products and services offered; for example, leisure travel and home mortgage
financing tends to decrease in economic downturns.

Due to the foregoing factors, priceline.com's quarterly revenues and
operating results are difficult to forecast. Priceline.com believes that
period-to-period comparisons of its operating results may not be meaningful and
should not be relied upon as an indication of future performance. In addition,
it is possible that in one or more future quarters priceline.com's operating
results will fall below the expectations of securities analysts and investors.
In such event, the trading price of the common stock would almost certainly be
materially adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, priceline.com has financed its operations primarily
through the sale of equity securities. Net proceeds from financing activities
since inception through June 30, 1999 totaled approximately $246.6 million.
Priceline.com's initial equity capital of approximately $27.0 million was
provided by Mr. Jay S. Walker, other high net worth individuals and a
partnership affiliated with General Atlantic Partners, LLC, a private equity
firm that invests worldwide in software and information technology companies. An
additional $20.0 million was invested by two partnerships affiliated with
General Atlantic in July 1998. On December 8, 1998, priceline.com received
approximately $54.4 million in proceeds from the sale of equity securities in a
private offering to a group of corporate and institutional investors and high
net worth individuals, including two partnerships affiliated with General
Atlantic; Vulcan Ventures, Incorporated; Liberty PL, Inc., a wholly owned
subsidiary of Liberty Media Corporation; Quantum Industrial Partners LDC, a fund
managed by Soros Fund Management, LLC and Allen & Company Incorporated. Allen &
Company Incorporated also has served as priceline.com's financial advisor. On
April 1, 1999, priceline.com completed its initial public offering in which it
sold 10,000,000 shares of its common stock at a price of $16.00 per share,
raising $160.0 million in gross proceeds. Offering proceeds to priceline.com,
net of approximately $11.2 million in aggregate underwriters discounts and
commissions and $4.4 million in related expenses, were approximately $144.4
million. As of June 30, 1999, priceline.com had approximately $142.8 million in
cash and cash equivalents.

In April 1998, priceline.com received proceeds from a loan of $1.0 million
for working capital from a high net worth individual who also was issued a
warrant to purchase 62,500 shares of common stock at an exercise price of $0.80
per share. This loan expires on April 15, 2003 and bears interest at a rate of
6.0%. The related warrant has been fully exercised, and as of the date of this
prospectus, the loan has been repaid.

In April 1999, priceline.com made a $3.3 million loan to Mr. Richard S.
Braddock for the payment of taxes related to the issuance to Mr. Braddock of
8,125,000 shares of common stock in August 1998. The loan bears interest at
5.28% per annum. Interest is payable annually and principal is payable in
January 2004.

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In July 1999, priceline.com made a $6.0 million loan to Mr. Daniel H.
Schulman, pursuant to the terms of his employment agreement dated June 14, 1999.
The loan bears interest annually at 5.82% per annum. Subject to prepayment
obligations and to forgiveness in the event of certain changes of control,
death, or termination without cause, pursuant to the terms of the loan, accrued
interest and principal are payable in July 2004.

Concurrent with this offering, priceline.com is making an offering of $250.0
million aggregate principal amount of % convertible subordinated notes due
2006, which will be convertible into shares of priceline.com common stock at a
conversion price of $ per share, subject to adjustment. Priceline.com expects
the proceeds from the concurrent note offering (after deducting the estimated
offering expenses and net of underwriting discounts and commissions), to be
approximately $241.9 million.

Net cash used in operating activities was $33.8 million for the six months
ended June 30, 1999. Net cash used in operating activities was primarily
attributable to net losses.

Net cash used in investing activities was $20.6 million for the six months
ended June 30, 1999. Net cash used in investing activities was primarily related
to purchases of property and equipment.

Net cash provided by financing activities was $143.6 million for the six
months ended June 30, 1999. Net cash provided by financing activities resulted
primarily from priceline.com's initial public offering of 10,000,000 shares of
its common stock, for which priceline.com received approximately $149.0 million
in cash, net of underwriting discounts and commissions on April 1, 1999.

Priceline.com had commitments for capital expenditures as of June 30, 1999
of approximately $1.2 million. Capital expenditures were $11.3 million for the
six months ended June 30, 1999, and priceline.com expects such expenditures to
be at least $22.0 million for the full year of 1999. As a result of its rapid
growth, priceline.com expects to increase capital expenditures for purchased
software, internally developed software, computer equipment and leasehold
improvements.

Priceline.com believes that, based upon its current operating plan, its
existing cash and cash equivalents, the net proceeds from its initial public
offering, the net proceeds from this offering and its concurrent note offering
and any cash generated from operations will be sufficient to fund its operating
activities, capital expenditures and other obligations through at least the next
three years. However, if during that period or thereafter priceline.com is not
successful in generating sufficient cash flow from operations or in raising
additional capital when required in sufficient amounts and on terms acceptable
to priceline.com, these failures could have a material adverse effect on
priceline.com's business, results of operations and financial condition. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of its then-current stockholders would be diluted.

MARKET-RELATED RISKS

Priceline.com currently has no floating rate indebtedness, holds no
derivative instruments and does not earn significant foreign-sourced income.
Accordingly, changes in interest rates or currency exchange rates do not
generally have a direct effect on priceline.com's financial position. However,
changes in currency exchange rates may affect the cost of international airline
tickets and international hotel room reservations offered through the
priceline.com service, and so indirectly affect consumer demand for such
products and priceline.com's revenue. In addition, to the extent that changes in
interest rates and currency exchange rates affect general economic conditions,
priceline.com would also be affected by such changes.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments and Hedging Activities" was released. The
statement requires the recognition of all derivatives as either assets or
liabilities in the balance sheet and the measurement of those instruments at
fair value. The accounting for changes in the fair value of a derivative depends
on the planned use of the

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derivative and the resulting designation. Priceline.com is required to implement
the statement in the first quarter of fiscal 2001. Priceline.com has not used
derivative instruments and believes the impact of adoption of this statement
will not have significant effect on its financial statements.

TAX MATTERS

NET OPERATING LOSS CARRYFORWARDS

Through July 31, 1998, priceline.com operated as a limited liability
company, and income taxes (benefits) accrued to its members. During the year
ended December 31, 1998, priceline.com had a net loss, and since converting from
a limited liability company to a corporation in July 1998, it has incurred a tax
net operating loss of $54.2 million. Utilization of priceline.com's net
operating loss carryforwards, which begin to expire in 2018, may be subject to
certain limitations under Section 382 of the Internal Revenue Code of 1986, as
amended. Priceline.com has provided a full valuation allowance on the deferred
tax asset, consisting primarily of net operating loss carryforwards, because of
uncertainty regarding its realization. Priceline.com's accounting for deferred
taxes under Statement of Financial Accounting Standards No. 109 involves the
evaluation of a number of factors concerning the realizability of its deferred
tax assets. In concluding that a full valuation allowance was required,
management primarily considered such factors as priceline.com's history of
losses from operations and expected future losses. See Notes 2 and 8 of Notes to
Combined Financial Statements included elsewhere in this prospectus.

FEDERAL AIR TRANSPORTATION TAX ON AIRLINE TICKET SALES

A federal air transportation tax is imposed upon the sale of airline tickets
and generally is collected by the airlines selling the tickets. The tax is based
upon a percentage of the cost of transportation, which was 9% for periods prior
to October 1, 1998 and 8% thereafter. Because of the unique pricing structures
employed in the priceline.com service, such as the amount paid by the customer
for a ticket being different than the amount charged by the airline for the same
ticket with the excess payment, if any, going to priceline.com as a charge for
the use of its proprietary business method, it is not clear how this federal tax
should be calculated when sales occur using the priceline.com service.
Priceline.com has been calculating this tax based on the fare paid to the
airline for a ticket, rather than the price paid by the customer. There is a
possibility that current law requires computation of the tax based on the price
paid by the customer to priceline.com. Due to the uncertainty of how the federal
air transportation tax applies to sales of airline tickets using the
priceline.com service, priceline.com has submitted a written request to the
United States Internal Revenue Service seeking a determination of
priceline.com's federal air transportation tax obligations. Such determination
may not be favorable and may require priceline.com to collect federal air
transportation tax on the total amount paid by consumers for air travel.

If the determination of the Internal Revenue Service is unfavorable,
priceline.com could owe $766,339 in additional taxes as of June 30, 1999.
Priceline.com has accrued for such potential liability in its condensed balance
sheet as of June 30, 1999 and is providing for such potential liability on an
ongoing basis. Priceline.com has agreed to indemnify and hold harmless certain
of its participating airlines from any liability with respect to such taxes as
well as to secure the payment of such taxes by a letter of credit.

NON-QUALIFIED STOCK OPTIONS

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will amount to approximately 1.5% to 2.0% of the difference between the exercise
price and the then fair market value of the common stock at the time of
exercise. However, upon exercise of outstanding options, priceline.com will be
paid the exercise price of the options that are exercised. Priceline.com also
will be entitled to an income tax deduction equal to the sum of (1) the
difference between the exercise price of the option and the then fair market
value of the common stock at the time of exercise and (2) the total amount of
payroll related tax payments. As the calculation of the expense is directly
dependent upon priceline.com's stock price and the exercise of options is within
the sole discretion of the holder of the options, the amount and timing of the
expense and the timing of the corresponding income tax deduction are not
currently able to be determined and are not within the control of priceline.com.
Priceline.com estimates that, in connection with the exercise of outstanding
options pursuant to the option exercise program, in the third quarter of 1999 it
will (x) record expenses of approximately $1.3 million in respect of such
payroll related taxes; (y) increase additional paid-in capital by approximately
$944,000 in respect of the exercise price of such options; and (z) increase
common stock by approximately $7,700 in respect of the par value of the shares
purchased upon exercise of such options.

YEAR 2000 READINESS DISCLOSURE

PRICELINE.COM'S STATE OF READINESS

Priceline.com has defined Year 2000 compliance as follows:

Information technology time and date data processes, including, but not
limited to, calculating, comparing and sequencing data from, into and between
the 20th and 21st centuries contained in its products and services offered
through the priceline.com service, will function accurately, continuously and
without degradation in performance and without requiring intervention or
modification in any manner that will or could adversely affect the performance
of such products or the delivery of such services as applicable at any time
hereafter.

Priceline.com's internal systems include both its information technology
systems and non-information technology systems. Priceline.com has initiated an
assessment of its proprietary information technology systems, and expects to
complete any remediation and testing of all information technology systems
during 1999. With respect to information technology systems provided by
third-party vendors, priceline.com has sought assurances from such vendors that
their technology is Year 2000 compliant. All of priceline.com's material
information technology system vendors have replied to inquiry letters sent by
priceline.com stating that they either are Year 2000 compliant or expect to be
so in a timely manner.

Priceline.com is evaluating its non-information technology systems for Year
2000 compliance. It has not, to date, discovered any material Year 2000 issues
with respect to its non-information technology systems.

Priceline.com is in the process of contacting its material seller
participants whose products or services are sold through the priceline.com
service to determine if they are Year 2000 compliant. To date, all such seller
participants have stated that they are, or expect to be, Year 2000 compliant in
a timely manner.

Priceline.com's customers are individual Internet users, and, therefore,
priceline.com does not have any individual customers who are material to an
evaluation of Year 2000 compliance issues.

THE COSTS TO ADDRESS YEAR 2000 ISSUES

Priceline.com has expensed amounts incurred in connection with Year 2000
compliance since its formation through June 30, 1999. Such amounts have not been
material. The additional costs to make any other products or services Year 2000
compliant will be expensed as incurred, but are not expected to be material.

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Priceline.com is not currently aware of any material operational issues or
costs associated with preparing its systems for the Year 2000. Nonetheless, it
may experience material unexpected costs caused by undetected errors or defects
in the technology used in its systems or because of the failure of a material
seller participant to be Year 2000 compliant.

RISKS ASSOCIATED WITH YEAR 2000 ISSUES

Notwithstanding priceline.com's Year 2000 compliance efforts, the failure of
a material system or vendor, including a seller participant in the priceline.com
service, or the Internet generally, to be Year 2000 compliant could harm the
operation of the priceline.com service or prevent certain products and services
being offered through the priceline.com service, or have other unforeseen,
adverse consequences to the company.

Finally, priceline.com also is subject to external Year 2000-related
failures or disruptions that might generally affect industry and commerce, such
as utility or transportation company Year 2000 compliance failures and related
service interruptions. Moreover, participating sellers in priceline.com services
might experience substantial slow-downs in business if consumers avoid products
and services such as air travel both before and after January 1, 2000 arising
from concerns about reliability and safety because of the Year 2000 issue. All
of these factors could have a material adverse effect on its business, financial
condition and results of operations.

CONTINGENCY PLANS

Priceline.com has developed a contingency plan to address situations that it
believes would arise if it fails to be Year 2000 compliant. Priceline.com has
not developed a contingency plan to address situations that may result if its
suppliers are unable to achieve Year 2000 compliance. The cost of developing and
implementing such a plan, if necessary, could be material.

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BUSINESS

OVERVIEW

Priceline.com has pioneered a unique e-commerce pricing system known as a
"demand collection system" that enables consumers to use the Internet to save
money on a wide range of products and services while enabling sellers to
generate incremental revenue. Using a simple and compelling consumer
proposition--"name your price"--priceline.com collects consumer demand, in the
form of individual customer offers guaranteed by a credit card, for a particular
product or service at a price set by the customer. Priceline.com then either
communicates that demand directly to participating sellers or accesses
participating sellers' private databases to determine whether it can fulfill the
customer's offer on the basis of the pricing information and rules established
by the sellers. Consumers agree to hold their offers open for a specified period
of time and, once fulfilled, offers cannot be canceled. Priceline.com benefits
consumers by enabling them to save money, while at the same time benefitting
sellers by providing them with an effective revenue management tool capable of
identifying and capturing incremental revenues. By requiring consumers to be
flexible with respect to brands, sellers and product features, priceline.com
enables sellers to generate incremental revenue without disrupting their
existing distribution channels or retail pricing structures.

Priceline.com commenced its service on April 6, 1998 with the sale of
leisure airline tickets and, during the period from launch through June 30,
1999, collected guaranteed offers for approximately 5.1 million airline tickets,
representing approximately $1.1 billion in total consumer demand, resulting in
sales of approximately 762,000 airline tickets, representing approximately
$165.2 million in revenue. During the six-month period ended June 30, 1999,
priceline.com collected guaranteed offers for approximately 1.8 million airline
tickets, representing approximately $486.3 million in total consumer demand.
This demand resulted in sales of approximately 627,000 airline tickets,
representing approximately $134.8 million in revenue. The number of offers that
priceline.com accepts is affected by a variety of factors, including the number
of reasonable offers received and the level of available inventory. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."

Since commencing service, the priceline.com business has grown significantly
and the priceline.com service now includes the following products and services:

- leisure airline tickets, which now includes six domestic and 16
international airline participants;

- new automobiles, which was launched on a test basis in the New York
metropolitan area in July 1998;

- home financing services, which was launched in January 1999 with home
mortgage services and now also includes home equity loans and refinancing
services.

Through the innovative use of "adaptive marketing programs," priceline.com
also markets customer acquisition programs for third parties. These programs
facilitate the completion of a higher percentage of successful transactions
through the priceline.com service while generating fee income for the company.
Priceline.com intends to continue to leverage the priceline.com brand by
expanding its product offerings to include rental cars, cruises, time shares,
vacation packages, personal and automobile loans, insurance and other financial
services products and by expanding our new car sales service to the entire U.S.
market. Priceline.com also is exploring expansion of its core "name your price"
business model to other areas of e-commerce, such as retail merchandise and the
consumer-to-consumer market.

Priceline.com offers products and services that are provided by
participating sellers, many of whom are leaders in their industries. Twenty-two
domestic and international airlines currently participate in priceline.com's
leisure airline ticket service, including Delta, Northwest, Continental, TWA,
America West and leading international carriers. Participants in the
priceline.com hotel room reservation service include

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Marriott, Renaissance, Sheraton, Westin and several other nationally recognized
hotel chains, as well as several important real estate investment trusts,
including Meristar, Patriot and Starwood. Priceline.com does not publicly
advertise the names of its seller participants in its airline and hotel
programs. Priceline.com's home financing service, which is offered through a
joint marketing arrangement with LendingTree, an Internet-based home financing
service provider, includes a network of more than 30 participating lending
institutions.

Priceline.com generates revenues in a variety of ways depending on the
product or service sold. With respect to its airline ticket and hotel room
reservation services, priceline.com determines whether to fulfill a customer's
offer based upon the available fares, rules and inventory that have been
provided by participating sellers through their private data bases. Upon
completion of a successful transaction, priceline.com recognizes as revenue the
customer's named price, net of taxes, and records as the cost of revenue, the
fare or rate charged by seller. With respect to priceline.com's automobile and
home financing services, a customer's offer is submitted directly to the
participating sellers who determine whether to fulfill the offer. With respect
to its automobile service, priceline.com earns a fixed fee from both the
customer and the seller after the transaction is consummated. With respect to
the home financing service, priceline.com receives marketing fees equal to a
percentage of the net revenue generated by the service, which is operated in
conjunction with LendingTree, Inc. For its adaptive marketing programs,
priceline.com earns fees payable by the seller and/or the customer or by its
adaptive marketing partner.

Priceline.com believes that the priceline.com service already has achieved
significant consumer acceptance and widespread brand awareness. Based upon the
results of an independent research study conducted for priceline.com, the
company believes that as of April 1999, among adult Americans, priceline.com was
the second most recognized e-commerce brand among the 20 leading brands included
in the survey and one of the most recognized Internet brands among the leading
brands included in the survey. Based on the study, priceline.com also believes
that, after only one year of operation, 91.1 million (or 46%) of all adult
Americans were aware of the priceline.com brand. The study also indicated that
awareness of the priceline.com brand increased over 14% since mid-1998.
Priceline.com's strong brand awareness has been achieved without any affiliation
with an Internet portal company such as Yahoo! or Excite or a proprietary online
service such as America Online. Beyond mere name recognition, priceline.com also
believes that it enjoys high levels of consumer satisfaction among users of its
service who provide powerful word-of-mouth endorsements. In addition,
priceline.com has been featured in hundreds of news stories in national
publications such as THE NEW YORK TIMES, THE WALL STREET JOURNAL AND USA TODAY.
The priceline.com service also has been awarded a four-star rating by YAHOO!
INTERNET LIFE magazine as the "most creative way to get a good deal" on leisure
airline tickets.

Priceline.com believes that priceline.com's unique business model can be
applied to a broad range of products and services. Priceline.com believes that
this broad applicability of its business model, its first mover advantage, the
strength of the priceline.com brand, its network of seller participants, its
proprietary software systems and its intellectual property strategies provide it
with significant competitive advantages.

INDUSTRY BACKGROUND

THE GROWTH OF COMMERCE ON THE INTERNET

The Internet has emerged as a significant interactive medium for conducting
business. International Data Corporation, a market research firm, estimates that
the number of Internet users worldwide exceeded 97 million in 1998 and will grow
to over 319 million by the end of 2002. International Data Corporation also
estimates that annual worldwide commerce over the Internet will increase from
approximately $32.0 billion in 1998 to approximately $425.0 billion by 2002. The
factors driving this growth include the increasing number of personal computers
in homes and offices, the decreasing cost of personal computers, technological
innovations providing easier, faster and cheaper access to the Internet, the
proliferation of content and services being provided on the Internet and the
increasing use of the Internet by businesses and consumers as a medium for
conducting business. The increasing use of the Internet as a

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commercial medium has been accompanied by a diversification in the type of
commerce that is conducted on the Internet and a proliferation in the types of
products and services available on the Internet.

The Internet possesses a number of unique and commercially powerful
characteristics that differentiate it from traditional media: users communicate
or access information without geographic or temporal limitations; users access
dynamic and interactive content on a real-time basis; and users communicate and
interact instantaneously with a single individual or a group of individuals at
little or no cost. The Internet has created a dynamic and particularly
attractive medium for commerce, empowering consumers to gather more comparative
purchasing data than is feasible with traditional commerce systems, to shop in
ways that can be more convenient for them and to interact with sellers in many
new ways. As the Internet has become more accessible and widely used for
transactions, it has emerged as a primary business channel alongside the
telephone, paper-based communication and face-to-face interaction.

LIMITATIONS OF TRADITIONAL PRICING MECHANISMS

Under traditional retail pricing methods, sellers typically market products
to consumers under brand names at fixed retail prices. Alternatively, prices can
be established through auction processes. However, each of these forms of
seller-driven commerce has certain significant disadvantages for both sellers
and consumers. For example, in the retail pricing model, sellers who discount
prices to clear excess inventory, utilize excess capacity or increase sales
velocity, risk disruption of their existing distribution channels and damage to
their retail pricing structures. They also lose the opportunity to earn
incremental revenue from "free-riders," that is, consumers who would have been
prepared to pay the undiscounted price for the product or service, but
nevertheless obtain the benefit of the discounted price. Moreover, none of these
pricing methods allow sellers to consider the flexibility of potential buyers
before setting prices. Similarly, consumers are often forced to pay a higher
price when the seller is setting a fixed retail price for a product with added
features or under a specific brand, which the customer would otherwise have been
prepared to forgo for a lower price. Auctions force consumers to compete against
each other for the benefit of the seller, which always results in the product
being sold on the basis of the highest bid.

While the Internet has become a significant medium for conducting business,
commerce presently conducted on the Internet is largely based upon traditional
pricing methods. Priceline.com believes that the vast information sharing and
communications power of the Internet creates an opportunity for significant
change in the way commerce or business is conducted.

THE PRICELINE.COM SOLUTION

Priceline.com has developed a unique pricing system known as a "demand
collection system" that uses the information sharing and communications power of
the Internet to create a new way of pricing products and services. Priceline.com
creates a new balance between the interests of buyers, who are willing to accept
trade-offs in order to save money, and sellers, who are prepared to generate
incremental revenue by selling products at below retail prices, provided that
they can do so without disrupting their existing distribution channels or retail
pricing structures. Priceline.com's demand collection system allows consumers to
name the price they are prepared to pay when submitting an offer for a
particular product or service within a specified range of substitutability.
Priceline.com then either communicates such offers to multiple sellers who
determine whether to accept the customer's offer or accesses participating
sellers' private databases to determine whether it can fulfill the customer's
offer on the basis of the pricing information and rules established by the
sellers. Consumers agree to hold their offers open for a specified period of
time to enable priceline.com to fulfill their offers from inventory provided by
participating sellers. Once fulfilled, offers generally cannot be canceled. This
system uses the flexibility of buyers to enable sellers to accept a lower price
in order to sell excess inventory or capacity or to increase sales velocity.
Priceline.com believes that its demand collection system addresses the
limitations inherent in traditional pricing mechanisms in a manner that offers
substantial benefits to both buyers and sellers.

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The principal advantages of the priceline.com system include the following:

- COST SAVINGS AND PREFERRED METHOD OF PURCHASING FOR CONSUMERS.
Priceline.com's demand collection system allows consumers to save money in
a simple and compelling way--"name your price." Buyers effectively trade
off flexibility about brands, product features and/or sellers in return
for prices that are lower than those that can be obtained at that time
through traditional retail distribution channels. Priceline.com believes
that in many cases, such as purchasing a new car or obtaining a home
mortgage, naming your own price over the Internet represents a preferred
purchasing method to traditional retail channels, which may involve
comparison shopping among a complex array of alternative features,
sometimes protracted negotiations and dealings with numerous brokers or
sales representatives. Priceline.com also believes that naming your price
over the Internet is a preferred purchasing method to auctions, which
result in a product being sold on the basis of the highest bid.

- INCREMENTAL REVENUE FOR SELLERS. Sellers use priceline.com as a revenue
management tool to generate incremental revenue without disrupting their
existing distribution channels or retail pricing structures. Priceline.com
requires consumers to be flexible with respect to brands, such as a
willingness to fly on any major airline; and/or product features, such as
a willingness to fly at any time of the day; and/or seller, such as any
BMW dealer in a specific geographic area. As a result, sellers' brands are
not revealed to customers prior to the consummation of a transaction,
thereby protecting their brand integrity. This shielding of brand identity
enables sellers to accept offers at discounted prices through
priceline.com without cannibalizing their own retail sales by publicly
announcing discount prices and without competing against their own
distributors. In effect, priceline.com serves as a discreet and insulated
channel of distribution. Sellers are further protected by the fact that
each transaction is independent and the prices at which offers are
accepted are not revealed to subsequent users of the priceline.com
service. Priceline.com gives sellers the ability to exercise a greater
degree of pricing flexibility without trading high-margin sales for
low-margin sales, thereby enabling sellers to expand their total revenues
and, in some cases, gain market share at the expense of non-participating
competitors.

- PROPRIETARY SELLER NETWORKS. Priceline.com assembles proprietary networks
of industry leading sellers that represent high quality brands, such as
Delta, Northwest, Continental, TWA, America West, Marriott, Renaissance,
Sheraton and Westin. By establishing attractive networks of seller
participants with reputations for quality, scale and national presence,
priceline.com fosters increased participation by both buyers and sellers.
Each participant in these unique seller networks is willing to consider
and accept consumer offers at prices that are below its retail prices.
Moreover, by shielding the seller's brand and not revealing the final
selling price to other consumers, priceline.com encourages participating
sellers to be aggressive in their pricing. Priceline.com believes that as
more and more sellers in an industry join the priceline.com service, other
industry participants will want to join the system.

- GUARANTEED CONSUMER DEMAND FOR SELLERS. Each customer who makes an offer
through priceline.com must guarantee his offer with a major credit card.
The guaranteed aspect of the demand is attractive to sellers because they
know that priceline.com offers them a confirmed sale whenever they accept
a buyer's offer. Sellers can be sure that collected demand represents
willing buyers, at each named price, rather than browsing shoppers who
have made no commitment to purchase. Priceline.com's database of consumer
offers also provides sellers with valuable market information about the
precise quantities of latent demand at each price point below their retail
prices.

- BROAD APPLICATIONS ACROSS MULTIPLE MARKETS. In contrast to many e-commerce
companies that are building brands in vertical categories or groups of
related categories, priceline.com believes that its e-commerce business
model has horizontal application to products and services in a wide range
of industries. Priceline.com further believes that the broad applicability
of the priceline.com service

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and the strength of the priceline.com brand afford it the opportunity to
obtain substantial economies of scale and offer the potential for
priceline.com to become a major new channel of distribution. The breadth
of potential applications of the priceline.com business model also is
enhanced by various cross-selling opportunities, since priceline.com
expects that consumers who successfully complete transactions through
priceline.com will return to priceline.com to purchase other products and
services.

THE PRICELINE.COM GROWTH STRATEGY

Priceline.com's objective is to continue to expand the priceline.com
business and to establish priceline.com's demand collection system as a leading
source for the purchase of products and services on the Internet. The key
elements of priceline.com's strategy are as follows:

- STRENGTHEN THE PRICELINE.COM BRAND. Priceline.com intends to establish
priceline.com as the leading consumer brand for buyer-driven commerce over
the Internet. To achieve this objective, priceline.com intends to continue
to pursue an aggressive brand development strategy through mass market and
targeted advertising and promotions, press coverage and strong
word-of-mouth support. While priceline.com believes it is already one of
the most recognized e-commerce brands among adult Americans, priceline.com
believes that it can expand the public's association with the
priceline.com "name your price" proposition to a broad range of products
and services.

- LEVERAGE THE PRICELINE.COM BRAND OVER NUMEROUS PRODUCTS AND SERVICES.
Priceline.com intends to leverage the priceline.com brand across numerous
products and services to achieve significant revenue scale and growth. In
contrast to most e-commerce businesses that operate in one or two
"vertical" markets, priceline.com is a "horizontal" commerce system that
can benefit both buyers and sellers in a broad range of industries.
Priceline.com's strategy is to make available multiple product and service
offerings at a single Web site under a common brand to take advantage of
these market opportunities. Over the next two years, priceline.com intends
to offer products and services in three sectors of the economy where its
demand collection system is particularly well suited. These sectors are:

- travel, including leisure airline tickets and hotel rooms, rental
cars, "all-inclusives" resorts, cruises and time shares;

- financial services, including home mortgages, equity loans and
refinancings, credit card balance consolidation and automobile and
life insurance; and

- automobile sales and related financing.

In these sectors, the priceline.com service currently offers leisure
airline tickets, hotel rooms, home financings and automobiles. Given the
size and scope of these markets, priceline.com believes it can achieve a
large revenue base and sustain revenue growth by capturing even a small
portion of the excess unsold inventory or capacity in these sectors and by
capturing even relatively small amounts of market share from traditional
seller-driven channels of retail distribution.

- EXPAND THE PRICELINE.COM BUSINESS MODEL. Priceline.com also intends to
explore expansion of its core "name your price" business model to other
areas of e-commerce. Priceline.com currently is evaluating the licensing
of its business model to two new companies. One of these companies is
developing a consumer-to-consumer transaction business in which buyers
would make conditional purchase offers to acquire goods from other
consumers. The other would enable consumers to use the Internet to name
the price that they are willing to pay for retail merchandise, which they
would pick up from participating retailers. However, priceline.com has not
determined the structure of its relationship with these companies, which
may include, among other things, licensing of the priceline.com brand and
"name your price" business model and investment in such entities.

- EXPAND SELLER PARTICIPANT NETWORKS. Priceline.com intends to continue to
expand its alliances with major seller participants selected for
reputation, quality and national presence to create proprietary

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seller networks for each of its major products and services. A critical
element of the priceline.com business has been priceline.com's ability to
demonstrate to its seller participants that priceline.com can generate
incremental revenues for sellers without disrupting their existing
distribution channels or retail pricing structures. Priceline.com intends
to form and maintain alliances with industry leaders by designing its
products and services in a way that requires consumers to accept some
trade-offs from currently available retail product offerings in return for
lower prices. Such trade-offs typically include not knowing the identity
of the seller or brand prior to the acceptance of a customer's offer by a
seller.

- ENHANCE SITE FUNCTIONALITY AND INCREASE CONSUMER USAGE. Priceline.com
intends to frequently update and enhance the features of the priceline.com
service. Priceline.com continually monitors feedback from consumers and
frequently adds new features to further refine and simplify the buying
process. Priceline.com also receives offers by telephone and provides
customer service by telephone and e-mail to assist consumers in the offer
process. By continuing to increase the functionality of the service and
enhance the consumer experience, priceline.com believes that it will
continue to increase customer usage and loyalty.

- EXPAND ADAPTIVE MARKETING PROGRAMS. Priceline.com intends to further
develop and expand what it refers to as "adaptive marketing programs."
Adaptive marketing programs include two distinct initiatives. "Adaptive
promotions" allow consumers to increase the amount of their offers, and
thus their likelihood of success, at no additional cost by participating
in sponsor promotions during the process of making a priceline.com offer.
For example, a customer making an offer to buy an airline ticket can
increase the amount of his offer by a stated amount by applying online for
a credit card issued by one of priceline.com's strategic sponsors. These
promotions have the effect of increasing the percentage of successful
offers at no additional cost to the customer, while at the same time
enabling priceline.com to earn significant fee income, which it can use to
offset the sale of products and services below its unit cost. The second
type of adaptive marketing program is referred to as "adaptive cross
selling" and utilizes cross selling of multiple products to increase the
number of successful transactions.

- INCREASE FINANCIAL RETURNS OVER TIME. While it is inherent in the nature
of priceline.com's business model that not all offers will be acceptable
to sellers, an integral part of priceline.com's strategy is to ensure that
a high percentage of reasonable offers get accepted, thereby increasing
financial returns while reinforcing the priceline.com service. As
consumers have become more familiar with the service, priceline.com has
been able to increase the percentage of offers it satisfies and expects
this trend to continue. As its revenue base grows, priceline.com intends
to increase its financial returns over time. Priceline.com's revenue model
for travel services enables it to balance revenue growth against gross
profit margins, thereby enhancing its ability to manage a targeted gross
margin as a percentage of revenues. Priceline.com initially intends to
emphasize revenue growth over profit margins in order to achieve
significant revenue scale and to further strengthen the priceline.com
brand. However, over time, as its revenue base increases, priceline.com
believes it will be able to capture a greater portion of the incremental
profit that it generates for participating sellers and thereby increase
its profit margins and financial returns.

