SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number 0-25581
PRICELINE.COM INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 06-1528493
- -------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 Connecticut Avenue
Norwalk, Connecticut 06854
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(Address of principal executive offices)
(203)299-8000
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed,
since last report.)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. YES |X| . NO__.
Number of shares of Common Stock outstanding at May 10, 2000:
Common Stock, par value $0.008 per share 170,924,185
- ---------------------------------------------- --------------------------
(Class) (Number of Shares)
PRICELINE.COM INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
PART I - UNAUDITED FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.............................3
CONDENSED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND
SEPTEMBER 30, 1999.........................................3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND 1999.......................4
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000..................5
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND 1999.......................6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS..........7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................28
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS....................28
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........29
ITEM 5. OTHER INFORMATION............................................29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................31
SIGNATURES............................................................32
PART I. - UNAUDITED FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PRICELINE.COM INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $125,855 $133,172
Short-term investments.................................... 23,625 38,771
Accounts receivable, net of allowance for doubtful
accounts of $3,075 and $1,961......... 52,751 21,289
Related party receivable.................................. 108 508
Prepaid expenses and other current assets................. 15,782 17,999
------ ------
Total current assets.................................... 218,121 211,739
Property and equipment, net.................................. 37,130 28,006
Related party receivable..................................... 13,404 8,838
Warrants to purchase common stock of Priceline WebHouse Club,
Inc........................................................ 189,000 189,000
Other assets................................................. 25,062 4,303
------ -----
Total assets........................................... $482,717 $441,886
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $59,411 $24,302
Accrued expenses.......................................... 13,766 13,695
Other current liabilities................................. 4,280 1,253
----- -----
Total current liabilities............................. 77,457 39,250
------ ------
Stockholders' equity:
Common stock, $0.008 par value, authorized 1,000,000 shares; issued
and outstanding, 170,162 and 163,867 shares,
respectively.......................................... 1,361 1,311
Additional paid-in capital.............................. 1,591,880 1,581,708
Accumulated other comprehensive income.................. 5,969
Accumulated deficit..................................... (1,193,950) (1,180,383)
----------- -----------
Total stockholders' equity.............................. 405,260 402,636
------- -------
Total liabilities and stockholders' equity............. $482,717 $441,886
======== ========
</TABLE>
See notes to financial statements.
PRICELINE.COM INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31,
----------------------------
2000 1999
---- ----
Revenues.................................. $ 313,798 $ 49,411
Cost of revenues:
Product costs.......................... 264,771 43,659
Supplier warrant costs................. 381 381
--------- ---------
Total costs of revenues............. 265,152 44,040
Gross profit.............................. 48,646 5,371
--------- ---------
Operating expenses:
Sales and marketing.................... 40,449 17,138
General and administrative (including $5,907
of option payroll taxes in 2000)..... 18,611 3,667
Systems and business development....... 5,868 2,184
--------- ---------
Total operating expenses............ 64,928 22,989
--------- ---------
Operating loss............................ (16,282) (17,618)
Interest income, net...................... 2,715 458
--------- ---------
Net loss.................................. (13,567) (17,160)
Accretion on preferred stock.............. (8,354)
--------- ---------
Net loss applicable to common stockholders $ (13,567) $(25,514)
========== =========
Net loss applicable to common stockholders
per basic and diluted common share......... $ (0.08) $ (0.27)
========== =========
Weighted average number of basic and
diluted common shares outstanding.......... 166,467 94,939
========== =========
See notes to financial statements.
PRICELINE.COM INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF MARCH 31, 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL OTHER
PAID-IN ACCUMULATED COMPREHENSIVE
COMMON STOCK CAPITAL DEFICIT INCOME TOTAL
------------ ------- ------- ------ -----
SHARES AMOUNT
------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000.... 163,867 $1,311 $1,581,708 $(1,180,383) $402,636
Exercise of options to 6,295 50 10,172 10,222
purchase common stock.....
Comprehensive income:
Net loss................. (13,567) (13,567)
Unrealized gain on
investments............ $5,969 5,969
------ -----
Total comprehensive
loss................. $5,969 (7,598)
------ -------
Balance, March 31, 2000 170,162 $1,361 $1,591,880 $(1,193,950) $5,969 $405,260
======= ====== ========== ============ ====== ========
</TABLE>
See notes to financial statements.
PRICELINE.COM INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................... $(13,567) $(17,160)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............. 2,672 748
Provision for uncollectible accounts...... 1,114 399
Warrant costs, net........................ 381 381
Changes in assets and liabilities:
Accounts receivable..................... (36,742) (6,615)
Prepaid expenses and other current 1,836 (1,268)
assets....................................
Accounts payable and accrued expenses... 35,180 7,757
Other assets............................ 617 (782)
Other current liabilities.............. 3,027 (587)
----- -------
Net cash used in operating activities (5,482) (17,127)
------- --------
INVESTING ACTIVITIES:
Additions to property and equipment...... (11,796) (4,830)
Purchase of investments................. (15,401)
Proceeds from sales of short-term 15,146
investments.............................. ------
Net cash used in investing activities...... (12,051) (4,830)
-------- -------
FINANCING ACTIVITIES:
Principal payments under capital lease (6) (6)
obligations...............................
Issuance of common stock and subscription
units..................................... 10,222
Deferred offering costs................... (1,036)
------- -------
Net cash provided by (used in) financing 10,216 (1,042)
------ -------
activities
Net increase in cash and cash equivalents... (7,317) (22,999)
Cash and cash equivalents, beginning of 133,172 53,593
period.................................... ------- ------
Cash and cash equivalents, end of period.... $125,855 $30,594
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest.. $1 $2
======== =======
</TABLE>
See notes to financial statements.
PRICELINE.COM INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of 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 three months ended March
31, 2000 are not necessarily indicative of the results that may be expected
for the full year ending December 31, 2000.
2. NET LOSS PER SHARE
The Company computes basic and diluted earnings per share in
accordance with Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings per Share". SFAS 128 requires the Company to report both
basic earnings per share, which is based on the weighted average number of
common shares outstanding, and diluted earnings per share, which is based
on the weighted average number of common shares outstanding and all
dilutive potential common shares outstanding. Since the Company incurred
losses for all periods presented, the inclusion of options in the
calculation of weighted average common shares is anti-dilutive; and
therefore there is no difference between basic and diluted earnings per
share.
3. OTHER ASSETS
Other assets consist of the following as of March 31, 2000:
Equity investments in publicly traded $12,969
companies
Convertible Notes 10,401
Other 1,692
-------
Long-term investments $25,062
=======
In 2000, the Company entered into several transactions with internet
businesses. The equity investments in two of these businesses,
Lastminute.com and LendingTree.com, the stock of each of which is publicly
traded, are recorded at the closing market price of the shares as of the
balance sheet date. The convertible notes of $6.8 million and $3.6 million,
in MyPrice and Alliance Capital Partners, respectively, are recorded at
cost. The cumulative unrealized gain of $6.0 million on the publicly traded
equity investments is included in accumulated other comprehensive income.
The warrants to purchase shares of priceline WebHouse Club are
carried at cost, which the Company believes is less than fair market value
at March 31, 2000. Neither the warrants nor the underlying shares are
publicly traded.
4. COMPREHENSIVE INCOME
Following are components of the Company's comprehensive income:
THREE MONTHS
ENDED, MARCH 31,
2000
----
Net loss $(13,567)
Other comprehensive income:
Unrealized gain on investments 5,969
-----
Total comprehensive loss $ (7,598)
========
5. COMMITMENTS AND CONTINGENCIES
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
and our U.S. Patent 5,794,207. We are currently awaiting information from
the Patent Office regarding whether it will initiate an interference
proceeding.
On January 19, 1999, Marketel International Inc. (Marketel), a
California corporation, filed a lawsuit against us, among others. On
February 22, 1999, Marketel filed an amended and supplemental complaint. On
May 9, 2000, Marketel filed a third amended complaint against us and
Priceline Travel, Inc. The third amended complaint alleges causes of action
for misappropriation of trade secrets, conversion, false advertising of
trade secrets, conversion, false advertising and for correction of
inventorship in U.S. Patent 5,794,207. In its third amended complaint,
Marketel alleges, among other things, that the defendants conspired to
misappropriate Marketel's business model, which allegedly was provided in
confidence approximately ten years ago. The third amended complaint also
alleges that four former Marketel employees are the actual sole inventors
or co-inventors of U.S. Patent 5,794,207, which was issued on August 11,
1998 and has been assigned to priceline.com. Marketel asks that the
patent's inventorship be corrected accordingly.
On February 5, and February 10, 1999, we filed an answer and amended
answer, respectively, to the amended complaint, in which we denied the
material allegations of liability in the complaint. We strongly dispute the
material legal and factual allegations contained in Marketel's amended
complaint and believe that the amended complaint is without merit. We
intend to defend vigorously against the action. 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 us harmless for damages, liabilities and legal
expenses incurred in connection with the Marketel litigation.
On October 13, 1999, we filed a complaint in the United States
District Court for the District of Connecticut under the caption
Priceline.com Incorporated v. Microsoft Corporation and Expedia, Inc., No.
399CV1991 (AWT) alleging that Microsoft Corporation and Expedia, Inc., a
subsidiary of Microsoft Corporation, infringe our U.S. Patent 5,794,207 by
operating the defendants' "Hotel Price Matcher" service, and that the
defendants' conduct toward us violated the Connecticut Unfair Trade
Practices Act. On December 20, 1999, defendants moved the Court to dismiss
the complaint for failure to name a necessary party, Marketel. On March 21,
2000, the presiding judge stated that he intends to deny defendant's motion
to dismiss, and that a decision will be forthcoming. On December 23, 1999,
the Court granted our motion to supplement the complaint to expressly
include defendant's "Flight Price Matcher" service. In the lawsuit, we are
seeking declaratory relief, permanent injunctive relief and actual and
punitive damages.
From time to time, we have been and expect 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 us. Such claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources and
could adversely affect our stock price.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
We have 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 Own PriceSM - 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. Consumers agree to hold their offers open for
a specified period of time and, once fulfilled, offers cannot be canceled.
We benefit consumers by enabling them to save money, while at the same time
benefiting 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, we enable sellers to generate incremental revenue without
disrupting their existing distribution channels or retail pricing
structures.
Our business model and brand are currently supporting several product
and service offerings, including the following:
o leisure airline tickets, provided by 10 domestic and 24 international
airline participants;
o hotel rooms, in substantially all major United States markets with
more than 15 leading national hotel chains as participants;
o rental cars, in substantially all major United States markets with
three leading rental car chains as participants;
o new automobiles, in substantially all major United States markets;
o home financing services, in substantially all major United States
markets, which includes home mortgage services, home equity loans and
refinancing services.
o Long distance telephone service, which was recently launched in March
2000.
We also are currently planning an expansion of our core Name Your Own
PriceSM business model to other areas of e-commerce, including cruises and
vacation packages.
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
currently have nine adaptive marketing partners, compared to one at March
31, 1999, thus reducing our dependence on any one partner. We intend 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.
Because the priceline.com system does not set minimum offer
thresholds, and consumers are not charged to make offers for our products,
it is expected that we will receive a significant number of unreasonable or
"fantasy offers." Accordingly, in addition to analyzing our actual
fulfillment rates, we also analyze the percentage of "reasonable" offers
that we are able to fill. We consider an offer for an airline ticket, hotel
room or rental car to be "reasonable" when it is no more than 30% lower
than the lowest generally available advance-purchase fare or price for the
same product or service. We measure our "bind" rate as the percentage of
reasonable offers that we ultimately fulfill. Our bind rate for the quarter
ended March 31, 2000 was 43.5% for all reasonable airline ticket, hotel
room and rental car offers.
When making offers for airline tickets 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. As a result
of our "checkstatus" feature, introduced in April 1999, consumers whose
initial requests are not satisfied are permitted to resubmit revised offers
that reflect at least one change to their itinerary. Effective with the
introduction of the checkstatus feature, each initial offer and any
resubmitted offers are treated as a single offer for purposes of measuring
our total offer volume and our offer fulfillment rates. Previously, each
had been counted as a separate offer. Therefore, comparisons with prior
periods may not be meaningful.
We have announced several transactions pursuant to which third
parties license the priceline.com name and demand collection system for
offering a particular product or service or for offering a number of
products or services in a distinct international region. Pursuant to the
licensee transactions, we generally receive a royalty under the license and
may also receive fees for services and reimbursement of certain expenses.
We also hold convertible securities or warrants entitling us to acquire a
significant percentage of such licensee's equity securities upon the
occurrence of certain events. Unless such securities or warrants are
converted or exercised, the results of licensees will not be included in
our financial results.
In January 2000, we entered into an agreement in principle with a
subsidiary of Hutchison Whampoa Limited to introduce the priceline.com
service to several Asian markets. Under the terms of the agreement in
principle, we will license our business model and provide our expertise in
technology, marketing and operations to the new company. The new company
will pay us an annual licensing fee to use our intellectual property. In
addition, we will purchase a convertible note allowing us to take up to a
50% equity stake in the new company under certain conditions. Completion of
the transaction is subject to approval by both company's Boards of
Directors and the execution of definitive agreements.
In March 2000, we entered into definitive agreements to license our
business model to MyPrice, a new company that will introduce our services
in Australia and New Zealand. We will provide our expertise in technology,
marketing and operations to MyPrice. MyPrice will pay us an annual
licensing fee to use our intellectual property. In addition, we will
purchase a convertible note allowing us to take up to a 50% equity stake in
MyPrice under certain conditions. Completion of the transaction is subject
to certain government approvals in Australia, which are expected in the
next several weeks. MyPrice is expected to launch its service in the second
half of 2000.
In March 2000, we entered into an agreement with Alliance Capital
Partners, pursuant to which Alliance formed an operating subsidiary,
Priceline Mortgage, for the primary purpose of acting as a broker and/or
lender of residential mortgage loans in connection with our mortgage
service. We have agreed to provide $3.62 million of financing to an
affiliate of Alliance in the form of a convertible secured note and have
agreed to license the "priceline" name and business model for use by
Priceline Mortgage. Alliance has agreed to provide management services to
Priceline Mortgage, including the procurement of personnel and office space
and assistance in obtaining regulatory approvals. Following the October
1999 launch of a pilot program, Priceline Mortgage launched the mortgage
service nationally during March 2000.
We believe that our continued growth will depend in large part on our
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. We
intend to continue to invest heavily in marketing and promotion, technology
and personnel. As a result, we expect to incur additional losses. However,
we plan to reduce operating losses and improve gross margins in an effort
to achieve profitability. Our limited operating history makes the
prediction of future results of operations difficult, and accordingly, we
cannot assure you that we will achieve or sustain revenue growth or
profitability.
RESULTS OF OPERATIONS
REVENUES
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
REVENUES.................................... $313,798 $49,411 535%
Revenues for the quarter ended March 31, 2000 were comprised
primarily of: (1) transaction revenues representing the selling price of
airline tickets, hotel rooms and rental cars; (2) fee income from adaptive
marketing programs offered in connection with our product offerings; (3)
ancillary revenues consisting primarily of Worldspan reservation booking
fees and customer processing fees; and (4) fee income from our home
financing and auto programs.
Revenues increased during the quarter primarily as a result of the
substantial development of our unique customer base, to which we added 1.5
million new customers and from which we generated approximately 830,000
repeat customer offers during the quarter ended March 31, 2000. As of March
31, 2000, we had a base of approximately 5.3 million unique customers,
compared to approximately 1.2 million unique customers at March 31, 1999. A
unique customer is defined as someone who has made a guaranteed offer for
at least one of our products. We believe our customer base grew as a result
of our aggressive advertising campaign and the availability of additional
airline product inventory, generated from adding three additional domestic
air carriers during the fourth quarter of 1999. In the first quarter, we
also experienced the benefits of the seasonal strength in the leisure
travel industry.
The growth in our customer base also is attributable to the continued
expansion of our service into new vertical markets. We continued the
expansion of our auto service during the first quarter, to 48 states by
March 31, 2000, and launched long distance telephone service in March 2000.
These services were not offered during the same period of 1999.
Ancillary revenues for the quarter ended March 31, 2000 increased as
a result of volume driven increases in Worldspan reservation booking fees
and the introduction of a customer processing fee in the airline and hotel
services during 1999. Fee-based income and ancillary revenues represented
8.5% and 13.5% of total revenues for the quarters ended March 31, 2000 and
1999, respectively. The decrease as a percentage of total revenues is due
to the rapid expansion of transactional revenues throughout 1999 and the
first quarter of 2000.