- EXPLORE INTERNATIONAL EXPANSION. Priceline.com believes that the
international scope of the Internet and the global demand for the types of
products and services that it intends to make available through
priceline.com presents opportunities to expand its service
internationally. Given the anticipated continued increase in use of the
Internet throughout the world, priceline.com intends to explore avenues
and strategies for international expansion. It believes that joint
ventures and licensing arrangements with international partners are likely
to be the preferred methods of international expansion, as they will
enable priceline.com to combine its expertise in demand collection systems
with its partners' expertise in their local markets.

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THE PRICELINE.COM BUSINESS MODEL

Priceline.com believes that its unique pricing system known as a "demand
collection system" is a powerful new business model for conducting commerce on
the Internet. The priceline.com business model is designed to allow consumers to
save money on a wide range of products and services by trading flexibility
regarding brands, product features and/or sellers in return for being able to
buy products and services at prices that are lower than those charged through
traditional retail channels of distribution. The priceline.com business model
motivates sellers to offer products through priceline.com at below their retail
prices by enabling them to generate incremental revenue while protecting their
existing channels of distribution and retail pricing structures.

The priceline.com business model enables the company to earn substantial
revenues without charging customers for submitting offers through, or charging
sellers for participating in, the priceline.com system. Priceline.com has the
flexibility to earn fixed or percentage based fees by serving as an intermediary
on the sale of products or services, or to earn the spread between the
customer's offer and the cost of a product or service by serving as principal in
a transaction. Consumer fees are payable only upon completion of successful
transactions. This unique revenue structure enables priceline.com to manage the
level of gross margins and, as appropriate, balance revenue growth with margin
growth.

In addition to its unique revenue structure, the defining elements of the
priceline.com business model are the following:

- the buyer specifies or accepts a RANGE OF SUBSTITUTABILITY among brands,
product features and/or sellers; for example, he agrees to stay at any
three-star hotel in a certain area, agrees to fly at any time of the day
or agrees to purchase a new car from any factory-authorized dealer;

- the buyer NAMES THE PRICE he is prepared to pay for the products or
services within the specified range of substitutability;

- the buyer GUARANTEES HIS OFFER for a specified time period by securing all
or a portion of his potential payment for the product or service with a
major credit card;

- companies sell products or services at prices below their currently
available retail prices using priceline.com as a BRAND SHIELD to protect
their retail pricing structures and channels of distribution;

- each guaranteed offer can be consummated with products or services from
any of a GROUP OF SELLERS; and

- offers made through priceline.com are held open for a specified period of
time, and CANNOT BE CANCELED by either the seller or the buyer.

The priceline.com consumer proposition is simple and compelling: realize
immediate savings by using the Internet to name your own price when you are
willing to be flexible about brands, product features and/or sellers. A central
premise of the priceline.com consumer proposition is that in many product and
service categories there are a significant number of consumers for whom brands,
product features or sellers are interchangeable, particularly if agreeing to a
substitution among brands or sellers will result in saving money. For example,
priceline.com believes that many leisure travelers are relatively indifferent
about the brand of major airline they fly. Similarly many consumers are
indifferent to which financial services company provides them with a credit card
or home mortgage. Priceline.com also believes that many consumers prefer not to
spend time and effort engaged in an evaluative process among similar products,
brands or sellers, which they consider to be substitutable. Finally,
priceline.com is appealing to some consumers because it does not charge a
customer to submit an offer, and priceline.com's Web site provides convenient
access, available 24 hours a day, seven days a week.

Priceline.com believes that the collection of large volumes of consumer
demand is essential to building networks of multiple sellers. Priceline.com also
believes that it is important that all of the demand

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it collects is GUARANTEED by the buyers, that offers must be held open for a
specified time period and that once an offer is accepted it generally cannot be
canceled or the purchase price refunded. This approach assures sellers that a
customer's offer is bona fide and that once an offer is accepted, the seller
will generate an immediate sale, rather than an invitation to further
negotiation or comparison shopping.

The priceline.com business model is predicated on the assumption that
sellers almost invariably have excess inventory or capacity that they would sell
at lower prices, if they could do so without either lowering their prices to
their retail customers or advertising that lower prices are available.
Priceline.com allows sellers to capture demand below their retail "price line,"
without allowing retail customers who might be willing to pay more to "free
ride" down to the lower price. The ability to offer prices below the retail
price line generates incremental revenue by accessing buyer segments otherwise
priced out of the market and, in certain cases, by capturing market share from
nonparticipating competitors. Finally, priceline.com's database of consumer
offers benefits sellers by providing them with valuable market information about
the precise quantities of latent demand at each price point below their retail
prices.

Priceline.com believes that its demand collection system is ideally suited
to industries characterized by low variable costs relative to total cost, which
results in high profit contribution margins and provides sellers with a strong
incentive to sell products at prices below their retail prices to generate
incremental sales, provided that they can do so without threatening their
existing distribution channels or retail pricing structures. Low variable costs
frequently exist in industries with expiring or rapidly aging inventory.
Priceline.com also believes, however, that its demand collection system will
prove to be effective even in industries that are not characterized by rapidly
aging inventories and low variable costs because a significant number of
consumers will prefer the relative cost savings, ease of use and convenience of
priceline.com's "name your price" system to traditional retail distribution
channels, and sellers will be attracted to the potential of the priceline.com
service to increase sales velocity, which is often a significant factor in the
success of businesses in these industries.

Priceline.com believes that markets characterized by a large degree of
brand, product feature or seller substitutability are substantial and include
both those in industries characterized by high profit contribution margins and
industries in which many consumers are dissatisfied with traditional retail
distribution methods. In the business-to-consumer market, travel, new car sales,
financial services and many retail products offer substantial ranges of
substitutability in consumers' minds. In the business-to-business market, long
distance service, media sales and office supplies are subject to high degrees of
product or brand substitutability. In the consumer-to-consumer market, there are
often multiple sellers that are ready, willing and able to offer new or nearly
new products that consumers consider substitutable. Priceline.com believes that
its business model can be applied to each of these markets, thereby providing it
with considerable potential for long term growth.

PRODUCTS AND SERVICES

Priceline.com launched the priceline.com service on April 6, 1998 with the
sale of leisure airline tickets. The priceline.com service now includes the sale
of new automobiles, hotel room reservations and home financing services.
Priceline.com also intends to expand its product offerings over the next two
years to include other leisure travel products such as rental cars, cruises,
time shares, and vacation packages; automobile and personal insurance and other
financial services products; and certain retail products such as computers, home
electronics and other consumer products. Priceline.com also intends to explore
expansion of its core "name your price" business model to other areas of
e-commerce, such as the consumer-to-consumer market.

TRAVEL SERVICES

LEISURE AIRLINE TICKETS. Priceline.com commenced its service with the sale
of leisure airline tickets. The number of airlines participating in
priceline.com's airline ticket service has increased substantially

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since the launch of the business, from an initial group of two domestic airlines
and four international airlines, to a total of six domestic airlines and 16
international airlines. Priceline.com also purchases and resells a small
percentage of its tickets from airline ticket consolidators. Airlines
participate in priceline.com's airline ticket service by making available to
priceline.com unpublished fares and, in some cases, dedicated or special
inventory. Priceline.com does not publicly advertise the names of airlines
participating in its airline ticket service.

Consumers can make offers to purchase airline tickets through the
priceline.com Web site or the 1-800-Priceline call center. The vast majority of
all airline ticket requests are made through priceline.com's Web site. To make
an offer, the customer specifies (1) the origin and destination of the trip, (2)
the dates on which he wishes to depart and return and (3) the price he is
willing to pay, and guarantees the offer with a credit card. Consumers must
agree to, among others, the following conditions:

- to fly on any major full-service airline, which is defined by the United
States Department of Transportation;

- to leave at any time of the day on their desired dates of departure and
return;

- to purchase only round trip economy class tickets between the same two
points of departure and return;

- to accept up to one stop or connection;

- to receive no frequent flier miles or upgrades; and

- to accept tickets that cannot be refunded or changed.

Consumers are informed that they can increase their chances of obtaining the
desired ticket by accepting greater flexibility, such as accepting flights
outside of priceline.com's normal flight times or accepting more than one stop
or connection. Consumers also are given the opportunity to have their offers
increased by a specified dollar amount, and thereby increase the likelihood of
success, if they agree to participate in an adaptive promotion during the
process of submitting their offers, such as applying for a credit card or
subscribing to a magazine. In order to encourage reasonable initial offers,
consumers are not permitted to make revised offers for an identical itinerary
within seven days of an unsuccessful offer.

When priceline.com receives an offer, it determines whether to fulfill the
offer based upon the available fares, rules and inventory that have been
provided by participating airlines. Such fares and rules are filed by
participating airlines in a private database known as SecureRate within the
Worldspan central reservation system. As a certified travel agency,
priceline.com also has access to the published "tariff" fares of all airlines,
including those not participating in the priceline.com service, although
priceline.com currently does not sell tickets purchased pursuant to published
tariff fares. If a qualifying airfare is identified, a search in Worldspan is
initiated to find seat availability on the requested dates of travel. Where more
than one seller is able to fulfill the customer's offer, priceline.com awards
the business based on an allocation protocol.

A customer is notified whether his offer has been accepted within one hour
for domestic flights and within twenty-four hours for international flights. If
priceline.com is able to obtain an airline ticket within the parameters
specified by the customer, the customer's credit card is charged for the amount
of the customer's offer, plus applicable taxes and standard processing fees, and
the ticket is delivered to the customer by the delivery method specified by the
customer. Approximately 94% of domestic tickets issued through priceline.com are
electronic tickets. Priceline.com earns the spread, if any, between the
customer's offered price and the cost to purchase the ticket from the airline,
and the handling fee charge paid by the customer on each ticket.

HOTELS. In October 1998, priceline.com launched its second travel service,
which allows consumers to name their price for hotel room reservations.
Priceline.com's hotel room reservation service currently is

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available in substantially all major cities and metropolitan areas in the United
States. Seller participants in the hotel room reservation service include
several of the most significant national hotel chains, including Marriott,
Renaissance, Sheraton and Westin, as well as several important real estate
investment trusts, including Meristar, Patriot and Starwood, and independent
property owners. Hotels participate by filing private discounted rates with
related inventory control rules in priceline.com's private database in the
Worldspan centralized reservation system for hotel rooms. These rates generally
are not available to the general public or to consolidators and other discount
distributors who sell to the public.

Priceline.com's hotel room reservation service operates in a manner similar
to its airline ticket service. Consumers are required to accept certain
trade-offs with respect to brands or product features in return for saving
money. For example, consumers are required to accept a reservation in any hotel
within a specified geographic area within a designated "class" of service (1, 2,
3, 4 or 5-star) and must accept limitations on changes and cancellations.
Priceline.com determines the class of service for each participating hotel based
upon published industry reports, the amenities available at each property and
other factors such as age and decor. As with the airline ticket service, the
target market for priceline.com's hotel room reservation service is the leisure
travel market.

Consumers can make offers for a hotel room reservation through the
priceline.com Web site. To make an offer, the customer (1) specifies (a) his
dates of stay, (b) the metropolitan area, including geographic zones within that
metropolitan area, (c) the class of hotel service and (d) the price he is
willing to pay; and (2) guarantees the offer with a credit card. Upon receipt of
an offer for a hotel room reservation, priceline.com systematically compares the
offer with rates and inventory rules provided by sellers through their
reservation systems and determines whether to fulfill the offer based upon
available inventory. Within a specified time, which currently is one hour, the
customer is notified whether his offer has been accepted. When selling a hotel
room reservation, priceline.com earns the spread between the consumer's offer
price and the price charged to the company by the hotel. Priceline.com also
earns fee income from adaptive promotions that it makes available to consumers
during the course of submitting an offer for a hotel room reservation.

The dynamics of the hotel industry are similar to those of the airline
industry in that both industries are characterized by expiring inventory and low
marginal costs so that the sale of any excess inventory provides a significant
contribution to profits. As with the airline industry, a significant amount of
available inventory in the hotel industry expires unsold. Priceline.com also
believes that consumers are willing to trade off brand identity for lower rates
with a specified class of hotel service and that such industry dynamics make
priceline.com's demand collection system particularly well-suited to the hotel
industry. Priceline.com also believes that the hotel room reservation service
will create opportunities for cross-selling to leisure travelers who purchase
airline tickets through priceline.com.

OTHER TRAVEL SERVICES. Priceline.com intends to expand its products and
services within the leisure travel industry over the next two years to encompass
the rental car, cruise, all-inclusive resort, time share and vacation package
segments.

FINANCIAL SERVICES PRODUCTS

HOME FINANCING SERVICES. Priceline.com introduced its home financing
service in January 1999. Priceline.com's financing service allows consumers to
name their interest rate for mortgages of a specified term, including purchase
money mortgages, refinancings and home equity loans. LendingTree, an Internet
based mortgage service provider, is priceline.com's joint marketing partner in
connection with its mortgage service. Under priceline.com's agreement with
LendingTree, priceline.com is responsible for maintaining the home financing
service on the priceline.com Web site and for consumer marketing. LendingTree
serves as the back-end processing system, which presents offers received through
priceline.com to multiple mortgage lending institutions for consideration. There
are currently more than 30 lenders participating in the home financing services
through LendingTree. See "--Strategic Alliances--Financing Alliances."

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To obtain a home mortgage, refinancing or home equity loan through the
priceline.com service, consumers access the priceline.com Web site and specify
the amount of the loan, the term, the interest rate and the points that they are
willing to pay. Consumers complete a simplified loan application as part of the
process of making an offer. In connection with making an offer, consumers are
required to guarantee with a major credit card the payment of a good-faith
deposit of $200 that is applied towards closing costs. The good-faith deposit is
charged by a lender only when a customer's offer is accepted. Priceline.com does
not charge the customer any fees for the use of its home financing services.
Priceline.com transmits each offer to LendingTree, which in turn presents the
offer to multiple lenders who can either accept the offered terms, or return a
counteroffer to the consumer. Priceline.com notifies consumers whether their
offer has been accepted within six business hours, between the hours of 8:00
a.m. and 8:00 p.m., Eastern Standard Time. If a customer's offer is not accepted
within six business hours, priceline.com notifies the customer if it has
received any counter-offers from participating lenders. Participating lenders
may submit counter-offers for up to two business days following the customer's
offer. Customers may check the status of any counter-offers by accessing the
priceline.com Web site. Priceline.com generates revenues with respect to its
home financing service in the form of marketing fees paid directly by
LendingTree.

Priceline.com is exploring the possibility of entering into a joint venture
with a subsidiary of a federally chartered thrift institution that would offer
to provide mortgage loans through the priceline.com service. Priceline.com
currently expects that such joint venture would participate in the priceline.com
service along with other mortgage lenders in the LendingTree network.

According to industry data published in 1998, approximately $1.1 trillion of
home mortgages were entered into in the United States in 1996. Priceline.com
believes that consumers are largely indifferent to which mortgage issuer
provides their mortgage and seek merely to obtain the lowest cost in the most
efficient manner. Moreover, comparison shopping among the hundreds of mortgage
lenders can be a frustrating experience for consumers. Priceline.com believes
the priceline.com mortgage service will provide consumers with a simple and
efficient vehicle for obtaining the interest rate they seek through a preferable
purchasing process. For lenders, the priceline.com mortgage service will provide
guaranteed demand from consumers who are committed to buy and will submit that
demand in a format that can be reviewed and evaluated by the lender with minimal
variable costs.

OTHER FINANCIAL SERVICES PRODUCTS. Priceline.com intends to expand its
products and services within the financial services industry over the next two
years to include unsecured personal loans, automobile loans, credit card balance
consolidations and automobile and life insurance policies. As with its other
products and services, priceline.com intends to expand its financial product
services by entering into strategic relationships with leading industry
participants. Priceline.com believes its financial product services will have
broad demographic appeal among consumers who seek to obtain the most attractive
economic terms in the most efficient manner from what they perceive to be
substitutable suppliers.

NEW CAR SALES

Priceline.com introduced its new car sales service on a test basis in the
New York metropolitan area in July 1998. Priceline.com utilized the New York
market to learn more about automobile sales over the Internet and to develop
product features and systems support. In July 1999, priceline.com launched a
similar test in the Tampa, Florida market, and expects to expand further in the
state of Florida, as well as into the states of California and Michigan during
the third quarter of 1999. Based on published industry data, the New York
metropolitan area represents approximately 10% of all consumer demand for new
automobiles in the United States, while California represents approximately 11%
and Florida represents approximately 9%. Additionally, the Detroit metropolitan
area provides access to the three largest U.S. auto-makers. Subject to achieving
positive results in these markets and receipt of appropriate state regulatory
approvals and authorizations necessary to conduct our new car sales service,
priceline.com expects to become operational in the 48 contiguous states during
the first quarter of 2000. Priceline.com recently entered into a co-marketing
agreement with AutoNation, Inc., a leading national automotive

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retailer. The agreement initially provides priceline.com with access to
AutoNation's inventory and dealerships in the Tampa, Florida market and provides
for expansion into other markets in the future.

Priceline.com's new car sales service accepts offers for every major brand
of automobile. To purchase a new car through the priceline.com service, the
customer identifies the exact vehicle desired to be purchased or leased,
including the make, model and specified options, the geographic area in which
the customer is willing to pick up the vehicle and the purchase price or lease
price the customer is willing to pay. All sales are made through factory
authorized dealers. To help consumers submit reasonable requests, both the
manufacturer's suggested retail price and the dealer invoice price for the
vehicles and options requested are displayed on the priceline.com Web site.
Additionally, priceline.com also supplies an estimated market price, based on
recent sales of the selected vehicle.

Upon receiving an offer for a new car, priceline.com transmits the
customer's offer to factory authorized dealers within the specified geographic
radius, without disclosing the identity of the customer. Priceline.com directs
the sale to the first dealer that notifies the company that it is willing to
accept the customer's offer. Priceline.com then notifies the customer to pick up
the vehicle from that dealer and the transaction is closed directly between
them.

Due to the numerous features and options on a new automobile, the range of
product substitutability that consumers will accept is lower in the case of new
cars than with airline tickets or hotels. As a result, a dealer that may not be
able to precisely fulfill a customer's offer is permitted to make a counteroffer
through priceline.com. The counteroffer may specify a different product package
or price. The customer is free to accept or reject such a counteroffer. The
customer also is permitted to submit an additional offer through priceline.com.

Once an offer for a new car is accepted by a dealer, the consumer completes
the transaction directly with the dealer and receives the same standard
manufacturer's warranty and other terms that are available with respect to any
new car purchased at that dealer. When a sale is completed, priceline.com is
paid a fee, which is currently $25, from the customer and an additional fee from
the auto dealer. If the customer fails to consummate the transaction within 14
business days of being notified that an offer is accepted, the customer is
charged a cancellation fee, which is currently $200, half of which is payable to
priceline.com with the other half payable to the dealer.

Currently, priceline.com does not offer financing arrangements through its
new car sales service. However, to assist consumers in determining whether they
can afford a particular vehicle, or what purchase price to offer, we provide
estimated month payment calculations, a "budget work-sheet" and a financing
calculator on our Web site. Priceline.com also allows consumers to request
financing from the accepting factory authorized dealer and to condition their
offers on obtaining such financing.

Priceline.com believes that, for many consumers, purchasing an automobile
through priceline.com's new car sales service will be a preferred purchasing
method compared to traditional retail channels which often involve protracted
negotiations with numerous dealers, some of which may utilize aggressive sales
tactics. Priceline.com also believes that many automobile dealers will view the
priceline.com service as an attractive way to generate incremental sales through
a low cost distribution channel.

The priceline.com new cars sales service is differentiated from other
Internet car sales services, which serve as lead generators for participating
car dealers. Under such services, multiple dealers may contact the customer in
response to the customer's inquiry to the Internet service. By contrast,
priceline.com's new car sales service does not reveal the identity of the
customer to the auto dealer until the dealer has accepted the customer's offer.
Furthermore, in contrast to other Internet car sales services, dealers are not
required to pay a participation fee to review offers from the priceline.com
service.

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ADAPTIVE MARKETING PROGRAMS

Priceline.com has developed adaptive marketing programs to help bridge the
gap between consumer offers and seller prices, provide users of the
priceline.com service with other desired products, and generate additional
revenue for the company. These programs also serve as an integral part of
priceline.com's strategy of building customer loyalty.

Priceline.com intends to further develop and expand its adaptive marketing
programs, which presently include two distinct initiatives. The first, which it
refers to as "adaptive promotions," allows consumers to increase the amount of
their offers, and thus their likelihood of success, at no additional cost by
participating in sponsor promotions during the process of making a priceline.com
offer. For example, a customer making an offer to buy one round-trip airline
ticket can immediately increase the amount of his offer by $40 by applying
online for a First USA credit card. If the customer obtains the requested
ticket, he still pays only the amount contained in his original offer, plus
applicable taxes and standard processing fees. For example, if a customer makes
an offer to purchase a round trip ticket from New York to Chicago for $200 and,
in the process of submitting that offer, he applies for a First USA credit card,
priceline.com would increase the customer's offer by up to an additional $40 to
enable the customer a greater chance of purchasing the ticket. If priceline.com
is able to purchase the ticket for $240 or less, the customer would still only
have to pay his original offer price of $200, plus applicable taxes and fees.

The second type of adaptive marketing program is referred to as "adaptive
cross selling" and utilizes cross selling of multiple products to increase the
number of successful transactions. For example, a customer whose offer for an
airline ticket was slightly below acceptable levels could be offered a second
related product such as a hotel room reservation or a rental car day at a
combined price that provided an acceptable margin for the sellers of both
products and for priceline.com.

Priceline.com also has an adaptive marketing agreement with E*TRADE, under
which E*TRADE compensates priceline.com for offering priceline.com customers the
opportunity to open an account with E*TRADE while visiting or making an offer on
the priceline.com Web site. While the program originally related to
priceline.com's initial public offering, it now applies to offers by customers
for products and services over the priceline.com service. The E*TRADE adaptive
marketing program is currently operated under an oral agreement and may be
terminated at any time.

Priceline.com recently has entered into adaptive marketing agreements with
Sprint Communications Company L.P., Discover Financial Services, Inc. and
Earthlink Network, Inc. The Sprint agreement is a short-term agreement under
which priceline.com, during a twelve-week test program, will earn fees from
Sprint in connection with customer agreeing to switch their long distance
telephone service to Sprint. Priceline.com and Sprint are currently in the
process of defining the program and the launch date has not yet been determined.
We are also evaluating similar programs with other long distance carriers.

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for any qualifying upgrade of an established Discover credit card account
submitted through the priceline.com service. The Discover adaptive marketing
program is expected to be implemented during the third quarter of 1999 and will
be offered to selected customers who have already participated, or who have
declined participation, in the First USA adaptive marketing program.

Under priceline.com's adaptive marketing program with EarthLink Network,
Inc., an internet service provider, priceline.com will earn fees when its
customers open accounts with EarthLink and upon such accounts being open for a
specified period of time. No specific date has been set for the launch of the
EarthLink program.

In addition, Priceline.com is exploring and has taken steps to expand its
adaptive marketing programs into a wide range of other products and services for
its customers. See "Risk Factors--We are Dependent on Adaptive Marketing
Programs" and "--Strategic Alliances--Adaptive Marketing Alliances."

MARKETING AND BRAND AWARENESS

Priceline.com has established itself as a leading e-commerce brand through
an aggressive marketing and promotion campaign. From inception through June 30,
1999, priceline.com incurred $59.7 million for sales and marketing expense. It
intends to continue to pursue an aggressive marketing strategy designed to
promote brand awareness and the concept that consumers can save money on a wide
range of products and services through priceline.com. Underlying priceline.com's
marketing strategy is the company's belief that its target market is all
consumers, not just Internet-savvy consumers. Substantially all of such spending
has been for radio and newspaper advertising. Priceline.com's campaign features
the actor William Shatner as its spokesperson.

Priceline.com supplements its paid advertising and promotion with targeted
media coverage. Priceline.com has been featured in hundreds of news stories in
national publications such as THE NEW YORK TIMES, THE WALL STREET JOURNAL AND
USA TODAY, reflecting the intuitive appeal of the priceline.com business model
and its strong word-of-mouth support. In addition, priceline.com engages in
grass roots marketing such as promotional events on college campuses and
co-promotions with popular media such as MTV.

Priceline.com believes that the priceline.com service has achieved
widespread brand awareness. Based upon the results of an independent research
study conducted for priceline.com, the company believes that, as of April 1999,
among adult Americans, priceline.com was the second most recognized e-commerce
brand among the 20 leading brands included in the survey and one of the most
recognized Internet brands among the leading brands included in the survey.
Based on the study, priceline.com also believes that, after only one year of
operations, 91.1 million (or 46%) of all adult Americans were aware of the
priceline.com brand. Priceline.com's strong brand awareness has been achieved
without any affiliation with an Internet portal company such as Yahoo! or Excite
or a proprietary online service such as America Online. Priceline.com also
believes that it enjoys high levels of consumer satisfaction among users of its
service who provide powerful word-of-mouth endorsements.

STRATEGIC ALLIANCES

AIRLINE ALLIANCES AND RELATIONSHIPS

Priceline.com has entered into Airline Participation Agreements with six
domestic and 16 international airlines. The Airline Participation Agreements do
not commit the airlines to provide tickets for any particular routes or at a
discount to their retail prices, but outline the terms and conditions under
which ticket inventory provided by the airlines may be sold. Such terms and
conditions include the following:

- the tickets must be non-refundable, non-endorsable and non-changeable;

- all travel must be round-trip between the same two points of departure and
return, with no stopovers permitted;

- the tickets are not eligible for frequent flyer mileage or upgrades;

- consumers must agree to accept up to one stop or connection on both their
departing and return flights;

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- consumers must be willing to fly on any participating airline;

- consumers must be willing to depart at any time after 6 a.m. and land any
time before 10 p.m. on the requested dates;

- all offers must be guaranteed with a major credit card; and

- consumers are limited in their ability to make multiple offers with
respect to the same travel itinerary.

The Airline Participation Agreements generally are subject to termination
upon 30 days' notice by priceline.com or the airline. While priceline.com's
agreement with Delta nominally has a ten-year term, the agreement does not
impose any material obligations on Delta. In particular, Delta is not at any
time obligated to supply airline tickets to priceline.com and may supply airline
tickets to priceline.com's competitors at any time, without offering any airline
tickets to priceline.com, or may offer tickets to priceline.com's competitors at
more favorable prices than those offered to priceline.com.

In addition to the Airline Participation Agreements, priceline.com entered
into a related agreement with Delta which provides, among other things, certain
incentives designed to encourage Delta to increase its participation in
priceline.com's buying service. For example, Delta is entitled to share in
revenue generated from airline ticket sales on Delta if priceline.com's gross
margin on such sales exceeds approximately 12% in any calendar quarter. In
addition, priceline.com is required to use the highest qualifying fare to
fulfill ticket requests allocable to Delta, subject to an agreed minimum profit
margin to priceline.com. Priceline.com's agreement with Delta, subject to
various exceptions, requires Delta's approval of the addition of new carriers to
the priceline.com service, restricts the routes for which tickets may be offered
by specified carriers through the priceline.com service and imposes limitations
on the code share arrangements of specified carriers. Delta also may require the
exclusion of specific markets in order for certain other airlines to
participate. These provisions could limit priceline.com's ability to expand its
airline ticket service. In addition, priceline.com's ability to transfer or
license its intellectual property to other travel providers is limited in the
manner set forth in the agreement.

In connection with the Airline Participation Agreement with Delta,
priceline.com also issued a
warrant to Delta to purchase up to 18,619,402 shares of common stock at an
exercise price of approximately $0.93 per share. The Delta warrant will become
exercisable at the earlier of December 31, 2005, or Delta's achievement of
certain performance thresholds of ticket sales.

Priceline.com also has issued to several participating airlines warrants to
purchase an aggregate of 3,187,500 shares of common stock, comprised of warrants
to purchase 937,500 shares of common stock at an exercise price of $3.20 per
share, warrants to purchase 1,250,000 shares of common stock at an exercise
price of $6.40 per share and warrants to purchase 1,000,000 shares of common
stock at an exercise price of approximately $97.41 per share. The warrants
having an exercise price of $3.20 per share become exercisable on October 28,
1999. With respect to the warrants having an exercise price of $6.40 per share,
warrants relating to one-half of the underlying shares become exercisable on
December 31, 1999, and warrants relating to the remaining underlying shares
become exercisable on December 31, 2000, subject to earlier termination of such
warrants in the circumstances identified in the warrant agreement. The warrants
having an exercise price of $97.41 per share become exercisable upon the earlier
of July 16, 2004 or the airline's achievement of various performance thresholds
based upon ticket sales.

FINANCING ALLIANCES

In connection with priceline.com's home financing service, priceline.com has
entered into a joint marketing relationship with LendingTree, an Internet based
mortgage service provider. Under this arrangement, priceline.com is responsible
for maintaining the mortgage service for the priceline.com Web site and for
consumer marketing. LendingTree provides the back-end processing system, which
presents the priceline.com offers to multiple participating lending institutions
for consideration.

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by the mortgage program, and the balance is earned by LendingTree. LendingTree
is responsible for providing (1) the substantive mortgage content of the
mortgage service for the priceline.com Web site; (2) a network of lenders to
participate in the mortgage program; (3) customer service; and (4) the software
required to effect a communication system between priceline.com, LendingTree and
the participating lenders. LendingTree also is responsible for compliance with
all regulations applicable to the mortgage service and products, including the
maintenance of requisite broker licenses, registration, approvals and
exemptions. The initial term of the agreement began on August 1, 1998, expires
one year from the commencement of the priceline.com mortgage service and renews
automatically thereafter. The agreement may be terminated by either party after
the initial term expires, or immediately in the event that the other party
materially breaches the agreement or becomes subject to a bankruptcy proceeding.

HOTEL ALLIANCES

In connection with priceline.com's hotel service, priceline.com has entered
into letter agreements with 39 hotel groups, which cover numerous brands and
include several of the leading national hotel chains. The agreements generally
provide for the hotels to supply priceline.com with competitive net rates for
hotel properties included in the priceline.com service. Hotels must be of 2-star
quality or higher, with priceline.com to make the final quality determination.
These letter agreements do not require the hotels to provide any minimum level
of inventory. In most cases, the agreements are cancellable by either party at
any time.

AUTOMOTIVE ALLIANCE

Priceline.com has entered into a co-marketing agreement with AutoNation,
Inc., a leading national automotive retailer. Under the terms of the
co-marketing agreement, consumer offers for automobiles submitted through the
priceline.com service will be offered to AutoNation dealers first. If no
AutoNation dealers accept a customer's offer, such offer will be submitted to
other dealers in the market. The service is being offered initially in the Tampa
and St. Petersburg, Florida markets, with plans to expand to additional markets
nationwide.

ADAPTIVE MARKETING ALLIANCES

During 1998 and the first quarter of 1999, our adaptive marketing revenues
were derived primarily from fees paid by Capital One Bank for qualifying credit
card applications submitted over the priceline.com service in connection with
customer offers for airline tickets. Effective May 1, 1999, our relationship
with Capital One ended. Since that time, our credit card adaptive marketing
program revenues have been attributable to our adaptive marketing relationship
with First USA Bank, a leading national credit card issuer. Under the First USA
adaptive marketing program, priceline.com enables its customers to increase the
amount of their offers by a specified amount by applying online for a First USA
credit card and offers other promotions linked to the First USA customer
acquisition program. The fee structure of the First USA program is based on
different factors than the factors that were applicable under the Capital One
program. Under the First USA program, priceline.com earns fees (1) upon the
opening of credit card accounts originated through the priceline.com service, up
to a specified maximum amount of five million accounts, subject to reduction
under certain circumstances by First USA; (2) upon the activation of credit card
accounts acquired for First USA through the priceline.com service and based upon
the use of such accounts; and (3) for transfers of balances from other credit
cards to First USA credit cards through the priceline.com service.

The First USA agreement has a term of five years, subject to certain earlier
termination and repricing rights of First USA. For example, subject to
priceline.com's rights of renegotiation, First USA has the right to terminate
the agreement after one year (and earlier under certain circumstances) if its
financial returns

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under the adaptive marketing program are not at least equivalent to certain
agreed upon levels. In addition, a portion of the fees earned under the First
USA program is required to be reinvested in program incentives. The full
financial statement impact of the shift from the Capital One adaptive marketing
program to the First USA adaptive marketing program will not be known until
completion of future periods.