PRODUCT COSTS AND GROSS PROFIT
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
PRODUCT
COSTS.......................... $265,152 44,040 502%
% OF REVENUES.................. 84% 89%
GROSS PROFIT................... $48,646 $5,371 806%
GROSS MARGIN................... 15.5% 10.9%
For the quarter ended March 31, 2000, product costs were comprised
of: (1) the cost of airline tickets from our suppliers, net of the federal
air transportation tax, segment fees and passenger facility charges imposed
in connection with the sale of airline tickets; (2) the cost of hotel rooms
from our suppliers, net of hotel tax; and (3) the cost of rental cars from
our suppliers. During the first quarter of 1999, substantially all of our
product costs were comprised of the cost of airline tickets from our
suppliers, net of the federal air transportation tax, segment fees and
passenger facility charges imposed in connection with the sale of airline
tickets. Included in product costs for both periods are supplier warrant
costs of approximately $381,000, which represent a non-cash expense related
to the issuance of common stock warrants to one of our airline program
participants in January 1999. We anticipate that we will recognize
additional supplier warrant costs in the amount of approximately $381,000
in each of the next three fiscal quarters.
Gross profit is comprised of revenues less cost of revenues. For the
quarter ended March 31, 2000, gross profit increased over the same period
in 1999 as a result of increased sales volume, increased fee-based
revenues, increased adaptive marketing revenues and decreased percentage of
tickets that were sold at a negative margin. Because fee-based and
ancillary revenues did not involve separate costs, these revenues have had
a disproportionately positive impact on total gross profit. Fee-based
income and ancillary revenues represented approximately 20% and 110% of
total gross profit for the quarters ended March 31, 2000 and 1999,
respectively.
For the quarter ended March 31, 2000, gross margin increased from the
same period of 1999 as a result of increased sales volume, increased
fee-based and ancillary revenue, and decreased sales of tickets that were
sold below cost. Fee-based revenues, such as adaptive marketing revenues,
ancillary revenues and revenues from financial services and automobiles
generate higher margins than transaction revenues, on which the gross
margin generated is derived from the spread between customer payments and
product costs.
OPERATING EXPENSES
Sales and Marketing
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
SALES &
MARKETING................................... $40,449 $17,138 136%
% OF SALES.................................. 12.9% 34.7%
Sales and Marketing expenses consist primarily of: (1) advertising
and promotion expenses; (2) credit card processing fees; (3) fees paid to
third-party service providers that operate our call centers; (4) provisions
for customer credit card charge-backs; and (5) compensation for our sales
and marketing personnel. For the quarter ended March 31, 2000, sales and
marketing expenses increased over the same period in 1999 due to
substantial increases in advertising expenditures and increases in
telecommunications, customer service, credit card processing and payroll
expenses. All of the increases in sales and marketing expenses were driven
by substantial increases in customer offers and revenue. We intend to
continue to pursue an aggressive advertising and branding campaign in order
to attract new users.
General and Administrative
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
GENERAL & ADMINISTRATIVE...................... $18,611 $3,667 408%
% OF SALES.................................... 5.9% 7.4%
General and administrative expenses consist primarily of: (1)
compensation for personnel; (2) fees for outside professionals; (3)
telecommunications costs; and (4) occupancy expenses. General and
administrative expenses increased for the quarter ended March 31, 2000 over
the same period of 1999 as a result of increased headcount and resulting
payroll and overhead costs associated with the expansion of our product
offerings and increases in our revenue base. To a lesser extent, the
increase was due to moving expenses related to the relocation of our
corporate offices during the quarter. In addition, the quarter ended March
31, 2000 included a charge of $5.9 million relating to option payroll taxes
resulting from the exercise of employee stock options.
Systems and Business Development
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
SYSTEMS & BUSINESS DEVELOPMENT................ $5,868 $2,184 169%
% OF SALES................................... 1.9% 4.4%
Systems and business development expenses for all periods consist
primarily of (1) compensation to our information technology and product
development staff, (2) payments to outside contractors, (3) data
communications and other expenses associated with operating our internet
site and (4) depreciation and amortization on computer hardware and
software. For the quarter ended March 31, 2000, systems and business
development expenses increased over the same period in 1999 due to
increased headcount and resulting payroll and overhead costs. In addition,
we experienced increased depreciation and amortization expenses resulting
from increased capital expenditures and increased development costs
associated with the expansion of our product offerings and technological
infrastructure.
INTEREST INCOME, NET
QUARTER ENDED %
MARCH 31, CHANGE
--------- ------
($000)
2000 1999
---- ----
INTEREST INCOME (NET)........................... $2,715 $458 493%
Interest income on cash and marketable securities increased due to
higher balances resulting from our initial public offering of common stock
in April of 1999 and our follow-on public offering of common stock in
August of 1999.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had approximately $149.5 million in cash,
cash equivalents and short-term investments.
Net cash used in operating activities was $5.5 million and $17.1
million for the three months ended March 31, 2000 and 1999, respectively.
Net cash used in operating activities was primarily attributable to net
losses from operations.
Net cash used in investing activities was $12.1 million and $4.8
million for the three months ended March 31, 2000 and 1999, respectively.
Net cash used in investing activities was primarily related to purchases of
property and equipment, and in the first quarter of 2000, to make certain
minority equity investments, more fully described below.
In February 2000, we provided $3.62 million of financing to an
affiliate of Alliance Capital Partners in the form of a convertible secured
note, in accordance with our agreement with Alliance to form Priceline
Mortgage.
In February 2000, we made an equity investment of $5.0 million in
Last Minute.com, a U.K. based e-commerce company.
In March 2000, we provided $6.8 million of financing to MyPrice in
the form of a convertible note in accordance with our agreement with
MyPrice.
We have certain commitments for capital expenditures as part of our
ongoing business cycle. None of these commitments are material to the
financial statements either individually or in the aggregate. As a result
of our rapid growth, we expect to continue to increase capital expenditures
for purchased computer hardware, internally developed software, other
equipment and leasehold improvements.
Net cash provided by financing activities was $10.2 million for the
three months ended March 31, 2000, primarily as a result of cash inflow
related to the exercise of employee stock options. Net cash used in
financing activities was $1.0 million for the three months ended March 31,
1999, primarily as a result of incurring deferred offering costs.
In the first quarter of 2000, we made loans to two executive officers
aggregating $5.0 million, which bear interest at 6.56% and 6.80%. Subject
to certain prepayment obligations and to forgiveness in the event of
certain changes of control, death, or termination without cause, pursuant
to the terms of these loans, accrued interest and principal are due after
five years, but are forgiven under certain circumstances if the executive
remains employed by us at that time. Upon any forgiveness of the loans, we
would recognize as compensation expense an amount up to the amount of
principal and interest forgiven.
We believe that our existing cash balances and liquid resources will
be sufficient to fund our operating activities, capital expenditures and
other obligations through at least the next twelve months. However, if
during that period or thereafter, we are not successful in generating
sufficient cash flow from operations or in raising additional capital when
required in sufficient amounts and on terms acceptable to us, we may be
required to reduce our planned capital expenditures and scale back the
scope of our business plan, either of which could have a material adverse
effect on our projected financial condition or results of operation. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of our then current stockholders would be diluted. We
cannot assure you that we will generate sufficient cash flow from
operations in the future, that anticipated revenue growth will be realized
or that future borrowings or equity contributions will be available in
amounts sufficient to make anticipated capital expenditures or finance our
business plan.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
The following risk factors and other information included in this
Form 10-Q should be carefully considered. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations. If any of the following
risks occur, our business, financial condition, operating results and cash
flows could be materially adversely affected.
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:
o attract leading sellers and consumers to the priceline.com
service;
o maintain and enhance our brand, and expand our product and
service offerings;
o attract, integrate, retain and motivate qualified personnel;
and
o 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
As of March 31, 2000, we had an accumulated deficit of $1.2 billion,
of which $1.07 billion related to certain non-cash charges arising from
equity issuances to a number of participating airlines, our chief executive
officer and other parties, which was partially offset by $188.8 million of
income representing the amount of estimated fair value of warrants received
by us in connection with our relationship with our licensee, Priceline
WebHouse Club, Inc. We have not achieved profitability and expect to
continue to incur losses. The principal causes of our losses are likely to
continue to be significant brand development costs, marketing, personnel
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. 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.
Potential Fluctuations in Our Financial Results Make 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 relatively unproven business
model, we cannot predict our 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
us 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, less excess airline ticket inventory would be available to
priceline.com. 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 a substantial majority of total revenue for the
year ended December 31, 1999 and the quarter ended March 31, 2000. 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 six largest airline
suppliers accounted for approximately 93% and 84%, respectively, of airline
ticket revenue for the year ended December 31, 1999 and the quarter ended
March 31, 2000, respectively. As a result, currently we are substantially
dependent upon the continued participation of these airlines in the
priceline.com service in order to maintain and continue to grow our total
airline ticket revenues. We currently have 34 participating airlines.
However, our airline participation agreements:
o do not require the airlines to make tickets available for
any particular routes;
o do not require the airlines to provide any specific quantity
of airline tickets;
o do not require the airlines to provide particular prices or
levels of discount;
o do not require the airlines to deal exclusively with us in
the public sale of discounted airline tickets; and
o 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.
Our agreement with Delta contains certain restrictions relating to
the terms of participation in our service by other carriers and the
circumstances under which we may transfer or license our intellectual
property to other travel providers. 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.
Our Business Model is Novel and Relatively Unproven
The priceline.com service is based on a novel and relatively 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 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 continue to
make new or complementary products and services and a broader range of
existing products and services available through the priceline.com service
or through services provided by our licensees. We will incur substantial
expenses and use significant resources in trying to continue to expand the
type and range of the products and services that we offer. However, we may
not be able to attract sellers, other participants and licensees to provide
such products and services or consumers to purchase such products and
services through the priceline.com service. In addition, if we or our
licensees launch new products or services that are not favorably received
by consumers, our reputation and the value of the priceline.com brand could
be damaged.
The great majority 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, hotel room
reservation or rental car reservation has no value. The expiring nature of
the inventory creates incentives for airlines, hotels and rental car
companies to sell seats, hotel room reservations or rental car 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.
New Businesses We Are Evaluating May Not Be Successful
We intend to expand our current Name Your Own PriceSM business model
into other areas of e-commerce and to other regions, directly and through
licensees. We recently licensed our name and business model to Priceline
WebHouse Club, Inc., a privately held independent start-up company
affiliated with Walker Digital, Inc. for use in a business that enables
consumers to use the Internet to identify the purchase terms for groceries
and other retail merchandise which they would subsequently pick up from
participating retailers. We also recently entered into a similar licensing
arrangement with Priceline Perfect Yard Sale, Inc., another privately held
independent start-up company affiliated with Walker Digital, Inc. for use
in a consumer-to-consumer business in which buyers would make conditional
purchase offers to acquire goods from other consumers. In addition, we have
licensed our name and business model to Alliance Capital Partners in
connection with our home financing services. We also have entered into, and
intend to continue to enter into, similar licensing arrangements with third
parties in connection with international expansion of the priceline.com
service.
These new businesses typically incur start-up costs and operating
losses and 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 need to service these licensees, our core business may suffer. Moreover,
expansion of our core business model will expose us to additional risks not
currently applicable to our existing operations. The additional risks
associated with the expansion of our core business could have a material
adverse effect on our business generally. In addition, as we expand our
business model to other areas of e-commerce, these new businesses will face
competition from established providers in those areas.
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 using the priceline.com
service. The fees paid to us by sponsors offering the promotions generate
significant revenues. Since these fees historically have involved limited
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, significantly increased 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.
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, or if additional adaptive marketing programs will be
initiated. If such programs are not successful, our gross profit and
results of operations could be adversely affected.
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, among other
things, 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.
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. We depend on the continued services and performance of our
executive officers and other key personnel. We do not have "key person"
life insurance policies. If we do not succeed in attracting new employees
or retaining and motivating current and future employees or executive
officers, our business could suffer significantly.
We Rely on Third-Party Systems
We rely on certain third-party computer systems and 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. Any interruption in these third-party services
systems or a deterioration in their performance, could be disruptive to our
business. Our agreements with third-party service providers 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 and,
as a result, our business and results of operations could be materially and
adversely affected.
Intense Competition Could Reduce Our Market Share and Harm
Our Financial Performance
We compete with both online and traditional sellers of the products
and services offered on priceline.com. Current and new competitors can
launch new sites at a relatively low cost. In addition, the traditional
retail industry for the products and services we offer is intensely
competitive.
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:
o Internet travel agents such as Microsoft's Expedia;
o traditional travel agencies;
o consolidators and wholesalers of airline tickets and other
travel products, including online consolidators such as
Cheaptickets.com;
o individual or groups of airlines, hotels, rental car
companies, cruise operators and other travel service
providers; and
o operators of travel industry reservation databases such as
Worldspan and Sabre.
Our current or potential competitors with respect to the arrangement
and sale of new automobiles in the online marketplace, include, among
others, Auto-by-Tel, Carsdirect.com, Greenlight.com and CarPoint.com. To
some extent, we compete for new car shoppers' attention with retail new car
dealers, many of which offer online shopping capabilities.
With respect to financial service products, our competitors
include:
o banks and other financial institutions;
o online and traditional mortgage and insurance brokers,
including Quicken Mortgage, E-Loan and iOwn, Inc.; and
o insurance companies.
Our current or potential competitors with respect to rental cars
include, among others, rental car companies and traditional and online
travel agencies and travel service providers.
With respect to long distance services, our potential competitors
include long distance providers, local exchange providers that may be
entering the long distance market and Internet Protocol telephone services.
We potentially face 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 us either directly
or indirectly through affiliations with other e-commerce or offline
companies. Other large companies with strong brand recognition, technical
expertise and experience in Internet commerce could also seek to compete
with us. We also believe that a number of airlines intend to invest in and
offer discount airfares and travel services through a site or sites to be
established and similar steps may be under consideration by certain hotel
companies and travel service providers. Competition from these and other
sources could have a material adverse effect on our business, results of
operations and financial condition.
Many of our 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 we have. Some of these competitors may be able to secure products and
services on more favorable terms than we can. In addition, many of these
competitors may be able to devote significantly greater resources to: (1)
marketing and promotional campaigns, (2) attracting traffic to their Web
sites, (3) attracting and retaining key employees, (4) securing vendors and
inventory and (5) Web site and systems development.
Increased competition could result in reduced operating margins and
loss of market share and could damage our brand. There can be no assurance
that we will be able to compete successfully against current and future
competitors or that competition will not have a material adverse effect on
our business, results of operations and financial condition.
Our Success Depends on Our Ability to Protect Our Intellectual Property
We regard our intellectual property as critical to our success, and
we rely on trademark, copyright and patent law, trade secret protection and
confidentiality and/or license agreements with our employees, customers,
partners and others to protect our proprietary rights. If we are not
successful in protecting our intellectual property, there could be a
material adverse effect on our business.
While we believe that our issued patents and pending patent
applications help to protect our business, there can be no assurance that
o any patent can be successfully defended against challenges
by third parties;
o pending patent applications will result in the issuance of
patents;
o competitors or potential competitors of priceline.com will
not devise new methods of competing with us that are not
covered by our patents or patent applications;
o because of variations in the application of our business
model to each of our products and services, our patents will
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;
o new prior art will not be discovered which may diminish the
value of or invalidate an issued patent; or
o a third party will not have or obtain one or more patents
that prevent us from practicing features of our business or
will require us to pay for a license to use those features.
There has been recent discussion in the press regarding the
examination and issuance of so called "business-method" patents. As a
result, the United States Patent and Trademark Office has indicated that it
intends to intensify the review process applicable to such patent
applications. The new procedures are not expected to have a direct effect
on patents already granted. We cannot anticipate what effect, if any, the
new process will have on our pending patent applications.
We pursue the registration of our trademarks and service marks in the
U.S. and internationally. However, effective trademark, service mark,
copyright and trade secret protection may not be available in every country
in which our services are made available online. We have licensed in the
past, and expect to license in the future, certain of our proprietary
rights, such as trademarks or copyrighted material, to third parties. These
licensees may take actions that might diminish the value of our proprietary
rights or harm our reputation.
Legal Proceedings
We are a party to the legal proceedings described in Item 1 of Part
II "Legal Proceedings." An adverse outcome in any of the actions described
in Item 1 of Part II could have a material adverse effect on our business.
The Success of Our Business Will Depend on Continued Growth
of Internet Commerce
The market for the purchase of products and services over the
Internet is a new and emerging market. As an Internet commerce business,
our future revenues and profits are substantially dependent upon the
widespread acceptance and use of the Internet and other online services as
a medium for commerce by consumers and sellers. If widespread acceptance
and growth of Internet use does not occur, our business and financial
performance will suffer. Rapid growth in the use of and interest in the
Internet and other online services is a recent phenomenon. This growth may
not continue. A sufficiently broad base of consumers may not adopt, or
continue to use, the Internet as a medium of commerce. Demand for and
market acceptance of 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.
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:
o unanticipated disruptions in service;
o slower response times;
o decreased customer service and customer satisfaction; or
o 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 scaleable. 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,
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.
We May Not Be Able to Keep Up with 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.