Priceline.com recently has entered into adaptive marketing agreements with
Sprint Communications Company L.P., Discover Financial Services, Inc. and
Earthlink Network, Inc. The Sprint agreement is a short-term agreement under
which priceline.com, during a twelve-week test program, will earn fees from
Sprint in connection with customers agreeing to switch their long distance
telephone service to Sprint. Priceline.com and Sprint are currently in the
process of defining the program and the launch date has not yet been determined.
We are also evaluating similar programs with other long distance carriers.

Under the Discover adaptive marketing program, selected customers will be
able to increase the amount of their offers by a specified amount by applying
online for a Discover credit card through the priceline.com service.
Priceline.com will receive a fee from Discover Financial Services for each
qualifying credit card application submitted through the priceline.com service.
Priceline.com will also receive a fee for any qualifying upgrade of an
established Discover credit card account submitted through the priceline.com
service. The Discover adaptive marketing program is expected to be implemented
during the third quarter of 1999 and will be offered to selected customers who
have already participated, or who have declined participation, in the First USA
adaptive marketing program.

COMPETITION

Priceline.com competes with both online and traditional sellers of the
products and services offered on priceline.com. The market for selling products
and services over the Internet is new, rapidly evolving and intensely
competitive. Current and new competitors can launch new sites at a relatively
low cost. In addition, the traditional retail industry for the products and
services priceline.com offers is intensely competitive.

Priceline.com currently or potentially competes with a variety of companies
with respect to each product or service it offers. With respect to travel
products, these competitors include:

- Internet travel agents such as Travelocity, Preview Travel and Microsoft's
Expedia;

- traditional travel agencies;

- consolidators and wholesalers of airline tickets and other travel
products, including online consolidators such as Cheaptickets.com;

- individual airlines, hotels, rental car companies, cruise operators and
other travel service providers; and

- operators of travel industry reservation databases such as Worldspan and
Sabre.

Priceline.com's current or potential competitors with respect to new
automobiles include traditional and online auto dealers, including newly
developing auto super stores such as AutoNation, Auto-by-Tel and Microsoft's
CarPoint. With respect to financial service products, priceline.com's
competitors include:

- banks and other financial institutions;

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- online and traditional mortgage and insurance brokers, including
mortgage.com, Quicken Mortgage, E-Loan and iOwn, Inc.; and

- insurance companies.

While priceline.com faces competition from all of these current or potential
competitors, its business and financial position would be particularly at risk
if the airlines chose to establish their own buyer-driven commerce system to
sell excess inventory.

Priceline.com potentially faces competition from a number of large Internet
companies and services that have expertise in developing online commerce and in
facilitating Internet traffic, including Amazon.com, America Online, Microsoft
and Yahoo!, who could choose to compete with priceline.com either directly or
indirectly through affiliations with other e-commerce companies. Other large
companies with strong brand recognition, technical expertise and experience in
Internet commerce could also seek to compete with priceline.com. Competition
from these and other sources could have a material adverse effect on
priceline.com's business, results of operations and financial condition.

Priceline.com believes that the principal competitive factors in its markets
are brand recognition, price, Web site accessibility, ability to fulfill offers,
customer service, reliability of delivery, ease of use, and technical expertise
and capabilities. Many of priceline.com's current and potential competitors,
including Internet directories and search engines and large traditional
retailers, have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing, technical and other
resources than priceline.com. Some of these competitors may be able to secure
products and services on more favorable terms than priceline.com. In addition,
many of these competitors may be able to devote significantly greater resources
to:

- marketing and promotional campaigns;

- attracting traffic to their Web sites;

- attracting and retaining key employees; and

- Web site and systems development.

Increased competition could result in reduced operating margins and loss of
market share and could damage priceline.com's brand. There can be no assurance
that priceline.com will be able to compete successfully against current and
future competitors or that competition will not have a material adverse effect
on priceline.com's business, results of operations and financial condition.

OPERATIONS AND TECHNOLOGY

Priceline.com's business is supported by a state of the art systems
platform, which was designed with an emphasis on scalability, performance and
reliability. Priceline.com's core demand collection and offer processing systems
are proprietary to priceline.com. The software platform and architecture are
built on server-side Java, C++, and ISO standard SQL scripts integrated with an
Oracle relational database system. This internal platform was designed to
include open application protocol interfaces that can provide real-time
connectivity to vendors in the range of industries in which the priceline.com
operates. These include large global inventory systems, such as airline and
hotel room reservation systems, for example, the Worldspan central reservation
systems; and financial service providers; as well as individual inventory
suppliers, such as auto dealers, individual hotels and hard goods merchants.
Priceline.com's Internet servers utilize Verisign digital certificates to help
it conduct secure communications and transactions.

Priceline.com out-sources most of its call center and customer service
functions, and uses a real-time interactive voice response system with transfer
capabilities to its call centers and customer service centers in Stamford,
Connecticut; Columbus, Ohio; and Charlotte, North Carolina.

Priceline.com's systems infrastructure, Web and database servers are hosted
at Exodus Communications, Inc. in Jersey City, New Jersey, which provides
communication lines from multiple providers including UUNet and AT&T, as well as
24-hour monitoring and engineering support. Exodus has its own

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generator and multiple back-up systems in Jersey City. Priceline.com also
maintains an uninterruptible power supply system and generator and redundant
servers at its Stamford, Connecticut headquarters to provide service capability
if the Exodus site fails.

Priceline.com also offers phone service through its toll-free number,
1-800-Priceline, which allows consumers who do not have access to a computer to
phone in their orders. In addition, consumers who choose not to transmit their
credit card information via the Internet have the option of submitting their
credit card information through the phone service. Priceline.com also uses its
toll-free number to provide customer service. Because priceline.com is an
Internet business, it intends to phase out its telephone ordering and credit
card submission services over time and, in the future, will use its toll-free
number only to provide customer service.

INTELLECTUAL PROPERTY

Priceline.com holds a business process patent issued by the United States
Patent and Trademark Office which is directed to a unique buyer-driven commerce
system. While so-called business process patents are only now becoming widely
understood by the general business community, a decision by the Court of Appeals
for the Federal Circuit (the highest United States appellate court for
patent-related appeals below the United States Supreme Court), recently affirmed
the validity of patents covering software-implemented business processes. STATE
STREET BANK & TRUST CO. V. SIGNATURE FINANCIAL GROUP, INC. (July 1998).

Priceline.com currently holds three issued United States patents, No.
5,794,207, No. 5,797,127 and No. 5,897,260, as well as 25 pending United States
patent applications and four pending international patent application.
Priceline.com is in the process of filing at least three more patent
applications, with an ongoing program for identifying and protecting new
inventions. Priceline.com's core business method patent is directed to a unique
buyer-driven commerce system using a computer to collect credit card-backed or
other financial account-backed conditional purchase offers to present to
multiple sellers, receive one or more acceptances or fulfillments of these
offers, and use the credit card or other financial account to provide a payment
to one or more of the sellers. The pending patent applications are directed to
various operational features of the system, as well as to product-specific
enhancements.

While priceline.com believes that its core buyer-driven commerce patent,
together with its pending patent applications, help to protect the priceline.com
business, there can be no assurance that (1) the core buyer-driven patent or any
other patent can be successfully defended against challenges by third parties;
(2) the pending patent applications will result in the issuance of patents; (3)
competitors or potential competitors of priceline.com will not devise new
methods of competing with the company that are not covered by priceline.com's
patent or patent applications; (4) because of variations in the application of
our business model to each of our products and services, our core buyer-driven
commerce patent may not be effective in preventing one or more third parties
from utilizing a copycat business model to offer the same product or service in
one or more categories; (5) new prior art will not be discovered which may
diminish the value of or invalidate an issued patent; or (6) a third party will
not have or obtain one or more patents that prevent priceline.com from
practicing features of its business or will require priceline.com to pay for a
license to use those features. Priceline.com has been notified that a third
party patent applicant has challenged its core patent through an interference
action in the United States Patent and Trademark Office. See "--Legal
Proceedings." In addition, priceline.com has learned of several Internet travel
services that appears to use customer-offer based transaction models.

Walker Digital currently owns the assets and intellectual property related
to two new areas of e-commerce into which priceline.com may expand its "name
your price" business model, one involving consumer-to-consumer sales and the
other involving the sale of retail merchandise. Priceline.com may license its
brand name and "name your price" business model to two new companies formed to
develop these businesses. Walker Digital may contribute assets and intellectual
property to these companies in return for an equity interest in these companies.

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Walker Digital owns the intellectual property rights underlying the
technology associated with priceline.com's adaptive marketing programs. Walker
Digital has licensed to priceline.com the right to use these intellectual
property rights under a perpetual, non-exclusive, royalty-free license
agreement. Walker Digital has several pending United States patent applications
directed to different aspects of the processes and technology supporting
adaptive marketing programs.

Priceline.com seeks to protect its copyrights, service marks, trademarks,
trade dress and trade secrets through a combination of laws and contractual
restrictions, such as confidentiality agreements. For example, priceline.com
attempts to register its trademarks and service marks in the United States and
internationally. However, effective trademark, service mark, copyright and trade
secret protection may not be available in every country in which priceline.com's
services are made available online. See "Risk Factors--Our Success Depends on
Our Ability to Protect Our Intellectual Property." A third party has sued
priceline.com for, among other things, misappropriation of trade secrets. See
"Legal Proceedings."

Priceline.com currently owns the Internet domain name "priceline.com."
Domain names generally are regulated by Internet regulatory bodies. The
relationship between regulations governing domain names and laws protecting
trademarks and similar proprietary rights is unclear. Priceline.com, therefore,
could be unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of its trademarks and other proprietary
rights. See "Risk Factors--Our Success Depends on Our Ability to Protect Our
Intellectual Property."

GOVERNMENTAL REGULATION

The products and services offered through the priceline.com service are
regulated by federal and state governments.

TRAVEL SERVICES

Priceline.com is subject to the laws and regulations of a number of states
governing the offer and/or sale of travel services. For example, priceline.com
is registered as a "seller of travel" under the California Seller of Travel Act
and is a member of the Airlines Reporting Corporation. In addition, a number of
state travel laws and regulations require compliance with specific disclosure,
bond and/or other requirements.

NEW CAR SALES

A number of states have laws and regulations governing the registration and
conduct of automobile dealers and brokers. Such laws generally provide that any
person receiving direct or indirect compensation for selling automobiles or
brokering automobile transactions must register as an automobile broker or
dealer. Registration for automobile dealers/brokers may, among other things,
require the registrant to maintain a physical office in the applicable state, a
dealer lot zoned for automobile sales within the applicable state and/or a
franchise agreement with the manufacturers of the automobiles to be sold. With
the planned expansion of its new automobile service from the New York
metropolitan area to all 48 contiguous states, priceline.com will attempt to
register as an automobile broker/dealer in the jurisdictions where registration
is required provided that it can reasonably comply with the requirements for
registration imposed by each jurisdiction. However, priceline.com may not be
able to register in all states. For example, priceline.com will not be able to
register in a jurisdiction that requires a dealer zoned lot or a franchise
agreement with manufacturers of the automobiles to be sold. Priceline.com will
work with the regulators of the various jurisdictions to obtain waivers of such
requirements, but it may not be successful in its efforts.

In jurisdictions where priceline.com cannot obtain registration, it is
possible that state regulatory bodies could take a strict enforcement position
and could require priceline.com to register as an automobile broker/dealer in as
a condition to offering our new automobile service in their states. In that

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case, priceline.com may be unable to continue to make its new automobile
services available in those jurisdictions.

HOME FINANCING SERVICES

Most states have laws and regulations governing the registration or
licensing and conduct of persons providing mortgage brokerage services. Such
laws and regulations also typically require certain consumer protection
disclosures, loan solicitation procedures and a variety of other practices
throughout the various stages of the mortgage solicitation, application and
approval process.

In addition to state law, mortgage brokerage services are heavily regulated
by federal law. For example, the Real Estate Settlement Procedures Act prohibits
the payment and receipt of mortgage loan referral fees. The act, however, does
permit persons to be compensated for the fair market value of non-referral
services actually rendered.

Priceline.com introduced its home financing service in January 1999.
LendingTree serves as the back-end processing system, which presents offers
received through the priceline.com service to multiple mortgage lending
institutions for consideration, for all of priceline.com's home financing
services,
Priceline.com provides and is responsible for maintaining the home financing
service on its Web site and develops and purchases all advertising. LendingTree
compensates priceline.com for the fair market value of its non-referral
services. Priceline.com believes that offering the priceline.com home mortgage
service does not require our registration under or compliance with the mortgage
or similar brokerage laws of any jurisdiction. However, it is possible that one
or more regulatory authorities could seek to enforce existing laws, or otherwise
enact new legislation, requiring priceline.com's registration and compliance and
could scrutinize the compensation arrangement between LendingTree and
priceline.com under Real Estate Settlement Procedures Act or other federal or
state laws. Such action could severely interfere with the conduct of the
priceline.com business.

LendingTree provides the back-end processing system, which presents offers
we receive to multiple mortgage lending institutions for consideration, for the
home financing service on priceline.com's Web site and is responsible for
maintaining the necessary and appropriate state registrations and licenses
associated with LendingTree's mortgage brokerage services. If a federal or state
regulatory authority, or an aggrieved customer, should in the future claim that
LendingTree has failed to comply fully with applicable federal or state law
requirements pertaining to LendingTree's provision of mortgage brokerage
services, the priceline.com home mortgage service could be materially and
adversely affected and priceline.com may be unable to continue to make its home
mortgage services Web site available, either to residents of affected state(s)
or on a national basis.

Priceline.com is exploring the possibility of acquiring a minority interest
in, and licensing the priceline.com name and business model to, a newly formed
subsidiary of a federally chartered savings and loan association. This entity
may be known as "priceline.mortgage.com" and also may serve as an entity that
could accept mortgage applications or mortgage qualification loans.

CONSUMER PROTECTION AND RELATED LAWS

All of priceline.com's services are subject to federal and state consumer
protection laws and regulations prohibiting unfair and deceptive trade
practices. Priceline.com also is subject to related "plain language" statutes in
place in many jurisdictions, which require the use of simple, easy to read,
terms and conditions in contracts with consumers.

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commerce could result in more stringent consumer protection laws that impose
additional compliance burdens on online companies. Such consumer protection laws
could result in substantial compliance costs and interfere with the conduct and
growth of the priceline.com business.

BUSINESS QUALIFICATION LAWS

Because priceline.com's service is available over the Internet in multiple
states, and because it sells to numerous consumers resident in such states, such
jurisdictions may claim that priceline.com is required to qualify to do business
as a foreign corporation in each such state. Priceline.com is qualified to do
business in a limited number of states, and failure by priceline.com to qualify
as a foreign corporation in a jurisdiction where it is required to do so could
subject priceline.com to taxes and penalties for the failure to so qualify and
limit its ability to conduct litigation in such states.

INTERNATIONAL EXPANSION

Priceline.com intends to explore opportunities for expanding the
priceline.com business into international markets. It is possible, however, that
the priceline.com demand collection system will not be readily adaptable to
regulatory environments of certain foreign jurisdictions. In addition, there are
various other risks associated with international expansion. They include
language barriers, unexpected changes in regulatory requirements, trade
barriers, problems in staffing and operating foreign operations, changes in
currency exchange rates, difficulties in enforcing contracts and other legal
rights, economic and political instability and problems in collection.

LEGAL PROCEEDINGS

On January 6, 1999, priceline.com received notice that a third party patent
applicant and patent attorney, Thomas G. Woolston, purportedly had filed in
December 1998 with the United States Patent and Trademark Office a request to
declare an "interference" between a patent application filed by Woolston
describing an electronic market for used and collectible goods and
priceline.com's core buyer-driven commerce patent. Priceline.com has received a
copy of a Petition for Interference from Woolston, the named inventor in at
least three United States Patent applications titled "Consignment Nodes," one of
which has issued as a patent (U.S. Patent Number: 5,845,265). Priceline.com
currently is awaiting information from the Patent Office regarding whether it
will initiate an interference proceeding concerning Woolston's patent
application and priceline.com's core buyer-driven commerce patent. An
interference is an administrative proceeding instituted in the Patent Office to
determine questions of patentability and priority of invention between two or
more parties claiming the same patentable invention. There is no statutory
period within which the Patent Office must act on an interference request. If an
interference is declared and proceeds through a final hearing in the Patent
Office, a final judgment is made by the Patent Office as to inventorship.
Following such final judgment, appeals could be made in Federal court. While
there can be no certainty as to time periods, interference proceedings typically
take years to resolve.

As a threshold to the initiation of an interference proceeding, Woolston
must show that his patent application supports claims that he copied from the
priceline.com core buyer-driven commerce patent. In order to make this showing,
he would have to prove, among other things, that he invented the subject matter
of the priceline.com claims before the inventors of the priceline.com patent. If
the Patent Office were to find that Woolston's patent application supported the
copied priceline.com claims, it would resolve the interference by awarding
inventorship to the party with the earliest proven date of invention. Woolston
announced in February 1999 an agreement to license his issued patent and pending
patent applications to the owner of a competing Internet travel service.

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patent claims. However, it is impossible to predict the outcome of an
interference with certainty. While Woolston claims to have an earlier invention
date by a period of approximately sixteen months, the final decision as to
priority of invention would be made by the Patent Office after considering facts
provided by each party during the interference proceeding. If an interference is
declared and thereafter resolved in favor of Woolston, such resolution could
result in an award of some or all of the disputed patent claims to Woolston. If,
following such award, Woolston were successful in a patent infringement action
against priceline.com, including prevailing over all defenses available to
priceline.com, such as those of non-infringement and invalidity, this could
require priceline.com to obtain licenses from Woolston and pay damages from the
date such patent issued at a cost which could significantly adversely affect
priceline.com's business. If Woolston prevailed in both an interference and an
infringement action, then priceline.com could be enjoined from conducting
business through the priceline.com service to the extent covered by the patent
claims awarded to Woolston. In addition, defense of the interference action may
be expensive and may divert management attention away from priceline.com's
business.

On January 19, 1999, a lawsuit was filed in the United States District Court
for the Northern District of California by Marketel International, Inc., a
California corporation, under the caption MARKETEL INTERNATIONAL INC. V.
PRICELINE.COM ET. AL.,No. C-99-1061 (N.D. CA 1999), against priceline.com,
Priceline Travel, Walker Asset Management, Walker Digital, Mr. Jay S. Walker,
priceline.com's Founder and Vice Chairman, and Mr. Andre Jaeckle, an individual
who made a $1.0 million loan to priceline.com bearing interest at a rate of 6%
per year and, in connection with the loan, received warrants, which have
subsequently been fully exercised, to purchase 62,500 shares of our common
stock. On February 22, 1999, Marketel filed an amended complaint, and March 17,
1999, Marketel filed a second amended complaint. The second amended complaint
includes as defendants, Mr. Timothy G. Brier, our Executive Vice President,
Travel, Mr. Bruce Schneier, and an individual and consultant to Walker Digital,
and Mr. James Jorasch, an individual and employee of Walker Digital, and alleges
causes of action for, among other things, misappropriation of trade secrets,
breach of contract, conversion, breach of confidential relationship, copyright
infringement, fraud, unfair competition, and false advertising, and seeks
injunctive relief and damages in an unspecified amount. In its second amended
complaint, Marketel alleges, among other things, that the defendants conspired
to misappropriate Marketel's business model, which it describes as a
buyer-driven electronic marketplace for travel services and its appurtenant
techniques, market research, forms, plans and processes, and which an executive
of Marketel allegedly provided to Messrs. Walker and Jaeckle in confidence
approximately ten years ago. The second amended complaint also alleges that
three former Marketel employees are the actual sole inventors or co-inventors of
U.S. patent No. 5794207, which was issued on August 11, 1998 with Jay S. Walker,
Bruce Schneier and James Jorasch listed as the inventors and which patent has
been assigned to priceline.com. Marketel asks that the patent's inventorship be
corrected accordingly.

Based upon publicly available information, priceline.com believes that
Marketel's fax and fee-based business was launched in 1991 and ceased operations
seven months later. Priceline.com's Internet-based model was independently
developed by Walker Digital and priceline.com, and practiced by priceline.com
starting in 1998. Based on publicly available information and Marketel's second
amended complaint, priceline.com understands that Marketel operated a fax-based
travel information service which offered consumers, travel agents and/or
consolidators the opportunity to purchase specially printed forms. These forms,
when accompanied by an additional non-refundable fee, allowed prospective ticket
buyers to fax to Marketel credit-card guaranteed bids for airline travel at a
bid price specified by the buyer. Priceline.com believes that Marketel has not
engaged in any regular commercial activities since ceasing operations in 1992.
Based upon publicly available information, Marketel reactivated its status as a
corporation by satisfying its back-due tax obligations to the State of
California shortly after the filing of its complaint.

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<PAGE>

material legal and factual allegations contained in Marketel's second amended
complaint and believe that the second amended complaint is without merit.
Priceline.com intends to defend vigorously against the action. Since May 28,
1999, there has been a discovery stay in effect, which was caused by the
withdrawal of Marketel's counsel. Marketel has retained new counsel, and
priceline.com now anticipates moving forward with discovery. Defending the
lawsuit may involve significant expense and, due to the inherent uncertainties
of litigation, there can be no certainty as to the ultimate outcome. Pursuant to
the terms of the indemnification obligations contained in the Purchase and
Intercompany Agreement with Walker Digital, Walker Digital has agreed to
indemnify priceline.com for damages, liability and legal expenses incurred in
connection with the Marketel litigation.

From time to time priceline.com has been and expects to continue to be
subject to legal proceedings and claims in the ordinary course of business,
including claims of alleged infringement of third party intellectual property
rights by the company. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.

EMPLOYEES

Currently, priceline.com has 263 full-time employees. In addition, through
an Intercompany Agreement with Walker Digital Corporation, priceline.com
receives a variety of services, including research and development, patent and
other intellectual property services and technical support. Priceline.com also
employs independent contractors to support its customer service and system
support functions. See "Certain Transactions."

Priceline.com has never had a work stoppage and its employees are not
represented by any collective bargaining unit. It considers its relations with
its employees to be good. Priceline.com's future success will depend, in part,
on its ability to continue to attract, integrate, retain and motivate highly
qualified technical and managerial personnel, for whom competition is intense.

FACILITIES

Priceline.com's executive, administrative and operating offices are located
in approximately 40,000 square feet of leased office space located in Stamford,
Connecticut. Priceline.com is subleasing this office space from Walker Digital
on a month-to-month basis. Priceline.com also has guaranteed Walker Digital's
obligations under a lease of office space in New York City that is used by both
companies. Priceline.com anticipates that it will require additional space
within the next 12 months to accommodate its anticipated growth and that
suitable office space will be available on commercially reasonable terms.
Priceline.com currently is negotiating a lease of new premises in Connecticut.
The premises are substantially larger than priceline.com's current premises and,
if a lease is signed, priceline.com's rental expense is likely to increase
significantly.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information regarding the directors and executive
officers of priceline.com as of the date hereof. Service with priceline.com
prior to July 1998 was rendered to priceline.com's predecessor, priceline.com
LLC.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Richard S. Braddock............................. 57 Chairman and Chief Executive Officer
Jay S. Walker................................... 43 Founder and Vice Chairman
Daniel H. Schulman.............................. 41 President and Chief Operating Officer and
Director
Paul E. Francis................................. 44 Chief Financial Officer
Ronald V. Rose.................................. 48 Chief Information Officer
Timothy G. Brier................................ 51 Executive Vice President, Travel
Melissa M. Taub................................. 35 Senior Vice President, General Counsel and
Secretary
Thomas P. D'Angelo.............................. 39 Vice President, Finance and Controller
Paul A. Allaire................................. 60 Director
Ralph M. Bahna(a)............................... 56 Director
Paul J. Blackney(b)............................. 52 Director
William E. Ford(b).............................. 38 Director
Marshall Loeb(a)................................ 70 Director
N.J. Nicholas, Jr.(a)........................... 59 Director
Nancy B. Peretsman(b)........................... 45 Director
</TABLE>

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

(a) Member of the Compensation Committee.

(b) Member of the Audit Committee.

RICHARD S. BRADDOCK has served as Chairman of the board of directors and
Chief Executive Officer of priceline.com since August 1998. From December 1997
to January 1999, he served as the non-executive Chairman of True North
Communications, Inc., an advertising company, and Ion Laser Technology, a laser
technology company. From September 1996 to August 1997, he served as a special
advisor to General Atlantic Partners, LLC, a private equity fund. Mr. Braddock
was a principal of Clayton, Dubilier & Rice, a private equity fund, from June
1994 through September 1995. He also served as Chief Executive Officer of Medco
Containment Services during 1993. From 1973 to 1993, Mr. Braddock held a variety
of positions at Citicorp and its principal subsidiary, Citibank, N.A., including
President and Chief Operating Officer. Mr. Braddock also serves as a director of
NewSub Services, Inc.; Amtec, Inc, a semiconductor equipment manufacturer;
Eastman Kodak Company, an imaging products company; E*TRADE Group, Inc., a
provider of online investing services; and Cadbury Schweppes plc, a global
beverage and confectionery manufacturer.

JAY S. WALKER is priceline.com's Founder and has served as Vice Chairman of
the board of directors of priceline.com since August 1998. From inception
through August 1998, he served as Chairman of the board of directors and Chief
Executive Officer of priceline.com. Mr. Walker is an entrepreneur and has been
actively engaged in the start-up of new enterprises for more than 15 years. Mr.
Walker serves as Chairman of the board of directors of Walker Digital
Corporation, which he founded in September 1994. In addition, he is the
co-founder and non-executive Chairman of NewSub Services, Inc., a direct
marketing firm he co-founded in 1992.

DANIEL H. SCHULMAN has been the President and Chief Operating Officer of
priceline.com since July 1, 1999. He has served as a director of priceline.com
since July 15, 1999. From December 1998 to July 1999,

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Mr. Schulman was President of the AT&T Consumer Markets Division of AT&T Corp.,
a telecommunications services company, and was appointed to the AT&T Operations
Group, the company's most senior executive body. From March 1997 to November
1998, Mr. Schulman was President of AT&T WorldNet(SM) Service. From December
1995 to February 1997, he was Vice President, Business Services Marketing of the
AT&T Business Markets Division and from May 1994 to November 1995, Mr. Schulman
was Small Business Marketing Vice President of the AT&T Business Markets
Division. Mr. Schulman also serves as director of iVillage, an Internet company
focused on building an online community of women; the Global Internet Project,
an international group committed to the worldwide growth of the Internet;
INROADS, an organization providing opportunities for minorities in Fortune 500
companies; and Teach for America, an organization focused on selecting teachers
for urban and inner city areas.

PAUL E. FRANCIS has been the Chief Financial Officer of priceline.com since
its inception. From June 1997 to December 1998, Mr. Francis also was Chief
Financial Officer of Walker Digital. From April 1993 to February 1997, Mr.
Francis was Executive Vice President--Finance and Administration, Chief
Financial Officer and a member of the Board of Directors of Ann Taylor Stores
Corporation, a specialty retailer of women's apparel. From 1986 to April 1993,
Mr. Francis served in a variety of positions at Merrill Lynch & Co. and certain
of its affiliates, including Managing Director in the Investment Banking
Division.

RONALD V. ROSE has been the Chief Information Officer of priceline.com since
March 1999. From September 1995 to March 1999, Mr. Rose served in various
capacities with Standard & Poor's, a financial services company, including Chief
Technology Officer of Retail Markets. While at Standard & Poor's, Mr. Rose led
the development of many Internet initiatives within the Financial Information
Services area and chaired the Internet Architecture Council. In 1998, Mr. Rose
assisted in creating Xpresso, a leading JAVA financial desktop computer, and
from 1991 to 1995, Mr. Rose assisted Bedford Associates, Inc., a technology
company, in creating two technology start-up business units focused on
telecommunications and technology consulting.

TIMOTHY G. BRIER has been an Executive Vice President, Travel of
priceline.com since its inception, and the President of Priceline Travel since
June 1998. In 1994, Mr. Brier co-founded CAP Systems, a division of NewSub
Services, Inc., that provides affinity marketing programs to airlines, and
served as its President from 1995 to 1998. From 1990 to 1995, he was Vice
President of Marketing for Continental Airlines. From 1988 to 1990, Mr. Brier
was Vice President of Marketing Planning for Pan American World Airways and from
1985 to 1988 was Vice President of Marketing for TWA.

MELISSA M. TAUB has been Senior Vice President, General Counsel and
Secretary of priceline.com since September 1998. Prior to joining priceline.com,
Ms. Taub practiced law in the Business Clients Department of Cummings &
Lockwood, a law firm with its principal office located in Stamford, Connecticut,
serving as a partner from January 1998 to September 1998 and an associate from
1989 to December 1997.

THOMAS P. D'ANGELO has been Vice President, Finance and Controller of
priceline.com since October 1997. From April 1993 to October 1997, he was Chief
Financial Officer of Direct Travel, Inc., a corporate travel agency. Mr.
D'Angelo has spent the last 19 years in the travel industry holding various
financial management positions with leading travel management companies.

PAUL A. ALLAIRE has served as a director of priceline.com since February
1999. Since 1991, he has been the Chairman of the Board of Directors and the
Chairman of the Executive Committee of Xerox Corporation, a company offering
document processing services and products, and from 1990 to May 1999, he was the
Chief Executive Officer of Xerox. Mr. Allaire also serves as a director of
various affiliates of Xerox. Mr. Allaire also serves as a director of J.P.
Morgan & Co., Inc., a global financial services company; Lucent Technologies
Inc., a global communications systems and software company; Sara Lee
Corporation, a global consumer packaged goods company; and SmithKline Beecham
p.l.c., a healthcare company.

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<PAGE>
Mr. Allaire is a member of the Business Council and is a member of the board of
directors of the Council on Foreign Relations, the Ford Foundation, and the
Council on Competitiveness.

RALPH M. BAHNA has served as a director of priceline.com since July 1998.
Since 1992, Mr. Bahna has been the President of Masterworks Development Corp., a
company he founded to develop a chain of hotels named Club Quarters-TM-. From
1980 to 1989, Mr. Bahna served as the Chief Executive Officer of Cunard Lines,
Ltd., and the Cunard Group of Companies.

PAUL J. BLACKNEY has served as a director of priceline.com since July 1998.
Mr. Blackney serves as Senior Vice President of Publishing and Federal Business
Services for The American Medical Association. Since January 1998, he has been
the Chairman of XTRA On-Line Corporation, a business to business desktop booking
system. Since September 1993, he has been the Chairman and President of Galileo
Japan. From September 1993 to September 1997, Mr. Blackney served as President
and Chief Executive Officer of Apollo Travel Services Partnership, an airline
central reservation system, and from March 1990 to September 1993, he served as
Senior Vice President of Operations at Covia, an airline central reservation
system.

WILLIAM E. FORD has served as a director of priceline.com since July 31,
1998. He is a Managing Member of General Atlantic Partners, LLC, a private
equity firm that invests globally in software services and related information
technology companies, where he has served since 1991. Mr. Ford also serves as a
director of GT Interactive Software Corp., an interactive entertainment software
company; Quintiles Transnational Corp., a provider of full-service contract
research, sales, marketing and healthcare policy consulting and health
information management services to pharmaceutical, biotechnology, medical device
and healthcare industries; LHS Group Inc., a billing solutions company; E*TRADE
Group, Inc., an online discount broker; Eclipsys Corporation, a provider of
clinical, financial and administrative software solutions to the healthcare
industry; and several private information technology companies. He also serves
as a director of NewSub Services, Inc.

MARSHALL LOEB has served as a director of priceline.com since July 1998. He
is the Editor of the COLUMBIA JOURNALISM REVIEW and the author of MARSHALL
LOEB'S LIFETIME FINANCIAL STRATEGIES. Mr. Loeb also is the broadcast commentator
for the CBS Radio Network "Your Dollars" program. Mr. Loeb is a member of the
Board of Overseers for the Stern School of Business at New York University and
is the Chairman of the Advisory Board of the Bagehot Fellows Program at Columbia
University. From 1994 to 1996, he was a columnist for FORTUNE and from 1986 to
1994, he served as the Managing Editor of FORTUNE magazine. From 1980 to 1984,
he also was Managing Editor of MONEY magazine. Mr. Loeb also has served as the
Business Editor, Nation Editor and Economics Editor of TIME magazine.