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 significant interruptions in our operations. For instance, several
major Web sites recently experienced significant interruptions as a result
of improper direction of excess traffic to those sites, and computer
viruses have substantially disrupted e-mail and other functionality in a
number of countries, including the United States. 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:
o quarterly variations in our operating results;
o operating results that vary from the expectations of
securities analysts and investors;
o changes in expectations as to our future financial
performance, including financial estimates by securities
analysts and investors;
o changes in market valuations of other Internet or online
service companies;
o announcements of technological innovations or new services
by us or our competitors;
o announcements by us or our competitors of significant
contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments;
o loss of a major seller participant, such as an airline or
hotel chain;
o changes in the status of our intellectual property rights;
o lack of success in the expansion of our business model
horizontally or geographically;
o announcements by third parties of significant claims or
proceedings against us or adverse developments in pending
proceedings;
o additions or departures of key personnel; and
o stock market price and volume fluctuations.
Sales of a substantial number of shares of our common stock 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.
In addition, the trading prices of Internet stocks in general,
including ours, have experienced extreme price and volume fluctuations.
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.
Our Business is Subject to Tax Uncertainties
Potential Federal Air Transportation Tax on Airline Ticket Sales. A
Federal transportation tax is imposed upon the sale of airline tickets. The
tax is based on a percentage of the cost of transportation, which was 9%
for periods prior to October 1, 1998, 8% for the period October 1, 1998
through September 30, 1999 and 7.5% thereafter. We have historically
interpreted the tax regulations as requiring that the tax be computed based
on the amount charged by the airline to us for the airline ticket and
participating airlines have collected and remitted the tax based on this
amount. We applied for a ruling from the Internal Revenue Service
confirming this interpretation. In December 1999, the Internal Revenue
Service indicated to us that it was unlikely that a favorable ruling would
be issued. We subsequently withdrew our ruling request because of the
uncertainty of the outcome. Because we anticipated the possibility of an
adverse ruling on this issue, we accrued approximately $1.9 million
relating to the balance of the tax liability for tickets sold prior to that
date. We believe this accrual to be adequate, but there can be no assurance
as to the final outcome because a formal ruling has not been issued by the
Internal Revenue Service.
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 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.
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.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Sections of this Form 10-Q may contain forward-looking statements.
Expressions of future goals and similar expressions including, without
limitation, "may," "will," "should," "could," "expects," "does not
currently expect," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue," reflecting something other than
historical fact are intended to identify forward-looking statements. The
following factors, among others, could cause our actual results to differ
materially from those described in the forward-looking statements:
inability to successfully expand our business model both horizontally and
geographically; management of our rapid growth; adverse changes in our
relationships with airlines and other product and service providers;
systems-related failures; our ability to protect our intellectual property
rights; the effects of increased competition; anticipated losses by us and
our licensees; legal and regulatory risks and the ability to attract and
retain qualified personnel. These factors and others are described in more
detail above in "Additional Factors That May Affect Future Results."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Please see Note 5 to the Notes to Unaudited Consolidated Financial
Statements included in the Form10-Q and Part I, Item 3 of priceline.com's
Annual Report on Form 10-K for the year ended December 31, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 1, 1999, priceline.com completed an initial public offering
in which it sold 10,000,000 shares of its common stock, $0.008 par value.
The managing underwriters in the offering were Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
BancBoston Robertson Stephens Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation. The shares of common stock sold in the offering
were registered under the Securities Act of 1933, as amended, on a
Registration Statement on Form S-1 (the "Registration Statement") (Reg. No.
333-69657) that was declared effective by the Securities and Exchange
Commission on March 29, 1999. All 10,000,000 shares of common stock
registered under the Registration Statement were sold at a price of $16.00
per share for gross proceeds of $160.0 million. Offering proceeds to
priceline.com, net of approximately $11.2 million in aggregate underwriter
discounts and commissions and $4.5 million in other related expenses, were
approximately $144.3 million.
A portion of the net offering proceeds received on April 1, 1999 from
the initial public offering were used for, and will continue to be used
for, general corporate purposes, including working capital to fund
anticipated operating losses, expenses associated with priceline.com's
advertising campaigns, brand-name promotions and other marketing efforts
and capital expenditures. In addition, Priceline.com also may use a portion
of the net proceeds, currently intended for general corporate purposes, to
acquire or invest in businesses, technologies, products or services,
although no specific acquisitions are planned and no portion of the net
proceeds has been allocated for any acquisition. None of the net offering
proceeds of priceline.com have been or will be paid directly or indirectly
to any director, officer, general partner of priceline.com or their
associates, persons owning 10% or more of any class of priceline.com's
equity securities, or an affiliate of priceline.com other than compensation
to officers of priceline.com in the ordinary course of business and
payments that were made in the ordinary course of business to Walker
Digital pursuant to a reciprocal services arrangement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our Annual Meeting of Stockholders on April 24, 2000.
Following are descriptions of the maters voted on and the results of such
meeting:
Number of Stockholders
Broker
Matter Voted On For Against Abstaining No-Votes
--------------- --- ------- ---------- --------
1. Election of Directors
Richard S. Braddock....... 108,681,032 99,120 --
Jay S. Walker............. 108,684,945 95,207 --
Daniel H. Schulman........ 108,691,860 88,292 --
Paul A. Allaire........... 108,734,347 45,805 --
Ralph M. Bahna............ 108,733,865 46,287 --
Paul J. Blackney.......... 107,822,765 957,387 --
William E. Ford........... 108,734,705 45,447 --
Marshall Loeb............. 108,714,903 65,249 --
N.J. Nicholas, Jr......... 108,734,355 45,797 --
Nancy B. Peretsman........ 107,813,879 966,273
2. Approval of Amendments to
Priceline.com 1999 Omnibus
Plan...................... 98,103,918 8,779,591 93,158 1,803,485
3. Ratification of appointment
of Deloitte & Touche LLP
as independent auditors
for fiscal year ended
December 31, 2000......... 108,708,393 26,709 45,050 --
ITEM 5. OTHER INFORMATION
On May 15, 2000, our Board of Directors announced that Daniel
H. Schulman, who had been our President and Chief Operating Officer, had
been elevated to the additional role of Chief Executive Officer. In his new
role, Mr. Schulman succeeds Richard S. Braddock, who was Chief Executive
Officer. Mr. Braddock will continue as Chairman of our Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
------ -----------
10.30 Employment Agreement, dated December 3, 1999, between the
Registrant and Michael McCadden.
10.31 Employment Agreement, dated December 30, 1999 between the
Registrant and Jeffery H. Boyd.
10.32 Employment Agreement, dated February 18, 2000, between the
Registrant and Heidi G. Miller.
10.33 Promissory Note, dated February 10, 2000 between Jeffery
H. Boyd and the Registrant.
10.34 Amendment to Promissory Note, dated March 28, 2000,
between Jeffery H. Boyd and the Registrant.
10.35 Promissory Note, dated March 7, 2000, between Heidi G.
Miller and the Registrant.
10.36 Stock Option Agreement, dated February 18, 2000, by and
between the Registrant and Heidi G. Miller.
10.37 Amendment to Promissory Note, dated March 28, 2000,
between Daniel H. Schulman and the Registrant.
10.38 Amendment Number One to the Priceline.com Incorporated
1999 Omnibus Plan.
10.39 Formation and Funding Agreement, dated as of March 17,
2000, by and between the Registrant and Alliance
Partners, LP.*
27.1 Financial Data Schedule.
- ----------------------------
* Certain portions of this document have been omitted pursuant to a
confidential treatment request.
(b) Reports on Form 8-K
On January 31, 2000, we filed a report on Form 8-K announcing our
fourth quarter 1999 financial results that included unaudited balance
sheets at December 31, 1999 and statements of operations for the
three-month period ending December 31, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 15, 2000 PRICELINE.COM INCORPORATED
(Registrant)
By: /s/ Richard S. Braddock
---------------------------------------
Name: Richard S. Braddock
Title: Chairman and Chief Executive Officer
Date: May 15, 2000 By: /s/ Heidi G. Miller
---------------------------------------
Name: Heidi G. Miller
Title: Chief Financial Officer
EXHIBIT 10.30
December 3, 1999
Mr. Mike McCadden
1 Chapel Hill Road
Westport, CT 06880
Dear Mike:
This letter supercedes the previously sent letter dated December 1, 1999.
We are very pleased to offer you the position of Chief Marketing Officer,
reporting to Dan Schulman, President and Chief Operating Officer for
priceline.com.
As discussed, your start date is to be determined, at a bi-monthly salary
of $10,416.66 less applicable withholdings (payable on the 15th and last
day of each month, aggregating $250,000.00 annually). This offer also
includes participation in a full range of company benefit programs as
described in the attached Employee Benefits Summary.
In addition to the above, the company has agreed to pay a sign on bonus in
the amount of $100,000.00, contingent upon your signing the below
referenced repayment authorization. This bonus will be subject to all
applicable withholdings and be payable as follows: $25,000.00 in the first
pay period following date of hire; an additional $25,000.00 upon completion
of 3 months of successful employment; an additional $25,000.00 upon
completion of 6 months of successful employment and the final $25,000.00
upon completion of 9 months of successful employment. Please be advised
that if you voluntarily leave the company within your first 6 months of
employment or are terminated for cause during this period, you will be
required to repay these monies. To facilitate the repayment, we will deduct
any amount owed from your final paycheck, pursuant to a signed written
authorization, with any additional monies not covered by the final paycheck
to be repaid via check or money order.
This offer also includes participation in the company's employee stock
option program. You will be eligible to receive a grant in the amount of
400,000 shares in accordance with terms and conditions of the plan. Options
will vest as follows: 50,000 shares will vest immediately upon date of
hire; an additional 50,000 shares will vest 6 months from your date of hire
based upon the completion of mutually agreed upon objectives; an additional
100,000 shares will vest on the first anniversary of your date of hire; an
additional 100,000 shares will vest on the second anniversary of your date
of hire; and the final 100,000 shares will vest third anniversary of your
date of hire. The exercise price per share of Stock will be determined by
the Fair Market Value at the close of business on your first day of
employment.
In the event that similarly situated executives are given the opportunity
to participate in other Walker companies equity arrangements, you would be
considered eligible for participation.
In the event your employment is terminated without cause, you will be
entitled to the payment of your annual base salary after termination as
follows: (a) For a period of six months from the date of termination (the
"Initial Severance Period"), without mitigation ("mitigation" being defined
as any obligation on your part to obtain gainful or other employment during
such six month period); and (b) For an additional six months thereafter,
(the "Second Severance Period") (for a total severance period of up to
twelve months); provided, however that severance payments made during this
Second Severance Period shall be reduced, on a dollar for dollar basis, by
the amount of any income generated by you in any capacity or in any
position (including as an employee, consultant, agent, representative,
principal, investor, officer, or director) with any person or entity during
the Initial Severance Period and the Second Severance Period.
All severance payments made to you in connection with a termination without
cause as herein described will be paid to you with the normal payroll
schedules of priceline, less all appropriate withholdings for federal,
state and local taxes and unemployment insurance.
Orientation is held every Monday at 9:30, at which point many of these
programs will be explained in more detail.
This offer is contingent upon the following:
| | Your ability to verify your identity and establish your right to
work in the United States, as required by the Immigration Reform and
Control Act of 1986. A list of acceptable documentation is enclosed
and must be brought with you on your first day of employment.
| | Your signing the enclosed Agreement Regarding Confidential
Information and Intellectual Property on or before your first date of
employment
| | Successful results of background and reference checks.
There are a number of other documents and forms also included with this
offer letter. These should be reviewed and/or completed by your first day
of employment.
Acceptance of this offer constitutes acknowledgment of your status as an
at-will employee. As such, you understand that either you or priceline may
terminate the employment relationship at any time. This letter is not
intended to alter your at-will status.
We are very excited about the prospect of you joining the team at
priceline.com. We are dependent upon people like you sharing your talent
and energy and creativity to ensure our continued growth and success. If
you have any questions, do not hesitate to contact your manager or me.
Sincerely,
Jeanne D. Wisniewski
Executive Vice President, Human Resources
Enclosures
PRICELINE.COM
EMPLOYEE BENEFITS SUMMARY
The company provides the following benefits for full time regular employees
and part-time regular employees working a minimum of 24 hours per week:
MEDICAL INSURANCE - carrier- OXFORD HEALTH PLANS. Allows employees and
families to use a network of health care providers. Co-payments for
in-network office visits are $10. You are not required to obtain a referral
to visit a specialist. If providers are used outside of the Oxford network
your are subject to deductibles (see summary of coverage). ELIGIBLE THE
FIRST OF THE MONTH FOLLOWING YOUR DATE OF HIRE.
DENTAL INSURANCE - carrier- DELTA DENTAL. Calendar year deductible $50 for
single, $150 for family. Employees are eligible to use any dentist. If you
choose a dentist within the Delta network there is no claim submission.
ELIGIBLE THE FIRST OF THE MONTH FOLLOWING YOUR DATE OF HIRE.
VISION - carrier- OXFORD HEALTH PLANS. Covers complete eye exams every 12
months up to $50 and hardware every 24 months up to $70. ELIGIBLE THE FIRST
OF THE MONTH FOLLOWING YOUR DATE OF HIRE.
LIFE INSURANCE/AD&D - One times basic annual salary up to a maximum of
$300,000. ELIGIBLE THE FIRST OF THE MONTH FOLLOWING YOUR DATE OF HIRE.
SICK TIME - Up to 6 days per calendar year. ELIGIBLE AFTER 3 MONTHS OF
CONTINUOUS EMPLOYMENT.
VACATION - ELIGIBLE AFTER 6 MONTHS OF EMPLOYMENT:
| | Up to 2 weeks/calendar year for years 1 through 4 (accrued at a rate of
.833 days for each full month of employment)
| | 3 weeks/calendar year for years 5 through 10 (accrued at a rate of 1.25
days for each full month of employment)
| | 4 weeks/calendar year for 11+ years (accrued at a rate of 1.67 days for
each full month of employment)
HOLIDAYS - Observe 8 per year: New Year's Day, Memorial Day, July 4th,
Labor Day, Thanksgiving Day, the day after Thanksgiving, Christmas Eve, and
Christmas Day. ELIGIBLE FROM FIRST DAY OF EMPLOYMENT.
FLOATER/PERSONAL HOLIDAYS - Up to 4 days per calendar year. ELIGIBLE AFTER
3 MONTHS OF CONTINUOUS EMPLOYMENT. Pro-rated according to your date of hire
during your first year of employment.
SHORT TERM DISABILITY - carrier- PROVIDENT. If totally disabled, income
protection may be paid at 70% of base weekly earnings. Benefits begin the
8th day and are payable up to a maximum of 26 weeks. ELIGIBLE THE FIRST OF
THE MONTH FOLLOWING YOUR DATE OF HIRE.
LONG TERM DISABILITY - carrier- PROVIDENT. If total disability continues
for 90 or more days, income protection may be paid at 60% of base monthly
earnings up to a maximum of $11,000 per month, subject to reduction by
deductible sources of income or disability earnings. Eligible after 30 days
of employment at no cost to the employee. Duration of benefits based upon
length of qualifying disability and age at time of disability. ELIGIBLE THE
FIRST OF THE MONTH FOLLOWING YOUR DATE OF HIRE.
401(K) PLAN - You will be eligible to participate in our 401(k) Savings
Plan on the first of the month following your date of hire. If you are
hired on the first day of the month, you will be eligible to participate
immediately.
TUITION REIMBURSEMENT - Reimbursement of tuition, books and lab fees up to
$2,000 per calendar year with a lifetime maximum of $15,000. Eligible after
1 year of continuous employment.
FITNESS CENTER - Access to gym, lockers, showers, sauna, exercise classes
and seminars Monday through Friday. Eligible on the first day of employment
at no cost to employees.
MEALS - Catered lunch and dinner are served daily at no cost to employees.
The above is a summary and therefore subject to the actual plan
descriptions and policy documents. All policies and practices are
subject to change.
PRICELINE.COM
SIGN-ON BONUS
REPAYMENT AUTHORIZATION
As a condition of receipt of the "sign-on" bonus referenced in my offer
letter, I agree to repay the full amount of the bonus if I voluntarily
leave the company within my first 6 months of employment, or am terminated
for cause during this period. Further, I authorize the company to deduct
any amount owed from my final paycheck, with any additional monies not
covered by the final paycheck to be repaid by me via check or money order.
Employee Signature: Date:
- ----------------- ----------------------------------------- ------
Printed Name: Date:
- ----------------- ----------------------------------------- ------
HR Signature: Date:
- ----------------- ----------------------------------------- ------
EXHIBIT 10.31
203.299.8000 [email protected]
TELEPHONE E.MAIL
priceline.com
December 30, 1999
Mr. Jeffery Boyd
34 Brookridge Drive
Greenwich, CT 06830
Dear Jeff:
We are very pleased to offer you the position of EVP, General Counsel,
reporting to me, CEO at priceline.com.
As discussed, your start date will be January 4, 2000, on a per diem basis,
at a minimum of 8 hours per week. Your hourly rate will be $120.20. You
will be involved in interim assignments until such time you transition to
your regular assignment. As a regular full-time employee, you will be
compensated at a bi-monthly salary of $10,416.66 less applicable
withholdings, ("Base Salary") (payable on the 15th and last day of each
month, aggregating $250,000.00 annually). This offer also includes
participation in a full range of Company benefit programs as described in
the attached Employee Benefits Summary, except that you will be entitled to
four weeks of vacation annually.