N. J. NICHOLAS, JR. has served as a director of priceline.com since July
1998. Mr. Nicholas is a private investor and from 1990 to 1992 was the co-Chief
Executive Officer of Time Warner Inc. From 1986 to 1990, he was President of
Time Inc. Mr. Nicholas also is a director of BT Capital Partners, an affiliate
of Bankers Trust; Boston Scientific Corporation, a developer, manufacturer and
marketer of medical devices; and Xerox Corporation, a document processing
company. He also serves on the boards of several privately owned companies,
including NewSub Services, Inc., and is Chairman of the Advisory Board of the
Columbia University Graduate School of Journalism.

NANCY B. PERETSMAN has served as a director of priceline.com since February
1999. Since June 1995, she has been a Managing Director and Executive Vice
President of Allen & Company Incorporated, an investment bank. Prior to joining
Allen & Company Incorporated, Ms. Peretsman had been an investment banker since
1983 at Salomon Brothers Inc, where she was a Managing Director since 1990. She
served for fourteen years on the Board of Trustees of Princeton University and
is currently an Emerita Trustee. Ms. Peretsman also is Vice Chairman of the
board of The New School and serves on the board of Oxygen Media, an Internet and
cable television enterprise. Ms. Peretsman also serves on the board of NewSub
Services, Inc.

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<PAGE>
BOARD COMMITTEES

Priceline.com's board of directors has an Audit Committee and a Compensation
Committee. The Audit Committee of the board consists of Messrs. Paul J.
Blackney, William E. Ford and Ms. Nancy B. Peretsman. The Audit Committee
reviews priceline.com's financial statements and accounting practices, makes
recommendations to the board regarding the selection of independent auditors and
reviews the results and scope of the audit and other services provided by
priceline.com's independent auditors. Mr. Ford is Chairman of the Audit
Committee. The Compensation Committee of the board consists of Messrs. Paul A.
Allaire, Ralph M. Bahna and N.J. Nicholas, Jr. The Compensation Committee makes
recommendations to the board concerning salaries and incentive compensation for
priceline.com's officers and employees and administers priceline.com's employee
benefit plans. Mr. Nicholas is Chairman of the Compensation Committee.

DIRECTOR COMPENSATION

Directors who are also employees of priceline.com receive no compensation
for serving on the board of directors. With respect to directors who are not
employees of priceline.com, priceline.com reimburses such non-employee directors
for all travel and other expenses incurred in connection with attending board of
directors and committee meetings. Non-employee directors are also eligible to
receive stock option grants under the 1997 Omnibus Plan. Pursuant to such plan,
Messrs. Bahna, Blackney, Ford, Loeb and Nicholas and Ms. Peretsman received
grants of 31,250 options each in December 1998 and Mr. Allaire received a grant
of 37,500 options in December 1998. Such options have vested and are exercisable
at any time at an exercise price of $3.20 per share, subject to certain
restrictions described under "Shares Eligible for Future Sale."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee of the board of directors
is an officer or employee of priceline.com. No executive officer of
priceline.com serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on
priceline.com's Compensation Committee.

SUMMARY OF COMPENSATION

The following table sets forth information concerning compensation earned in
the fiscal year ended December 31, 1998, by priceline.com's Chief Executive
Officer and its other four most highly compensated executive officers.

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<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
----------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- -------------------------------------------------- --------- ----------- ----------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Richard S. Braddock(a)............................ 1998 112,500 -- 6,250,000 --(b)
Chairman and Chief Executive Officer
Jay S. Walker(c).................................. 1998 250,000 -- 1,515,000 --
Vice Chairman and Founder
Jesse M. Fink(d).................................. 1998 227,083 -- 2,443,750 1,028(e)
Chief Operating Officer
Paul E. Francis................................... 1998 225,000(f) -- 1,035,000 413(e)
Chief Financial Officer
Timothy G. Brier.................................. 1998 177,083 72,917 2,003,125 6,789(e)
Executive Vice President, Travel
</TABLE>

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

(a) Mr. Braddock commenced serving as Chairman and Chief Executive Officer in
August 1998.

(b) Excludes the grant to Mr. Braddock in July 1998 of a profits interest with
respect to 6,500,000 units in priceline.com's predecessor, priceline.com
LLC, which units were converted into 8,125,000 shares of common stock.

(c) Mr. Walker served as Chairman and Chief Executive Officer of priceline.com
LLC from its formation until its conversion into priceline.com in August
1998, and of priceline.com from its inception until August 1998.

(d) Effective June 30, 1999, Mr. Fink resigned from his position as Chief
Operating Officer of priceline.com. Mr. Fink is an employee of Walker
Digital.

(e) Represents life insurance premiums paid and, in the case of Mr. Fink,
disability insurance premiums paid for the fiscal year.

(f) Includes distributions as a member in priceline.com's predecessor,
priceline.com LLC.

STOCK OPTIONS

The following table sets forth information concerning the grant of stock
options to priceline.com's Chief Executive Officer and each of its other four
most highly compensated executive officers during the fiscal year ended December
31, 1998.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (A)
--------------------------------------------------------------------
NUMBER OF % OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED EXERCISE OR PRESENT
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION VALUE
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE ($) (B)
- ------------------------------------- ------------------- ------------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Richard S. Braddock.................. 6,250,000 30.6 0.80 6/1/2008 812,579
Jay S. Walker........................ 1,515,000 7.4 0.80 6/1/2008 196,969
Jesse M. Fink (c).................... 2,443,750 12.0 0.80 6/1/2008 317,718
Paul E. Francis...................... 1,035,000 5.1 0.80 6/1/2008 139,563
Timothy G. Brier..................... 2,003,125 9.8 0.80 6/1/2008 260,431
</TABLE>

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

(a) Options become exercisable as follows: (1) with respect to Mr. Braddock:
6,250,000 shares have vested, but are not exercisable until September 26,
1999; (2) with respect to Mr. Walker: (a) 1,382,500 shares are vested, but
are not exercisable until September 26, 1999, and (b) the remainder of the
shares vest and become exercisable on June 1, 2000; (3) with respect to Mr.
Fink: (a) 2,443,750 shares are vested, but are not exercisable until
September 26, 1999; (4) with respect to Mr. Francis: (a) 750,000 shares are
vested, but are not exercisable until September 26, 1999, and (b) the
remainder of the shares vest and become exercisable on June 1, 2000; and (5)
with respect to Mr. Brier: (a) 50,000 options have been exercised; (b)
1,512,500 shares are vested, but are not exercisable until September 26,
1999; and (c) the remainder of the shares vest and become exercisable on
June 1, 2000.

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<PAGE>
(b) Based on Black-Scholes pricing model, using a discount rate of 6 percent, an
expected life of 3 years, no dividends and no volatility.

(c) Effective June 30, 1999, Mr. Fink resigned from his position as Chief
Operating Officer of priceline.com. Mr. Fink is an employee of Walker
Digital.

EXERCISE OF OPTIONS AND YEAR-END VALUES

The following table sets forth information concerning the exercise of stock
options during the fiscal year ended December 31, 1998 by priceline.com's Chief
Executive Officer and each of its other four most highly compensated executive
officers and the fiscal year-end value of unexercised options.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SHARES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS
VALUE OPTIONS AT FY-END (#) AT FY-END ($) (A)
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAMES ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------------- --------------- ----------- --------------------- -------------------
<S> <C> <C> <C> <C>
Richard S. Braddock................... -- -- 0/6,250,000 0/18,750,000
Jay S. Walker......................... -- -- 0/1,515,000 0/4,545,000
Jesse M. Fink (b)..................... -- -- 0/2,443,750 0/7,331,250
Paul E. Francis....................... -- -- 0/1,035,000 0/3,105,000
Timothy G. Brier...................... -- -- 0/2,003,125 0/6,009,375
</TABLE>

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

(a) Assumes a fiscal year-end market price of $3.20 per share.

(b) Effective June 30, 1999, Mr. Fink resigned from his position as Chief
Operating Officer of priceline.com. Mr. Fink is an employee of Walker
Digital.

STOCK BASED PLANS

Pursuant to the priceline.com Incorporated 1997 Omnibus Plan, priceline.com
has granted awards of options to certain officers, other employees, consultants
and directors of priceline.com. The maximum number of shares of common stock
reserved for the grant or settlement of awards under the 1997 Omnibus Plan is
23,875,000, subject to adjustment as provided therein. Of such number,
22,719,557 options covering shares of common stock were outstanding under the
1997 Omnibus Plan as of July 29, 1999. In February 1999, priceline.com
established the priceline.com Incorporated 1999 Omnibus Plan, pursuant to which
awards will be made to certain officers, other employees, consultants and
directors of priceline.com from time to time following the consummation of this
offering. The maximum number of shares of common stock reserved for the grant or
settlement of awards under the 1999 Omnibus Plan is 9,375,000, subject to
adjustment. Of such number, options covering 3,775,505 shares of common stock
were outstanding under the 1999 Omnibus Plan as of July 29, 1999.

Set forth below is a description of the provisions of the 1999 Omnibus Plan
and the provisions of the 1997 Omnibus Plan. The description is only a summary
and is qualified in its entirety by the provisions of such plans. Terms not
defined herein have the meanings given to such terms in the respective plans.

PRICELINE.COM INCORPORATED 1997 OMNIBUS PLAN

The 1997 Omnibus Plan was ratified and approved by the board of directors
and stockholders of priceline.com and by the Board of Managers and the members
of priceline.com LLC in 1997. The 1997 Omnibus Plan is intended to promote the
long term financial interests and growth of priceline.com by providing
employees, officers, directors and consultants of priceline.com with appropriate
incentives and rewards to enter into and continue in the employ of, or their
relationship with, the company and to acquire

74
<PAGE>
a proprietary interest in the long-term success of the company; and to reward
the performance of individual officers, other employees, consultants and
directors in fulfilling their responsibilities for long-range achievements.

GENERAL

The 1997 Omnibus Plan provides for the granting of awards to such officers,
other employees, consultants and directors of priceline.com and its affiliates
as the compensation committee, which is the committee of the board appointed to
administer the 1997 Omnibus Plan, may select from time to time. Awards under the
1997 Omnibus Plan may be made in the form of options to acquire priceline.com
common stock. Some of the options granted under the 1997 Omnibus Plan may
qualify as "incentive stock options;" as defined in the Internal Revenue Code of
1986, generally referred to as the "Code," and some of the options granted under
the 1997 Omnibus Plan will not qualify as incentive stock options. Such options
are generally referred to as "non-qualified stock options." Awards under the
1997 Omnibus Plan may also be made in the form of appreciation rights with
respect to common stock, which appreciation rights may be granted in tandem with
other awards or may be granted independent of other awards, or may be made in
the form of restricted stock, phantom stock, stock bonuses or other awards.

If any shares subject to an award are forfeited, cancelled, exchanged or
surrendered or if an award otherwise terminates or expires without a
distribution of shares to the holder of such award, the shares of common stock
with respect to such award will, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for awards under the 1997 Omnibus Plan.

In the event that the compensation committee determines that any dividend or
other distribution (whether in the form of cash, common stock, or other
property), recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the common stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of holders of awards under the 1997 Omnibus Plan, then the compensation
committee will make such equitable changes or adjustments as it deems necessary
or appropriate to any or all of (1) the number and kind of shares of common
stock or other property (including cash) that may thereafter be issued in
connection with awards; (2) the number and kind of shares of common stock or
other property (including cash) issued or issuable in respect of outstanding
awards; (3) the exercise price, grant price, or purchase price relating to any
award; and (4) the maximum number of shares of common stock subject to
outstanding awards that may be awarded to any employee during any priceline.com
tax year; provided that, with respect to incentive stock options, such
adjustment shall be made in accordance with the applicable provisions of the
Code.

ADMINISTRATION

The 1997 Omnibus Plan will be administered by the compensation committee.
The compensation committee has the authority in its sole discretion, subject to
and not inconsistent with the express provisions of the 1997 Omnibus Plan, to
administer the 1997 Omnibus Plan and to exercise all the powers and authorities
either specifically granted to it under, or necessary or advisable in the
administration of, the 1997 Omnibus Plan, including, without limitation, the
authority to grant awards; to determine the persons to whom and the time or
times at which awards shall be granted; to determine the type and number of
awards to be granted, the number of shares of common stock to which an award may
relate and the terms, conditions, restrictions and performance goals relating to
any award; to determine whether, to what extent, and under what circumstances an
award may be settled, canceled, forfeited, exchanged, or surrendered; to make
adjustments in the performance goals in recognition of unusual or non-recurring
events affecting priceline.com or the financial statements of priceline.com, to
the extent not inconsistent with Section 162(m) of the Code, if applicable, or
in response to changes in applicable laws, regulations, or accounting
principles; to construe and interpret the 1997 Omnibus Plan and any award; to
prescribe, amend and rescind rules and regulations relating to the 1997 Omnibus
Plan; to determine the terms and

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provisions of agreements evidencing awards; and to make all other determinations
deemed necessary or advisable for the administration of the 1997 Omnibus Plan.

The compensation committee may, in its absolute discretion, without
amendment to the 1997 Omnibus Plan, (a) accelerate the date on which any option
or stand-alone appreciation right granted under the 1997 Omnibus Plan becomes
exercisable, waive or amend the operation of provisions respecting exercise
after termination of employment or otherwise adjust any of the terms of such
option or stand-alone appreciation right, (b) accelerate the vesting or waive
any condition imposed with respect to any restricted stock, phantom stock or
other awards and (c) otherwise adjust any of the terms applicable to any award.

AWARDS UNDER THE 1997 OMNIBUS PLAN

STOCK OPTIONS; STOCK APPRECIATION RIGHTS

Unless otherwise determined by the compensation committee, options granted
pursuant to the 1997 Omnibus Plan will become exercisable ratably over three
years commencing on the first anniversary of the date of grant, but in no event
may an option be exercised more than 10 years following the date of its grant.
The "option exercise price," which is the purchase price per share payable upon
the exercise of an option, will be established by the compensation committee;
PROVIDED, HOWEVER, that incentive stock options may not have an exercise price
less than the fair market value of a share of common stock on the date of grant.
The option exercise price is payable by any one of the following methods or a
combination thereof, to the extent permitted by the compensation committee: (1)
in cash or by personal check, certified check, bank cashier's check or wire
transfer; (2) subject to the approval of the compensation committee, in common
stock owned by the participant for at least six months prior to the date of
exercise and valued at their fair market value on the effective date of such
exercise; or (3) subject to the approval of the compensation committee, by such
other provision as the compensation committee may from time to time authorize.

The compensation committee also has the authority to specify, at the time of
grant or, with respect to non-qualified stock options at or after the time of
grant, that a participant shall be granted a new non-qualified stock option,
otherwise known as a "reload option," for a number of shares of common stock
equal to the number of shares of common stock surrendered by the participant
upon exercise of all or a part of an option in the manner described above,
subject to the availability of common stock under the 1997 Omnibus Plan at the
time of such exercise; PROVIDED, HOWEVER, that no reload option shall be granted
to a non-employee director. Reload options shall be subject to such conditions
as may be specified by the compensation committee in its discretion, subject to
the terms of the 1997 Omnibus Plan.

Appreciation rights with respect to priceline.com's common stock may be
granted alone or in tandem with options. An appreciation right is a right to be
paid an amount in cash for each share of common stock subject to the
appreciation right equal to the excess of the fair market value of a share of
common stock on the date the appreciation right is exercised over either the
fair market value of a share of common stock on the date of grant, in case of a
stand-alone appreciation right, or the exercise price of the related stock
option, in case of a tandem appreciation right.

RESTRICTED STOCK; PHANTOM STOCK

A restricted stock award is an award of common stock and a phantom stock
award is an award of the right to receive cash or common stock at a future date,
in each case, that is subject to such restrictions on transferability and other
restrictions, if any, as the compensation committee may impose at the date of
grant or thereafter, which restrictions may lapse separately or in combination
at such times, under such circumstances, including, without limitation, a
specified period of employment or the satisfaction of pre-established
performance goals, when granted to executive officers, in such installments, or
otherwise, as the compensation committee may determine. The compensation
committee may grant such restricted stock or phantom stock to such persons, in
such amounts, and subject to such terms and conditions as the

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compensation committee may determine in its discretion; PROVIDED, HOWEVER, that
shares of restricted stock and phantom stock granted to executive officers may
vest upon the attainment of performance goals pre-established by the
compensation committee, based on one or more of the following criteria: return
on total owner equity; earnings per share; pre-tax income or after-tax income;
revenue; return on assets; increases in EBITDA; or such other criteria as the
stockholders of priceline.com may approve.

OTHER AWARDS

Upon a determination by the compensation committee, an executive officer may
receive awards of shares of common stock. In addition, other awards valued in
whole or in part by reference to, or otherwise based on, common stock may be
granted either alone or in addition to other awards under the 1997 Omnibus Plan.
Subject to the provisions of the 1997 Omnibus Plan, the compensation committee
will have the sole and complete authority to determine the persons to whom and
the time or times at which such other awards will be granted, the number of
shares of common stock to be granted pursuant to such other awards and all other
conditions of such other awards.

AMENDMENT; TERMINATION

The board of directors or the compensation committee may suspend, revise,
terminate or amend the 1997 Omnibus Plan at any time; PROVIDED, HOWEVER, that
(1) stockholder approval will be obtained if and to the extent required under
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
which is generally referred to as the "Exchange Act," or if and to the extent
the board determines that such approval is required for purposes of satisfying
Section 162(m) or Section 422 of the Code and (2) no such suspension, revision,
termination or amendment may, without the consent of a participant, reduce the
participant's rights under any outstanding award.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to awards under the 1997 Omnibus Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.

NON-QUALIFIED STOCK OPTIONS

An optionee will not recognize any taxable income upon the grant of a
non-qualified stock option. Priceline.com will not be entitled to a tax
deduction with respect to the grant of a non-qualified stock option. Upon
exercise of a non-qualified stock option, the excess of the fair market value of
the common stock on the exercise date over the option exercise price will be
taxable as compensation income to the optionee and will be subject to applicable
withholding taxes. Priceline.com will generally be entitled to a tax deduction
at such time in the amount of such compensation income. The optionee's tax basis
for the common stock received pursuant to the exercise of a non-qualified stock
option will equal the sum of the compensation income recognized and the exercise
price.

In the event of a sale of common stock received upon the exercise of a
non-qualified stock option, any appreciation or depreciation after the exercise
date generally will be taxed as capital gain or loss.

INCENTIVE STOCK OPTIONS

An optionee will not recognize any taxable income at the time of grant or
timely exercise of an incentive stock option and priceline.com will not be
entitled to a tax deduction with respect to such grant or exercise. Exercise of
an incentive stock option may, however, give rise to taxable compensation income
subject to applicable withholding taxes, and a tax deduction to priceline.com,
if the incentive stock option is not exercised on a timely basis (generally,
while the optionee is employed by priceline.com or within

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90 days after termination of employment) or if the optionee subsequently engages
in a "disqualifying disposition," as described below.

A sale or exchange by an optionee of shares acquired upon the exercise of an
incentive stock option more than one year after the transfer of the shares to
such optionee and more than two years after the date of grant of the incentive
stock option will result in any difference between the net sale proceeds and the
exercise price being treated as long-term capital gain or loss to the optionee.
If such sale or exchange takes place within two years after the date of grant of
the incentive stock option or within one year from the date of transfer of the
incentive stock option shares to the optionee, such sale or exchange will
generally constitute a "disqualifying disposition" of such shares that will have
the following results: any excess of (x) the lesser of (1) the fair market value
of the shares at the time of exercise of the incentive stock option and (2) the
amount realized on such disqualifying disposition of the shares over (y) the
option exercise price of such shares, will be ordinary income to the optionee,
subject to applicable withholding taxes, and priceline.com will be entitled to a
tax deduction in the amount of such income. Any further gain or loss after the
date of exercise generally will qualify as capital gain or loss and will not
result in any deduction by priceline.com.

APPRECIATION RIGHTS

The grant of appreciation rights has no federal income tax consequences at
the time of grant. Upon the exercise of appreciation rights, the amount received
is generally taxable as ordinary income, and priceline.com is entitled to a
corresponding deduction.

RESTRICTED STOCK

A grantee will not recognize any income upon the receipt of restricted stock
unless the holder elects under Section 83(b) of the Code, within thirty days of
such receipt, to recognize ordinary income in an amount equal to the fair market
value of the restricted stock at the time of receipt, less any amount paid for
the shares. If the election is made, the holder will not be allowed a deduction
for amounts subsequently required to be returned to priceline.com. If the
election is not made, the holder will generally recognize ordinary income, on
the date that the restrictions to which the restricted stock are subject are
removed, in an amount equal to the fair market value of such shares on such
date, less any amount paid for the shares. At the time the holder recognizes
ordinary income, priceline.com generally will be entitled to a deduction in the
same amount.

Generally, upon a sale or other disposition of restricted stock with respect
to which the holder has recognized ordinary income, for example, if a Section
83(b) election was previously made or the restrictions were previously removed,
the holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized on such sale or other disposition and the
holder's basis in such shares.

PHANTOM STOCK

The grant of phantom stock has no federal income tax consequences at the
time of grant. Upon the receipt of payment, the amount received is generally
taxable as ordinary income, and priceline.com is entitled to a corresponding
deduction.

OTHER TYPES OF AWARDS

The grant of any other stock-based award generally will not result in income
for the grantee or in a tax deduction for priceline.com. Upon the settlement of
such an award, the grantee will recognize ordinary income equal to the aggregate
value of the payment received, and priceline.com generally will be entitled to a
tax deduction in the same amount.

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PRICELINE.COM INCORPORATED 1999 OMNIBUS PLAN

In February 1999, priceline.com established the 1999 Omnibus Plan. The 1999
Omnibus Plan is intended to promote the long-term financial interests and growth
of priceline.com by providing employees of priceline.com with appropriate
incentives and rewards to encourage them to enter into and continue in the
employ of the company and to acquire a proprietary interest in the long-term
success of the company; and to reward the performance of individual officers,
other employees, consultants and directors in fulfilling their responsibilities
for long-range achievements.

GENERAL

The 1999 Omnibus Plan provides for the granting of awards to such officers,
other employees, consultants and directors of priceline.com and its affiliates
as the compensation committee, which is the committee of the board of directors
appointed to administer the Plan may select from time to time. Awards under the
1999 Omnibus Plan may be made in the form of incentive stock options,
non-qualified stock options, restricted stock or other awards.

The maximum number of shares of common stock reserved for the grant or
settlement of awards under the 1999 Omnibus Plan is 9,375,000 subject to
adjustment as provided in the 1999 Omnibus Plan. The maximum number of shares of
common stock that may be awarded in respect of options, restricted stock and
other awards to a single individual in any given year may not exceed 9,375,000,
3,125,000 and 6,250,000, respectively, which amounts are subject to adjustment
as described below. Awards (either as options, restricted stock or other awards)
will be made in a manner consistent with Section 162(m) of the Code. Shares of
common stock acquired upon the exercise or settlement of awards may, in whole or
in part, be authorized but unissued shares or shares that shall have been or may
be reacquired by priceline.com in the open market, in private transactions or
otherwise. If any shares subject to an award are forfeited, cancelled, exchanged
or surrendered or if an award otherwise terminates or expires without a
distribution of shares to the holder of such award, the shares of common stock
with respect to such award will, to the extent of any such forfeiture,
cancellation, exchange, surrender, termination or expiration, again be available
for awards under the 1999 Omnibus Plan.

Except as provided in an agreement evidencing the grant of an award, in the
event that the compensation committee determines that any dividend or other
distribution (whether in the form of cash, common stock, or other property),
recapitalization, stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the common stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of holders of awards under the 1999 Omnibus Plan, then the compensation
committee will make such equitable changes or adjustments as it deems necessary
or appropriate to any or all of (1) the number and kind of shares of common
stock or other property (including cash) that may thereafter be issued in
connection with awards, (2) the number and kind of shares of common stock or
other property, including cash, issued or issuable in respect of outstanding
awards, (3) the exercise price, grant price, or purchase price relating to any
award; provided that, with respect to incentive stock options, such adjustment
shall be made in accordance with Section 424(h) of the Code, (4) the performance
criteria with respect to an award and (5) the individual limitations applicable
to awards.

ADMINISTRATION

The 1999 Omnibus Plan is administered by the compensation committee, the
composition of which will at all times satisfy the provisions of Section 162(m)
of the Code and Rule 16b-3 promulgated under the Exchange Act. The compensation
committee has the authority, in its sole discretion, subject to and not
inconsistent with the express provisions of the 1999 Omnibus Plan, to
administer, and to exercise all the powers and authorities either specifically
granted to it under, the 1999 Omnibus Plan or necessary or

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advisable in the administration of the 1999 Omnibus Plan, including, without
limitation, the authority to grant awards; to determine the persons to whom and
the time or times at which awards shall be granted; to determine the type and
number of awards to be granted, the number of shares of common stock to which an
award may relate and the terms, conditions, restrictions and performance goals
relating to any award; to determine whether, to what extent, and under what
circumstances an award may be settled, canceled, forfeited, exchanged, or
surrendered; to make adjustments in the performance goals in recognition of
unusual or non-recurring events affecting priceline.com or the financial
statements of priceline.com, to the extent not inconsistent with Section 162(m)
of the Code, if applicable, or in response to changes in applicable laws,
regulations, or accounting principles; to construe and interpret the 1999
Omnibus Plan and any award; to prescribe, amend and rescind rules and
regulations relating to the 1999 Omnibus Plan; to determine the terms and
provisions of agreements evidencing awards; and to make all other determinations
deemed necessary or advisable for the administration of the 1999 Omnibus Plan.

The compensation committee may, in its absolute discretion, without
amendment to the 1999 Omnibus Plan, (a) accelerate the date on which any option
granted thereunder becomes exercisable, waive or amend the operation of the 1999
Omnibus Plan provisions thereunder respecting exercise after termination of
employment or otherwise adjust any of the terms of such option, (b) accelerate
the vesting or waive any condition imposed with respect to any restricted stock
and (c) otherwise adjust any of the terms applicable to any award.

AWARDS UNDER THE 1999 OMNIBUS PLAN

STOCK OPTIONS

Unless otherwise determined by the compensation committee, options granted
pursuant to the 1999 Omnibus Plan become exercisable ratably over three years
commencing on the first anniversary of the date of grant. The "option exercise
price," which is the purchase price per share payable upon the exercise of an
option, will be established by the compensation committee; PROVIDED, HOWEVER,
that the option exercise price may be no less than the fair market value of a
share of common stock on the date of grant. The option exercise price is payable
by any one of the following methods or a combination thereof: (1) in cash or by
personal check, certified check, bank cashier's check or wire transfer; (2)
subject to the approval of the compensation committee, in stock owned by the
participant for at least six months prior to the date of exercise and valued at
their fair market value on the effective date of such exercise; or (3) in such
other manner as the compensation committee may from time to time authorize.

RESTRICTED STOCK

The compensation committee may grant restricted shares of common stock to
such persons, in such amounts, and subject to such terms and conditions,
including the attainment of performance goals, which performance goals may be
based upon one or more of the following criteria: pre-tax or after-tax income;
operating profit; return on equity, assets, capital or investment; earnings or
book value per share; sales or revenues; operating expenses; stock price
appreciation; and the implementation or completion of critical projects or
processes, as the compensation committee may determine in its discretion. Unless
the compensation committee determines otherwise, termination of employment
during the restricted period will result in the forfeiture by the participant of
all shares still subject to restrictions.

OTHER AWARDS

Other awards valued in whole or in part by reference to, or otherwise based
on, common stock may be granted either alone or in addition to other awards
under the 1999 Omnibus Plan. Subject to the provisions of the 1999 Omnibus Plan,
the compensation committee has the sole and complete authority to determine the
persons to whom and the time or times at which such other awards will be
granted, the number of

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shares of common stock to be granted pursuant to such other awards and all other
conditions of such other awards, including the attainment of performance goals.

OTHER FEATURES OF THE 1999 OMNIBUS PLAN

In the event of a Change in Control, as defined in the 1999 Omnibus Plan, of
priceline.com, all outstanding awards will become fully vested and/or
immediately exercisable and any restrictions thereon will lapse.

The board or the compensation committee may suspend, revise, terminate or
amend the 1999 Omnibus Plan at any time; PROVIDED, HOWEVER, that no such action
may, without the consent of a participant, reduce the participant's rights under
any outstanding award.

NEW PLAN BENEFITS

Inasmuch as awards under the 1999 Omnibus Plan will be granted at the sole
discretion of the compensation committee, it is not possible to determine the
awards that will be granted at the time of the offering or during 1999. As of
July 29, 1999, options covering 3,775,505 shares of common stock were
outstanding under the 1999 Omnibus Plan. See "Option Grants in Last Fiscal
Year."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to awards under the 1999 Omnibus Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
income and other tax consequences.

NON-QUALIFIED STOCK OPTIONS

INCENTIVE STOCK OPTIONS

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of grant of the incentive stock option will result in any difference between the
net sale proceeds and the exercise price being treated as long-term capital gain
or loss to the optionee. If such sale or exchange takes place within two years
after the date of grant of the incentive stock option or within one year from
the date of transfer of the incentive stock option shares to the optionee, such
sale or exchange will generally constitute a "disqualifying disposition" of such
shares that will have the following results: any excess of (a) the lesser of (i)
the fair market value of the shares at the time of exercise of the Incentive
Stock Option and (ii) the amount realized on such disqualifying disposition of
the shares over (b) the option exercise price of such shares, will be ordinary
income to the optionee, subject to applicable withholding taxes, and
priceline.com will be entitled to a tax deduction in the amount of such income.
Any further gain or loss after the date of exercise generally will qualify as
capital gain or loss and will not result in any deduction by priceline.com.

RESTRICTED STOCK

OTHER TYPES OF AWARDS

EMPLOYMENT ARRANGEMENTS

BRADDOCK EMPLOYMENT AGREEMENT. Pursuant to an employment agreement, dated
as of August 15, 1998, between priceline.com and Mr. Richard S. Braddock, Mr.
Braddock serves as the Chairman and Chief Executive Officer of priceline.com
through August 15, 2001. Pursuant to an agreement in principle entered into July
23, 1998, by and between priceline.com and Mr. Braddock in anticipation of
entering into the employment agreement, Mr. Braddock received 6,500,000 equity
units in priceline.com's predecessor, which have since been converted into
8,125,000 shares of common stock. Mr. Braddock also was granted an option to
purchase up to 5,000,000 equity units in priceline.com's predecessor at an
exercise price of $1.00 per share, subject to standard anti-dilution
adjustments, which has been converted into an option to purchase 6,250,000
shares of common stock at an exercise price of $0.80 per share and which is
fully vested. The option is not exercisable until September 26, 1999, upon
expiration of the 180 day period following consummation of priceline.com's
initial public offering. Under the terms of his employment agreement, Mr.
Braddock is entitled to an initial annual base salary of $300,000, subject to
annual

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adjustment, and is eligible to participate in any cash bonus program that may be
introduced by priceline.com. In connection with the execution of the employment
agreement, Mr. Braddock also received an option to purchase an equity interest
in Walker Digital from Walker Digital.

SCHULMAN EMPLOYMENT AGREEMENT. Pursuant to an employment agreement, dated
as of June 14, 1999, between priceline.com and Mr. Daniel H. Schulman, Mr.
Schulman serves as the President and Chief Operating Officer of priceline.com.
Under the terms of his employment agreement, Mr. Schulman is entitled to an
annual base salary of $300,000, subject to adjustment, and is eligible to
participate in any cash bonus program that may be introduced by priceline.com.
Priceline.com also granted Mr. Schulman a ten year option to purchase up to
3,000,000 shares of common stock at an exercise price of $76.875 per share,
subject to standard anti-dilution adjustments. The option:

- currently is vested for 500,000 of such shares;

- will vest for an additional 500,000 on December 31, 1999;

- will vest for an additional 1,000,000 on December 31, 2000; and

- will vest as to the balance of such shares on December 31, 2001, subject
in each case, to acceleration or cancellation under certain circumstances
in connection with the termination of his employment.