Priceline.com will loan you $2,000,000.00 upon your joining the Company.
The loan will be fully recourse and will accrue interest at the lowest
annual rate which avoids imputation of income under the Federal Internal
Revenue Code. Interest and principal will be payable at maturity of the
loan, which will be five years from the date of the loan. You will be
required to make prepayments of principal and accrued interest in an amount
equal to 25% of your after tax proceeds over $2,000,000.00 from the
exercise of your stock options until termination date of the loan (five
years), at which point any amounts remaining outstanding under the loan
will be forgiven. Any remaining outstanding principal and interest on the
loan will also be forgiven upon a Change in Control, death, a Disability
Termination, a Termination without Cause or a Termination for Good Reason
(each term being used as defined below). Upon commencement of your
employment you will execute a note and option/stock pledge agreement having
terms mutually acceptable to you and the Company to effect the terms of
this paragraph.
This offer also includes participation in the Company*s employee stock
option program. Effective the comniencement date of your employment, you
will receive a grant of options to purchase 500,000 shares of the Company*s
common stock (the "options") in accordance with terms and conditions of the
1999 Omnibus Plan (the "option plan"). Options will vest as follows: 50,000
shares will vest immediately upon date of hire; an additional 50,000 shares
will vest 6 months from your date of hire; an additional 200,000 shares
will vest on the first anniversary of your date of hire; an additional
100,000 shares will vest on the second anniversary of your date of hire;
and the final 100,000 shares will vest on the third anniversary of your
date of hire. The exercise price per share of stock will be determined by
the fair market value of the Company*s common stock at the close of
business on your first day of employment.
Your employment under this letter shall terminate upon the earliest to
occur of any of the following events: Disability. If by reason of the same
or related physical or mental illness or incapacity (as determined in the
reasonable discretion of the Company), you are unable to carry out your
material duties pursuant to this letter for more than six (6) consecutive
months, the Company may terminate your employment for disability (a
"Disability Termination"). Such termination shall be upon thirty (30) days
written notice by a Notice of Disability Termination. A Termination for
Disability hereunder shall not be effective if you return to the full time
performance of your material duties within such thirty (30) day period.
Termination for Good Reason. A Termination for Good Reason means a
tenninalion by you by written notice given within ninety (90) days after
the occurrence of the Good Reason event (as defined below), unless such
circumstances are fully corrected prior to the date of termination
specified in the Notice of Termination for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the occurrence or failure to cause
the occurrence, as the case may be, without your express written consent,
of any of the following circumstances: (i) any material diminution of your
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of your employment for Cause or Disability
or as a result of your death, or temporarily as a result of your illness or
other absence), the assignment to you of duties or responsibilities that
are inconsistent with your then current and accepted position; a change in
your reporting relationship such that you no longer report directly to the
Chief Executive Officer of the Company, or a reduction in your compensation
and benefits; (ii) removal of, or the nonreelection of, you from officer
positions with the Company specified herein without election to a higher
position; (iii) a relocation of the Company*s main office in Connecticut to
a location outside of the NY metro area; (iv) any material breach by the
Company of any provision of this letter; (v) a Change in Control; or (vi)
failure of any successor to the Company (whether direct or indirect and
whether by merger, acquisition, consolidation or otherwise) to assume (in a
writing delivered to you upon the assignee becoming such) the obligations
of the Company hereunder.
Cause. Your employment hereunder may be terminated by the Company for
Cause. For purposes of this letter, the term "Cause" shall be limited to
(1) willful misconduct by you with regard to the Company which has a
material adverse effect on the Company; (ii) your willful refusal to follow
the proper written direction of the Board, a Committee therof or a more
senior officer of the Company, provided that the foregoing refusal shall
not be "Cause" if you in good faith believe that such direction is illegal,
unethical or immoral and promptly so notify the Board, the Board Committee,
or the more senior officer (whichever is applicable); (iii) substantial and
willful refusal by you to attempt to perform the duties required of you
hereunder (other than any such failure resulting from incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to you by the Board or the Chief Executive Officer
of the Company which specifically identifies the manner in which it is
believed that you have substantially and continually refused to perform
your duties hereunder and a reasonable opportunity to cure; (iv) your
committing a crime of moral turpitude; or (v) your being convicted of a
felony (other than a felony involving a traffic violation or as a result of
vicarious liability). For purposes of this paragraph, no act, or failure to
act, on your part shall be considered "willful" unless done or omitted to
be done, by you not in good faith and without reasonable belief that your
action or omission was in the best interests of the Company.
Consequences of Termination of Employment.
Death. If your employment is terminated by reason of your death, your
employment will terminate without further obligations to you or your legal
representatives under this letter except for: (i) any compensation earned
but not yet paid, including and without limitation, any bonus if declared
or earned but not yet paid for a completed fiscal year, any amount of Base
Salary earned but unpaid, any accrued vacation pay payable pursuant to the
Company's policies, which amounts shall be promptly paid in a lump sum to
your estate; (ii) any other amounts or benefits owing to you under the then
applicable employee benefit plans, long term incentive plans or equity
plans and programs of the Company which shall be paid or treated in
accordance with the terms of such plans and programs; (iii) continuation of
your health benefits for your dependents at the same level and cost as if
you were an employee of the Company for twelve (12) months; and (iv) if a
bonus plan is in place, the product of(x) the target annual bonus for the
fiscal year of your death, multiplied by (y) a fraction, the numerator of
which is the number of days of the current fiscal year during Which you
were employed by the Company, and the denominator of which is 365, which
bonus shall be paid when bonuses fbr such period are paid to the other
executives; and (v) forgiveness of the outstanding principal amount and
accrued interest of the loan of $2,000,000.00 referred to above. Further,
your estate, legal representatives, beneficiaries or other designees (as
applicable), will be entitled to all vested Options granted to you
hereunder or after commencement of employment. However, all unvested
Options on the date of your termination will automatically terminate and be
of no further force or effect.
Disability. If your employment is terminated by reason of your Disability,
you shall be entitled to receive the payments and benefits to which your
representatives would be entitled in the event of a termination of
employment by reason of your death plus, to the extent not duplicative of
the foregoing, you shall be entitled to continuation of the benefits
(including without limitation to health, lile, disability and pension) as
if you had been an employee of the Company for twelve (12) months. In
addition you will retain all vested Options but unvested Options will
terminate with your employment effective as of your termination date.
Termination by you for Good Reason or Termination by the Company without
Cause. If (i) you terminate your employment hereunder for Good Reason or
(ii) your employment with the Company is terminated by the Company without
Cause, you shall be entitled to receive, (A) over a period of twelve (12)
months after such termination (the "severance period") an amount equal to
the sum of your Base Salary for the year in which such termination occurs;
(B) any accrued amounts at the date of termination; (C) any other amounts
or benefits owing to you under the then applicable employee benefit, long
term incentive or equity plans and programs of the Company, which shall be
paid or treated in accordance with the terms of such plans and programs;
(D) continuation of the benefits (including without limitation to health,
life, disability and pension) as if you were an employee of the Company for
twelve (12) months, provided that, if such termination is after a Change in
Control, the period of benefit continuation shall be twenty-four
(24)months; (E) if a bonus plan is in place, the product of(x) the target
annual bonus for the fiscal year, multiplied by (y) a fraction, the
numerator of which is the number of days of the current fiscal year during
which Executive was employed by the Company, and the denominator of which
is 365, which bonus shall be paid when bonuses for such period are paid to
the other executives; (F) all vested Options vested as of the effective
date of termination, which shall be exercisable during the severance
period; and (G) Options which are scheduled to vest during the severance
period shall fully vest as of the termination date, and shall be
exercisable during the severance period.
Termination with Cause or Voluntary Resignation without Good Reason or
Retirement. If your employment hereunder is terminated (i) by the Company
for Cause or (ii) by you without Good Reason, you shall be entitled to
receive (A) your Base Salary through the date of termination; (B) any
unreimbursed business expenses payable; and (C) If such termination is by
you without Good Reason, you are entitled to the same payments and benefits
as if terminated by the Company for Cause and you are also entitled to
payment of bonus that has been declared or earned but not yet paid for a
completed fiscal year. If terminated by the Company for Cause or by you
without Good Reason, your rights under all benefits plans and equity grants
shall be determined in accordance with the Company's plans, programs and
grants. You Shall remain liable for payment of the outstanding principal
amount and accrued interest, if any, in respect of the loan of
$2,000,000.00 referred to above.
No Mitigation; No Set-Off. In the event of any termination of employment
hereunder, you shall be under no obligation to seek other employment and
there shall be no offiet against any amounts due you under this Agreement
on account of any remuneration attributable to any subsequent employment
that you may obtain. The amounts payable hereunder shall not be subject to
setoft counterclaim, recoupment, defense or other right which the Company
may have against you or others, except upon obtaining by the Company of a
final unappealable judgment against you.
Change in Control. For purposes of this letter, the term "Change in
Control" shall have the meaning set forth in the 1999 priceline.com omnibus
stock option plan.
This offer is contingent upon the following:
o Your ability to verify your identity and establish your right to work in
the United States, as required by the Immigration Reform and Control Act
of 1986. A list of acceptable documentation is enclosed and must be
brought with you on your first day of employment.
o Your signing the enclosed Agreement Regarding Confidential Information
and Intellectual Property on or before your first date of employment
There are a number of other documents and forms also included with this
offer letter. These should be reviewed and/or completed by your first day
of employment.
Acceptance of this offer constitutes acknowledgment of your status as an
at-will employee. As such, you understand that either you or priceline may
terminate the employment relationship at any time. This letter is not
intended to alter your at-will status. Notwithstanding that your employment
relationship is at-will, you will be entitled to all the compensation and
benefits committed to you in this letter as determined by the facts and
details of your termination of employment.
We are very excited about the prospect of you joining the team at
priceline.com. We are dependent upon people like you sharing your talent
and energy and creativity to ensure our continued growth and success. If
you have any questions, do not hesitate to contact me.
Sincerely,
Richard S. Braddock
Chairman & Chief Executive Officer
Enclosures
EXHIBIT 10.32
2/17/00
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of February 18. 2000, by and between
priceline.com Incorporated, a Delaware corporation, with its principal
United States office at 800 Connecticut Avenue, Norwalk, Connecticut 06854
(the "Company"). and Ms. Heidi G. Miller, residing at 12 Grahampton Lane,
Greenwich, Connecticut 06830 ("Executive)
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive as Senior Executive
Vice President, Chief Financial Officer, Strategy, Planning and
Administration of the Company;
WHEREAS, the Company and Executive desire to enter into this agreement
(the "Agreement") as to the terms of her employment by the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment. Except for earlier termination as provided in
Section 9 hereof, Executives employment under this Agreement shall be for a
five (5) year term (the "Initial Employment Term") commencing on February
18, 2000 (the "Commencement Date") and ending on February 18, 2005. Subject
to Section 9 hereof, the Initial Employment Term shall be automatically
extended for additional terms of successive one (1) year periods (the
"Additional Employment Term") unless the Company or Executive gives written
notice to the other at least ninety (90) days this prior to the expiration
of the then Initial Employment Term or Additional Employment Term of the
termination of Executive's employment hereunder at the end of such
Employment Term. The Initial Employment Term and the Additional Employment
Term shall be referred to herein as the "Employment Term."
2. Positions (a) Commencing on the Commencement Date, Executive shall
serve as Senior Executive Vice President, Chief Financial Officer,
Strategy, Planning and Administration of the Company. As soon as
practicable, the Company will also nominate Executive for election as a
member of the Board of Directors of the Company (the "Board"), and the
Company shall take all requisite action to increase the size of the Board
and to otherwise facilitate Executive's election to the Board and her
continuing as director during the Employment Term. Executive shall also
serve, if requested by the Board, or the Chief Executive Officer, as an
executive officer and/or a director of subsidiaries and/or a director of
associated companies of the Company and shall comply with the policy of the
Compensation Committee of the Company's Board (the "Compensation
Committee") with regard to retention or forfeiture of director's fees.
(b) Executive shall report directly to the Chief Executive Officer of
the Company and, shall have such duties and authority, consistent with her
then position, as shall be assigned to her from time to time by the Board
or the Chief Executive Officer of the Company.
(c) During the Employment Term, Executive shall devote substantially
all of her business time and efforts to the performance of her duties
hereunder; provided, however, that Executive shall be allowed, to the
extent that such activities do not materially interfere with the
performance of her duties and responsibilities hereunder, to manage her
personal financial and legal affairs and to serve on corporate, civic,
charitable and industry boards or committees. Notwithstanding the
foregoing, Executive shall only serve on for-profit corporate boards of
directors if specifically approved in advance by the Board or the Chairman
(which approval shall not be unreasonably withheld or delayed), provided,
however, nothing shall preclude Executive from serving on the boards of any
for-profit enterprises on which she is currently serving as listed on
Exhibit A.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of not less than $300,000. Base
salary shall be payable in accordance with the usual payroll practices of
the Company. Executive's base salary shall be subject to annual review by
the Board or the Compensation Committee during the Employment Term and may
be increased, but not decreased, from time to time by the Board or the
Compensation Committee. The annualized base salary as determined as
aforesaid from time to time shall constitute "Base Salary" for purposes of
this Agreement.
4. Incentive Compensation. (a) Bonus. Executive shall be eligible to
participate in any annual bonus plan the Company may implement at any time
during Executive's Employment Term for senior executives at a level
commensurate with her position.
(b) Long Term Compensation. For each fiscal year or portion thereof
during the Employment Term, Executive shall be eligible to participate in
any long-term incentive compensation plan generally made available to
senior executives of the Company at a level commensurate with her position
in accordance with and subject to the terms of such plan.
(c) Equity Opportunity,
(i) Options Common Stock of the Company.
On the Commencement Date Executive is being granted a stock
option (the "Option") under a stand along plan having terms substantially
similar to the terms of the priceline.com Incorporated 1999 Omnibus Plan
(the "Plan") to purchase two million five hundred thousand (2,500,000)
shares of the Company's common stock (the "Common Stock"). The Option shall
terminate on the tenth (10) anniversary of the date of grant or, if
earlier, following a termination of Executive's employment with the Company
as provided below. The per share exercise price with respect to one million
(1,000,000) shares of the Common Stock subject to the Option shall be the
Fair Market Value of the Common Stock on the date of grant of the Option
which shall be equal to the closing market price of the Common Stock on the
NASDAQ Stock Market on the last trading day prior to the date of grant
(such portion of the Option, the "FMV Options"). The exercise price with
respect to the remaining one million five hundred thousand (l,500,000)
shares of the Common Stock subject to the Option shall be $90.00 per share
(such portion of the Option, the "Premium Options"). The Option will vest
and become exercisable as to one sixth (1/6) of the Option upon the
Commencement Date, as to one sixth (1/6) of the Option on December 31,
2000, as to one-third (1/3) of the Option on December 31, 2001 and as to
the final one-third (1/3) of the Option on December 31, 2002, provided that
Executive is employed by the Company on such vesting dates, subject to
accelerated vesting and exercisability as provided below. On each vesting
date forty percent (40%) of the portion of The Option vesting on each such
vesting date shall be FMV Optional and sixty percent (60%) of the portion
of the Option vesting on each such vesting date shall be Premium Options.
Vesting and exercisabiity shall be accelerated as follows: (i) upon a
Termination without Cause or a Termination for Good Reason, the Option will
immediately vest and became exercisable (to the extent not then vested and
exercisable) as follows: one million six hundred twenty-five thousand
(1,625,000) shares if the termination takes place prior to the first
anniversary of the Commencement Date; two million sixty-two thousand five
hundred (2,062,500) shares, if the termination takes place on or after the
first anniversary of the Commencement Date and prior to the second
anniversary of the Commencement Date; and two million five hundred thousand
(2,500,000) shares, if the examination takes place thereafter; or (ii) upon
death or Termination for a Disability, the Option will immediately vest as
to fifty percent (50%) of Executive's then unvested shares; and (iii) in
the event of a Change in Control, the Option will vest and became
exercisable (to the extent not then vested and exercisab1e): one million
six hundred twenty-five thousand (1,625,000) shares, if the Change in
Control takes place prior to the first anniversary of the Commencement
Date; two million sixty-two thousand five hundred (2,062,500), if the
Change in Control takes place on or after the first anniversary of the
Commencement Date and prior to the second anniversary of the Commencement
Date; and two million five hundred thousand (2,500,000) shares, if the
Change in Control takes place thereafter; provided that the remaining
unvested shares shall vest and become exercisable (to the extent not
otherwise vested and exercisable prior thereto by the other terms hereof)
six (6) months after the Change in Control, if the Executive is then
employed by the Company or, if earlier, upon a Termination without Cause,
Termination for Good Reason, death, Termination for Disa1bility or the
Option not being continued or assumed upon the Change in Control. Upon a
termination each Option shall continue to be exercisable as follows: (i) in
the event of a termination due to Termination without Cause, Termination
for Good Reason, death or Termination for disability, the Option shall
continue to be exercisable for eighteen (18) months following the date of
such termination, and (ii) in the event of a Termination for Cause or by
the Executive without Good Reason, all unvested options shall be forfeited
and vested options shall remain exercisable for ninety (90) days following
the date of such termination.