In July 1999, priceline.com made a loan to Mr. Schulman in the amount of
$6.0 million. The loan bears interest at 5.82% per annum. Interest and principal
will be payable in July 2004. Mr. Schulman will be required to make prepayments
of principal and accrued interest in an amount equal to 25% of his pre-tax
proceeds over $10,000,000 from the exercise of his stock options until June 14,
2004, or unless earlier terminated, at which point any remaining outstanding
amounts under the loan will be forgiven by priceline.com. Any remaining
outstanding amounts under the loan will also be forgiven by priceline.com in the
event of certain changes of control, death, or termination without cause.

FINK EMPLOYMENT AGREEMENT. Pursuant to an employment agreement, dated as of
January 1, 1998, as amended, between priceline.com, Walker Digital, Mr. Jay S.
Walker and Mr. Jesse M. Fink, Mr. Fink served as the Chief Operating Officer of
both priceline.com and Walker Digital. Effective June 30, 1999 Mr. Fink resigned
as Chief Operating Officer of priceline.com. Under the terms of his employment
agreement, Mr. Fink is entitled to an annual base salary of $225,000, subject to
annual adjustment, and was eligible to participate in any cash bonus program
that may be introduced by priceline.com. Prior to June 30, 1999, payment of Mr.
Fink's salary was allocated between priceline.com and Walker Digital as mutually
agreed. Since July 1, 1999, Mr. Fink's salary has been paid by Walker Digital.
In addition, Mr. Fink was issued 2,700,000 equity units in the priceline.com
LLC, which units have since been converted into 3,375,000 shares of common
stock. Priceline.com also granted Mr. Fink an option to purchase up to 2,443,750
shares of common stock at an exercise price of $0.80 per share, subject to
standard anti-dilution adjustments. The option is fully vested and is not
exercisable until September 26, 1999.

Under the terms of his employment agreement, Mr. Fink also is entitled to
additional compensation from Walker Digital and Mr. Walker. In addition, the
employment agreement provides that, upon the mutual agreement of Mr. Fink and
Mr. Walker, Mr. Fink may be employed by an entity controlled by Mr. Walker,
other than priceline.com or Walker Digital.

BRIER EMPLOYMENT AGREEMENT. Pursuant to an employment agreement, dated as
of July 23, 1998, as amended, between priceline.com and Mr. Timothy G. Brier,
Mr. Brier serves as an Executive Vice President of priceline.com and as the
President of Priceline Travel, Inc., through December 31, 2000. Under the terms
of his employment agreement, Mr. Brier is entitled to an annual base salary of
$250,000, and until April 6, 1999, was entitled to receive cash bonuses based
upon the number of airlines and

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consolidators that participate in the priceline.com service. Under certain
circumstances, Mr. Brier may also be entitled to a compensatory bonus that is
designed to ensure that his aggregate annual compensation for services rendered
to priceline.com and CAP Systems, another entity affiliated with Mr. Walker for
which Mr. Brier continues to provide services, equals $625,000. In addition, Mr.
Brier was issued 1,200,000 equity units in priceline.com LLC, which have since
been converted into 1,500,000 shares of common stock. Priceline.com also granted
Mr. Brier an option to purchase up to 2,003,125 shares of common stock at an
exercise price of $0.80 per share, subject to standard anti-dilution
adjustments, of which 50,000 have been exercised. The option:

- currently is vested for 1,512,500 of such shares that are not exercisable
until 180 days after the date of this prospectus; and

- will become exercisable for the balance of such shares on June 1, 2000,
subject, in each case, to acceleration or cancellation under certain
circumstances in connection with the termination of Mr. Brier's
employment.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Section 145 of the Delaware General Corporation Law authorizes 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 expenses incurred,
arising under the Securities Act.

As permitted by Delaware law, priceline.com's certificate of incorporation
includes a provision that eliminates the personal liability of its directors for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to priceline.com
or its stockholders; (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) under Section 174 of
the Delaware General Corporation Law regarding unlawful dividends and stock
purchases; or (4) for any transaction from which the director derived an
improper personal benefit.

As permitted by Delaware law, priceline.com's certificate of incorporation,
provides that (1) priceline.com is required to indemnify its directors and
officers to the fullest extent permitted by Delaware law, subject to certain
very limited exceptions; (2) priceline.com is permitted to indemnify its other
employees to the extent that it indemnifies its officers and directors, unless
otherwise required by law, its certificate of incorporation, its by-laws or
agreements; (3) priceline.com is required to advance expenses, as incurred, to
its directors and officers in connection with a legal proceeding to the fullest
extent permitted by Delaware law, subject to certain very limited exceptions;
and (4) the rights conferred in the certificate of incorporation are not
exclusive.

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CERTAIN TRANSACTIONS

Priceline.com was founded as a limited liability company in July 1997 and
converted to a corporation in July 1998. In connection with this conversion, all
equity units issued by priceline.com's predecessor were converted into an equal
number of shares of common stock. The following discussion does not distinguish
between priceline.com and its predecessor and the common stock and the equity
units of priceline.com's predecessor.

EQUITY TRANSACTIONS

Upon its inception, priceline.com issued to Mr. Jay S. Walker, its Founder,
35,640,211 shares of common stock for services previously rendered.
Priceline.com also issued 6,895,833 shares of common stock to Walker Digital, an
affiliate of Mr. Walker, in partial consideration for the transfer of certain
intellectual property to priceline.com and for the ongoing planning, maintenance
and prosecution of the patents related to such rights. Subsequently,
priceline.com sold an aggregate of 25,212,955 shares of common stock to Mr.
Walker and his affiliates for $0.80 per share, the estimated fair market value
of the shares at the time of the sale.

Upon its inception, priceline.com issued to several officers of
priceline.com an aggregate of 7,350,000 shares of common stock for services
previously rendered. Of such shares, 3,375,000 shares were issued to Mr. Jesse
M. Fink, 1,500,000 shares were issued to Mr. Timothy G. Brier and 675,000 shares
were issued to Paul E. Francis.

In October 1997, priceline.com sold 713,470 shares of common stock to Mr.
Paul E. Francis, its Chief Financial Officer, for approximately $0.70 per share,
the estimated fair market value of the shares at the time of the sale.

In February 1998, priceline.com sold 2,854,875 shares of common stock to an
affiliate of General Atlantic for approximately $0.70 per share, the estimated
fair market value of the shares at the time of the sale. Affiliates of General
Atlantic own in excess of 5 percent of the outstanding capital of priceline.com.

On July 1, 1998, priceline.com sold 1,250,000 shares of common stock to Mr.
Richard S. Braddock, its Chief Executive Officer, for $0.80 per share. In
December 1998, priceline.com sold an additional 78,125 shares of common stock to
Mr. Braddock for $3.20 per share. The per share purchase price for both
transactions represented the estimated fair value of the shares at the time of
such transactions.

On July 1, 1998, priceline.com sold 312,500 shares of common stock to Mr.
Ralph M. Bahna, who is a director of the company, for $0.80 per share, the
estimated fair market value of the shares at the time of the sale.

On July 1, 1998, priceline.com sold 625,000 shares of common stock to a
family trust of Mr. N.J. Nicholas, Jr., who is a director of the company, for
$0.80 per share, the estimated fair market value of the shares at the time of
the sale.

On July 31, 1998, priceline.com sold an aggregate of 17,288,684 shares of
preferred stock to two affiliates of General Atlantic for approximately $1.16
per share, the estimated fair market value of the shares at the time of the
sale. This preferred stock was automatically convertible into 21,610,855 shares
of common stock upon the completion of priceline.com's initial public offering.

In October 1998, priceline.com sold 107,758 shares of common stock to Mr.
Paul J. Blackney, who is a director of the company, for approximately $0.93 per
share, the estimated fair market value of the shares at the time of the
purchase.

In December 1998, priceline.com sold an aggregate of 13,837,500 shares of
preferred stock to a group of investors for $4.00 per share, the estimated fair
market value of the shares at the time of the sale. Of such shares, 7,500,000
shares were sold to Vulcan Ventures Incorporated, an aggregate of 1,437,500
shares were sold to affiliates of General Atlantic and 275,000 shares were sold
to Allen & Company Incorporated. Vulcan Ventures and affiliates of General
Atlantic each own in excess of 5 percent of the capital stock of priceline.com.
Ms. Nancy B. Peretsman, who is a director of priceline.com, also is a director
and stockholder of Allen & Company. This preferred stock was automatically
convertible into 17,296,875 shares of common stock upon the completion of
priceline.com's initial public offering.

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RELATIONSHIP WITH WALKER DIGITAL

The priceline.com core buyer driven commerce business model and related
intellectual property rights were initially developed by Walker Digital, a
technology research and development company that was founded and is controlled
by Mr. Walker. In partial consideration for the transfer of such rights and for
the ongoing planning, maintenance and prosecution of the patents related to such
rights, priceline.com issued Walker Digital 6,895,833 shares of common stock.
Priceline.com also granted Walker Digital a perpetual, non-exclusive,
royalty-free right and license to use the intellectual property related to the
priceline.com service for non-commercial internal research and development
purposes. Priceline.com also has the right to purchase at fair market value any
intellectual property that is owned and subsequently acquired, developed or
discovered by Walker Digital that will provide significant value in the use or
commercial exploitation of the priceline.com system.

Walker Digital currently owns assets and intellectual property related to
two new areas of e-commerce into which priceline.com may expand its "name your
price" business model, one involving consumer-to-consumer sales and the other
involving the sale of retail merchandise. Priceline.com may license its brand
name and "name your price" business model to two new companies formed to develop
these businesses. Walker Digital may contribute assets and intellectual property
to these companies in return for an equity interest in these companies.

Walker Digital owns the intellectual property rights underlying the
technology associated with priceline.com's adaptive marketing programs. Walker
Digital has licensed to priceline.com the right to use these intellectual
property rights under a perpetual, non-exclusive, royalty-free license
agreement. Walker Digital has pending several United States patent applications
directed to different aspects of the processes and technology supporting
priceline.com's adaptive marketing programs.

Walker Digital and priceline.com provide each other with a variety of
services. The services provided by priceline.com include various management and
administrative services, for which priceline.com collects fees from Walker
Digital. The services provided by Walker Digital include (1) research and
development assistance; (2) patent planning, maintenance and prosecution; and
(3) intellectual property services, including technical support. Walker Digital
also subleases a portion of its Stamford, Connecticut facilities to
priceline.com on a month-to-month basis. Additionally, priceline.com has
guaranteed Walker Digital's obligations under a lease of 2,500 square feet for
office space in a building in New York City that is used by both companies. The
lease provides for annual rental payments of approximately $170,000 plus
expenses for a term of five years.

Pursuant to the terms of the indemnification obligations contained in the
Purchase and Intercompany Agreement, Walker Digital has agreed to indemnify
priceline.com for damages, liability and legal expenses incurred in connection
with the Marketel litigation.

Several of priceline.com's executive officers and other key employees also
are directors, officers, employees or stockholders of Walker Digital and either
own, or hold an option to purchase, equity securities of Walker Digital.

Priceline.com issued a promissory note to Walker Digital for $1,000,000 in
June 1998. The promissory note bore interest at a rate of 6% per annum and was
due June 30, 1999. The Note has been repaid.

MERGER OF PRICELINE TRAVEL, INC. INTO PRICELINE.COM

Priceline.com's travel agency license was previously held by Priceline
Travel, a separate company that was owned by Mr. Walker. As a result, all of
priceline.com's airline ticket sales were effected through Priceline Travel.
Priceline Travel was merged into priceline.com on March 24, 1999 for nominal
consideration.

OTHER TRANSACTIONS

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Benerofe, Timothy G. Brier and Thomas P. D'Angelo, participated in the option
exercise program, pursuant to which 967,183 shares underlying their options are
expected to be sold in the public market on their behalf through a cashless
exercise program administered by Morgan Stanley & Co. Incorporated. After
expiration of the eleven-day period, such employees agreed to an extended
180-day lock-up period on the balance of their unsold option shares,
representing 7,669,588 in aggregate, that restricts the exercise of their
remaining options and sale of the underlying shares until 180 days after the
date of this prospectus. Employees who had no options vested as of June 1, 1999
and former employees, directors and consultants were not eligible to participate
in the option exercise program.

In July 1999, priceline.com made a loan to Mr. Daniel H. Schulman, the new
President and Chief Operating Officer of priceline.com in the amount of $6.0
million. The loan bears interest at 5.82% per annum. Interest and principal will
be payable in July 2004. Mr. Schulman will be required to make prepayments of
principal and accrued interest in an amount equal to 25% of his pre-tax proceeds
over $10,000,000 from the exercise of his stock options until June 14, 2004, or
unless earlier terminated, at which point any remaining outstanding amounts
under the loan will be forgiven by priceline.com. Any remaining outstanding
amounts under the loan will also be forgiven by priceline.com in the event of
certain changes in control, death or termination without cause.

Priceline.com has entered into compensation arrangements with certain of its
directors and officers. See "Management--Summary of Compensation" and "--Stock
Based Plans."

Priceline.com received a loan in the amount of $1.0 million on July 14, 1998
from Mr. Michael Loeb, a relative of Mr. Marshall Loeb, who is a director of the
company, and a loan in the amount of $500,000 on July 17, 1998 from Mr. Francis.
The interest rate on each of the loans was 10%. As of the date of this
prospectus, both of the loans have been repaid.

Priceline.com has granted registration rights to certain stockholders and
warrant holders. See "Description of Capital Stock--Registration Rights."

In February 1999, priceline.com made a payment of $850,000 to Allen &
Company Incorporated for financial advisory services. Ms. Peretsman, who is a
director of priceline.com, is a director and stockholder of Allen & Company.

Mr. Richard S. Braddock invested as a limited partner of an affiliate of
General Atlantic from August 1996 to December 31, 1998 and served as a special
advisor to General Atlantic from September 1996 to August 1997. Mr. Braddock,
however, did not participate in any of the investments by affiliates of General
Atlantic in priceline.com.

Messrs. Richard S. Braddock and William E. Ford are members of the board of
directors of E*TRADE Group, Inc., which has a co-marketing agreement with
priceline.com to establish an adaptive marketing program under which E*TRADE
compensates priceline.com for offering priceline.com customers the opportunity
to open an account with E*TRADE while visiting or making an offer on the
priceline.com Web site. See "Business--Strategic Alliances--Adaptive Marketing
Alliances."

Priceline.com offers its magazine subscription promotion pursuant to a
revenue sharing arrangement with NewSub Services, Inc., a direct marketing firm
that is an affiliate of Mr. Jay S. Walker. Under this arrangement, priceline.com
shares in a percentage of the revenues generated upon the conversion of
priceline.com generated subscriptions to annual subscriptions after a six month
free trial period. Affiliates of General Atlantic have invested approximately
$59.3 million in NewSub Services.

In connection with this offering, priceline.com has agreed to indemnify the
selling stockholders, which include various related parties of priceline.com,
for liabilities arising under the Securities Act and to pay certain expenses of
this offering.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to priceline.com
with respect to beneficial ownership of priceline.com's common stock as of July
29, 1999 by (1) each stockholder known by priceline.com to be the beneficial
owner of more than 5% of priceline.com's common stock; (2) each director of
priceline.com; (3) priceline.com's Chief Executive Officer and each of its other
four most highly compensated executive officers; (4) all executive officers and
directors as a group; and (5) the selling stockholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES SHARES BENEFICIALLY
OWNED PRIOR TO BEING OWNED AFTER
OFFERING(A) SOLD(A) OFFERING(A)
-------------------------- ---------- --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT NUMBER NUMBER PERCENT
- --------------------------------------------------- ------------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Jay S. Walker(b)................................... 62,504,373 43.2% -- 62,302,061 42.0%
Richard S. Braddock(c)............................. 17,829,125 11.9 202,312 17,625,813 11.5
Timothy G. Brier(d)................................ 3,012,700 2.1 72,832 2,939,868 2.0
Paul E. Francis(e)................................. 2,138,470 1.5 30,000 2,065,638 1.4
Daniel H. Schulman(f).............................. 500,000 * -- 500,000 *
Paul A. Allaire(g)................................. 56,200 * -- 56,200 *
Ralph M. Bahna(h).................................. 344,750 * -- 344,750 *
Paul J. Blackney(i)................................ 140,008 * -- 140,008 *
William E. Ford(j)................................. 26,296,353 18.3 -- 25,648,103 17.5
Marshall Loeb(k)................................... 32,250 * -- 32,250 *
N. J. Nicholas, Jr.(l)............................. 3,906,250 2.7 -- 3,906,250 2.7
Nancy B. Peretsman(m).............................. 2,906,250 2.0 -- 2,906,250 2.0
Paul Breitenbach(n)................................ 1,591,950 1.1 72,832 1,519,118 1.0
T. Scott Case(o)................................... 2,200,000 1.5 72,832 2,127,168 1.4
Jesse M. Fink(p)................................... 5,805,750 4.0 202,312 5,603,438 3.8
Michael Loeb....................................... 200,000 * 69,648 130,352 *
Jim Manzi(q)....................................... 312,500 * 5,862 304,787 *
The Jonathan Otto Foundation, Inc.................. 150,000 * 121,387 28,613 *
General Atlantic Partners, LLC(j).................. 26,296,353 18.3 648,250 25,648,103 17.5
Vulcan Ventures Incorporated(r).................... 9,375,000 6.5 231,406 9,143,594 6.2
Yarmouth Limited Partnership(q).................... 312,500 * 1,851 304,787 *
Walker Digital Corporation(b)...................... 62,504,373 43.2 202,312 62,302,061 42.0
Delta Airlines, Inc.(s)............................ 18,619,402 13.0 1,523,329 17,096,073 11.6
Strypemonde Foundation(t).......................... 42,832 * 42,832 -- *
All directors and executive officers as a group,
including (b)-(m) (15 persons) (u)............... 119,983,695 77.8% 1,198,539 118,784,153 75.0%
</TABLE>

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

* Represents beneficial ownership of less than one percent.

(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock and
options or warrants that are currently exercisable or exercisable within 60
days of July 29, 1999 are deemed to be outstanding and to be beneficially
owned by the person holding such options for the purpose of computing the
percentage ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other person. The
number of shares being sold excludes any shares that may be sold as a result
of the exercise by the underwriters of their over-allotment option, which if
exercised, will be allocated pro rata among the selling stockholders.

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(b) Includes: (1) 7,520,833 shares held by Walker Digital Corporation, of which
Mr. Walker is Founder, Chairman and the controlling stockholder; (2)
5,500,000 shares held by The Jay Walker Irrevocable Credit Trust; (3) 1,000
shares held by an immediate family member of Mr. Walker, as to which Mr.
Walker disclaims beneficial ownership; (4) an aggregate of 4,534,800 shares
as to which Mr. Walker has granted options to purchase to certain
individuals; (5) 48,100,041 shares held by Mr. Walker individually; and (6)
an aggregate of 228,171 shares as to which Walker Digital has granted
options to purchase to certain of its employees and consultants. Also
includes options outstanding to purchase 1,382,500 shares which are vested
but not exercisable until September 26, 1999. Excludes 132,500 shares
subject to options that are not vested or exercisable within 60 days of July
29, 1999. Shares beneficially owned after this offering reflect the sale of
202,312 shares by Walker Digital Corporation. The address of Walker Digital
Corporation is Five High Ridge Park, Stamford, Connecticut 06905. Mr. Walker
has agreed to a 180 day lockup with the underwriters in connection with this
offering.

(c) Includes: (1) 5,000,000 shares held by Richard S. Braddock as Trustee of The
Richard S. Braddock 1999 Annuity Trust; and (2) 1,000 shares held by an
immediate family member of Mr. Braddock, as to which Mr. Braddock disclaims
beneficial ownership. Also includes options outstanding to purchase
6,250,000 shares which are vested but are not exercisable until September
26, 1999. Includes options to purchase 250,000 shares that are currently
exercisable for shares owned by Mr. Walker. Mr. Braddock has agreed to a 180
day lockup with the underwriters in connection with this offering.

(d) Includes: (1) 500,000 shares held by The Timothy Brier 1998 Grantor Retained
Annuity Trust, of which 8,092 shares are being sold in this offering; and
(2) 7,700 shares held by immediate family members of Mr. Brier, as to which
Mr. Brier disclaims beneficial ownership. Includes options outstanding to
purchase 1,512,500 shares which are vested but not exercisable until 180
days after the date of this prospectus. Excludes 440,625 shares subject to
options that are not vested or exercisable within 60 days of July 29, 1999.

(e) Includes: (1) 62,500 shares held by The Paul E. Francis 1998 Trust, dated
April 1, 1998; (2) 15,625 shares held by The Paul E. Francis 1998 Trust,
dated December 2, 1998; (3) 15,625 shares held by The Paul E. Francis 1999
Trust, dated February 26, 1999; and (4) 125,000 shares held by The Paul E.
Francis 1999 Grantor Retained Annuity Trust. Includes options outstanding to
purchase 750,000 shares which are vested but not exercisable until September
26, 1999. Excludes 285,000 shares subject to options that are not vested or
exercisable within 60 days of July 29, 1999. Excludes 42,832 shares owned by
the Strypemonde Foundation, a charitable foundation established by Mr.
Francis and his spouse.

(f) Includes options outstanding to purchase 500,000 shares which are vested but
not exercisable until expiration of the lock-up period related to the
initial public offering. Excludes 2,500,000 shares subject to options that
are not vested or exercisable within 60 days of July 29, 1999.

(g) Includes options outstanding to purchase 37,500 shares which are vested but
not exercisable until September 26, 1999.

(h) Includes options outstanding to purchase 31,250 shares which are vested but
not exercisable until September 26, 1999.

(i) Includes options outstanding to purchase 31,250 shares which are vested but
not exercisable until September 26, 1999.

(j) Includes 26,265,103 shares held by various General Atlantic entities. In
addition, includes options outstanding to purchase 31,250 shares which are
vested but not exercisable until September 26, 1999, which options are held
by Mr. Ford. Mr. Ford, a director of priceline.com, is a managing member of
General Atlantic Partners, LLC and a general partner of certain General
Atlantic entities. Mr. Ford disclaims beneficial ownership of the 26,265,103
shares referred to above, except to the extent of his pecuniary interest
therein. General Atlantic disclaims beneficial ownership of the 31,250
options

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referred to above. Shares beneficially owned after this offering reflect the
sale of 648,250 shares by various General Atlantic entities. The address of
General Atlantic is 3 Pickwick Plaza, Greenwich, Connecticut 06830. The
General Atlantic entities have agreed to a 180 day lockup with the
underwriters in connection with this offering.

(k) Includes: (1) 1,000 shares held by an immediate family member of Mr. Loeb;
and (2) options outstanding to purchase 31,250 shares which are vested but
not exercisable until September 26, 1999 and which are held by Mr. Loeb's
daughter, as to which Mr. Loeb disclaims beneficial ownership.

(l) Includes 3,125,000 shares held by Gore Creek Trust, as to which Mr. Nicholas
disclaims beneficial ownership. Includes options held by Gore Creek Trust to
purchase 750,000 shares that are currently exercisable for shares owned by
Mr. Jay S. Walker, as to which Mr. Nicholas disclaims beneficial ownership.
Also includes options outstanding to purchase 31,250 shares which are vested
but not exercisable until September 26, 1999.

(m) Includes: (1) 1,343,750 shares held by Allen & Company Incorporated on its
own behalf and on behalf of certain of its officers, directors and
employees; (2) options held by Allen & Company Incorporated to purchase
571,875 shares owned by Mr. Jay S. Walker; (3) 959,375 shares held by Ms.
Nancy B. Peretsman; and (4) options held by Ms. Peretsman to purchase 31,250
shares, which options are vested but not exercisable until September 26,
1999. Ms. Peretsman, who is a Managing Director and Executive Vice President
of Allen & Company Incorporated, disclaims beneficial ownership of the
shares and options referred to in clauses (1) and (2) above, except to the
extent of her pecuniary interest therein. Allen & Company disclaims
beneficial ownership of the shares and options referred to in clauses (3)
and (4) above.

(n) Includes options outstanding to purchase 450,000 shares which are vested but
not exercisable until 180 days after the date of this prospectus. Excludes
250,000 shares subject to options that are not vested or exercisable within
60 days of July 29, 1999. Also includes options held by Mr. Breitenbach to
purchase 1,141,950 shares that are owned by Mr. Jay S. Walker which are
currently exercisable. Excludes options to purchase 570,945 shares from Mr.
Walker which are not vested or exercisable within 60 days of July 29, 1999.

(o) Includes 500,000 shares held by The T. Scott Case 1998 Grantor Retained
Annuity Trust and options outstanding to purchase 700,000 shares which are
vested but not exercisable until 180 days after the date of this prospectus.

(p) Includes 875,000 shares held by The Jesse Fink 1998 Grantor Retained Annuity
Trust and options outstanding to purchase 2,443,750 shares which are vested
but not exercisable until September 26, 1999. Mr. Fink has agreed to a 180
day lockup with the underwriters in connection with this offering.

(q) Includes: (1) 75,000 shares held by Yarmouth Limited Partnership; and (2)
237,500 shares held by Mr. Manzi.

(r) Excludes 156,250 shares held by an officer and director of Vulcan Ventures
Incorporated. The address of Vulcan Ventures Incorporated is 110 110th
Avenue N.E., Bellevue, Washington 98004-5840.

(s) Includes 1,523,329 shares to be issued upon exercise of presently
exercisable warrants and sold in this offering and warrants to purchase an
aggregate of 17,096,073 shares underlying options that are exercisable upon
the achievement of certain performance thresholds.

(t) The Strypemonde Foundation is a charitable foundation established by Mr.
Francis and his spouse.

(u) Includes options outstanding to purchase 10,861,966 shares. Excludes
3,691,458 shares subject to options that are not vested or exercisable
within 60 days of July 29, 1999. The address of all directors, officers and
other individual stockholders is Five High Ridge Park, Stamford, Connecticut
06905.

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CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. INVESTORS

INTRODUCTION

The following is a summary of certain United States federal tax consequences
to non-U.S. investors. In this summary, "non-U.S. investor" means a person or
entity other than:

- a citizen or resident of the United States;

- a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any of the States;

- an estate, the income of which is subject to United States federal income
taxation regardless of its source; or

- a trust, the administration of which is subject to the primary supervision
of a United States court and the control of all of the substantial
decisions of which is within the authority of one or more United States
persons.

This summary does not address all of the federal tax considerations that may
be relevant to a non-U.S. investor in light of its particular circumstances or
to non-U.S. investors that may be subject to special treatment under federal tax
laws. Furthermore, this summary does not discuss any aspects of state, local or
foreign taxation. This summary is based on current provisions of the Internal
Revenue Code, Treasury regulations, judicial opinions, published positions of
the IRS and other applicable authorities. These authorities are all subject to
change, possibly with retroactive effect. Each prospective non-U.S. investor
should consult its tax advisor with respect to the tax consequences of investing
in the common stock.

DIVIDENDS

Dividends paid to a non-U.S. investor generally will be subject to
withholding of federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. However, if the dividend is
effectively connected with the conduct of a trade or business of the non-U.S.
investor within the United States, the dividend will instead be taxed at
ordinary federal income tax rates on a net income basis. Further, if the
non-U.S. investor is a corporation, such effectively connected dividend income
may also be subject to an additional branch profits tax.

SALE OR OTHER DISPOSITION OF COMMON STOCK

A non-U.S. investor generally will not be subject to federal income tax on
any gain recognized on the sale or other disposition of common stock, except in
the following circumstances:

(1) The gain will be subject to federal income tax if it is effectively
connected with a trade or business of the non-U.S. investor within the
United States.

(2) The gain will be subject to federal income tax if the non-U.S.
investor is an individual who holds the common stock as a capital asset, is
present in the United States for 183 or more days in the taxable year of the
sale or other disposition, and either the individual has a "tax home" in the
United States for federal income tax purposes or the gain is attributable to
an office or other fixed place of business maintained by the individual in
the United States.

(3) The gain may be subject to federal income tax pursuant to federal
income tax laws applicable to certain expatriates.

(4) The gain may be subject to federal income tax if priceline.com is or
has been during certain periods a "United States real property holding
corporation" and the non-U.S. investor held, at any time during the
five-year period ending on the date of disposition (or, if shorter, the
non-U.S. investor's holding period), more than 5 percent of the outstanding
common stock. Priceline.com

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believes that it will not constitute a United States real property holding
corporation immediately after the offering and does not expect to become a
United States real property holding corporation; however, no assurance can
be given in this regard.

BACKUP WITHHOLDING AND INFORMATION REPORTING

DIVIDENDS. United States backup withholding tax generally will not apply to
dividends paid to a non-U.S. investor at an address outside the United States.
Priceline.com must report annually to the IRS and to each non-U.S. investor the
amount of dividends paid to such investor and the amount, if any, of tax
withheld with respect to such dividends. This information may also be made
available to the tax authorities in the non-U.S. investor's country of
residence.

SALE THROUGH A U.S. OFFICE OF A BROKER. Upon the sale or other disposition
of common stock by a non-U.S. investor to or through a United States office of a
broker, the broker must backup withhold at a rate of 31% and report the sale to
the IRS, unless the investor certifies its foreign status under penalties of
perjury or otherwise establishes an exemption from backup withholding.

SALE THROUGH A FOREIGN OFFICE OF A BROKER. Upon the sale or other
disposition of common stock by a non-U.S. investor to or through a foreign
office of a United States broker or a foreign broker with certain types of
relationships with the United States, the broker is not required to backup
withhold. However, the broker must report the sale or other disposition to the
IRS unless the broker has documentary evidence in its files that the seller is a
non-U.S. investor and certain other conditions are met, or the holder otherwise
establishes an exemption.

BACKUP WITHHOLDING IS NOT AN ADDITIONAL TAX. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit against
the non-U.S. investor's federal income tax liability, if any, provided, that the
required information is furnished to the IRS.

Final United States Treasury regulations, effective for payments made after
December 31, 2000, may affect the procedures to be followed by a non-U.S.
investor in establishing such investor's foreign status for purposes of the
withholding, backup withholding and information reporting rules. Prospective
non-U.S. investors should consult their tax advisors concerning such
regulations.

FEDERAL ESTATE TAXES

Common stock owned or treated as owned by an individual who is not a citizen
or "resident" (as specially defined for federal estate tax purposes) of the
United States at the time of death, will be included in such individual's gross
estate for federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.

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DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of priceline.com consists of 1,000,000,000
shares of common stock, par value $0.008 per share, and 150,000,000 shares of
preferred stock, par value $0.01 per share, of priceline.com. Upon completion of
this offering, there will be 146,810,939 outstanding shares of common stock,
outstanding options to purchase 26,495,062 shares of common stock and
outstanding warrants to purchase 20,283,573 shares of common stock.

COMMON STOCK

Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in the priceline.com's
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election. The
common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon the occurrence of a liquidation, dissolution or
winding-up, the holders of shares of common stock would be entitled to share
ratably in the distribution of all of the company's assets remaining available
for distribution after satisfaction of all its liabilities and the payment of
the liquidation preference of any outstanding preferred stock. Each outstanding
share of common stock is, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.

PREFERRED STOCK

The board of directors has the authority, within the limitations and
restrictions stated in the certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more classes
or series, and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock and could
adversely affect the voting and other rights of the holders of common stock. See
"Risk Factors--Anti-Takeover Provisions Affecting Us Could Prevent or Delay a
Change of Control."

OPTIONS

As of July 29, 1999, (1) options to purchase a total of 26,495,062 shares of
common stock were outstanding; and (2) up to 5,787,755 additional shares of
common stock may be subject to options granted in the future under the 1997
Omnibus Plan or the 1999 Omnibus Plan. All of the options contain standard
anti-dilution provisions. See "Management--Priceline.com Incorporated 1997
Omnibus Plan," "--Priceline.com Incorporated 1999 Omnibus Plan" and "--Summary
of Compensation."

WARRANTS

As of July 29, 1999, priceline.com had the following outstanding warrants to
purchase shares of common stock: (1) a warrant to purchase up to 18,619,402
shares of common stock at an exercise price of approximately $0.93 per share
that is held by Delta; and (2) warrants to purchase up to an aggregate of
937,500 shares of common stock at an exercise price of $3.20 per share; (3)
1,250,000 shares of common stock at an exercise price of $6.40 per share, that
are held by various airlines; and (4) 1,000,000 shares of common stock at an
exercise price of $97.41 per share. All of the warrants contain standard
anti-dilution provisions. See "Business--Strategic Alliances."