(ii) Opportunity to Invest in Digital Corporation.
Executive shall be given the opportunity, as soon after the
Commencement Date as practicab1e, to invest in the equity of Walker Digital
Corporation. The size and terms of such equity opportunity shall be subject
to mutual agreement of the parties.
(d) Other Compensation. The Company may, upon recommendation of the
Compensation Committee, award to Executive such other bonuses and
compensation as it deems appropriate and reasonab1e.
5. Loan. The Company shall lend Executive three million dollars
($3,000,000) (the "Loan") on the Commencement Date or as soon thereafter as
practical. The Loan shall accrue interest annually at the applicable
Federal rate, pursuant to Section 1274(d) of the Internal Revenue Code, as
amended, and shall be a full recourse loan. The Loan shall mature five (5)
years after the date of the Loan at which time the interest and principal
will become payable. Executive shall be required to make prepayments of the
principal and accrued interest in an amount equal to twenty-five percent
(25%) of Executive's pre-tax profits over six million six hundred thousand
dollars ($6,60O,O00) from the exercise of the Option prior to five (5)
years from the Commencement Date. Notwithstanding any provision to the
contrary, any outstanding principa1 and interest on the Loan shall be
forgiven upon a Change in Control, Death, Termination for Disability.
Termination without Cause, or Termination for Good Reason or at the end of
the five (5) year term (if Executive has not been terminated for Cause or
resigned without Good Reason prior thereto).
6. Employment Benefits and Vacation. (a) During the Employment Term,
Executive shall be entitled to participate in all benefit plans and
arrangements and fringe benefits and perquisite programs generally provided
to comparable senior executives of the Company.
(b) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from
time to time, but in no event less than four (4) weeks paid vacation per
calendar year. Executive shall also be entitled to such periods of sick
leave as is customarily provided by the Company for its senior executive
employees.
7. Business Expenses. The Company shall reimburse Executive for the
travel, entertainment and other business expenses incurred by Executive in
the performance of her duties hereunder, in accordance with the Company's
policies as in effect from time to time.
8. Termination. (a) The employment of Executive under this Agreement
shall terminate upon the earliest to occur of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment due to Executive's
Disability pursuant to Section 8(b) hereof,
(iii) the termination of Executive's employment due by Executive
for Good Reason pursuant to Section 8(c) hereof,
(iv) the termination of Executive's employment by the Company
without Cause;
(v) the termination of employment by Executive without Good
Reason upon sixty (60) days prior written notice; or
(vi) the termination of Executive's employment by the Company for
Cause pursuant to Section 8(e) hereof.
(b) Disability. If by reason of the same or related physical or mental
illness or incapacity, the Executive is unable to carry out her material
duties pursuant to this Agreement for more than six (6) consecutive months,
the Company or Executive may terminate Executive's employment for
Disability, as determined by an approved medical doctor. For this purpose
an approved medical doctor shall mean a medical doctor selected by the
Company and Executive. If the Parties cannot agree on a medical doctor,
each Party shall select a medical doctor and the two doctors shall select a
third who shall be the approved medical doctor for this purpose. Such
termination shall be upon thirty (30) days written notice by a Notice of
Disability Termination, at any time thereafter while Executive
consecutively continues to be unable to carry out her duties as a result of
the same or related physical or mental illness or incapacity. A Termination
for Disability hereunder shall not be effective if Executive returns to the
full time performance of her material duties within such thirty (30) day
period.
(c) Termination for Good Reason. A Termination for Good Reason means a
termination by Executive by written notice given within ninety (90) days
after Executive learns of the occurrence of the Good Reason event, unless
such circumstances are fully corrected prior to the date of termination
specified in the Notice of Termination for Good Reason (as defined in
Section 9(d) hereof). For purposes of this Agreement, "Good Reason" shall
mean the occurrence or failure to cause the occurrence, as the case may be,
without Executive's express written consent, of any of the following
circumstances: (i) any material diminution of Executive's positions, duties
or responsibilities hereunder (except, in each case, in connection with the
termination of Executive's employment for Cause or Disability or as a
result of Executive's death, or temporarily as a result of Executive's
illness), or, the assignment to Executive of duties or responsibilities
that are inconsistent with Executive's then position; (ii) removal of; or
the nonreelection of, Executive from officer positions with the Company
specified herein without election to a higher position or removal of
Executive from any of her then officer positions; (iii) a relocation of the
Company's executive office in Connecticut to a location more than
thirty-five (35) miles from the current location or more than thirty-five
(35) miles further from Executive's residence at the time of relocation;
(iv) a failure by the Company (A) to continue any bonus plan, program or
arrangement in which Executive is entitled to participate (the "Bonus
Plans"), provided that any such Bonus Plans may be modified at the
Company's discretion from time to time but shall be deemed terminated if
(x) any such plan does not remain substantially in the form in effect prior
to such modification and (y) if plans providing Executive with
substantially similar benefits are not substituted therefor ("Substitute
Plans"), or (B) to continue Executive as a participant in the Bonus Plans
and Substitute Plans on at least the same basis as to potential amount of
the bonus as Executive participated in prior to any change in such plans or
awards, in accordance with the Bonus Plans and the Substitute Plans; (v)
any material breach by the Company of any provision of this Agreement,
including without limitation Section 3, Section 4 or Section 13 hereof;
(vi) Executive's removal from or failure to be elected or reelected to the
Board; or (vii) failure of any successor to the Company (whether direct or
indirect and whether by merger, acquisition, consolidation or otherwise) to
assume, in a writing delivered to Executive upon the assignee becoming
such, the obligations of the Company hereunder.
(d) Notice of Termination or Good Reason. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific
termination provision in Section 8(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for Termination for Good Reason. The failure by Executive to set forth in
the Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of
Executive hereunder or preclude Executive from asserting such fact or
circumstance in enforcing her rights hereunder. The Notice of Termination
for Good Reason shall provide for a date of termination not less than ten
(10) nor more than sixty (60) days after the date such Notice of
Termination for Good Reason is given, provided that in the case of the
events set forth in Sections 8(c)(i) or (ii) the date may be five (5)days
after the giving of such notice.
(e) Cause. Subject to the notification provisions of Section 8(f)
below, Executive employment hereunder may be terminated by the Company for
Cause. For purposes of this Agreement, the term "Cause" shall be limited to
(i) willful misconduct by Executive with regard to the Company which has a
material adverse effect on the Company; (ii) the will refusal of Executive
to attempt to follow the proper written direction of the Board or a more
senior officer of the Company, provided that the foregoing refusal shall
not be "Cause" if Executive in good faith believes that such direction is
illegal, unethical or immoral and promptly so notifies the Board or the
more senior officer (whichever is applicable); (iii) substantial and
continuing willful refusal by Executive to attempt to perform the duties
required of her hereunder (other than any such failure resulting from
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to Executive by the Board or a more
senior officer of the Company which specifically identifies the manner in
which it is believed that Executive has substantially and continually
refused to attempt to perform her duties hereunder; or (iv) Executive being
convicted of a felony (other than a felony involving a traffic violation or
as a result of vicarious liability). For purposes of this paragraph, no
act, or failure to act, on Executive's part shall be considered "willful"
unless done, or omitted to be done, by her not in good faith and without
reasonable belief that her action or omission was in the best interests of
the Company. A notice by the Company of a non-renewal of the Employment
Term pursuant to Section 1 hereof shall be deemed an involuntary
termination of Executive by the Company without Cause as of the end of the
then Employment Term, but Executive may terminate at any time after the
receipt of such notice and shall be treated as if she was terminated
without Cause as of such date.
(f) Notice of Termination for Cause. A Notice of Termination for Cause
shall mean a notice that shall indicate the specific termination provision
in Section 8(e) relied upon and shall set forth in reasonable detail the
facts and circumstances which provide for a basis for Termination for
Cause. Executive shall have 10 days after the date that such written notice
has been given to Executive in which to cure such conduct, to the extent
such cure is possible. If she fails to cure such conduct, Executive shall
then be entitled to a hearing before the Board. Further, a Termination for
Cause shall not become final without a resolution duly adopted by at least
two-thirds (2/3) of the entire membership of the Board at a meeting of the
Board which was called for the purpose of considering such termination and
which Executive and her representative had the right to attend and address
the Board, finding that, in the good faith of the Board, Executive engaged
in conduct set forth in the definition of Cause herein and specifying the
particulars thereof in reasonable detail. The date of termination for a
Termination for Cause shall be the date indicated in the Notice of
Termination. Any purported Termination for Cause which is held by a court
not to have been based on the grounds set forth in this Agreement or not to
have followed the procedures set forth in this Agreement shall be deemed a
Termination by the Company without Cause.
9. Consequences of Termination of Employment.
(a) Death. If Executives employment is terminated by reason of
Executive's death, the employment period under this Agreement shall
terminate and Executive's legal representative shall be entitled to: (i)
any compensation earned but not yet paid, including, without limitation,
any bonus if declared or earned but not yet paid for a completed fiscal
year, any amount of Base Salary earned but unpaid, any accrued vacation pay
payable pursuant to the Company's policies, and any unreimbursed business
expenses payable pursuant to Section 7 (collectively "Accrued Amounts"),
which amounts shall be promptly paid in a lump sum to Executives estate or
other designated legal representative; (ii) any other amounts or benefits
owing to Executive under the then applicable employee benefit plans, long
term incentive plans or equity plans and programs of the Company which
shall be paid or treated in accordance with Section 4(c) hereof with regard
to the Option and otherwise in accordance with the terms of such plans and
programs; (iii) continuation of Executive's health benefits for Executive's
dependents at the same level and cost as if Executive was an employee of
the Company for twelve (12) months following the date of death; and (iv) if
a bonus plan is in place, the product of (x) the target annual bonus for
the fiscal year of Executive's death, multiplied by (y) a fraction, the
numerator of which is the number of days of the then current fiscal year
during which Executive was employed by the Company, and the denominator of
which is 365, which bonus shall be paid when bonuses for such period are
paid to the other executives.
(b) Disability. If Executive's employment is terminated by reason of
Executive's Disability, Executive shall be entitled to receive the payments
and benefits to which her representatives would be entitled in the event of
a termination of employment by reason of her death plus, to the extent not
duplicative of the foregoing, Executive shall be entitled to continuation
of the benefits (including without limitation to health, life, disability
and pension) as if Executive had been an employee of the Company for twelve
(12) months following the date of termination due to Disability.
(c) Termination by Executive for Good Reason or Termination by the
Company without Cause. If (i) Executive terminates her employment hereunder
for Good Reason during the Employment Term or (ii) Executives employment
with the Company is terminated by the Company without Cause, Executive
shall be entitled to receive, (A) over a period of twelve (12) mouths after
such termination an amount equal to two (2) times the sum of her Base
Salary and target bonus, if any, for the year in which such termination
occurs (provided, however, in the event that the Base Salary or target
bonus, if any, has been decreased in the twelve (12) months prior to the
Termination, the amount to be used shall be the highest Base Salary and
target bonus, if any, during such twelve (12) month period); (B) any
Accrued Amounts at the date of termination (C) any other amounts or
benefits owing to Executive under the then applicable employee benefits
long term incentive or equity plans and programs of the Company, which
shall be paid or treated in accordance with Section 4(c) hereof with regard
to the Option and otherwise in accordance with the terms of such plans and
programs; (D) continuation of the benefits (including, without limitation,
health, life, disability and pension) as if Executive was an employee of
the Company for twenty-four (24) months following the dare of termination,
and (E) if a bonus plan is in place, the product of (x) the target annual
bonus for the fiscal year of Executive's death, multiplied by (y) a
fraction, the numerator of which is the number of days of the then current
fiscal year during which Executive was employed by the Company, and the
denominator of which is 365, which bonus shall be paid when bonuses for
such period are paid to the other executives.
(d) Termination with Cause or Voluntary Resignation without Good
Reason or Retirement. If, Executive's employment hereunder is terminated
(i) by the Company for Cause or (ii) by Executive without Good Reason,
Executive shall be entitled to receive only her Base Salary through the
date of termination, and any unreimbursed business expenses payable
pursuant to Section 7 and, if such termination is by Executive without Good
Reason, any bonus that has been declared or earned but not yet paid for a
completed fiscal year. Executive's rights under all benefits plans and
equity grants shall be determined in accordance with the Company's plans,
programs and grants, except as otherwise provided in Section 4(c) hereof
with respect to the Option.
10. No Mitigation; No Set-Off. In the event of any termination of
employment hereunder, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain. The amounts payable
hereunder shall not be subject to setoff, counterclaim, recoupment, defense
or other right which the Company may have against Executive or others,
except upon obtaining by the Company of a final non-appealable judgment
against Executive.
11. Change in Control (a) For purposes of this Agreement, the term
"Change in Control" shall mean the occurrence of any one of the following
events:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or its Affiliates) representing twenty-five percent (25%) or more
of the combined voting power of the Company's then outstanding voting
securities;
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors serving: individuals who, on the
Commencement Date, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company's stockholders was approved or recommended by a vote of the at
least two-thirds (2/3) of the directors then still in office who either
were directors on the Commencement Date or whose appointment, election or
nomination for election was previously so approved or recommended;
(iii) there is a consummated merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity) more
than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving or parent equity outstanding
immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person, directly or indirectly, acquired
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or its Affiliates); or
(iv) the stock holders of the Company approve a plan of complete
liquidation of the Company or there is consummated an agreement for the
sale or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect), other than a
sale or disposition by the Company of all or substantially all of the
Company's assets to an entity, at least fifty percent (50%) of the combined
voting power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership of the
Company immediately prior to such sale.
(b) For purposes of this Section 11, the following terms shall have
the following meanings:
(i) "Affi1iate" shall mean an affiliate of the Company, as defined
in Rule 12b-2 promulgated under Section 12 of the Securities
Exchange Act of 1934, as amended from time to time (the "Exchange
Act");
(ii) "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act
(iii) "Person" shall have the meaning set forth in Section
3(a)(9) of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof, except that such term shall not include
(1) the Company, (2) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, (3) an
underwriter temporarily holding securities pursuant to an
offering of such securities or (4) a corporation owned, directly
or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of shares
of Common Stock of the Company.
12. Confidential Information. (a) Executive acknowledges that as a
result of her employment by the Company, Executive will obtain confidential
information as to the Company and its affiliates and the Company and its
affiliates will suffer substantial damage, which would be difficult to
ascertain, if Executive should use such confidential information and that
because of the nature of the information that will be known to Executive it
is necessary for the Company and its affiliates to be protected by the
Confidentiality restrictions set forth herein.
(b) During and after the Employment Term, Executive shall not use for
her own benefit or disclose confidential information, knowledge or data
relating to the Company and its affiliates, and their respective
businesses, including any confidential information as to customers of the
Company and its affiliates obtained by Executive during her employment by
the Company and its affiliates and not (i) otherwise public knowledge or
known within the applicable industry or (ii) in connection, with
performance of her duties hereunder as she deems in good faith to be
necessary or desirable. Executive shall not, without prior written consent
of the Company, unless compelled pursuant to the order of a court or other
governmental or legal body having jurisdiction over such matter,
communicate or divulge any such information, knowledge or data to anyone
other than the Company and those designated by it. In the event Executive
is compelled by order of a court or other governmental or legal body to
communicate or divulge any such information, knowledge or data to anyone
other than the foregoing, she shall promptly notify the Company of any such
order so it may seek a protective order.
(c) Upon termination of her employment with the Company and its
affiliates, or at any time as the Company may request, Executive will
promptly deliver to the Company, as requested, all documents (whether
prepared by the Company, an affiliate, Executive or a third party) relating
to the Company, an affiliate or any of their businesses or property which
she may possess or have under her direction or control other than documents
provided to Executive in her capacity as a participant in any employee
benefit plan, policy or program of the Company, any agreement by and
between Executive and the Company with regard to Executive1s employment or
severance or any personal calendars, diaries, rolodexes or similar items of
a personal nature.
(d) In the event of a breach or potential breach of this Section 12,
Executive acknowledges that the Company and its affiliates will be caused
irreparable injury and that money damages may not be an adequate remedy and
agree that the Company and its affiliates shall be entitled to injunctive
relief (in addition to its other remedies at law) to have the provisions of
this Section 12 enforced. It is hereby acknowledged that the provisions of
this Section 12 are for the benefit of the Company and all of the
affiliates of the Company and each such entity may enforce the provisions
of this Section 12 and only the applicable entity can waive the rights
hereunder with respect to its confidential information and employees.