93
<PAGE>
REGISTRATION RIGHTS

The holders of an aggregate of 144,983,503 shares of common stock or
securities convertible into common stock are entitled to certain registration
rights. Of such shares, shares are being sold in this offering
pursuant to such registration rights. These rights are provided under the terms
of a registration rights agreement between priceline.com and the holders of the
registrable securities, who include Mr. Braddock, Mr. Walker, Walker Digital,
General Atlantic, Vulcan Ventures Incorporated, other stockholders and several
airlines. This agreement provides demand registration rights to the holders of
substantially all of the registrable securities. In addition, the holders of all
of the registrable securities are entitled under the agreement, subject to
certain limitations, to require priceline.com to include their registrable
securities in future registration statements the company files. Registration of
shares of common stock pursuant to the rights granted in this agreement will
result in such shares becoming freely tradeable without restriction under the
Securities Act of 1933. All registration expenses incurred in connection with
the above registrations will be borne by priceline.com.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is ChaseMellon
Shareholder Services, L.L.C.

LISTING

The common stock is traded on the Nasdaq National Market under the trading
symbol "PCLN."

94
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of common stock, including shares issued
upon exercise of outstanding options and warrants, in the public market after
this offering could adversely affect market prices prevailing from time to time
and could impair priceline.com's ability to raise capital through the sale of
its equity securities. Sales of substantial amounts of common stock of
priceline.com in the public market could adversely affect the prevailing market
price and the ability of priceline.com to raise equity capital in the future.

Upon completion of this offering, priceline.com will have outstanding
146,810,939 shares of common stock. Of these shares, the 5,500,000 shares of
common stock sold in this offering, the 10,000,000 shares of common stock sold
in priceline.com's initial public offering and 967,183 shares of common stock
eligible to be sold by employees upon exercise of stock options pursuant to the
option exercise program will be freely tradeable without restriction under the
Securities Act unless purchased by "affiliates" of priceline.com as defined in
Rule 144 under the Securities Act. The shares of common stock issuable upon
conversion of the % convertible subordinated notes sold in the concurrent
note offering will be freely tradeable in a similar manner. In addition,
26,495,062 shares are issuable upon exercise of outstanding options granted
under the 1997 Omnibus Plan and the 1999 Omnibus Plan. We have filed a
registration statement on Form S-8 covering the shares of common stock issuable
under such options. As a result, when the options are exercised, the shares
issued will be freely tradeable after September 25, 1999 under the Securities
Act unless purchased by "affiliates" of priceline.com as defined in Rule 144
under the Securities Act. The balance of priceline.com's outstanding shares of
common stock and the shares of common stock issuable upon exercise of
outstanding warrants will be "restricted securities" under the Securities Act,
subject to restrictions on the timing, manner and volume of sales of such
shares.

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock;

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;

- as to selling stockholders that are parties to the registration rights
agreement, make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any security convertible
into or exercisable or exchangeable for common stock; or

- file a registration statement, other than, in the case of priceline.com, a
registration statement (1) on Form S-8 covering shares of common stock
subject to outstanding options or options to be issued under the 1997
Omnibus Plan or the 1999 Omnibus Plan or (2) on any appropriate form in
response to demand registration rights under the registration rights
agreement.

The restrictions described in this paragraph do not apply in certain
circumstances, including:

- the sale of the shares to the underwriters in this offering;

- the issuance of restricted stock awards under priceline.com's existing
employee benefit plans or shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding on the
date of this prospectus;

- the grant of options to certain officers, directors, employees or
consultants provided such options are not exercisable prior to the end of
the lock-up period;

95
<PAGE>
certain supply, adaptive marketing or other similar arrangements, provided
that the recipients of such warrants or shares agree to be bound by the
foregoing provisions; or

- other transfers of any shares of common stock by certain of the foregoing
persons to any associate, as such term is defined in Rule 12b-2 under the
Exchange Act, of such person which agrees to be bound by the foregoing
provisions.

In addition, holders who will own 3,547,311 shares of common stock after
this offering and options to purchase an additional 4,532,504 shares after this
offering agreed in connection with our initial public offering to similar
restrictions until after September 25, 1999.

In connection with the option exercise program, holders of options to
purchase 5,416,000 shares of common stock registered on our Form S-8 entered
into lock-up agreements restricting the exercise of their options and sale of
the underlying shares until 180 days after the date of this prospectus, without
our prior written consent.

<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
DATE SHARES ELIGIBLE FOR SALE
- ----------------------------------------------------------------------------------- -----------------------------
<S> <C>
September 26, 1999................................................................. 5,140,000
October through November 1999...................................................... 1,520,000
December 1999 through January 2000................................................. 11,580,000
Thereafter......................................................................... 150,650,000
</TABLE>

Since many of these shares were purchased at prices substantially below current
market prices, we believe a significant number of these shares will be sold when
eligible for resale.

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 the holding period of any prior owner except an
affiliate, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (1) 1% of the number of shares of
common stock then outstanding, which will equal approximately 1,400,000 shares
immediately after this offering, or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of a Form 144
with respect to such sale. Sales under Rule 144 also are subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about priceline.com. Under Rule 144(k), a person who
is not deemed to have been an affiliate of priceline.com at any time during the
three months preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years, including the holding period of any
prior owner except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.

Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions of Rule 144. Any employee, officer or
director of or consultant to priceline.com who purchased his or her shares
pursuant to a written compensatory plan or contract may be entitled to rely on
the resale provisions of Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
such shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.

Upon consummation of this offering and subject to the foregoing lock-up
agreements, holders of up to 142,153,503 shares of common stock and securities
exercisable for shares of common stock will have certain rights to request the
registration of their shares under the Securities Act. Upon the effectiveness of
such registration, all shares covered by such registration statement would be
freely transferable. Walker Digital also owns directly approximately 5.2% of our
outstanding common stock. Walker Digital has established an option plan for its
officers and employees that provides for the grant of options to purchase common
stock held by Walker Digital. See "Description of Capital Stock--Registration
Rights."

96
<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the U.S. underwriters named below
for whom Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Allen &
Company Incorporated, BancBoston Robertson Stephens Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as U.S. representatives, and the international
underwriters named below for whom Morgan Stanley & Co. International Limited,
Goldman Sachs International, Allen & Company Incorporated, BancBoston Robertson
Stephens International Limited, Donaldson, Lufkin & Jenrette International and
Merrill Lynch International are acting as international representatives, have
severally agreed to purchase an aggregate of 2,000,000 shares of common stock
from us and 3,500,000 shares from the selling stockholders. The number of shares
of common stock that each underwriter has agreed to purchase is set forth
opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..................................................................
Goldman, Sachs & Co................................................................................
Allen & Company Incorporated.......................................................................
BancBoston Robertson Stephens Inc..................................................................
Donaldson, Lufkin & Jenrette Securities Corporation................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................................

----------
Subtotal......................................................................................... 4,400,000
----------
International Underwriters:
Morgan Stanley & Co. International Limited.........................................................
Goldman Sachs International........................................................................
Allen & Company Incorporated.......................................................................
BancBoston Robertson Stephens International Limited................................................
Donaldson, Lufkin & Jenrette International.........................................................
Merrill Lynch International........................................................................

----------
Subtotal......................................................................................... 1,100,000
----------

Total............................................................................................ 5,500,000
----------
----------
</TABLE>

The U.S. underwriters and the international underwriters are collectively
referred to as the "underwriters," and the U.S. representatives and the
international representatives are collectively referred to as the
"representatives." The underwriters are offering the shares of common stock
subject to their acceptance of the shares from priceline.com and the selling
stockholders and subject to prior sale. The underwriting agreement provides that
the obligations of the several underwriters to pay for and accept delivery of
the shares of common stock offered by this prospectus are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and

97
<PAGE>
pay for all of the shares of common stock offered by this prospectus if any such
shares are taken. However, the underwriters are not required to take or pay for
the shares covered by the underwriters over-allotment option described below.

In the agreement between U.S. and international underwriters, sales may be
made between U.S. underwriters and international underwriters of any number of
shares as may be mutually agreed. The per share price of any shares sold by the
underwriters shall be the public offering price listed on the cover page of this
prospectus, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers described below.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering
price. Any underwriter may allow, and such dealers may reallow, a concession not
in excess of $ a share to other underwriters or to certain dealers.
After the initial offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the representatives.

The selling stockholders have granted to the U.S. underwriters an option,
exercisable for 30 days from the date of this prospectus, to purchase up to an
aggregate of 825,000 additional shares of common stock at the public offering
price listed on the cover page of this prospectus, less underwriting discounts
and commissions. The U.S. underwriters may exercise this option solely for the
purpose of covering overallotments, if any, made in connection with the offering
of the shares of common stock offered by this prospectus. To the extent the
option is exercised, each U.S. underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the additional
shares of common stock as the number listed next to the U.S. underwriter's name
in the preceding table bears to the total number of shares of common stock
listed next to the names of all U.S. underwriters in the preceding table. If the
U.S. underwriters' option is exercised in full, the total price to the public
would be $ , the total underwriters' discounts and commissions
would be $ and the total proceeds to the selling stockholders
would be $ .

Each of priceline.com, the selling stockholders and Mr. Jay S. Walker who,
after this offering, will own an aggregate of 146,335,223 shares of common
stock, including shares issuable upon exercises of options and warrants owned by
them, has agreed, subject to limited exceptions, for a period of 180 days after
the date of this prospectus that they will not, without the prior written
consent of Morgan Stanley & Co. Incorporated, directly or indirectly:

- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock;

The restrictions described in this paragraph do not apply in certain
circumstances, including:

- the sale of the shares to the underwriters in this offering;

98
<PAGE>

- the grant of options to certain officers, directors, employees or
consultants provided such options are not exercisable prior to the end of
the lock-up period;

- the issuance of warrants (or shares of capital stock upon the exercise of
such warrants) to suppliers or other entities providing products or
services to priceline.com in connection with entering into certain supply,
adaptive marketing or other similar arrangements, provided that the
recipients of such warrants or shares agree to be bound by the foregoing
provisions; or

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities, and may
end any of these activities at any time.

Priceline.com, the selling stockholders and the underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

Priceline.com has entered into an adaptive marketing agreement with Discover
Financial Services, Inc. Discover Financial Services will pay priceline.com a
fee for qualifying credit applications and qualifying credit applications and
qualifying upgrades of existing Discover credit card accounts. Discover
Financial Services and Morgan Stanley & Co. Incorporated are both wholly owned
by Morgan Stanley Dean Witter & Co.

99
<PAGE>
LEGAL MATTERS

The validity of the issuance of the shares of common stock offered and
certain other matters will be passed upon for priceline.com by Skadden, Arps,
Slate, Meagher & Flom LLP and Melissa M. Taub, Esq., Senior Vice President,
General Counsel and Secretary of priceline.com, and the validity of shares of
common stock offered by priceline.com will be passed upon for the underwriters
by Davis Polk & Wardwell.

EXPERTS

The combined financial statements of priceline.com and Priceline Travel,
Inc. as of December 31, 1997 and December 31, 1998 (restated) and for the period
July 18, 1997 (Inception) to December 31, 1997 and for the year ended December
31, 1998 (restated) included in this prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

Priceline.com has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered hereby. This prospectus does not contain all of
the information set forth in the registration statement and the exhibits
thereto. For further information with respect to priceline.com and the common
stock offered hereby, reference is made to the registration statement and the
exhibits thereto. Statements contained in this prospectus regarding the contents
of any contract or any other document to which reference is made are not
necessarily complete, and, in each instance where a copy of such contract or
other document has been filed as an exhibit to the registration statement,
reference is made to the copy so filed, each such statement being qualified in
all respects by such reference. A copy of the registration statement and the
exhibits thereto may be inspected without charge at the Public Reference Room of
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the Commission upon the payment of
the fees prescribed by the Commission. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission also maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants, such as priceline.com, that file electronically with the
Commission.

100
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................................................... F-2
COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND DECEMBER 31, 1998 AND FOR THE PERIOD JULY 18,
1997 (INCEPTION) TO DECEMBER 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1998 (As Restated):
Combined Balance Sheets................................................................................ F-3
Combined Statements of Operations...................................................................... F-4
Combined Statements of Changes in Stockholders' Equity................................................. F-5
Combined Statements of Cash Flows...................................................................... F-6
Notes to Combined Financial Statements................................................................. F-7

CONDENSED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE
30, 1998 and 1999 (UNAUDITED):
Condensed Balance Sheets............................................................................... F-22
Condensed Statements of Operations..................................................................... F-23
Condensed Statement of Changes in Stockholders' Equity................................................. F-24
Condensed Statements of Cash Flows..................................................................... F-25
Notes to Condensed Financial Statements................................................................ F-26
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders of
priceline.com Incorporated and Priceline Travel, Inc.

We have audited the accompanying combined balance sheets of priceline.com
Incorporated and Priceline Travel, Inc. (collectively the Company) as of
December 31, 1997 and 1998 and the related combined statements of operations,
changes in stockholders' equity and cash flows for the period July 18, 1997
(Inception) to December 31, 1997 and the year ended December 31, 1998. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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, such combined financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1997
and 1998 and the results of their operations and their cash flows for the period
July 18, 1997 to December 31, 1997 and the year ended December 31, 1998 in
conformity with generally accepted accounting principles.

As discussed in Note 13, the accompanying 1998 financial statements have
been restated.

/s/ Deloitte & Touche LLP
Stamford, Connecticut
February 10, 1999
(March 25, 1999 as to Note 12 and March 16, 1999 as to Note 13)

F-2
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

COMBINED BALANCE SHEETS

AS OF DECEMBER 31, 1997 AND 1998

<TABLE>
<CAPTION>
1997 1998
------------ --------------
<S> <C> <C>
AS RESTATED
SEE NOTE 13
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 16,459 $ 53,593,026
Restricted bank deposit........................................................... -- 511,589
Accounts receivable, net of allowance for uncollectible accounts of $290,823 at
December 31, 1998............................................................... -- 4,176,980
Note receivable from stockholder.................................................. 250,000 --
Prepaid expenses and other current assets......................................... -- 1,921,953
------------ --------------
Total current assets.......................................................... 266,459 60,203,548
PROPERTY AND EQUIPMENT--Net......................................................... 1,180,119 5,926,877
RESTRICTED BANK CERTIFICATE OF DEPOSIT.............................................. -- 168,750
OTHER ASSETS........................................................................ 2,686 273,310
------------ --------------
TOTAL ASSETS........................................................................ $ 1,449,264 $ 66,572,485
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................................. $ 899,052 $ 5,268,430
Related party payable............................................................. 1,104,391 32,447
Accrued professional fees......................................................... 266,614 1,766,216
Accrued marketing fees............................................................ -- 1,225,315
Accrued telecommunications expense................................................ 24,354 776,303
Other accrued expenses............................................................ 36,595 490,807
Current portion of capital lease obligations...................................... 21,906 25,033
Other current liabilities......................................................... 302,363 696,997
------------ --------------
Total current liabilities..................................................... 2,655,275 10,281,548
LONG-TERM DEBT--net................................................................. -- 989,018
CAPITAL LEASE OBLIGATIONS--net of current portion................................... 51,108 26,074
------------ --------------
Total liabilities................................................................... 2,706,383 11,296,640
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock................................................................... -- 311,262
Common stock...................................................................... 416,358 748,802
Additional paid-in capital........................................................ 840,005 171,155,186
Accumulated deficit............................................................... (2,513,482) (116,939,405)
------------ --------------
Total stockholders' equity (deficiency)....................................... (1,257,119) 55,275,845
------------ --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................... $ 1,449,264 $ 66,572,485
------------ --------------
------------ --------------
</TABLE>

See notes to combined financial statements.

F-3
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

COMBINED STATEMENTS OF OPERATIONS

FOR THE PERIOD JULY 18, 1997 (INCEPTION) TO DECEMBER 31, 1997 AND THE

YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
JULY 18, 1997
(INCEPTION)
TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
------------- ---------------
<S> <C> <C>
AS RESTATED
SEE NOTE 13
Revenues.......................................................................... $ -- $ 35,236,860
Cost of revenues:
Product costs................................................................... -- 33,495,745
Supplier warrant costs.......................................................... -- 3,029,014
------------- ---------------
Total cost of revenues............................................................ -- 36,524,759
------------- ---------------
Gross profit (loss)............................................................. -- (1,287,899)
Expenses:
Supplier start-up warrant costs................................................. -- 57,978,678
Sales and marketing............................................................. 441,479 24,388,061
General and administrative...................................................... 1,011,600 18,004,585
Systems and business development................................................ 1,060,091 11,131,650
------------- ---------------
Total expenses.................................................................... 2,513,170 111,502,974
------------- ---------------
Operating loss.................................................................... (2,513,170) (112,790,873)
Interest income (expense), net.................................................... (312) 548,374
------------- ---------------
Net loss.......................................................................... (2,513,482) (112,242,499)
Accretion on preferred stock...................................................... -- (2,183,424)
------------- ---------------
Net loss applicable to common stockholders........................................ $ (2,513,482) $ (114,425,923)
------------- ---------------
------------- ---------------
Per share basic and diluted net loss applicable to common stockholders............ $ (0.05) $ (1.41)
------------- ---------------
------------- ---------------
Weighted average common shares outstanding........................................ 50,833,756 81,231,425
</TABLE>

See notes to combined financial statements.

F-4
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD JULY 18, 1997 (INCEPTION) TO DECEMBER 31, 1997 AND THE

YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRICELINE.COM INCORPORATED PRICELINE TRAVEL, INC. COMBINED
------------------------------ --------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK COMMON STOCK ADDITIONAL COMMON STOCK ADDITIONAL
-------------------- -------------------- PAID-IN --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES AMOUNT CAPITAL DEFICIT
---------- -------- ---------- -------- ------------ ------ ------ ---------- -------------
Issuance of common
stock and common
stock
subscriptions..... -- -- 51,669,719 $413,358 $ 836,642 3,000 $3,000 $3,363 --
Net loss............ -- -- -- -- -- -- -- -- $ (2,513,482)
---------- -------- ---------- -------- ------------ ------ ------ ---------- -------------
Balance, December
31, 1997.......... -- -- 51,669,719 413,358 836,642 3,000 3,000 3,363 (2,513,482)
Issuance of common
stock and common
stock
subscriptions..... -- -- 41,555,480 332,444 32,662,919 -- -- -- --
Issuance of Series A
convertible
preferred stock... 17,288,684 $172,887 -- -- 19,827,113 -- -- -- --
Issuance of Series B
convertible
preferred stock... 13,837,500 138,375 -- -- 54,276,175 -- -- -- --
Accretion on
preferred stock as
restated.......... -- -- -- -- 2,183,424 -- -- -- (2,183,424)
Issuance of options
to purchase common
stock............. -- -- -- -- 245,063 -- -- -- --
Issuance of warrants
to purchase common
stock............. -- -- -- -- 61,120,487 -- -- -- --
Net loss as
restated.......... -- -- -- -- -- -- -- -- (112,242,499)
---------- -------- ---------- -------- ------------ ------ ------ ---------- -------------
Balance, December
31, 1998 as
restated.......... 31,126,184 $311,262 93,225,199 $745,802 $171,151,823 3,000 $3,000 $3,363 $(116,939,405)
---------- -------- ---------- -------- ------------ ------ ------ ---------- -------------
---------- -------- ---------- -------- ------------ ------ ------ ---------- -------------

<S> <C>

TOTAL
------------
Issuance of common
stock and common
stock
subscriptions..... $ 1,256,363
Net loss............ (2,513,482)
------------
Balance, December
31, 1997.......... (1,257,119)
Issuance of common
stock and common
stock
subscriptions..... 32,995,363
Issuance of Series A
convertible
preferred stock... 20,000,000
Issuance of Series B
convertible
preferred stock... 54,414,550
Accretion on
preferred stock as
restated.......... --
Issuance of options
to purchase common
stock............. 245,063
Issuance of warrants
to purchase common
stock............. 61,120,487
Net loss as
restated.......... (112,242,499)
------------
Balance, December
31, 1998 as
restated.......... $ 55,275,845
------------
------------
</TABLE>

See notes to combined financial statements.

F-5
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

COMBINED STATEMENTS OF CASH FLOWS

FOR THE PERIOD JULY 18, 1997 (INCEPTION) TO DECEMBER 31, 1997

AND THE YEAR ENDED DECEMBER 31, 1998

<TABLE>
<CAPTION>
JULY 18, 1997
(INCEPTION) YEAR ENDED
TO DECEMBER 31, DECEMBER 31,
1997 1998
--------------- ----------------------
<S> <C> <C>
AS RESTATED SEE NOTE
13
OPERATING ACTIVITIES:
Net loss................................................................. $ (2,513,482) $ (112,242,499)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.......................................... 211,996 1,860,096
Provision for uncollectible accounts................................... -- 580,448
Equity based compensation.............................................. -- 67,865,550
Changes in assets and liabilities:
Accounts receivable.................................................. -- (4,757,428)
Prepaid expenses and other current assets............................ -- (1,921,953)
Restricted bank deposit and bank certificate of deposit.............. -- (680,339)
Accounts payable and accrued expenses................................ 1,226,615 8,300,456
Other................................................................ 299,677 113,030
--------------- ----------------------
Net cash used in operating activities.............................. (775,194) (40,882,639)
--------------- ----------------------
INVESTING ACTIVITIES--Additions to property and equipment................ (1,317,404) (6,606,854)
--------------- ----------------------
FINANCING ACTIVITIES:
Related party payable.................................................. 1,104,391 (1,071,944)
Issuance of long-term debt............................................. -- 1,000,000
Principal payments under capital lease obligations..................... (1,697) (21,907)
Issuance of common stock and subscription units........................ 1,006,363 26,495,361
Payment received on stockholder note................................... -- 250,000
Issuance of Series A convertible preferred stock....................... -- 20,000,000
Issuance of Series B convertible preferred stock....................... -- 54,414,550
--------------- ----------------------
Net cash provided by financing activities.......................... 2,109,057 101,066,060
--------------- ----------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................................ 16,459 53,576,567
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................... -- 16,459
--------------- ----------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................. $ 16,459 $ 53,593,026
--------------- ----------------------
--------------- ----------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Capital lease obligations.............................................. $ 74,711 $ --
Cash paid during the period for interest............................... 836 60,681
</TABLE>

See notes to combined financial statements.

F-6
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION

Priceline.com Incorporated (priceline.com) has pioneered a unique new type
of e-commerce known as a demand collection system that enables consumers to use
the Internet to save money on a wide range of products and services while
enabling sellers to generate incremental revenue. Using a simple and compelling
consumer proposition--name your price, priceline.com collects consumer demand,
in the form of individual customer offers guaranteed by a credit card, for a
particular product or service at a price set by the customer. Priceline.com then
either communicates that demand directly to participating sellers or accesses
participating sellers' private databases to determine whether the customer's
offer can be fulfilled on the basis of the pricing information and rules
established by the sellers. Consumers agree to hold their offers open for a
specified period of time and once fulfilled, offers cannot be canceled. By
requiring consumers to be flexible with respect to brands, sellers and/or
product features, priceline.com enables sellers to generate incremental revenue
without disrupting their existing distribution channels or retail pricing
structures. Priceline.com commenced its service on April 6, 1998 with the sale
of leisure airline tickets. During 1997, the Company had been in the development
stage. Priceline.com's services were expanded to include the sale of new
automobiles, on a test basis, in July 1998, hotel room reservations in October
1998, and home mortgages in January 1999.

Priceline.com was founded as a limited liability company (LLC) in July 1997
and converted to a corporation in July 1998. All LLC units and options and
warrants to purchase units, were converted in July 1998 to common stock of
priceline.com (Common Stock) and options and warrants to purchase Common Stock.
For presentation purposes all such LLC units, and options and warrants to
purchase units are presented as Common Stock or options and warrants to purchase
Common Stock. Priceline Travel, Inc. (Priceline Travel) holds the travel agency
license used to effect airline ticket sales. Priceline Travel is wholly owned by
the founding stockholder and Vice-Chairman of priceline.com. Priceline.com has a
call option to purchase Priceline Travel for nominal consideration.
Priceline.com and Priceline Travel are entities under common control,
accordingly, the financial statements of the two companies are presented on a
combined basis. Priceline Travel will merge into priceline.com during the first
quarter of 1999. Priceline.com and Priceline Travel are referred to,
collectively, as the Company.

Walker Digital Corporation (Walker Digital), a research and development
company, developed the priceline.com service and the business model and related
intellectual property rights underlying the priceline.com service, the rights
for which were transferred to the Company on July 18, 1997. Walker Digital had
no operations and no revenues related to the assets transferred to
priceline.com. Walker Digital was founded and is controlled by the founding
stockholder and Vice Chairman of priceline.com. Walker Digital has also been
providing the Company with a variety of services including subleasing office
facilities to the Company on a month to month basis. Charges to the Company for
such services aggregated $19,813 and $706,160 during the period July 18, 1997 to
December 31, 1997 and the year ended December 31, 1998, respectively. Such
amounts are included in general and administrative expense. In addition, the
Company charged Walker Digital $95,874 and $384,831 for the period July 18, 1997
to December 31, 1997 and the year ended December 31, 1998, respectively, for
shared expenses. Such reimbursement has been offset against general and
administrative expenses in the accompanying combined statements of operations.
Several of the Company's executive offers and other key employees are also
officers, employees and/or stockholders of Walker Digital.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION AND BASIS OF PRESENTATION--The combined financial
statements for all periods presented include the financial statements of
priceline.com and Priceline Travel. The combined financial

F-7
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statements have been prepared in accordance with generally accepted accounting
principles. All significant intercompany transactions have been eliminated.

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 date of the financial
statements and reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's financial instruments,
including cash and cash equivalents, restricted bank deposits, accounts
receivable-net and accounts payable, are carried at cost which approximates
their fair value because of the short-term maturity of these financial
instruments. The carrying value of the capital lease obligations and long-term
debt approximates fair value because the interest rates on these obligations are
comparable to the interest rates that could have been obtained at the date of
the balance sheet.

CASH AND CASH EQUIVALENTS, RESTRICTED BANK DEPOSITS--The Company invests
excess cash primarily in money market accounts, certificates of deposits, and
short-term commercial paper. All highly liquid instruments with an original
maturity of three months or less are considered cash equivalents. Restricted
bank deposits collateralize letters of credit issued in favor of certain
airlines.

NOTE RECEIVABLE FROM STOCKHOLDER--Represents a note receivable related to
the sale of common stock that was subsequently paid on January 9, 1998.

PROPERTY AND EQUIPMENT--Property and equipment are stated at historical
cost. Depreciation and amortization of property and equipment is computed on a
straight-line basis, generally over the estimated useful lives of the assets or,
when applicable, the life of the lease, whichever is shorter. Capitalized
software costs represent costs paid to third parties and are amortized on a
straight-line basis over their estimated useful lives. Maintenance and repairs
are charged directly to expense as incurred.

INTANGIBLE ASSETS--The Company acquired certain patent rights covering the
core buyer-driven commerce system and the method and system for pricing and
selling airline ticket options from a Walker Digital affiliate on July 18, 1997
in exchange for 6,895,833 shares of common stock. Since the transfer was between
entities under common control, it was recorded at the historical cost of the
asset transferred, which was zero.

IMPAIRMENT OF 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.

REVENUES AND COST OF REVENUES--The manner in which revenues are recognized
differs depending on the product or service sold through the priceline.com
service. With respect to airline ticket or hotel room reservation services,
revenues are generated by transactions with customers who make offers to
purchase airline tickets and hotel rooms supplied by participating sellers. All
offers are guaranteed by a customer credit card. Credit cards are the only form
of payment accepted by priceline.com. Revenues and related costs are recognized
if, and when, the Company accepts the customer's offer and charges the
customer's credit card. Because priceline.com is the merchant of record in these
transactions, revenue for these

F-8
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
services includes the amount billed to the customer, net of certain
transportation taxes and fees. Airline and hotel revenues may be supplemented by
fees that are paid to the Company by third parties in connection with adaptive
marketing programs. With respect to automobile and mortgage services, fees or
other payments payable by the seller and/or the customer are recognized as
revenue. Because priceline.com acts as an intermediary between the customer and
the seller in these transactions, revenue for these products and services is
recorded at the amount of the fee received in connection with the transaction,
and not on the value of the underlying transaction, when the transaction is
completed. Automobile and mortgage services revenues may also include fees from
third parties for adaptive marketing programs.

Revenues from adaptive marketing programs are earned when customers elect to
increase their offering price, and thus the likelihood of a successful
transaction, at no additional costs, by participating in a sponsor promotion.
Priceline.com earns fee income from the corporate sponsor of each adaptive
marketing program based primarily upon customer participation levels. During
1998, the Company generated approximately $4,037,000 of revenues from adaptive
marketing programs. All of these adaptive marketing revenues resulted from fees
paid to the Company by Capital One Bank in connection with a credit card
promotion--see Note 12.

Priceline.com expressly permits only credit cards as an acceptable form of
payment from its consumers. Consequently, the Company believes that it does not
have a significant risk of loss with respect to customer transactions. On rare
occasions, the Company provides credit card refunds to individual customers to
satisfy disputes and complaints. The Company accrues for expected credit card
charge-backs and classifies the resulting expense as an addition to the
allowance for doubtful accounts. The Company extends customary payment terms to
corporate customers such as automobile dealers and adaptive marketing sponsors.
The Company did not experience any uncollectible corporate accounts receivable
in 1998.

Cost of revenues includes product costs and the pro rata amount of the Delta
Warrant earned prior to the December 31, 1998 measurement date based on their
performance through that date--see Note 6.

SUPPLIER START-UP WARRANT COSTS--Supplier start-up warrant costs includes
the value of warrants issued to secure certain airline alliances and
relationships including the value of the Delta Warrant net of the amount
included in cost of revenues--see Note 6.

SALES AND MARKETING--Sales and marketing expenses are comprised primarily of
costs of radio and newspaper advertising, costs of the third-party offer-taking
call center, credit card processing fees, provisions for customer credit card
charge-backs and compensation for the Company's sales and marketing personnel.
All sales and marketing costs are expensed as incurred.

SYSTEMS AND BUSINESS DEVELOPMENT--Systems and business development expenses
are comprised primarily of compensation to the Company's information systems and
product development staff and payments to outside contractors, data
communications and other expenses associated with operating the Company's Web
site, depreciation on computer hardware and licensing fees for computer
software. Such costs are expensed as incurred.

INTEREST INCOME (EXPENSE), NET--Interest income (expense), net includes
interest income of $523 and $633,294 and interest expense of $835 and $84,920
for the period July 18, 1997 to December 31, 1997 and the year ended December
31, 1998, respectively.

F-9
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUITY-BASED COMPENSATION--The Company accounts for stock-based employee
compensation arrangements in accordance with provisions of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
complies with the disclosure provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. Under APB Opinion No. 25, compensation expense is
based on the difference, if any, on the date of grant, between the fair value of
priceline.com's stock and the exercise price.

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
("EITF") Issue No. 96-18, Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services. All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.

INCOME TAXES--The Company accounts for income taxes 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 basis of assets and
liabilities using presently enacted tax rates in effect. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.

During the period that priceline.com operated as an LLC, it was treated
substantially as a partnership for tax purposes and, accordingly, the tax effect
of its activities accrued to its members through July 1998.

NET LOSS PER SHARE--The Company computes net loss per share in accordance
with SFAS No. 128, Earnings Per Share which requires dual presentation of basic
earnings per share ("EPS") and diluted EPS.

Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares and potentially
dilutive shares outstanding during the period. Potential common shares consist
of the incremental common shares issuable upon conversion of the Series A and
Series B Convertible Preferred Stock (using the if-converted method) and shares
issuable upon the exercise of stock options and warrants (using the treasury
stock method). At December 31, 1998, Series A and Series B Convertible Preferred
Stock were convertible into 21,610,854 shares and 17,296,874 shares,
respectively, and options and warrants to purchase 42,181,997 shares of Common
Stock were outstanding. Outstanding convertible preferred stock, warrants and
options could potentially dilute basic earnings per share in the future but have
not been included in the computation of diluted net loss per share as the impact
would have been antidilutive for the periods presented.