13. Indemnification. (a) The Company agrees that if Executive is made
a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that she is or was a director, officer
or employee of the Company or is or was serving at the request of the
Company as a director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not
the basis of such Proceeding is Executive's alleged action in an official
capacity while serving as a director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by the Company to the
fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of
Directors or, if greater, by the laws of the State of Delaware, against all
cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or other liabilities
or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if she has ceased to be
a director, member, employee or agent of the Company or other entity and
shall inure to the benefit of Executive's heirs, executors and
administrators. The Company shall advance to Executive all reasonable costs
and expenses incurred by her in connection with a Proceeding within 20
calendar days after receipt by the Company of a written request for such
advance, Such request shall include an undertaking by Executive to repay
the amount of such advance if it shall ultimately be determined that she is
not entitled to be indemnified against such costs and expenses; provided
that the amount of such obligation to repay shall be limited to the
after-tax amount of any such advance except to the extent Executive is able
to offset such taxes incurred on the advance by the tax benefit, if any,
attributable to a deduction realized by her for the repayment.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning
payment of amounts claimed by Executive under Section 13(a) above that
indemnification of Executive is proper because she has met the applicable
standard of conduct, nor a determination by the Company (including its
board of directors, independent legal counsel or stockholders) that
Executive has not met such applicable standard of conduct. shall create a
presumption in any judicial proceeding that Executive has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive with coverage
comparable to that provided to other senior executives of the Company.
14. Legal Fees; Resolution of Disputes.
(a) The Company shall pay Executive's reasonable legal fees and costs
associated with entering into this Agreement
(b) All disputes and controversies arising under or in connection with
this Agreement, other than the seeking of injunctive or other equitable
relief pursuant to Section 12 hereof, shall be settled by arbitration
conducted before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial disputes
of the American Arbitration Association then in effect. The determination
of the majority of the arbitrators shall be final and binding on the
parties. Judgement may be entered on the award of the arbitrator in any
court having proper jurisdiction. All expenses of such arbitration,
including the fees and expenses of the counsel of Executive, shall be borne
by the Company unless the arbitrators determine that Executive's position
was overall frivolous or otherwise taken in bad faith, in which case the
arbitrators may determine that Executive shall bear her own legal fees.
(c) In the event after a Change in Control either party files for
arbitration to resolve any dispute as to whether a termination is for Cause
or Good Reason, until such dispute is determined by the arbitrators,
Executive shall continue to be treated economically and benefit-wise in the
manner asserted by her in the arbitration effective as of the date of the
filing of the arbitration, subject to Executive's promptly refunding any
amounts paid to her, paying the cost of any benefits provided to her and
paying to the Company the profits in any stock option or other equity
awards exercised or otherwise realized by her during the pendency of the
arbitration which she is ultimately held not to be entitled to; provided
the arbitrators may terminate such payments and benefits in the event that
they determine at any point that Executive is intentionally delaying
conclusion of the arbitration, provided further that any refund to the
Company required of Executive pursuant to this Section 14(c) shall be
limited to the after tax amount of any such advance except to the extent
Executive is able to offset such taxes incurred on such amounts paid to her
by the tax benefit, if any, attributable to a deduction realize by her for
the refund.
15. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without reference to
principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company
and Executive. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the subject
matter herein other than those expressly set forth herein and therein. This
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a
waiver of such party's rights or deprive such party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement. Any such waiver must be in writing and signed by Executive or an
authorized officer of the Company, as the case may be.
(d) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only to an acquirer of
all or substantially all of the assets of the Company, provided such
acquirer promptly assumes all of the obligations hereunder of the Company
in a writing delivered to Executive and otherwise complies with the
provisions hereof with regard to such assumption.
(e) Company Representations. The Company represents and warrants that
it is duly authorized to enter into this Agreement, that there is no law,
agreement or other legal restriction on its entering into this Agreement,
that its Board of Directors has approved this Agreement and that the
officer signing this Agreement is duly authorized and empowered to sign
this Agreement on behalf of the Company.
(f) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect to
the fullest extent permitted by law.
(g) Effect of Agreement on Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not
prohibit or restrict Executive's entitlement to full participation in the
employee benefit and other plans or programs in which senior executives of
the Company are eligible to participate.
(h) Successors; Binding Agreement; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees legatees and permitted assignees of the parties
hereto. Executive shall be entitled, to the extent permitted under any
applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit payable hereunder following Executive's
death by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of her incompetence reference
in this Agreement to Executive shall be deemed, where appropriate, to refer
to her beneficiary, estate or other legal representative.
(i) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (1) when faxed or delivered, or
(ii) two (2) business days after being mailed by United States registered
to certified mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth on the initial page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the Secretary of the Company, or to such other address as any party may
have furnished to the other in writing in accordance herewith. Notice of
change of address shall be effective only upon receipt.
(j) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state and local taxes as
may be requited to be withheld pursuant to any applicable law or
regulation.
(k) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 13 hereof, shall survive
any termination of Executive's employment to the extent necessary to the
agreed preservation of such rights and obligations.
(1) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
(m) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
priceline.com Incorporated
By: /s/ Richard S. Braddock
-----------------------------------------
Name: Mr. Richard S. Braddock
Title: Chairman and Chief Executive Officer
Executive
----------------------------------------------
Ms. Heidi G. Miller
EXHIBIT A
Meade Inc.
General Mills, Inc.
Risk Inc.
PRICELINE.COM INCORPORATED
1999 OMNIBUS PLAN
AWARD AGREEMENT
Name of Optionee: Name
Qualified
Non-Qualified X
Stock Option: x,xxx shares of common stock, $.008 par value, of
priceline.com Incorporated (the "Optioned Shares")
Exercise Price Per Share: price
Option Grant Date: _____________, 2000
Date Stock Option
Becomes Exercisable: x,xxx.xx Shares, on ______, 2000
x,xxx.xx Shares, on ______, 2001
x,xxx.xx Shares, on ______, 2002
Termination Date: ______________
EXHIBIT 10.33
PROMISSORY NOTE
$2,000,000.00 February 10, 2000
Norwalk, Connecticut
FOR VALUE RECEIVED, the undersigned, JEFFERY H. BOYD, an individual
residing at 34 Brookridge Drive, Greenwich, Connecticut 06830 (the
"Borrower"), hereby promises to pay to the order of PRICELINE.COM
INCORPORATED, a Delaware corporation with an office located at 800
Connecticut Avenue, Norwalk, Connecticut 06854 (the "Company"), the
aggregate principal amount of TWO MILLION and 00/100 DOLLARS
($2,000,000.00), together with interest on the unpaid principal amount
hereunder accruing annually at 6.56%. Subject to any prepayment obligations
hereunder, interest shall be payable in full on the Maturity Date (as
defined below). The unpaid principal amount hereunder, together with all
accrued but unpaid interest, shall be due and payable in full on February
10, 2005 (the "Maturity Date"). Payment of principal and interest shall be
made to the Company at the address indicated above, or at such other
address as the Company may specify in writing to the Borrower.
The Borrower shall pay to the Company a mandatory prepayment of
accrued interest hereunder and principal upon the exercise, at any time on
or prior to February 10, 2005, of one or more Company stock options granted
by the offer of employment dated December 30, 1999, by and between the
Company and Borrower (the "Offer Letter"), in an amount equal to
twenty-five percent (25%) of Borrower's pretax profits in excess of two
million dollars ($2,000,000.00) (the "Profits Threshold"). Within ten (10)
Business Days (as hereinafter defined) following each date that the
Borrower shall exercise options referred to in the Offer Letter in excess
of the Profits Threshold, Borrower shall deliver a mandatory prepayment in
reduction of the accrued interest and outstanding principal balance of this
Note in an amount required by the first sentence of this paragraph. Each
prepayment, as provided herein, shall be applied first against accrued but
unpaid interest under this Note and then in reduction of the outstanding
principal amount hereof until the indebtedness of this Note is paid in
full. "Business Day" shall mean any day on which NASDAQ is not authorized
or required to close and trading of securities is permitted.
The Borrower shall have the right to prepay this Note in whole or in
part at any time, without premium or penalty, but with interest accrued on
the principal being paid to the date of such prepayment.
Notwithstanding anything contained herein to the contrary, the
Borrower shall be released of the outstanding debt evidenced by this Note,
including all accrued but unpaid interest, and the same shall be forgiven
and extinguished upon a "Change in Control", or the death, "Termination for
Disability", "Termination without Cause", or "Termination for Good Reason"
of the Borrower (each such term being used as defined and used in the Offer
Letter), or immediately following expiration of the Maturity Date provided
that the Borrower's employment with the Company has not been terminated for
"Cause" or by the Borrower without "Good Reason" prior thereto (each such
term being used as defined in the Offer Letter).
In the event of the default in the payment of principal or interest
due hereunder when the same shall be due and payable and such default shall
continue for thirty (30) days after receipt by the Borrower of written
notice thereof (a "Default"), then, the Company or any subsequent holder of
this Note, at its option, may, by written notice to the borrower, declare
the entire then unpaid principal amount of this Note and the interest
accrued and unpaid thereon to be immediately due and payable.
If a Default occurs, the Company or any subsequent holder of this
Note, may proceed to protect and enforce its rights either by suit in
equity and/or by action at law, or by other appropriate proceedings.
Notwithstanding anything to the contrary set forth in the Offer Letter and
provided that no issue is present as to the basis of any termination of
employment by the Borrower with the Company, the Borrower promises to pay
the Company's reasonable attorneys' fees and other costs of collection of
this Note or any portion thereof, including the costs of suit if a suit
shall be instituted upon this Note and the Company shall prevail in such
suit.
No delay or omission of the Company or any subsequent holder of this
Note, to exercise any right hereunder, whether before or after the
happening of a Default, shall impair any such right or shall operate as a
waiver thereof or of a Default hereunder nor shall any single or partial
exercise thereof preclude any other or further exercise thereof, or the
exercise of any other right.
The Borrower hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement hereof and consents that no indulgence,
and no substitution, release or surrender of collateral, and no discharge
or release of any other party primarily or secondarily liable hereon, shall
discharge or otherwise affect the liability of the Borrower.
Anything herein contained to the contrary notwithstanding, the
maximum rate of interest payable with respect to the unpaid principal
amount hereof shall not exceed the maximum rate allowable under such
provisions of applicable law.
The rights and benefits of the Company hereunder shall inure to the
benefit of its successors and assigns. This Note shall be construed and
interpreted in accordance with the laws of the State of Delaware.
---------------------------------
JEFFERY H. BOYD
EXHIBIT 10.34
AMENDMENT TO PROMISSORY NOTE
The undersigned, Jeffery H. Boyd hereby agrees that the
Promissory Note dated February 10, 2000, issued by me to priceline.com
Incorporated is hereby amended by adding a new paragraph after the fourth
paragraph thereof reading in full as follows:
"The Borrower shall be obligated to prepay this Note in whole,
plus accrued interest, on the date 30 days following termination of
Borrower's employment by the Company for "Cause" or by the Borrower
voluntarily without "Good Reason".
IN WITNESS WHEREOF, I have signed this Amendment to Promissory
Note on March 28, 2000.
__________________________
Jeffery H. Boyd
EXHIBIT 10.35
PROMISSORY NOTE
$3,000,000.00 March 7, 2000
Norwalk, Connecticut
FOR VALUE RECEIVED, the undersigned, HEIDI G. MILLER, an individual
residing at 12 Grahampton Lane, Greenwich, Connecticut 06830 (the
"Borrower"), hereby promises to pay to the order of PRICELINE.COM
INCORPORATED, a Delaware corporation with an office located at 800
Connecticut Avenue, Norwalk, Connecticut 06854 (the "Company"), the
aggregate principal amount of THREE MILLION and 00/100 DOLLARS
($3,000,000.000), together with interest on the unpaid principal amount
hereunder accruing annually at 6.80%. Subject to any prepayment obligations
hereunder, interest shall be payable in full on the Maturity Date (as
defined below). The unpaid principal amount hereunder, together with all
accrued but unpaid interest, shall be due and payable in full on February
18, 2005 (the "Maturity Date"). Payment of principal and interest shall be
made to the Company at the address indicated above, or at such other
address as the Company may specify in writing to the Borrower.
The Borrower shall pay to the Company a mandatory prepayment of
accrued interest hereunder and principal upon any exercise, in whole or in
part at any time prior to the Maturity Date, of the stock option (the
"Option") to purchase 2,500,000 shares of the Company's common stock, par
value $.01 per share, granted by the Company to the Borrower on February
18, 2000 pursuant to the Employment Agreement dated February 18, 2000, by
and between the Company and Borrower (the "Employment Agreement"), in an
amount equal to twenty-five percent (25%) of Borrower's pretax profits from
such exercise, to the extent that the sum of such pretax profits, and of
all prior pretax profits from such exercises, exceeds six million, six
hundred thousand dollars ($6,600,000.00) (the "Profits Threshold"). Within
ten (10) Business Days (as hereinafter defined) following each date that
the Borrower shall receive pretax profits from any exercise of the Option
in excess of the Profits Threshold, Borrower shall deliver a mandatory
prepayment in reduction of the accrued interest and outstanding principal
balance of this Note in an amount equal to 25% of the excess attributable
to such exercise. Each prepayment, as provided herein, shall be applied
first against accrued but unpaid interest under this Note and then in
reduction of the outstanding principal amount hereof until the indebtedness
of this Note is paid in full. "Business Day" shall mean any day on which
NASDAQ is not authorized or required to close and trading of securities is
permitted.
The Borrower shall have the right to prepay this Note in whole or in
part at any time, without premium or penalty, but with interest accrued on
the principal being paid to the date of such prepayment.
Notwithstanding anything contained herein to the contrary, the
Borrower shall be released of the outstanding debt evidenced by this Note,
including all accrued but unpaid interest, and the same shall be forgiven
and extinguished upon a "Change in Control", or the death, "Termination for
Disability", "Termination without Cause", or "Termination for Good Reason"
of the Borrower (each such term being used as defined and used in the
Employment Agreement), or immediately following expiration of the Maturity
Date provided that the Borrower's employment with the Company has not been
terminated for "Cause", or by the Borrower voluntarily without "Good
Reason", prior thereto (each such term being used as defined in the
Employment Agreement).
The Borrower shall be obligated to prepay this Note in whole, plus
accrued interest, on the date 30 days following the termination of
Borrower's employment by the Company for "Cause" or by the Borrower
voluntarily without "Good Reason".
In the event of the default in the payment of principal or interest
due hereunder when the same shall be due and payable and such default shall
continue for thirty (30) days after receipt by the Borrower of written
notice thereof (a "Default"), then, the Company or any subsequent holder of
this Note, as its option, may, by written notice to the Borrower, declare
the entire then unpaid principal amount of this Note and the interest
accrued and unpaid thereon to be immediately due and payable.
If a Default occurs, the Company or any subsequent holder of this
Note may proceed to protect and enforce its rights by institution of
arbitration pursuant to Section 14 of the Employment Agreement.
Notwithstanding anything to the contrary set forth in the Employment
Agreement and provided that no issue is present as to the basis of any
termination of employment of the Borrower with the Company, the Borrower
promises to pay the Company's reasonable attorneys' fees and other costs of
collection of this Note or any portion thereof, including the costs of
arbitration and seeking judgment on any award if a proceeding shall be
instituted upon this Note and the Company shall prevail in such proceeding.
No delay or omission of the Company or any subsequent holder of this
Note, to exercise any right hereunder, whether before or after the
happening of a Default, shall impair any such right or shall operate as a
waiver thereof or of a Default hereunder nor shall any single or partial
exercise thereof preclude any other or further exercise thereof, or the
exercise of any other right.
The Borrower hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement hereof and consents that no indulgence,
and no substitution, release or surrender of collateral, and no discharge
or release of any other party primarily or secondarily liable hereon, shall
discharge or otherwise affect the liability of the Borrower.
This Note may be assigned by the Company only to a successor to all,
or substantially all, of its business or assets (through merger
consolidation, sale of assets, or otherwise). This Note shall be construed
and interpreted in accordance with the laws of the State of Delaware.
Except as otherwise provided in this Note, any dispute arising under this
Note shall be resolved in accordance with the terms and procedures set
forth in Section 14 of the Employment Agreement.
-------------------
Heidi G. Miller
EXHIBIT 10.36
STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") made as of the 18th day of
February, 2000 by and between Priceline.com Incorporated, a Delaware
corporation with its principal United States office at 800 Connecticut
Avenue, Norwalk, Connecticut 06854 (the "Company"), and Ms. Heidi G. Miller
residing at 12 Grahampton Lane, Greenwich, Connecticut 06830 ("Executive").
WITNESSETH:
Executive has been granted on February 18, 2000 (the "Grant
Date"), subject to execution of this agreement, a non-qualified stock
option (the "Option") to purchase the number of shares of the Company's
common stock, par value $.01 per share ("Shares") set forth below, pursuant
to the terms of the Employment Agreement, dated as of February 18, 2000, by
and between the Company and Executive (the "Employment Agreement"). Unless
otherwise indicated, any capitalized term used herein, but not defined
herein, shall have the meaning ascribed to such term in the Employment
Agreement. References to the "Board" shall mean the Board of Directors of
the Company and references to "Committee" shall mean the Compensation
Committee of the Board.
1. Grant of Options
(a) Subject to the terms and conditions set forth herein, the
Executive is granted an Option to purchase 2,500,000 Shares at a per Share
exercise price with respect to 1,000,000 Shares subject to the Option of
$55.00 (the "FMV Shares") and with respect to the remaining 1,500,000
Shares subject to the Option, a per Share exercise price of $90.00 (the
"Premium Shares"). No part of the Option is intended to be an "incentive
stock option" within the meaning of section 422 of the Internal Revenue
Code of 1986, as amended.