BUSINESS RISK--Business risks include the following:

Competition--The markets for the products and services offered on the
priceline.com service are intensely competitive. The Company competes with both
traditional distribution channels and online services. The Company currently or
potentially competes with a variety of companies with respect to each product or
services offered. The Company potentially faces competition from a number of
large online services that have expertise in developing online commerce and in
facilitating Internet traffic. Many

F-10
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
competitors have significant competitive advantages. For example, airlines,
hotels and other suppliers also sell their products and services directly to
consumers and have established Web sites. Internet directories, search engines
and large traditional retailers have significantly greater operating histories,
customer bases, technical expertise, brand recognition and/or online commerce
experience than the Company. In addition, certain competitors may be able to
devote significantly greater resources to furthering their business.

Dependence on Airline Industry and Certain Carriers--The Company's near
term, and possibly long term, prospects are significantly dependent upon the
sale of leisure airline tickets. Sales of leisure airline tickets and revenues
derived from related adaptive marketing programs represented essentially all of
the Company's revenues for the year ended December 31, 1998. Sales of airline
tickets from the Company's three largest airline suppliers accounted for
approximately 95% of airline ticket revenue for the year ended December 31,
1998. As a result, currently the Company is substantially dependent upon the
continued participation of these three airlines in the priceline.com service in
order to maintain and continue to grow its total airline ticket revenues.
Significantly reducing the Company's dependence on the airlines is likely to
take a long time and there can be no guarantee that the Company will succeed in
reducing that dependence.

Risks Associated with Brand Development--The Company intends to continue to
pursue an aggressive brand-enhancement strategy, which will include mass market
and multimedia advertising, promotional programs and public relations
activities. To increase awareness of the priceline.com brand and expand it to a
wide range of products and services, the Company will need to continue to spend
significant amounts on advertising and promotions. These expenditures may not
result in a sufficient increase in revenues to cover such advertising and
promotions expenses.

CONCENTRATION OF CREDIT RISK--Financial instruments which potentially
subject the Company to concentrations of credit risk are principally bank
deposits and accounts receivable. Cash and cash equivalents and restricted bank
deposits are deposited with high credit quality financial institutions. Accounts
receivable typically represent credit card purchases and are derived from the
revenues earned from customers in the U.S. and are denominated in U.S. dollars.
Accounts receivable balances are typically settled through customer credit cards
and, as a result, the majority of accounts receivable are collected upon
processing of credit card transactions. The Company maintains an allowance for
uncollectible accounts based upon the expected collectibility of accounts
receivable. During the year ended December 31, 1998, approximately 11% of
revenues were generated from one vendor participating in an adaptive marketing
program. As of December 31, 1998, amounts due from this vendor represented
approximately 54% of accounts receivable.

COMPREHENSIVE INCOME--Effective January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income. Under SFAS 130 changes in net assets of
an entity resulting from transactions and other events and circumstances from
non-owner sources are reported in a financial statement for the period in which
they are recognized. Because there were no such changes, adoption of SFAS 130
did not impact the combined financial statements of the Company.

SEGMENT REPORTING--Effective January 1, 1998, the Company adopted SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information. The
Company operates as a single segment and will evaluate additional segment
disclosure requirements as it expands its operations.

F-11
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting Standards SFAS No 133
Accounting for Derivative Instruments and Hedging Activities was released. The
statement requires the recognition of all derivatives as either assets or
liabilities in the balance sheet and the measurement of those instruments at
fair value. The accounting for changes in the fair value of a derivative depends
on the planned use of the derivative and the resulting designation. The Company
is required to implement the statement in the first quarter of fiscal 2000. The
Company has not used derivative instruments and believes the impact of adoption
of this statement will not have a significant effect on the financial
statements.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, Accounting for Costs of Computer Software
Developed or Obtained for Internal Use. This SOP is effective for fiscal years
beginning after December 15, 1998. This SOP requires capitalization of certain
costs of computer software developed or obtained for internal use.

3. ACCOUNTS RECEIVABLE

A summary of the activity in the allowance for uncollectible accounts for
the year ended December 31, 1998 is as follows:

<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Provision charged to expense..................................................... $ 580,448
Charge offs...................................................................... (289,625)
-----------
Balance at end of period......................................................... $ 290,823
-----------
-----------
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1997 and 1998 consists of the
following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS) 1997 1998
----------------- ------------ ------------
<S> <C> <C> <C>
Computer equipment and software......................................... 3 $ 1,144,263 $ 7,034,088
Office equipment........................................................ 3 89,846 584,034
Furniture and fixtures.................................................. 7 158,006 380,847
------------ ------------
Total................................................................... 1,392,115 7,998,969
Less accumulated depreciation and amortization.......................... 211,996 2,072,092
------------ ------------
Property and equipment--net............................................. $ 1,180,119 $ 5,926,877
------------ ------------
------------ ------------
</TABLE>

Depreciation and amortization expense was $211,996 and $1,860,096 for the
period July 18, 1997 to December 31, 1997 and the year ended December 31, 1998,
respectively.

5. LONG-TERM DEBT

In April 1998, priceline.com issued a promissory note to an investor for
$1,000,000. The promissory note bears interest at a rate of 6% per annum and
matures on April 15, 2003. In connection with the promissory note, priceline.com
issued detachable warrants to purchase 62,500 common shares at $0.80 per

F-12
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT (CONTINUED)
share. The portion of the proceeds allocable to the warrant, estimated fair
value of $12,795, was accounted for as additional paid-in capital. The fair
value of the warrants was determined using an option pricing model. The discount
will be recorded as interest expense over the term of the promissory note. At
December 31, 1998, the principal balance of the promissory note, net of
unamortized discount, was $989,018.

6. STOCKHOLDERS' EQUITY

Combined stockholders' equity at December 31, 1997 and 1998 consists of the
following:

<TABLE>
<CAPTION>
1997 1998
------------- ---------------
<S> <C> <C>
Priceline.com Incorporated:
Common stock, $0.008 par value--authorized 300,000,000 shares at December 31, 1997
and 1998 issued and outstanding, 51,669,719 and 93,225,199 shares at December
31, 1997 and 1998, respectively................................................. $ 413,358 $ 745,802
Convertible Preferred Stock, $0.01 par value; authorized 150,000,000 shares:
Series A--$1.16 liquidation value; issued and outstanding 17,288,684 shares....... -- 172,887
Series B--$4.00 liquidation value; issued and outstanding, 13,837,500 shares...... -- 138,375
Additional paid-in capital........................................................ 836,642 171,151,823

Priceline Travel, Inc:
Common stock, $1 par value--3,000 shares authorized, issued and outstanding....... 3,000 3,000
Additional paid-in capital........................................................ 3,363 3,363

Accumulated deficit............................................................... (2,513,482) (116,939,405)
------------- ---------------
Total stockholders' equity (deficiency)........................................... $ (1,257,119) $ 55,275,845
------------- ---------------
------------- ---------------
</TABLE>

On July 18, 1997, priceline.com issued 42,990,211 shares of Common Stock for
the initial contributed services of the founders. No compensation expense was
recognized for the contributed services as priceline.com was in the earliest
phases of development. Such services included conceiving the priceline.com
business model, developing business strategies and operating plans, initiating
contact with airline suppliers and raising capital. There were no employment
agreements related to the services initially contributed and/or the shares
issued in respect of such shares.

Also, on July 18, 1997, priceline.com issued 6,895,833 shares of Common
Stock to Walker Digital in exchange for the transfer by Walker Digital to
priceline.com all of the rights, title, and interest in certain patents and
patent applications relating to buyer driven commerce.

In July 1998, priceline.com also issued 8,125,000 shares of Common Stock, to
the Chairman and Chief Executive Officer which resulted in the recognition of a
one time charge of $6,500,000 with respect to these shares. The shares were
issued as compensation for agreeing to accept the position.

In July 1998, pursuant to an agreement between priceline.com and two
partnerships affiliated with General Atlantic Partners, LP (collectively GAP),
priceline.com sold to GAP a total of 17,288,684 shares of

F-13
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

6. STOCKHOLDERS' EQUITY (CONTINUED)
Series A Convertible Preferred Stock, par value $0.01 per share (the Series A
Preferred Stock) for $20,000,000.

In December 1998, priceline.com raised net proceeds of approximately
$54,414,550 by completing a private placement of an aggregate of 13,837,500
shares of its Series B Convertible Preferred Stock (the Series B Preferred
Stock) with several investors, including GAP and Vulcan Ventures Incorporated.
Fees of $850,000 have been paid to a company, in which a director of
priceline.com is a director and stockholder, in connection with this
transaction.

Shares of the Series A and Series B Preferred Stock are automatically
convertible, subject to antidilution adjustment, into an equal number of shares
of Common Stock upon an initial public offering of the Company. The holders of
the Series A and Series B Preferred Stock vote together as a single class with
the holders of Common Stock. If the Company has not consummated an initial
public offering by December 1999, the conversion price of Series B Preferred
Stock will be adjusted to $1.97 per share. Since the Series B Preferred Stock
contained this beneficial conversion feature at the date of issue, the Company
allocated a portion of the proceeds equal to the value of the feature,
$34,650,000, to additional paid-in capital. This amount will be amortized over
one year. Amortization will cease if an initial public offering is completed
within one year and the Series B Preferred Stock convert at $3.20 per share. The
shares of the Series A and Series B Preferred Stock rank senior to the Common
Stock with respect to liquidation and equal to the Common Stock with respect to
dividends.

In April 1998, priceline.com issued warrants to purchase 125,000 shares of
Common Stock, at a zero exercise price, to a non-employee in exchange for
services rendered to the Company. The estimated fair value of the warrants at
the date of grant of $100,000 was based on the value of the equivalent shares as
of the grant date, that is 125,000 shares at $0.80 per share, and has been
reflected as sales and marketing expense and additional paid-in-capital.

In April 1998, priceline.com issued warrants to purchase 62,500 shares of
Common Stock at an exercise price of $0.80 per share in conjunction with a
promissory note (see Note 5--Long-Term Debt).

In August 1998, priceline.com entered into a warrant agreement with Delta
Air Lines (Delta) to purchase up to 18,892,603 shares of Common Stock at an
exercise price of approximately $0.93 per share (Delta Warrant) for agreeing to
participate in the priceline.com service. Vesting was contingent upon
achievement of certain predetermined performance thresholds. However, there was
no penalty for failure to provide ticket inventory to satisfy these performance
thresholds. Accordingly, no expense was recorded when the warrant was issued. On
December 31, 1998, the Company amended its agreement with Delta to eliminate the
vesting contingencies and fix the number of shares subject to the warrant at
18,619,402. The warrants were immediately vested on the date of grant, in that
they are not subject to any forfeiture for any reason. The amended Delta Warrant
will become exercisable at the earlier of seven years or over three years upon
the achievement of certain performance thresholds. The agreement does not
require Delta to make any performance commitments, is non-exclusive and allows
Delta to participate in other programs similar to the priceline.com service.
Accordingly, the Company recognized approximately $58.7 million of expense based
upon the fair value of the warrant on December 31, 1998, of which $3 million is
included in cost of revenues-supplier warrant costs and $55.7 million is
included in expenses-supplier start-up warrant costs in the accompanying
statement of operations.

On December 31, 1998, priceline.com issued warrants to purchase 937,500
shares of Common Stock at an exercise price of $3.20 per share to three airlines
in recognition of their being among the original

F-14
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

6. STOCKHOLDERS' EQUITY (CONTINUED)
participants in the priceline.com service. Because there are no requirements as
to the nature or length of that participation and the warrants are not subject
to forfeiture for any reason, the Company recognized approximately $2.3 million
of expense based upon the fair value of the warrants at December 31, 1998, which
is included in expenses-supplier start-up warrant costs in the accompanying
statement of operations.

On January 29, 1999, priceline.com issued warrants to an airline to purchase
1,250,000 shares of Common Stock at an exercise price of $6.40 per share. The
warrants become exercisable as follows, 50% on January 29, 2000 and 50% on
January 29, 2001. The agreement requires the airline to make available to
priceline.com airline ticket inventory on certain specified terms and conditions
for two years. If the airline does not provide the specified airline ticket
inventory, the unexercised warrants are returnable and in addition, there is a
penalty of $1.0 million in the first year and $0.5 million in the second year.
The fair value of the warrant of $3.1 million at the grant date was capitalized
and will be amortized over the two year period during which services will be
provided to the Company.

The fair value of the airline warrants was based on a third party valuation
using an option pricing model and the following assumptions:

<TABLE>
<CAPTION>
OTHER
DELTA AIRLINE
WARRANTS WARRANTS
----------- -------------
<S> <C> <C>
Stock Price............................................................................. $ 3.20 $ 3.20
Exercise Price.......................................................................... $ 0.93 $ 3.20-$6.40
Term.................................................................................... 7 years 3-4 years
Volatility.............................................................................. 132% 132%
Risk Free Rate.......................................................................... 4.6% 4.6%
</TABLE>

As of December 31, 1998, no warrants had been exercised.

7. STOCK OPTION PLAN

Priceline.com has adopted the 1997 Omnibus Plan (the Plan), which provides
for grants of options as incentives and rewards to encourage employees,
officers, consultants and directors in the long term success of the Company. The
Plan provides for grants of options to purchase up to 23,875,000 shares at a
purchase price equal to the fair market value on the date of grant. Generally,
the options vest over three years from the date of grant. In accounting for the
Plan, the Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. When the exercise price of employee
stock options issued under the plan equaled the fair value of the underlying
stock on the date of grant, no compensation expense was recorded. Compensation
expense was recognized for the fair value of the options granted to
non-employees and to the extent fair value of the underlying stock exceeded the
exercise price of employee stock options. Compensation expense, included in
general and administrative, recognized during the year ended December 31, 1998
aggregated $245,063.

F-15
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

The following summarizes the transactions pursuant to the Plan:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE RANGE
SHARES OPTION PRICE OF SHARE
------------ ------------- -----------
<S> <C> <C> <C>
Granted during 1998..................................................... 23,449,219 $ 0.93 $ 0.80-3.20
Forfeited............................................................... (189,374) 0.80 0.80
Cancelled............................................................... (815,625) 0.80 0.80
------------
Balance at December 31, 1998............................................ 22,444,220 0.94
------------
------------
Exercisable at December 31, 1998........................................ None
------------
------------
Available for grant at December 31, 1998................................ 1,430,780
------------
------------
</TABLE>

Had compensation costs been determined based upon the fair value at grant
date, the Company's pro forma net loss and pro forma net loss per share for the
year ended December 31, 1998 would have been reported as follows:

<TABLE>
<CAPTION>
REPORTED PRO FORMA
-------------- --------------
<S> <C> <C>
Net loss......................................................................... $ 112,242,499 $ 114,613,228
Net loss applicable to common shareholders....................................... 114,425,923 116,796,653
Basic and diluted loss per common share.......................................... 1.41 1.44
</TABLE>

The fair value of each option grant was determined on the date of grant
using the minimum value method. The weighted average fair value of options
granted during 1998 was estimated to be approximately $0.15 on the dates of
grant using the minimum value method and the following assumptions: volatility
of 0%, risk free interest rate of 6.00% and an expected life of 3 years,
respectively. The Plan also provides for the grant of tandem stock appreciation
rights, stand-alone stock appreciation rights, phantom stock and other forms of
equity based incentive awards which do not reduce the number of shares with
respect to which incentive awards may be granted. No such awards were made as of
December 31, 1998.

In February 1999, priceline.com established the 1999 Omnibus Plan (the 1999
Plan), which provides for grants of options as incentives and rewards to
encourage employees, officers, consultants and directors in the long term
success of the Company. The Plan provides for grants of options to purchase up
to 9,375,000 shares at a purchase price equal to the fair market value on the
date of grant. Generally, the options vest over three years from the date of
grant. The Plan also provides for the grant of tandem stock appreciation rights,
stand-alone stock appreciation rights, phantom stock and other forms of equity
based incentive awards which do not reduce the number of shares with respect to
which incentive awards may be granted.

8. TAXES

INCOME TAXES--Through July 31, 1998, priceline.com operated as a limited
liability company and income taxes (benefits) accrued to the members.
Accordingly, no income taxes (benefits) were reflected in the accompanying
financial statements as of December 31, 1997 and for the period then ended.
Since converting from an LLC to a corporation in July 1998, the Company has
incurred net operating losses of $22,703,000. This loss will expire if not
utilized by December 31, 2018. As of December 31, 1998 a valuation allowance for
the full amount of the net deferred tax asset of approximately $37,985,023,
resulting from the tax net operating losses and other items was recorded because
of the uncertainty regarding its realization.

F-16
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

8. TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
1998
--------------
<S> <C>
Equity based compensation..................................................... $ 25,267,265
Net operating loss carryforwards.............................................. 9,347,966
Start-up costs................................................................ 2,988,359
Other......................................................................... 381,433
--------------
Less valuation allowance...................................................... (37,985,023)
--------------
Deferred tax asset, net....................................................... $ --
--------------
--------------
</TABLE>

The income tax benefit is different from the amount computed using
applicable statutory federal rates for the following reasons:

<TABLE>
<CAPTION>
1998
--------------
<S> <C>
Income tax benefit at federal statutory rate.................................. $ 39,284,875
Adjustment due to:
LLC status through July 31, 1998............................................ (7,089,945)
State taxes and other....................................................... 5,790,093
Increase in valuation allowance............................................. (37,985,023)
--------------
Income tax benefit............................................................ $ --
--------------
--------------
</TABLE>

FEDERAL AIR TRANSPORTATION TAX--Currently, a Federal transportation tax is
imposed upon the sale of airline tickets and generally is collected by the
airlines selling the tickets. The tax is based upon a percentage of the cost of
transportation, which was 9% for periods prior to October 1, 1998 and 8%
thereafter. The tax has been calculated based on the amount paid to the airline
for a ticket, rather than the price paid by the customer. There is a possibility
that current law requires computation of the tax based on the price paid by the
customer. Approximately $111,000 in additional taxes relating to the method of
calculating the tax has been accrued as of December 31, 1998.

9. OTHER RELATED PARTY TRANSACTIONS

The Founder and Vice Chairman of priceline.com also serves as non-executive
Chairman of NewSub Services, Inc. (NewSub), a direct marketing company
co-founded by him. The Company participates in certain adaptive marketing
programs with NewSub. Sales and marketing expense related to these programs
totaled $80,799 for the year ended December 31, 1998. There was no such expense
in 1997.

In June 1998, priceline.com issued a promissory note to a Walker Digital for
$1,000,000. The promissory note bore interest at a rate of 6% per annum and was
due June 30, 1999. The note has been repaid.

10. COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS--On January 6, 1999, priceline.com received notice that a
third party patent applicant and patent attorney, Thomas G. Woolston,
purportedly had filed in December 1998 with the United States

F-17
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Patent and Trademark Office a request to declare an interference between a
patent application filed by Woolston describing an electronic market for used
and collectible goods and priceline.com's core buyer-driven commerce patent.
Priceline.com has received a copy of a Petition for Interference from Woolston,
the named inventor of at least three United States Patent applications titled
Consignment Nodes, one of which has issued as a patent. Priceline.com currently
is awaiting information from the Patent Office regarding whether it will
initiate an interference proceeding concerning Woolston's patent application and
priceline.com's core buyer-driven commerce patent. An interference is an
administrative proceeding instituted in the Patent Office to determine questions
of patentability and priority of invention between two or more parties claiming
the same patentable invention. There is no statutory period within which the
Patent Office must act on an interference request. If an interference is
declared and proceeds through a final hearing in the Patent Office, a final
judgment is made by the Patent Office as to inventorship. Following such final
judgment, appeals could be made in Federal court. While there can be no
certainty as to time periods, interference proceedings typically take years to
resolve.

As a threshold to the initiation of an interference proceeding, Woolston
must show that his patent application supports claims that he copied from the
priceline.com core buyer-driven commerce patent. In order to make this showing,
he would have to prove, among other things, that he invented the subject matter
of the priceline.com claims before the inventors of the priceline.com patent. If
the Patent Office were to find that Woolston's patent application supported the
copied priceline.com claims, it would resolve the interference by awarding
inventorship to the party with the earliest proven date of invention. Woolston
recently announced an agreement to license his issued patent and pending patent
applications to the owner of an Internet travel service that, according to such
announcement, commenced on-line operations in the fourth quarter of 1998 and
purports to compete with priceline.com.

While the interference process is still at an early stage, priceline.com
believes that it has meritorious defenses to Woolston's claim, which it intends
to pursue vigorously. Among other things, priceline.com believes that the
Woolston patent application does not disclose the inventions covered by the
priceline.com patent claims. However, it is impossible to predict the outcome of
an interference with certainty. While Woolston claims to have an earlier
invention date by a period of approximately sixteen months, the final decision
as to priority of invention would be made by the Patent Office after considering
facts provided by each party during the interference proceeding. If an
interference is declared and thereafter resolved in favor of Woolston, such
resolution could result in an award of some or all of the disputed patent claims
to Woolston. If, following such award, Woolston were successful in a patent
infringement action against priceline.com, including prevailing over all
defenses available to priceline.com such as those of non-infringement and
invalidity, this could require priceline.com to obtain licenses from Woolston at
a cost which could significantly adversely affect priceline.com's business. If
Woolston prevailed in both an interference and an infringement action, then
priceline.com could be enjoined from conducting business through the
priceline.com service to the extent covered by the patent claims awarded to
Woolston. In addition, defense of the interference action may be expensive and
may divert management attention away from priceline.com's business.

On January 19, 1999, Marketel International Inc. (Marketel), a California
corporation, filed a lawsuit against priceline.com and Priceline Travel, among
others. On February 22, 1999, Marketel filed an amended and supplemental
complaint. The amended complaint filed by Marketel alleges causes of action for,
among other things, misappropriation of trade secrets, breach of contract,
conversion, breach of confidential relationship, copyright infringement, fraud,
unfair competition and false advertising, and seeks injunctive relief and
damages in an unspecified amount. In its amended complaint, Marketel alleges,

F-18
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
among other things, that the defendants conspired to misappropriate Marketel's
business model, which it describes as a buyer-driven electronic marketplace for
travel services and its appurtenant techniques, market research, forms, plans,
and processes, which allegedly were provided in confidence approximately ten
years ago. The amended complaint also alleges that three former Marketel
employees are the actual sole inventors or co-inventors of a patent which was
issued on August 11, 1998 and which patent has been assigned to priceline.com.
Marketel asks that the patent's inventorship be corrected accordingly.

Based upon publicly available information, priceline.com believes that
Marketel's fax and fee-based business was launched in 1991 and ceased operations
seven months later. Priceline.com's Internet-based model was independently
developed by Walker Digital and priceline.com, and practiced by the Company
starting in 1998. Based on publicly available information and Marketel's
complaint, priceline.com understands that Marketel operated a fax-based travel
information service which offered consumers, travel agents and/or consolidators
the opportunity to purchase specially printed forms. These forms, when
accompanied by an additional non-refundable fee, allowed prospective ticket
buyers to fax to Marketel credit-card guaranteed bids for airline travel at a
bid price specified by the buyer. The Company believes that Marketel has not
engaged in any regular commercial activities since ceasing operations in 1992.
Based upon publicly available information, Marketel reactivated its active
status as a corporation by satisfying its back-due tax obligations to the State
of California shortly after the filing of its complaint.

On February 5, and February 10, 1999, the Company filed their answer and
amended answer, respectively, to the amended complaint, in which they denied the
material allegations of liability in the complaint. Priceline.com and all other
defendants strongly dispute the material legal and factual allegations contained
in Marketel's amended complaint and believe that the amended complaint is
without merit. Priceline.com intends to defend vigorously against the action.
Defending the lawsuit may involve significant expense and, due to the inherent
uncertainties of litigation, there can be no certainty as to the ultimate
outcome. Pursuant to the indemnification obligations contained in the Purchase
and Intercompany Services Agreement with Walker Digital, Walker Digital has
agreed to indemnify, defend and hold harmless priceline.com for damages,
liabilities and legal expenses incurred in connection with the Marketel
litigation.

From time to time the Company has been and expects to continue to be subject
to legal proceedings and claims in the ordinary course of business, and
including claims of alleged infringement of third party intellectual property
rights by the company. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources.

AIRLINE ALLIANCES AND RELATIONSHIPS--Priceline.com has entered into Airline
Participation Agreements with eighteen airlines for the supply of airline
tickets. The Airline Participation Agreements do not commit the airlines to
provide tickets for any particular routes or at a discount to their retail
prices, but outline the terms and conditions under which tickets may be sold
pursuant to fares, rules and availability that the airlines may provide from
time to time. The Airline Participation Agreements are generally subject to
termination upon 30 days notice by priceline.com or the airline.

EMPLOYMENT CONTRACTS--Priceline.com has entered into employment agreements
with certain members of senior management that provide for minimum annual
compensation of approximately $2,135,000 in the aggregate. The agreements
provide for periods of employment of up to 3 years. Generally, the agreements
provide for incentives and bonuses based on the achievement of performance
goals, as well as the grant of stock options under the 1997 Omnibus Stock Option
Plan.

F-19
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CAPITAL LEASES--Priceline.com leases certain machinery and equipment costing
$74,711 under a capital lease agreement. Accumulated depreciation on this
equipment was $2,075 and $26,979 at December 31, 1997, and December 31, 1998,
respectively. These amounts are included in property and equipment in Note 4.

Future minimum lease payments, including interest, under the capital lease
at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------------------------
<S> <C>
1999................................................................................................... $ 30,389
2000................................................................................................... 30,389
---------
Total minimum lease payments........................................................................... 60,778
Less amounts representing interest..................................................................... 9,671
---------
Present value of future minimum lease payments......................................................... 51,107
Less current portion of obligations.................................................................... 25,033
---------
Obligations under capital leases, net of current portion............................................... $ 26,074
---------
---------
</TABLE>

11. BENEFIT PLAN

Priceline.com adopted a defined contribution 401(k) savings plan (the Plan)
during 1998 covering all employees who are at least 21 years old and have
completed 6 months of service. The Plan allows eligible employees to contribute
up to 20% of their eligible earnings, subject to a statutorily prescribed annual
limit. The Company may make matching contributions on a discretionary basis to
the Plan. All participants are fully vested in their contributions and
investment earnings. During the year ended December 31, 1998, the Company did
not make any matching contributions to the Plan.

12. SUBSEQUENT EVENTS

On March 25, 1999, the Company obtained shareholder approval of a 1.25 for 1
stock split of its common stock and an increase in the authorized shares of its
common stock to 1,000,000,000 shares. In conjunction with the stock split the
par value of the common stock was reduced from $.01 per share to $.008 per
share. All share and per share data have been retroactively adjusted to reflect
the stock split.

On March 24, 1999, priceline.com exercised its call option to purchase
Priceline Travel for nominal consideration and Priceline Travel was merged into
priceline.com.

On March 3, 1999, Capital One Bank notified the Company of its termination
of its adaptive marketing program effective May 1, 1999.

13. RESTATEMENT

Subsequent to the issuance of the Company's combined 1998 financial
statements, the Company's management determined that the calculation of the fair
value of the Delta warrant, other airline warrants and the beneficial conversion
feature on the Series B Preferred Stock should be revised. The fair value of the
Delta warrant and the other airline warrants has been revised to reflect the
change in the volatility assumption from 50% to 132%, eliminate the large block
and lack of marketability discounts, and consider

F-20
<PAGE>
PRICELINE.COM INCORPORATED AND PRICELINE TRAVEL, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

13. RESTATEMENT (CONTINUED)
the warrant's anti-dilution and exercisability features. As a result, the 1998
combined financial statements have been restated from the amounts previously
reported to recognize an additional $22.0 million of expense based upon the
revised fair value of the warrants at December 31, 1998, of which $3.0 million
is included in the cost of revenues-supplier warrant costs and $19.0 million is
included in expenses-supplier start-up warrant costs. In addition, the value of
the beneficial conversion feature on the Series B Preferred Stock has been
revised to calculate such amount based on 22,500,000 shares. As a result,
additional paid-in capital and accumulated deficit have been restated from
amounts previously reported to recognize an additional $883,424 of accretion of
preferred stock based on the revalued beneficial conversion feature.

A summary of the significant effects of the restatement is as follows:

<TABLE>
<CAPTION>
AS PREVIOUSLY
REPORTED AS RESTATED
-------------- ---------------
<S> <C> <C>
At December 31, 1998:
Additional paid-in capital................................................. $ 148,224,070 $ 171,155,186
Accumulated deficit........................................................ (94,008,289) (116,939,405)
For the year ended December 31, 1998:
Cost of revenues-supplier warrant costs.................................... -- 3,029,014
Expenses-supplier start-up warrant costs................................... 38,960,000 57,978,678
Net loss................................................................... (90,194,807) (112,242,499)
Accretion on preferred stock............................................... (1,300,000) (2,183,424)
Net loss applicable to common stockholders................................. (91,494,807) (114,425,923)
Per share basic and diluted net loss applicable to common stockholders..... (1.13 (1) (1.41)
</TABLE>

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

(1) Per share basic and diluted net loss applicable to common stockholders as
previously reported has been restated for a 1.25 for one stock split.

F-21
<PAGE>
PRICELINE.COM INCORPORATED

CONDENSED BALANCE SHEETS

AS OF DECEMBER 31, 1998 AND JUNE 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
ASSETS 1998 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 53,593,026 $142,803,134
Short term investments....................................... -- 9,307,474
Accounts receivable, net of allowance for uncollectible
accounts of $290,823 and $1,173,243 at December 31, 1998
and June 30, 1999, respectively............................ 4,176,980 22,683,987
Related party receivable..................................... -- 1,383,592
Prepaid expenses and other current assets.................... 2,433,542 7,338,897
------------ ------------
Total current assets....................................... 60,203,548 183,517,084
PROPERTY AND EQUIPMENT--net.................................... 5,926,877 15,311,214
RELATED PARTY RECEIVABLE....................................... -- 4,374,372
OTHER ASSETS................................................... 442,060 1,592,222
------------ ------------
TOTAL ASSETS................................................... $ 66,572,485 $204,794,892
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 5,268,430 $ 26,933,608
Related party payable........................................ 32,447 --
Accrued expenses............................................. 4,258,641 6,403,716
Other current liabilities.................................... 722,030 136,109
------------ ------------
Total current liabilities.................................. 10,281,548 33,473,433
LONG-TERM DEBT--net............................................ 989,018 --
CAPITAL LEASE OBLIGATIONS--net of current portion.............. 26,074 12,248
------------ ------------
Total liabilities.............................................. 11,296,640 33,485,681
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY
Preferred stock.............................................. 311,262 --
Common stock................................................. 745,802 1,138,564
Additional paid-in capital................................... 171,158,186 326,880,953
Accumulated deficit.......................................... (116,939,405) (156,710,306)
------------ ------------
Total stockholders' equity................................. 55,275,845 171,309,211
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $ 66,572,485 $204,794,892
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to condensed financial statements.

F-22
<PAGE>
PRICELINE.COM INCORPORATED

CONDENSED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999

(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
-------------- --------------
<S> <C> <C>
Revenues......................................................................... $ 7,021,639 $ 160,974,391
Cost of Revenues:
Product costs.................................................................. 7,942,840 144,323,527
Supplier warrant costs......................................................... -- 761,518
-------------- --------------
Total cost of revenues........................................................... 7,942,840 145,085,045
Gross profit (loss)............................................................ (921,201) 15,889,346
-------------- --------------
Expenses:
Sales and marketing............................................................ 7,764,477 34,871,086
General and administrative..................................................... 4,798,876 9,169,869
Systems and business development............................................... 5,368,214 5,652,423
-------------- --------------
Total expenses................................................................... 17,931,567 49,693,378
-------------- --------------
Operating loss................................................................... (18,852,768) (33,804,032)
Interest income, net............................................................. 162,331 2,387,104
-------------- --------------
Net loss......................................................................... (18,690,437) (31,416,928)
Accretion on preferred stock..................................................... -- (8,353,973)
-------------- --------------
Net loss applicable to common stockholders....................................... $ (18,690,437) $ (39,770,901)
-------------- --------------
-------------- --------------
Per share basic and diluted net loss applicable to common stockholders........... $ (0.27) $ (0.29)
-------------- --------------
-------------- --------------
Weighted average common shares outstanding....................................... 69,738,365 137,436,399
</TABLE>

See accompanying notes to condensed financial statements.