(b) The term of the Option shall be ten (10) years from the Grant
Date, subject to earlier termination as provided in Section 3 herein. Upon
expiration of the Option, the Option shall be canceled and no longer
exercisable.
(c) Subject to Section 3 hereof, the Option will vest and become
exercisable as to one sixth (1/6) of the Shares subject to the Option on
the Commencement Date; as to one sixth (1/6) of the Shares subject to the
Option on December 31, 2000; as to one-third (1/3) of the Shares subject to
the Option on December 31, 2001; and as to the remaining one-third (1/3) of
the Shares subject to the Option on December 31, 2002 (each such date
hereinafter referred to as a "Vesting Date"); provided, that on each of
such Vesting Dates, Executive has been continuously employed by the Company
through such date. On any Vesting Date, forty percent (40%) of the Shares
subject to the Option vesting on such Vesting Date shall be FMV Shares and
sixty percent (60%) of the Shares subject to the Option vesting on such
Vesting Date shall be Premium Shares. For avoidance of doubt, there shall
be no proportionate or partial vesting in the periods prior to each Vesting
Date and vesting shall occur only on the appropriate Vesting Date pursuant
to this Section 1(c). To the extent the Option has become vested and
exercisable, the Option may thereafter be exercised by Executive, in whole
or in part, at anytime or from time to time prior to the expiration of the
Option as provided herein.
(d) To the extent vested hereunder, the Option may be exercised by
Executive by delivering notice to the Company's principal office, to the
attention of its Secretary. Such notice shall be accompanied by a copy of
this Agreement, shall specify the number of Shares with respect to which
the Option is being exercised and the effective date of the proposed
exercise and shall be signed by Executive or other person then having the
right to exercise the Option. Payment for Shares purchased upon the
exercise of the Option shall be made on or before the effective date of
such exercise by one or a combination of the following means: (i) in cash
or by personal check, certified check, bank cashier's check or wire
transfer; (ii) if Shares are traded on a national securities exchange or
the Nasdaq Stock Market, Inc. or quoted on a national quotation system
sponsored by the National Association of Securities Dealers, or a
comparable national market system (a "Public Market"), through a "cashless
exercise" procedure whereby Executive delivers irrevocable instructions to
a broker to deliver promptly to the Company an amount equal to the purchase
price; (iii) subject to the approval of the Committee, in Shares owned by
Executive for at least six months prior to the date of exercise (or such
other period required by accounting standards to avoid a charge to Company
earnings) and valued at their "Fair Market Value" on the effective date of
such exercise; (iv) subject to the approval of the Committee, by such other
means as the Committee may from time to time authorize or (v) in any other
means then generally available to holders of stock options issued under the
Company's 1999 Omnibus Plan (the "Omnibus Plan"). For purposes of this
Agreement, Fair Market Value shall have the same meaning as in the Omnibus
Plan as in effect on the date hereof, provided, however that, if Shares are
no longer traded on a Public Market (which shall be deemed equivalent to
being traded on a national securities exchange for purposes of the
definition of Fair Market Value as used in the Omnibus Plan) at a time when
their Fair Market Value is to be determined pursuant to this Agreement,
then Fair Market Value shall mean value as determined in good faith by the
Committee without discount for being a minority interest.
(e) Subject to the terms in this Agreement, certificates for Shares
purchased upon the exercise of an Option shall be issued in the name of
Executive or other person entitled to receive such Shares, and delivered to
Executive or such other person as soon as practicable following the
effective date on which the Option is exercised.
2. Shares; Adjustment Upon Certain Events
(a) Shares to be issued under this Agreement shall be made available,
at the discretion of the Board, either from authorized but unissued Shares,
from issued Shares reacquired by the Company or from Shares purchased by
the Company on the open market specifically for this purpose.
(b) The existence of this Agreement and the Option granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company or
any affiliate, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the Shares, the authorization or
issuance of additional Shares, the dissolution or liquidation of the
Company or any affiliate or sale or transfer of all or part of the assets
or business of the Company or any affiliate, or any other corporate act or
proceeding.
(c) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Shares 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 Shares
such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Executive under the Option, then the Committee
shall make such equitable changes or adjustments as it deems necessary or
appropriate to the Option's exercise price, to the number and kind of
Shares, securities or other property (including cash) issued or issuable
upon exercise of the Option, and to other terms and conditions of the
Option, provided that the Option shall in no respect be treated less
favorably with respect to such changes and adjustments than any stock
option issued heretofore under the Omnibus Plan. The determination of the
Committee, if made in good faith, shall be final and binding on the Company
and the Executive.
3. Effect of Termination of Employment; Change in Control
(a) In the event of Executive's Termination without Cause or
Termination for Good Reason, the Option will immediately vest and become
exercisable (to the extent not then vested and exercisable) upon any such
termination with respect to (i) 1,625,000 Shares if the termination takes
place prior to the first anniversary of the Commencement Date; (ii)
2,062,500 Shares if the termination takes place on or after the first
anniversary of the Commencement Date and prior to the second anniversary of
the Commencement Date; and (iii) 2,500,000 Shares if the termination takes
place anytime on or after the second anniversary of the Commencement Date.
(b) In the event of Executive's termination of employment as the
result of his death or a Termination for Disability, the Option shall
immediately vest as to fifty percent (50%) of the then unvested Shares
thereunder.
(c) In the event of a Change in Control while the Executive is
employed by the Company, the Option will vest and become exercisable (to
the extent not then vested and exercisable) with respect to (i) 1,625,000
Shares if the Change in Control takes place prior to the first anniversary
of the Commencement Date; (ii) 2,062,500 Shares if the Change in Control
takes place on or after the first anniversary of the Commencement Date and
prior to the second anniversary of the Commencement Date; and (iii)
2,500,000 Shares, if the Change in Control takes place on or after the
second anniversary of the Commencement Date, provided that any remaining
unvested Shares shall vest and become exercisable (to the extent not
otherwise vested and exercisable prior thereto under this Agreement) six
(6) months after the Change in Control if the Executive is then employed by
the Company or, if earlier but at, after or in connection with the Change
in Control, upon a Termination without Cause, Termination for Good Reason,
Termination as the result of death, Termination for Disability or, in the
event the Option is not continued, assumed or substituted for upon a Change
in Control upon the Change in Control. For this purpose, the Option will
not be considered substituted for unless the terms and conditions of the
substitute option are no less favorable to the Executive than those of the
Option (within the constraints of Internal Revenue Code Regulation
1.425-1(a)(4)(i)).
(d) Notwithstanding anything in this Agreement to the contrary, forty
percent (40%) of the Shares subject to the Option that vest as a
consequence of the application of Section 3(a), 3(b) or 3(c) or otherwise
shall be FMV Shares and the remaining sixty percent (60%) of such Shares
that so vest shall be Premium Shares.
(e) In the event of Executive's Termination for Cause or voluntary
Termination without Good Reason, the unvested portion of the Option shall
be immediately forfeited and canceled.
(f) Upon termination of Executive's employment with the Company, the
portion of the Option that is not, and does not become, vested in
accordance with the terms hereof shall be immediately forfeited and the
vested portion of the Option shall expire on the earlier of (i) the tenth
(10th) anniversary of the Grant Date, or (ii)(A) eighteen (18) months after
such termination if the termination is as of the result of Executive's
death, Termination for Disability, Termination without Cause, non-extension
of the Employment Term in accordance with Section 1 of the Employment
Agreement as a result of notice from the Company or Termination for Good
Reason, and (B) ninety (90) days after such termination if such termination
is a result of Executive's Termination for Cause, voluntary Termination by
Executive without Good Reason, or non-extension of the Employment Term in
accordance with Section 1 of the Employment Agreement as a result of notice
by Executive.
4. Nontransferability of Option
Neither the Option nor any other rights hereunder shall be
transferable by Executive otherwise than by will or under applicable laws
of descent and distribution. The Option shall be exercisable, during
Executive's lifetime only by Executive or her Permitted Transferees (as
defined below). In addition, neither the Option nor any other rights
hereunder shall, except as otherwise provided herein, be assigned,
negotiated, pledged, or hypothecated in any way or be subject to execution,
attachment or similar process. Notwithstanding the forgoing, Executive may,
upon providing written notice to the Company, elect to transfer all or any
portion of the Option to members of her immediately family, including, but
not limited to, children, grandchildren and spouse, or to trusts for the
benefit of such immediate family members or to partnerships in which such
family members are the only partners ("Permitted Transferees"), provided,
however, that no such transfer by Executive may be made in exchange for
consideration.
5. Rights as a Stockholder
Neither Executive nor her Permitted Transferees shall have any rights
as a stockholder with respect to any Shares subject to the Option until
Executive or her Permitted Transferees, as the case may be, shall have
become the holder of record of such Shares, and no adjustments shall be
made for dividends in cash or other property or distributions or other
rights in respect to any such Shares, except as otherwise specifically
provided for herein.
6. Determinations
Each determination, interpretation and other action made or taken
pursuant to the provisions of this Agreement by the Committee or the Board
in good faith shall be final, conclusive and binding for all purposes and
upon all persons, including, without limitation, the Executive and the
Company, and their respective heirs, executors, administrators, personal
representatives and other successors in interest.
7. Securities Representations
If the Committee determines that the law so requires, the holder of
the Option granted hereunder shall, upon any exercise or conversion
thereof, execute and deliver to the Company a written statement, in a form
satisfactory to the Company, representing and warranting that:
(a) holder has been advised that holder may be an "affiliate" within
the meaning of Rule 144 under the Securities Act of 1933 (the "Act") and in
this connection the Company is relying in part on holder's representations
set forth in this Section;
(b) holder understands that Shares received on any exercise of the
Option must be held indefinitely unless an exemption from any applicable
resale restrictions is available or the Company files an additional
registration statement (or a "re-offer prospectus") with regard to such
Shares and the Company is under no obligation to register such Shares (or
to file a "reoffer prospectus"), except as otherwise permitted herein;
(c) holder understands that the exemption from registration under
Rule 144 will not be available unless (i) a public trading market then
exists for Shares of the Company, (ii) adequate information concerning the
Company is then available to the public, and (iii) other terms and
conditions of Rule 144, or any exemption therefrom, are complied with and
that any sale of Shares acquired pursuant to the Option may be made only in
limited amounts in accordance with such terms and conditions;
(d) Shares acquired pursuant to the Option are being acquired for
holder's own account and not with a view to, or for sale in connection
with, the distribution thereof, nor with any present intention of
distributing or selling any such Shares;
(e) in the event that holder is permitted to sell, transfer, pledge,
hypothecate, assign or otherwise dispose of Shares acquired pursuant to the
Option, holder may only do so pursuant to a registration statement under
the Act and qualification under applicable state securities laws or
pursuant to an opinion of counsel satisfactory to the Company that such
registration is not required, and that the transaction (if it involves a
sale in the over-the-counter market or on a securities exchange) complies
with the provisions of Rule 144 under the Act. A stop-transfer order will
be placed on the books of the Company respecting the certificates
evidencing Shares acquired pursuant to the Option, and such certificates
shall bear any required legends until such time as the Shares evidenced by
such certificates shall have been registered under the Act or shall have
been transferred in accordance with an opinion of counsel for the Company
that such registration is not required;
(f) holder has been advised that holder may be subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of
1934 (the "Securities Act") and that holder may be subject to insider
trading restrictions and reporting requirements on the purchase and sale of
securities of the Company imposed under the Securities Act.
8. Other Conditions
(a) Except as otherwise provided herein, the Company shall be under
no obligation to effect the registration of the Option or any Shares
acquired pursuant to the Option, pursuant to the Act or under any state
laws, provided that, to the extent that stock options issued under the
Omnibus Plan heretofore are then currently effectively registered on Form
S-8 (or a successor form thereto), the Company shall use its best
reasonable efforts to similarly register the Option and the Shares acquired
pursuant to the Option and, if it cannot , shall (after consultation with
Executive) use reasonable business efforts based in good faith
consideration of other Company business activities and concerns and the
available alternatives to take such other steps as are reasonably available
to register the Shares acquired pursuant to the Option for resale by the
Executive at such time as Executive wishes to sell them. Notwithstanding
anything herein to the contrary, the Company shall not be obligated to
cause to be issued or delivered any certificates evidencing Shares acquired
pursuant to the Option unless and until the Company is advised by its
counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority
and the requirements of any securities exchange on which Shares are traded.
(b) The transfer of any Shares acquired pursuant to the Option shall
be effective only at such time as counsel to the Company shall have
determined that the issuance and delivery of such Shares is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which Shares are traded. The
Committee, may in its good faith discretion, defer the effectiveness of any
transfer of Shares hereunder in order to allow the issuance of such Shares
to be made pursuant to registration or an exemption from registration or
other methods for compliance available under federal or state securities
laws. The Committee shall inform the Executive in writing of its decision
to defer the effectiveness of a transfer. During the period of such
deferral, Executive may, by written notice, withdraw the portion of the
Option exercise subject to the deferral and obtain the refund of any amount
paid with respect thereto.
9. Withholding Taxes
(a) Upon any exercise of the Option, Executive will pay to the
Company, or make arrangements satisfactory to the Company that are in
compliance with applicable law regarding payment of, any U.S. federal,
state or local taxes of any kind required by law to be withheld with
respect of such exercise ("Tax Obligations"). If the Committee generally
permits Tax Obligations with regard to stock options issued heretofore
under the Omnibus Plan to be satisfied in a particular manner, to the
extent legally permitted Executive may satisfy her Tax Obligations under
this Section 9(a) in the same manner.
(b) The Company shall, to the extent permitted by law, have the right
to deduct from any payment of any kind otherwise due to Executive any Tax
Obligations not timely satisfied pursuant to Section 9(a).
(c) In the event that any Tax Obligations are not satisfied on a
timely basis pursuant to Sections 9(a) or 9(b), the Company may, but shall
not be required to, pay such required withholding and treat such amount as
a demand loan to Executive at the maximum rate permitted by law, with such
loan, at the Company's sole discretion and, provided the Company so
notifies Executive within thirty (30) days of the making of the loan,
secured by Shares to which such Tax Obligations relate and any failure by
Executive to pay the loan upon demand shall entitle the Company to all of
the rights at law of a creditor secured by such Shares. The Company may
hold as security any certificates representing such Shares and, upon demand
of the Company, Executive shall deliver to the Company any certificates in
Executive's possession representing such Shares together with a stock power
duly endorsed in blank.
10. Miscellaneous
(a) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, personal legal
representatives, successors, trustees, administrators, distributees,
devisees and legatees. The Company shall assign to, and require, any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company to expressly assume and agree in writing to perform this
Agreement. Notwithstanding the foregoing, this Agreement may not be
assigned by the Executive.
(b) No modification or waiver of any of the provisions of this
Agreement shall be effective unless in writing and signed by the party
against whom it is sought to be enforced.
(c) This Agreement may be executed in one or more counterparts, all
of which taken together shall constitute one contract.
(d) The failure of any party hereto at any time to require
performance by another party of any provision of this Agreement shall not
affect the right of such party to require performance of that provision,
and any waiver by any party of any breach of any provision of this
Agreement shall not be construed as a waiver of any continuing or
succeeding breach of such provision, a waiver of the provision itself, or a
waiver of any right under this Agreement.
(e) The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or modify
any of the terms or provisions hereof.
(f) The Company shall pay all fees and expenses necessarily incurred
by the Company in connection with this Agreement and will from time to time
use its reasonable efforts to comply with all laws and regulations which,
in the opinion of counsel to the Company, are applicable thereto.
(g) All notices, consents, requests, approvals, instructions and
other communications provided for herein shall be in writing and validly
given or made when delivered, or on the second succeeding business day
after being mailed by registered or certified mail, whichever is earlier,
to the persons entitled or required to receive the same, at the addresses
set forth at the heading of this Agreement or to such other address as
either party may designate by like notice. Notices to the Company shall be
addressed to its principal office, attention of the Executive Vice
President and General Counsel.
(h) To the extent not inconsistent with this Agreement or the
Employment Agreement, the provisions of the Omnibus Plan shall apply to the
Options granted herein as if the grant was under such Omnibus Plan and the
Committee shall have the right to interpret and administer the grants made
herein in the same manner as grants made under such Omnibus Plan. Sections
10 and 20 of the Omnibus Plan shall not apply to the Options.
(i) This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the laws of the
state of Delaware without reference to principles of conflict of laws.
(j) The Company represents and warrants that it is duly authorized by
its Board of Directors and/or the Committee (and by any other person or
body whose authorization is required) to enter into this Agreement, that
there is no agreement or other legal restriction which would prevent it
from entering into, and carrying out its obligations under, this Agreement,
and that the officer signing this Agreement is duly authorized and
empowered to sign this Agreement on behalf of the Company.
(k) Any dispute arising under, or relating to, this Agreement shall
be resolved in accordance with Section 14 of the Employment Agreement. day
and year first above written.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
PRICELINE.COM INCORPORATED
By________________________
(Title)
__________________________
Heidi G. Miller
EXHIBIT 10.37
AMENDMENT TO PROMISSORY NOTE
The undersigned, Daniel H. Schulman hereby agrees that the
Promissory Note dated July 2, 1999, issued by me to priceline.com
Incorporated is hereby amended by adding a new paragraph after the fourth
paragraph thereof reading in full as follows:
"The Borrower shall be obligated to prepay this Note in whole,
plus accrued interest, on the date 30 days following termination of
Borrower's employment by the Company for "Cause" or by the Borrower
voluntarily without "Good Reason".
IN WITNESS WHEREOF, I have signed this Amendment to Promissory
Note on March 28, 2000.
__________________________
Daniel H. Schulman
EXHIBIT 10.38
AMENDMENT NUMBER ONE
TO THE
PRICELINE.COM INCORPORATED
1999 OMNIBUS PLAN
WHEREAS, priceline.com Incorporated (the "Company") maintains
the priceline.com Incorporated 1999 Omnibus Plan (the "Plan");
WHEREAS, the Board of Directors of the Company (the "Board"),
acting through the Compensation Committee, is authorized to amend the Plan,
subject to stockholder approval in certain instances; and
WHEREAS, the Board desires to amend the Plan, subject to
stockholder approval.
NOW, THEREFORE, effective immediately, but subject to, and
conditioned upon, approval of this amendment by the stockholders of the
Company in accordance with the requirements of the laws of the State of
Delaware at the next annual stockholders meeting, the Plan is amended as
follows:
1. Section 2(i) of the Plan is amended in its entirety to read
as follows:
" (i) "Committee" means (1) with respect to the application of this
Plan to employees and consultants, a committee established by the
Board, which committee shall be intended to consist of two or more
non-employee directors, each of whom shall be a "non-employee
director" as defined in Rule 16b-3 of the Exchange Act and an
"outside director" as defined under Section 162(m) of the Code and
(2) with respect to the application of this Plan to Non-Employee
Directors, the Board.
2. Section 2(y) of the Plan is amended in its entirety to read
as follows:
"(y) "Participant" shall mean (i) an employee, consultant or
Non-Employee Director of the Company to whom an Award is granted
hereunder and (2) any such persons successors, heirs, executors and
administrators, as the case may be, in such capacity.
3. Section 3 of the Plan is amended by replacing the first
sentence thereof with the following:
"The maximum number of shares of Stock reserved for the grant or
settlement of Awards under the Plan shall be 25,375,000 shares,
subject to adjustment as provided herein."
4. Section 6 of the Plan shall be amended in its entirety to
read as follows:
"6. Awards Under the Plan; Non-Employee Director Grants
(a) Grants. The Committee may grant Options, Restricted Stock and
Other Stock-Based Awards to Participants in such amounts and on such
terms and conditions, not inconsistent with the Plan, as the
Committee shall determine in its sole and absolute discretion.
(b) Non-Employee Director Grants. Unless determined otherwise by the
Committee in its sole and absolute discretion, and without further
action by the Board or the stockholders of the Company, each
Non-Employee Director shall, subject to the terms of the Plan, be
granted a Non-Qualified Option to purchase (1) 20,000 shares of Stock
as of the date the Non-Employee Director begins service as a
Non-Employee Director and (2) an additional Option to purchase 10,000
shares of Stock as of the first business day following each annual
meeting of stockholders of the Company, provided that the individual
is a Non-Employee Director on such date. Unless otherwise determined
by the Committee at the time of grant, each such Option shall be for
a ten (10) year term, shall become exercisable as to one-third of the
shares subject to the Option on the first anniversary of the date of
grant and as to the balance monthly in equal installments over the
next twenty-four months following such first anniversary, shall be
granted at a per share exercise price equal to the Fair Market Value
and otherwise be in accordance with Section 7 of this Plan.
(c) Agreements. Each Award granted under the Plan shall be evidenced
by an Agreement that shall contain such provisions as the Committee
may, in its sole and absolute discretion, deem necessary or
desirable. By accepting an Award, a Participant thereby agrees that
the Award shall be subject to all terms and provisions of the Plan
and the applicable Agreement.
(d) Notwithstanding the above, no grants under Section (b) above
shall be made to the extent it would exceed the limitations set forth
in Section 3 of the Plan with any grants then due being cut back pari
passu and such non-made grants automatically being made at such time
as they may be made under Section 3 (other than as a result of an
amendment thereof).
5. Section 10 of the Plan is amended by replacing the first
sentence thereof with the following:
"Notwithstanding anything in the Plan to the contrary, upon the
occurrence of a Change in Control, any Award issued prior to April
25, 2000 carrying a right to exercise that was not previously
exercisable and vested, shall become fully exercisable and vested and
the restriction and forfeiture conditions applicable to any other
such Award shall lapse and such Award shall be deemed fully vested.
In the case of any Award made on or after the aforesaid date, no
acceleration of exercisability, vesting or lapsing shall occur on a
Change in Control except to the extent, if any, provided in the
specific Award Agreement or as otherwise determined by the Committee
or the Board."
IN WITNESS WHEREOF, this Amendment has been executed this th
day of ____, 2000.
PRICELINE.COM INCORPORATED
By:___________________________
EXHIBIT 10.39
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS
DOCUMENT. CONFIDENTIAL PORTIONS HAVE BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FORMATION AND FUNDING AGREEMENT
by and between
PRICELINE.COM INCORPORATED
and
ALLIANCE PARTNERS, LP
Dated as of March 17, 2000
FORMATION AND FUNDING AGREEMENT
FORMATION AND FUNDING AGREEMENT (this "Agreement") dated as of March
17, 2000, by and between PRICELINE.COM INCORPORATED, a Delaware corporation
("Priceline"), and ALLIANCE PARTNERS, LP, a Delaware limited partnership
("Alliance"). Priceline and Alliance are hereunder also referred to
collectively as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, Priceline is a public e-commerce company that facilitates the
sale of products and services over the Internet by means of the Priceline
Business Model; and
WHEREAS, Priceline has developed an Internet web site, currently
located at http://www.Priceline.com (the "Priceline Site"), which
facilitates the marketing of various products and services using the
Priceline Business Model; and
WHEREAS, Alliance is a privately held financial services holding
company which owns and operates a number of businesses in the mortgage
lending and consumer loan origination industries; and
WHEREAS, Alliance has formed an operating subsidiary for the primary
purpose of acting as a broker and/or lender of residential mortgage loans
through an Internet marketing channel (the "Plan") and, in connection
therewith, desires to use the Priceline Business Model and certain
intellectual property of Priceline; and
WHEREAS, Priceline desires to license to an Affiliate of Alliance the
Priceline Business Model and certain intellectual property of Priceline in
furtherance of the Plan, and to invest certain funds in the operating
subsidiary formed by Alliance for the primary purpose of effectuating the
Plan.
NOW, THEREFORE, in consideration of the foregoing and the covenants,
representations and warranties contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS
1.1 "Advertising Agreement" means the Advertising and Services
Agreement between Priceline and PricelineMortgage dated as of the date
hereof, as amended from time to time.
1.2 "Advertising Fees" means any and all fees payable under the
Advertising Agreement.
1.3 "Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control
with such Person and (ii) any officer or director of such Person. For
purposes of this definition, the terms "controls," "is controlled by," or
"is under common control with" shall mean possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person or entity, whether through the ownership of voting
securities, by contract or otherwise.
1.4 "Alliance" means Alliance Partners, LP, a Delaware limited
partnership, as set forth in the Preamble to this Agreement.
1.5 "Alliance Call" shall have the meaning set forth in Section
9.3(a) hereof.
1.6 "Alliance Call Notice" has the meaning set forth in Section
9.3(b) hereof.
1.7 "Alliance Mortgage" means Alliance Mortgage Company, a Florida
corporation and an indirect wholly owned subsidiary of Alliance.
1.8 "Alliance Put" has the meaning set forth in Section 9.2(a)
hereof.
1.9 "Alliance Put Notice" has the meaning set forth in Section 9.2(b)
hereof.
1.10 "AllPrice" means AllPrice Holdings, Inc., a Delaware corporation
and a wholly owned subsidiary of AMC Acquisitions.
1.11 "AllPrice Certificate" means the Certificate of Incorporation of
AllPrice, as amended from time to time.
1.12 "AllPrice Common Stock" means the common stock, par value $.01
per share, of AllPrice.
1.13 "AllPrice Directors" has the meaning set forth in Section 5.4
hereof.
1.14 "AMC Acquisitions" means AMC Acquisitions, Inc., a Florida
corporation and a wholly owned subsidiary of Alliance.
1.15 "Annual Plan" means a business operations plan detailing
PricelineMortgage's goals and procedures for personnel, technical,
financial, administrative, marketing, and other significant activities for
PricelineMortgage's next succeeding fiscal year, as approved each year and
revised from time to time by the Board.
1.16 "Applicable Law" means, as to any Person, any statute, law, rule,
regulation, directive, treaty, judgment, order, decree or injunction of any
Governmental Authority that is applicable to or binding upon such Person or
any of its properties.
1.17 "Board" means the Board of Directors of PricelineMortgage as
described in the LLC Agreement.
1.18 "Business" means the business of PricelineMortgage, as described
in the LLC Agreement, as amended from time to time.
1.19 "Business Day" means each day of the calendar year other than a
Saturday, a Sunday or a day on which banks are authorized or required to
close in the States of Connecticut or Florida.
1.20 "Call Price" has the meaning set forth in Section 9.1(a) hereof.
1.21 "Capital Stock" means (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership,
partnership interests (whether general or limited), (iv) in the case of a
limited liability company, shares, interests, units or any other equity
interests in such limited liability company and (v) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
1.22 "Cash Payment" has the meaning set forth in Section 9.4(b)(i)
hereof.
1.23 "Change in Control Transaction" means, as to any Person, (i) any
Initial Public Offering of any class of capital stock of such Person
following which the holders of such Person's capital stock immediately
prior to such Initial Public Offering shall cease to own, beneficially and
of record, shares representing at least fifty percent (50%) of the
aggregate ordinary voting power represented by the issued and outstanding
voting securities of such Person; (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of such Person; (iii) any sale, pledge,
exchange or other transfer (in one transaction or a series of related
transactions) of shares of capital stock of such Person such that any
Person or group of Persons (other than the holders of such capital stock
immediately prior to such transaction or series of transactions) shall
become the owner, directly or indirectly, beneficially or of record, of
shares representing more than fifty percent (50%) of the aggregate ordinary
voting power represented by the issued and outstanding voting securities of
such Person; (iv) any merger, consolidation, recapitalization or similar
transaction in which the outstanding voting capital stock of such Person is
converted into or exchanged for cash, securities or other property, such
that immediately after such transaction any Person or group of Persons
(other than the holders of such capital stock immediately prior to such
transaction or series of transactions) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than
fifty percent (50%) of the aggregate ordinary voting power represented by
the issued and outstanding voting securities of such Person; (v) the
replacement of a majority of the Board of Directors of such Person over a
two-year period from the directors who constituted the Board of Directors
of such Person at the beginning of such period, where such replacement
shall not have been approved by a vote of at least a majority of the Board
of Directors of such Person who either were members of such Board of
Directors at the beginning of such period or whose election as members of
such Board of Directors was previously so approved; or (vi) the liquidation
or dissolution of such Person.
1.24 "Closing" has the meaning set forth in Section 4.1 hereof.
1.25 "Confidential Information" has the meaning set forth in Section
6.8(a) hereof.
1.26 "Consents" has the meaning set forth in Section 7.1(c) hereof.
1.27 "Conversion" means the conversion, at any time and at the option
of Priceline, of the principal amount and interest due and owing under the
Note into One Thousand (1,000) duly authorized, validly issued, fully paid
and nonassessable shares of AllPrice Common Stock.
1.28 "Conversion Date" means the date of exercise by Priceline, or any
successor thereto or assignee thereof, of its right of Conversion pursuant
to the terms and provisions of the Note.
1.29 "Development Assets" means, collectively, all software and
customer interfaces developed by Alliance and/or Priceline for use by
PricelineMortgage.
1.30 "Development Costs" means the costs paid or incurred and
capitalized by Alliance and Priceline or any of their respective Affiliates
in connection with the acquisition and/or development of the Development
Assets.
1.31 "Director" means a member of the Board with the powers and duties
as specified in the LLC Agreement.
1.32 "Disclosing Party" has the meaning set forth in Section 6.8(a)
hereof.
1.33 "Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security
that is convertible into, or exchangeable for, Capital Stock).
1.34 "FAB" means First Alliance Bank, a federal savings association
chartered by the OTS.
1.35 "FAB Directors" has the meaning set forth in Section 5.4 hereof.
1.36 "Fair Market Value" means the average of the daily closing prices
per share of Priceline Common Stock, as reported on the NASDAQ Stock Market
(or, if the Priceline Common Stock shall not trade on the NASDAQ Stock
Market on such date, as reported on such other national securities exchange
or automated quotation system on which the Priceline Common Stock shall
trade), for the thirty (30) trading days immediately preceding the date as
of which Fair Market Value is to be calculated.
1.37 "Governmental Authority" means any domestic or foreign
government, governmental authority, court, tribunal, agency or other
regulatory, administrative or judicial agency, commission or organization,
and any subdivision, branch or department of any of the foregoing.
1.38 "Independent Auditor" means the independent certified public
accounting firm engaged by PricelineMortgage to act as its independent
auditor.
1.39 "Initial Public Offering" means, as to any Person, an initial
public offering of any class of such Person's capital stock or other equity
interests pursuant to an effective Registration Statement filed under the
Securities Act.
1.40 "Investment Date" means the date on which AllPrice makes its
initial investment in PricelineMortgage, as contemplated by Section 2.3(b)
hereof.
1.41 "LendingTree" means LendingTree, Inc., a Delaware corporation.
1.42 "Licensing Agreement" means the Licensing Agreement by and among
Priceline, PricelineMortgage and AllPrice dated as of the date hereof, as
amended from time to time.
1.43 "LLC Agreement" means the limited liability company agreement of
PricelineMortgage dated as of the date hereof, as amended from time to
time.
1.44 "Loan Path" means any screen flow or customer interface that is
powered by PricelineMortgage.
1.45 "Note" means the 5.11% Convertible Secured Note dated as of the
date hereof in the aggregate principal amount of Three Million Six Hundred
Twenty Thousand Dollars ($3,620,000) evidencing the obligation of AllPrice
to repay the Priceline Funds to Priceline upon the terms and subject to the
conditions set forth therein.
1.46 "Option" means the option granted by AMC Acquisitions to
Priceline under the Option Agreement pursuant to which Priceline shall have
the right, at any time from and after the Conversion Date, to purchase all
of the Equity Interests of AllPrice then held by AMC Acquisitions at an
exercise price of One Dollar ($1.00) such that, following the exercise of
the Conversion and the Option, Priceline shall own one hundred percent
(100%) of the issued and outstanding Equity Interests of AllPrice.
1.47 "Option Agreement" means the Option Agreement, dated as of the
date hereof, between Priceline and AMC Acquisitions, pursuant to which AMC
Acquisitions has granted the Option to Priceline.
1.48 "OTS" means the Office of Thrift Supervision.
1.49 "Party" and "Parties" have the meanings set forth in the Preamble
to this Agreement.
1.50 "Permitted Transfer" has the meaning set forth in Section 8.1
hereof.
1.51 "Person" means an individual, Governmental Authority,
partnership, limited liability company, firm, corporation, or other
business association.
1.52 "Pilot Program" means the pilot program established by Alliance
and Priceline on October 10, 1999 for the purpose of implementing the Plan
on a preliminary basis in a limited number of jurisdictions.
1.53 "Pilot Program Assets" means all assets acquired or developed by
Alliance Mortgage and/or Priceline for use in connection with the
formation, development or operation of the Pilot Program.
1.54 "Pilot Program Costs" means, collectively, all costs and expenses
paid or incurred by Alliance and Priceline or any of their respective
Affiliates in forming, developing and operating the Pilot Program, but
excluding the net book value of the Pilot Program Assets.
1.55 "Plan" has the meaning set forth in the Recitals to this
Agreement.
1.56 "Pledge Agreement" means the Pledge Agreement dated as of the
date hereof between Priceline, as secured party, and AllPrice, as grantor,
as amended from time to time.
1.57 "Pre-Advertising Income" means, with respect to any period, the
net income of PricelineMortgage before deduction for taxes, plus the amount
of any Advertising Fees attributable to such period.
1.58 "Priceline" means priceline.com Incorporated, a Delaware
corporation, as set forth in the Preamble to this Agreement.
1.59 "Priceline Business Model" means the product distribution model
utilized by Priceline on the Priceline Site pursuant to which a consumer
identifies a specific price and terms under which he or she will purchase a
product or service, and Priceline attempts to find a seller willing to sell
the product or service to the consumer on the terms identified by the
consumer.
1.60 "Priceline Call" has the meaning set forth in Section 9.1(a)
hereof.
1.61 