F-23
<PAGE>
PRICELINE.COM INCORPORATED

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- --------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- --------- ---------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>

Balance, January 1, 1999......... 31,126,184 $ 311,262 93,225,199 $ 745,802 $171,158,186 $(116,939,405) $55,275,845

Conversion of Series A
convertible preferred stock.... (17,288,684) (172,887) 21,610,853 172,887 -- -- --

Conversion of Series B
convertible preferred stock.... (13,837,500) (138,375) 17,296,875 138,375 -- -- --

Accretion on preferred stock..... -- -- -- -- 8,353,973 (8,353,973) --

Issuance of common stock......... -- -- 10,000,000 80,000 144,274,221 -- 144,354,221

Exercise of warrants............. 187,500 1,500 48,500 -- 50,000

Issuance of warrants to purchase
common stock................... -- -- -- -- 3,046,073 -- 3,046,073

Net loss......................... -- -- -- -- -- (31,416,928) (31,416,928)
---------- --------- ---------- --------- ----------- ------------ -----------

Balance, June 30, 1999........... -- $ -- 142,320,427 $1,138,564 $326,880,953 $(156,710,306) $171,309,211
---------- --------- ---------- --------- ----------- ------------ -----------
---------- --------- ---------- --------- ----------- ------------ -----------
</TABLE>

See accompanying notes to condensed financial statements.

F-24
<PAGE>
PRICELINE.COM INCORPORATED

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999

(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................................................... $ (18,690,437) $ (31,416,928)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................ 659,544 1,911,678
Provision for uncollectible accounts......................................... 5,829 1,401,372
Supplier warrant costs....................................................... 761,518
Changes in assets and liabilities:
Receivables.................................................................. (1,679,081) (19,908,379)
Related party receivables.................................................... -- (5,790,411)
Prepaid expenses and other current assets.................................... (368,159) (3,382,318)
Accounts payable and accrued expenses........................................ 3,315,410 23,703,167
Other........................................................................ (296,447) (1,030,020)
-------------- --------------
Net cash used in operating activities...................................... (17,053,341) (33,750,321)

INVESTING ACTIVITIES:
Additions to property and equipment.......................................... (5,076,153) (11,285,032)
Purchases of short-term investments.......................................... -- (9,307,474)
-------------- --------------
Net cash used in investing activities...................................... (5,076,153) (20,592,506)

FINANCING ACTIVITIES:
Issuance of long-term debt................................................... 2,000,000 --
Payment of long-term debt and capital lease obligations...................... (10,587) (1,012,099)
Issuance of common stock and subscription units.............................. 23,364,000 144,565,034
Payment received on stockholder note......................................... 250,000 --
-------------- --------------
Net cash provided by financing activities.................................. 25,603,413 143,552,935

NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 3,473,919 89,210,108

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................... 16,459 53,593,026
-------------- --------------

CASH AND CASH EQUIVALENTS, END OF PERIOD......................................... $ 3,490,378 $ 142,803,134
-------------- --------------
-------------- --------------

SUPPLEMENTAL CASH FLOW INFORMATION--Cash paid during the year for interest....... $ 5,232 $ 50,397
</TABLE>

See accompanying notes to condensed financial statements.

F-25
<PAGE>
PRICELINE.COM INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. BUSINESS DESCRIPTION

Priceline.com Incorporated ("priceline.com") has pioneered a new type of
e-commerce known as a demand collection system that enables consumers to use the
Internet to save money on a wide range of products and services while enabling
sellers to generate incremental revenue. Priceline.com collects consumer demand,
in the form of individual customer offers guaranteed by a credit card for a
particular product or service at a price set by the customer. Priceline.com then
either communicates that demand directly to participating sellers or accesses
participating sellers' private databases to determine whether the customer's
offer can be fulfilled on the basis of the pricing information and rules
established by the sellers. Consumers agree to hold their offers open for a
specified period of time and once fulfilled, offers cannot be cancelled. By
requiring consumers to be flexible with respect to brands, sellers and/or
product features, priceline.com enables sellers to generate incremental revenue
without disrupting their existing distribution channels or retail pricing
structures.

Priceline Travel, Inc. ("Priceline Travel") previously held the travel
agency license used to effect airline ticket sales through the priceline.com
service. Priceline Travel was wholly owned by the founding stockholder of
priceline.com and on March 24, 1999, Priceline Travel was merged into
priceline.com for nominal consideration. The accompanying condensed financial
statements include the financial position and results of operations of Priceline
Travel for all periods presented.

2. BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring accruals considered necessary for a
fair presentation, have been included in the accompanying unaudited financial
statements. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1999.

3. INITIAL PUBLIC OFFERING OF COMMON STOCK

On April 1, 1999, priceline.com completed an initial public offering in
which it sold 10,000,000 shares of its common stock at a price of $16.00 per
share, raising $160.0 million in gross proceeds. Offering proceeds to
priceline.com, net of approximately $11.2 million in aggregate underwriters
discounts and commissions and $4.4 million in related expenses, were
approximately $144.4 million. Simultaneous with the effectiveness on March 29,
1999 of priceline.com's Registration Statement on Form S-1, each outstanding
share of priceline.com's Series A and Series B convertible preferred stock was
automatically converted into shares of common stock. As of June 30, 1999,
approximately 142.2 million shares of common stock were outstanding.

4. NET LOSS PER SHARE

Priceline.com computes net loss per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" which requires dual
presentation of basic earnings per share ("EPS") and diluted EPS.

Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number

F-26
<PAGE>
PRICELINE.COM INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

4. NET LOSS PER SHARE (CONTINUED)
of common shares and potentially dilutive shares outstanding during the period.
The effect of the conversion of the Series A and Series B convertible preferred
stock is included in the weighted average number of shares outstanding during
the period that commenced on the conversion date, March 29, 1999. The effect of
the preferred stock conversion for the period prior to March 29, 1999 has not
been included in the computation of diluted net loss per share as the impact
would have been antidilutive for the periods presented. Potential common shares
consist of the incremental common shares issuable upon the exercise of stock
options and warrants. At June 30, 1999, options and warrants to purchase
48,228,959 shares of common stock were outstanding. Outstanding warrants and
options could potentially dilute basic earnings per share in the future but have
not been included in the computation of diluted net loss per share as the impact
would have been antidilutive for the periods presented.

Net loss applicable to common stockholders for the six month period ended
June 30, 1999 was $39.8 million including a non-recurring, non-cash charge
associated with the accretion on the Series B convertible preferred stock that
was outstanding during such period of $8.4 million. Based on the weighted
average number of 137.4 million shares of common stock outstanding during the
six month period ended June 30, 1999, the per share basic and diluted net loss
applicable to common stockholders was $0.29.

5. RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for Costs of Computer Software
Developed or Obtained for Internal Use." This SOP requires capitalization of
certain costs of computer software developed or obtained for internal use.
Priceline.com adopted this SOP on January 1, 1999 and for the six month period
ended June 30, 1999, priceline.com capitalized approximately $5.7 million of
computer software developed or obtained for internal use. Amortization of such
costs aggregated approximately $149,000 during the six month period ended June
30, 1999.

6. COMMITMENTS AND CONTINGENCIES

Woolston recently announced an agreement to license his issued patent and
pending patent applications to the owner of a competing Internet travel service.

F-27
<PAGE>
PRICELINE.COM INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
each party during the interference proceeding. If an interference is declared
and thereafter resolved in favor of Woolston, such resolution could result in an
award of some or all of the disputed patent claims to Woolston. If, following
such award, Woolston were successful in a patent infringement action against
priceline.com, including prevailing over all defenses available to priceline.com
such as those of non-infringement and invalidity, this could require
priceline.com to obtain licenses from Woolston at a cost which could
significantly adversely affect priceline.com's business. If Woolston prevailed
in both an interference and an infringement action, then priceline.com could be
enjoined from conducting business through the priceline.com service to the
extent covered by the patent claims awarded to Woolston. In addition, defense of
the interference action may be expensive and may divert management attention
away from priceline.com's business.

On January 19, 1999, Marketel International Inc. ("Marketel"), a California
corporation, filed a lawsuit against priceline.com and Priceline Travel, among
others. On February 22, 1999, Marketel filed an amended and supplemental
complaint, and on March 17, 1999, Marketel filed a second amended complaint. The
second amended complaint filed by Marketel alleges causes of action for, among
other things, misappropriation of trade secrets, breach of contract, conversion,
breach of confidential relationship, copyright infringement, fraud, unfair
competition and false advertising, and seeks injunctive relief and damages in an
unspecified amount. In its second amended complaint, Marketel alleges, among
other things, that the defendants conspired to misappropriate Marketel's
business model, which it describes as a buyer-driven electronic marketplace for
travel services and its appurtenant techniques, market research, forms, plans,
and processes, which allegedly were provided in confidence to some of the
defendants approximately ten years ago. The second amended complaint also
alleges that three former Marketel employees are the actual sole inventors or
co-inventors of a patent which was issued on August 11, 1998 and which patent
has been assigned to priceline.com. Marketel asks that the patent's inventorship
be corrected accordingly.

On February 5, 1999, February 10, 1999 and March 31, 1999, the defendants
filed their answer, amended answer and answer to the second amended complaint,
respectively in which they denied the material allegations of liability in the
complaints. Priceline.com and all other defendants strongly dispute the material
legal and factual allegations contained in Marketel's second amended complaint
and believe that the second amended complaint is without merit. Since May 28,
1999, there has been a discovery stay in effect, which was caused by the
withdrawal of Marketel's counsel. Marketel has retained new counsel, and the
priceline.com now anticipates moving forward with discovery.

Defending the Marketel litigation may involve significant expense and, due
to the inherent uncertainties of litigation, there can be no certainty as to the
ultimate outcome. Pursuant to the indemnification obligations contained in the
Purchase and Intercompany Services Agreement with Walker Digital, Walker Digital
has agreed to indemnify, defend and hold harmless priceline.com for damages,
liabilities and legal expenses incurred in connection with the Marketel
litigation.

From time to time priceline.com has been and expects to continue to be
subject to legal proceedings and claims in the ordinary course of business,
including claims of alleged infringement of third party intellectual property
rights. Such claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources.

F-28
<PAGE>
PRICELINE.COM INCORPORATED

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

7. SUBSEQUENT EVENTS

COMMON STOCK AND CONVERTIBLE DEBT OFFERINGS. On July 23, 1999,
priceline.com filed a registration statement covering the sale of up to
$287.5 million of convertible subordinated notes (including $37.5 million in
respect of an underwriters' over-allotment option) and up to 6.325 million
shares of common stock, (including 825,000 shares in respect of an
underwriters' over-allotment option). The common stock offering is to be
comprised of 2.0 million shares of common stock to be issued and sold by
priceline.com and 3.5 million shares to be sold by certain selling
stockholders, plus the sale by the selling stockholders of any additional
shares sold upon exercise of the underwriters' over-allotment option.

OPTION EXERCISE PROGRAM. On July 19, 1999, an option exercise program
was established to enable employees to exercise options and sell shares
through a cashless exercise program administered through a broker dealer.
Priceline.com employees holding 967,183 options that were vested as of June
1, 1999 are permitted during the period commencing on July 20, 1999 and
ending on July 30, 1999, to exercise a portion of their options that
otherwise would not be exercisable until September 26, 1999 (following
expiration of the 180 day initial public offering lock-up period) and to
sell the underlying option shares through the program. Any employee choosing
to exercise options and sell option shares pursuant to the option exercise
program is required to agree to enter into a "lock-up" agreement in a form
similar to that signed by selling stockholders in the secondary common stock
offering, which prohibits additional option exercises or stock sales prior
to 180 days from the completion of the secondary common stock offering.

CONTINENTAL AIRLINES AGREEMENTS. Continental Airlines agreed to join
the priceline.com service on July 20, 1999 pursuant to the terms of an
Airline Participation Agreement with priceline.com. Upon execution of the
Airline Participation Agreement, priceline.com issued a warrant to
Continental for the purchase of 1 million shares of common stock at an
exercise price of $97.41 per share. The warrant will become exercisable upon
the earlier of July 2004 or the achievement of certain performance
thresholds. However the agreement does not require Continental to make any
performance commitments. Priceline.com will incur a non-cash charge of
approximately $90 million during the quarter ending September 30, 1999,
reflecting the fair value of the Continental warrant at the grant date.

F-29
<PAGE>
[At the top of the page, a picture of a customer in the middle of the
following text: BUYER-DRIVEN COMMERCE]

[Four page screen shots with textual descriptions of the four steps involved
in making an offer for airline tickets with the heading: airline ticket
example... and the following language below the heading: In just four steps,
priceline.com customers can name their own price for a leisure airline ticket on
a major carrier.]

The first page screen shot in the top left with the following caption:

Step 1:

Tell us where and when....

Enter where you want to go and the dates you want to travel. Choose as many
different airports to leave and arrive from as you want--the more the better.

The second page screen shot in the top right with the following caption:

Step 2:

Review the rules....

Priceline.com's airline ticket service is designed for leisure travelers who
can be flexible on their flights and routing. The rules are clearly explained on
the Web site.

The third page screen shot in the bottom left with the following caption:

Step 3:

Name your price....

Enter the price you want to pay--there are no minimums and no advance
purchase restrictions. We encourage customers to shop around first and be
reasonable.

The fourth page screen shot in the bottom right with the following caption:

Step 4:

Provide a credit card....

Your credit card is used to guarantee that you'll buy the tickets if
priceline.com is successful at getting a major airline to agree to your price.
You get a yes or no answer in just one hour!

priceline.com(sm)

The page is blank except for the following text in the middle of the page:

priceline.com(sm)

name your own price..and save!
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JULY 30, 1999

$250,000,000

[LOGO]

% CONVERTIBLE SUBORDINATED NOTES DUE 2006
---------------------

INTEREST PAYABLE ON FEBRUARY 1 AND AUGUST 1
------------------

HOLDERS MAY CONVERT THE NOTES INTO COMMON STOCK OF PRICELINE.COM AT ANY TIME AT
A CONVERSION PRICE OF $ PER SHARE, SUBJECT TO ADJUSTMENT UPON CERTAIN
EVENTS.
------------------------

BEGINNING AUGUST 6, 2002, PRICELINE.COM MAY REDEEM ANY OF THE NOTES AT AN
INITIAL REDEMPTION PRICE OF % OF THEIR PRINCIPAL AMOUNT PLUS ACCRUED
INTEREST.
------------------------

FOR A MORE DETAILED DESCRIPTION OF THE NOTES, SEE "DESCRIPTION OF NOTES"
BEGINNING ON PAGE 96.

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

OUR COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"PCLN." ON JULY 29, 1999, THE REPORTED LAST SALE PRICE FOR THE COMMON STOCK WAS
$80.50 PER SHARE.

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

CONCURRENT WITH THIS OFFERING, PRICELINE.COM IS OFFERING 2,000,000 SHARES OF
COMMON STOCK AND SELLING STOCKHOLDERS ARE OFFERING AN ADDITIONAL 3,500,000
SHARES. THE STOCK OFFERING WILL BE MADE PURSUANT TO A SEPARATE PROSPECTUS.
CLOSING OF THE STOCK OFFERING IS NOT A CONDITION TO THE CLOSING OF THIS
OFFERING.
------------------------

INVESTING IN THE NOTES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.

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

PRICE % AND ACCRUED INTEREST, IF ANY
------------------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS PRICELINE.COM
------------------ ------------------ ------------------
<S> <C> <C> <C>
PER NOTE........................................... % % %
TOTAL.............................................. $ $ $
</TABLE>

PRICELINE.COM HAS GRANTED THE UNDERWRITERS THE RIGHT TO PURCHASE UP TO AN
ADDITIONAL $37,500,000 PRINCIPAL AMOUNT OF NOTES TO COVER OVER-ALLOTMENTS.
MORGAN STANLEY & CO. INCORPORATED EXPECTS TO DELIVER THE NOTES TO PURCHASERS ON
AUGUST , 1999.

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

MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.

ALLEN & COMPANY INCORPORATED

BANCBOSTON ROBERTSON STEPHENS

DONALDSON, LUFKIN & JENRETTE

MERRILL LYNCH & CO.

, 1999
<PAGE>
DESCRIPTION OF ARTWORK:

[At the top of the page, a picture of a person using the Internet in the
middle of the following text: BUYER-DRIVEN COMMERCE]

"Priceline.com's name-your-price process was carefully designed to be fast
and easy to use."

"In just a few minutes, and at no cost, a consumer can name a guaranteed
ready-to-buy price for a flexible range of goods. Priceline.com then searches
for a seller who wants the sale."

On the left side of the page, the following text:

A UNIQUE E-COMMERCE SYSTEM WHERE BUYERS NAME THEIR PRICE, AND PRICELINE.COM
"COLLECTS" INCREMENTAL DEMAND FOR SELLERS TO CONSIDER.

[Icon of an airplane with the text] "Domestic Airline Tickets"

[Icon of an airplane with the text] "International Airline Tickets"

[Icon of a suitcase with the text] "Hotel Rooms"

[Icon of a car with the text] "New Cars (N.Y. Metro)"

[Icon of a house with the text] "Home Mortgages"

[Icon of a house with the text] "Home Refinancing"

[Icon with a house with the dollar sign on it with the text] "Home Equity
Loans"

Underneath the button menu, the following text:

priceline.com(SM)

priceline.com and the priceline.com logo are service marks of priceline.com
Incorporated.

On right side, top half of the first page of the gatefold, a picture of an
airline, with the following heading flowing around it:

priceline.com(SM) airline tickets

2
<PAGE>
Below the heading, three page screen shots with textual descriptions of the
airline tickets services offered by priceline.com with the following caption:

"Airline Tickets. . . Priceline.com's inaugural name-your-price service was
launched on April 6, 1998. During the second quarter of 1999, priceline.com sold
over 440,000 airline tickets."

On the left side, top half of the first page of the gatefold, the first two
buttons in the button menu of services that the priceline.com service offers are
duplicated:

[Icon of an airplane with the text] "Domestic Airline Tickets"

[Icon of an airplane with the text] "International Airline Tickets"

Below the buttons, the following text:

AIRLINE TICKETS

Name your price for leisure travel on a major airline. . .

On right side, bottom half of the first page of the gatefold, a picture of a
hotel, with the following heading flowing around it:

priceline.com(SM) hotel rooms

Below the heading, three page screen shots with textual descriptions of the
hotel rooms services offered by priceline.com with the following caption:

"Hotel Rooms . . . Priceline.com's second travel service was initially
launched in October 1998 and was launched nationally in April 1999."

On the left side, bottom half of the first page of the gatefold, the third
button in the button menu of services that the priceline.com service offers is
duplicated:

[Icon of a suitcase with the text] "Hotel Rooms"

Below the button, the following text:

HOTEL ROOMS

Name your price for a hotel room in over 1000 U.S. cities. . .

With priceline.com's hotel room service, a traveler names his price, quality
rating and geographic zone in any of over 1000 U.S. cities. The buyer agrees to
stay in any major hotel that accepts his price.

priceline.com(SM)

On the right side, top half of the second page of the gatefold, a picture of
a house, with the following heading flowing around it:

priceline.com(SM) home financing

Below the heading, three page screen shots with textual descriptions of the
home financing services offered by priceline.com with the following caption:

3
<PAGE>
On the left side, top half of the second page of the gatefold, the last
three buttons in the button menu of services that the priceline.com service
offers are duplicated:

[Icon of a house with the text] "Home Mortgages"

[Icon of a house with the text] "Home Refinancing"

[Icon with a house with the dollar sign on it with the text] "Home Equity
Loans"

Below the buttons, the following text:

HOME FINANCING

Name your interest rate and points for a mortgage, refinancing or home
equity loan. . .

On the right side, bottom half of the second page of the gatefold, a picture
of a car, with the following heading flowing around it:

priceline.com(SM) new cars

Below the heading, three page screen shots with textual descriptions of the
new cars services offered by priceline.com with the following caption:

On the left side, bottom half of the second page of the gatefold, the third
button in the button menu of services that the priceline.com service offers is
duplicated:

[Icon of a car with the text] "New Cars (N.Y. Metro)"

Below the button, the following text:

NEW CARS

Name your price for the exact car you want and let priceline.com get a
dealer to agree. . .

priceline.com(SM)

4
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 4
Special Note Regarding Forward-Looking
Statements................................... 26
Use of Proceeds................................ 27
Price Range of Common Stock.................... 27
Dividend Policy................................ 27
Capitalization................................. 28
Selected Financial Data........................ 29
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 30
Business....................................... 45

Management..................................... 69
Certain Transactions........................... 85
Principal and Selling Stockholders............. 89
Certain United States Federal Income Tax
Considerations............................... 92
Description of the Notes....................... 96
Description of Capital Stock................... 107
Shares Eligible for Future Sale................ 109
Underwriters................................... 111
Legal Matters.................................. 113
Experts........................................ 113
Additional Information......................... 113
Index to Financial Statements.................. F-1
</TABLE>

In this prospectus, the terms "company," "priceline.com," "we," "us" and
"our" refer to priceline.com Incorporated and, unless the context otherwise
requires, "convertible notes" or "notes" refers to the % convertible
subordinated notes due 2006 of priceline.com being offered in this offering and
"common stock" refers to the common stock, par value $0.008 per share, of
priceline.com. Our financial statements as of and for the periods ended December
31, 1997 and December 31, 1998 (restated) are presented on a combined basis with
the financial statements of Priceline Travel, Inc., previously a separate
company owned by Mr. Jay S. Walker, our Founder and Vice Chairman. Priceline
Travel, which owned our travel agency license, was merged with and into
priceline.com as of March 24, 1999.

Unless otherwise indicated, all information in this prospectus (1) reflects
a 1.25 for one stock split of our common stock on March 26, 1999 and the
conversion of all outstanding shares of our convertible preferred stock into
38,907,728 shares of common stock on March 29, 1999; (2) reflects the
consummation of the merger between priceline.com and Priceline Travel, Inc. as
of March 24, 1999; (3) assumes that all 967,183 shares eligible to be sold in
the Option Exercise Program described under "Certain Transactions-- Other
Transactions" are sold pursuant to such program; and (4) assumes no exercise of
the underwriters' over-allotment option in this offering or the concurrent
common stock offering. See "Description of Capital Stock."

i
<PAGE>
PROSPECTUS SUMMARY

- leisure airline tickets, provided by six domestic and 16 international
airline participants;

- new automobiles, which was launched on a test basis in the New York
metropolitan area in July 1998;

- home financing services, which was launched in January 1999 with home
mortgage services and now also includes home equity loans and refinancing
services.

<TABLE>
<S> <C>
Securities Offered............ $250,000,000 aggregate principal amount of % Convertible
Subordinated Notes Due 2006 plus an additional $37,500,000
principal amount if the underwriters' over-allotment option
is exercised in full. See "Description of Notes."

Interest Payment Dates........ February 1 and August 1, commencing February 1, 2000.

Conversion.................... The notes will be convertible at the option of the holder at
any time into common stock at a conversion price of $
per share, subject to adjustment upon certain events. See
"Description of Notes--Conversion of Notes."

Subordination................. The notes are subordinated to all existing and future senior
indebtedness, as defined in the indenture under which the
notes will be issued. As of June 30, 1999, priceline.com had
no outstanding indebtedness that would have constituted
senior indebtedness. The notes also will be effectively
subordinated to the liabilities, including trade payables,
and lease obligations and all preferred stock, if any, of
any subsidiary of priceline.com. The indenture does not
prohibit or limit the amount of indebtedness, including
senior indebtedness, that priceline.com or its subsidiaries
may incur. See "Description of Notes--Subordination of
Notes."

Redemption.................... At any time on or after August 6, 2002, the notes will be
redeemable on at least 30 but not more than 60 days' notice
at the option of priceline.com, in whole or in part, at the
redemption prices set forth in "Description of Notes,"
together with accrued interest.

Fundamental Change............ Upon the occurrence of any Fundamental Change, as defined in
the indenture, each holder shall have the right, at such
holder's option, to require priceline.com to redeem all or
any part of such holder's notes in multiples of $1,000
principal amount at a price equal to 100% of the principal
amount to be redeemed plus accrued interest. See
"Description of Notes--Redemption at Your Option."

Use of Proceeds............... For working capital and general corporate purposes. See "Use
of Proceeds."
</TABLE>

CONCURRENT COMMON STOCK OFFERING

Concurrent with this offering, priceline.com and certain of our stockholders
are making a public offering of 5,500,000 shares of our common stock, of which
priceline.com is selling 2,000,000 shares. The common stock offering will be
made pursuant to a separate prospectus. Closing of the common stock offering is
not a condition to the closing of this offering.

2
<PAGE>
SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
JULY 18, 1997
(INCEPTION) YEAR ENDED
TO DECEMBER 31, SIX MONTHS
DECEMBER 31, 1998 ENDED
1997 RESTATED(A) JUNE 30, 1999
------------- --------------- ---------------
<S> <C> <C> <C>
Statement of Operations Data:(b)
Revenues.................................................. $ -- $ 35,236,860 $ 160,974,391
Cost of revenues:
Product costs........................................... -- 33,495,745 144,323,527
Supplier warrant costs(c)............................... -- 3,029,014 761,518
------------- --------------- ---------------
Total cost of revenues.................................... -- 36,524,759 145,085,045
------------- --------------- ---------------
Gross profit (loss)..................................... -- (1,287,899) 15,889,346
Expenses:
Supplier start-up warrant costs(c)...................... -- 57,978,678 --
Sales and marketing..................................... 441,479 24,388,061 34,871,086
General and administrative.............................. 1,011,600 18,004,585(d) 9,169,869
Systems and business development........................ 1,060,091 11,131,650 5,652,423
------------- --------------- ---------------
Total expenses............................................ 2,513,170 111,502,974 49,693,378
------------- --------------- ---------------
Operating loss............................................ (2,513,170) (112,790,873) (33,804,032)
Interest income (expense), net............................ (312) 548,374 2,387,104
------------- --------------- ---------------
Net loss.................................................. (2,513,482) (112,242,499) (31,416,928)
Accretion on preferred stock(e)........................... -- (2,183,424) (8,353,973)
------------- --------------- ---------------
Net loss applicable to common stockholders................ $ (2,513,482) $ (114,425,923) $ (39,770,901)
------------- --------------- ---------------
------------- --------------- ---------------
Per share basic and diluted net loss applicable to common
shareholders............................................ $ (0.05) $ (1.41) $ (0.29)
------------- --------------- ---------------
------------- --------------- ---------------
Weighted average common shares outstanding................ 50,833,756 81,231,425 137,436,399
Deficiency of earnings available to cover fixed charges... (2,513,482) (112,242,499) (31,416,928)
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
------------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(F)
-------------- --------------
BALANCE SHEET DATA(B):
Cash and cash equivalents........................................................ $ 142,803,134 $ 539,602,330
Working capital.................................................................. 150,043,651 546,842,847
Total assets..................................................................... 204,794,892 609,719,754
Total liabilities................................................................ 33,485,681 283,485,681
Total stockholders' equity....................................................... 171,309,211 326,234,073
</TABLE>

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

(a) As restated, see Note 13 to the 1998 combined financial statements.

(d) Includes a non-cash charge of $6,500,000 with respect to 8,125,000 shares of
common stock issued as executive compensation.

(e) Represents amortization of the beneficial conversion feature on the Series B
preferred stock that ceased upon conversion of the Series B preferred stock
into common stock on March 29, 1999.

(f) As adjusted to reflect the receipt by priceline.com of the estimated net
proceeds of (x) $241,874,334 from the sale of the notes in this offering
(after deducting the estimated offering expenses and underwriting discounts
and commissions); (y) $153,508,166 from the sale of the 2,000,000 shares of
common stock offered by priceline.com in the concurrent common stock
offering (after deducting the estimated offering expenses and underwriting
discounts and commissions) based upon an assumed public offering price of
$80.50 per share; and (z) $1,416,696 from the exercise of warrants to
purchase 1,523,329 shares of common stock by Delta Airlines at an exercise
price of $0.93 per share.

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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT DECISION. THE TRADING PRICE OF OUR NOTES AND COMMON STOCK COULD
DECLINE DUE TO ANY OF THESE RISKS, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT. YOU ALSO SHOULD REFER TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO.

OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT

- attract leading sellers and consumers to the priceline.com service;

- maintain and enhance our brand, and expand our product and service
offerings;

- attract, integrate, retain and motivate qualified personnel; and

- adapt to meet changes in our markets and competitive developments.

We may not be successful in accomplishing these objectives.

WE ARE NOT PROFITABLE AND EXPECT TO CONTINUE TO INCUR LOSSES

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WE ARE DEPENDENT ON ADAPTIVE MARKETING PROGRAMS

POTENTIAL FLUCTUATIONS IN OUR FINANCIAL RESULTS MAKES FINANCIAL FORECASTING
DIFFICULT

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future revenues or results of operations accurately. It is likely that in one or
more future quarters our operating results will fall below the expectations of
securities analysts and investors. If this happens, the trading price of our
notes and our common stock would almost certainly be materially and adversely
affected.

WE ARE DEPENDENT ON THE AIRLINE INDUSTRY AND CERTAIN AIRLINES

- do not require the airlines to make tickets available for any particular
routes;

- do not require the airlines to provide any specific quantity of airline
tickets;

- do not require the airlines to provide particular prices or levels of
discount;

- do not require the airlines to deal exclusively with us in the public sale
of discounted airline tickets; and

- generally, can be terminated upon relatively short notice.

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These agreements also outline the terms and conditions under which ticket
inventory provided by the airlines may be sold.

Our agreement with Delta, subject to various exceptions, requires Delta's
approval of the addition of new carriers to the priceline.com service, restricts
the routes for which tickets may be offered by specified carriers through the
priceline.com service and imposes limitations on the code share arrangements of
specified carriers. Delta also may require the exclusion of specific markets in
order for certain other airlines to participate. These provisions could limit
our ability to expand our airline ticket service. In addition, our ability to
transfer or license our intellectual property to other travel providers is
limited in the manner set forth in the agreement.

The sale of shares of common stock by the selling stockholders in the
concurrent common stock offering is being made pursuant to the "piggyback"
registration rights contained in the registration rights agreement.
Priceline.com obtained from parties to the registration rights agreement that
hold shares (or presently exercisable warrants to purchase shares) of common
stock available for sale in the concurrent common stock offering a waiver of a
30-day notice period under the agreement and a consent to the assignment of
registration rights by Messrs. Jay Walker and Richard Braddock, each of whom
chose to sell less than his pro rata number of shares in the concurrent common
stock offering. Priceline.com did not obtain such waiver and consent from
certain other parties to the registration rights agreement (comprised of certain
airline participants) because they do not have shares (or presently exercisable
warrants to purchase shares) of common stock available for sale in the
concurrent common stock offering. Priceline.com believes that no damages arise
as a result of the failure to obtain such waiver and consent since such airline
participants do not have shares (or presently exercisable warrants to purchase
shares) of common stock available for sale. Nevertheless, if a disagreement with
such airline participants were to arise, priceline.com can not be certain as to
the effect, if any, that it could have on its relationship with such airline
participants or whether damages or other remedies could be imposed.

OUR BUSINESS MODEL IS NOVEL AND UNPROVEN

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Many of the factors influencing consumers' and sellers' willingness to use
the priceline.com service are outside our control. For example, a labor dispute
that disrupts airline service or an airline accident could make consumers
unwilling to use a service like priceline.com that does not permit the customer
to designate the airline on which the customer purchases a ticket. In addition,
a breach of security on the Internet, even if we were not involved, could make
consumers unwilling to guarantee orders online with a credit card. Consequently,
it is possible that consumers and sellers will never utilize the priceline.com
service to the degree necessary for us to achieve profitability.

WE NEED TO SELL NEW PRODUCTS AND SERVICES

TWO NEW BUSINESSES WE ARE EVALUATING MAY NOT BE SUCCESSFUL

OUR BRAND MAY NOT ACHIEVE THE BROAD RECOGNITION NECESSARY TO SUCCEED

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enhancement strategy, which will include mass market and multimedia advertising,
promotional programs and public relations activities. These initiatives will
involve significant expense. If our brand enhancement strategy is unsuccessful,
these expenses may never be recovered and we may be unable to increase future
revenues. Successful positioning of the priceline.com brand will largely depend
on: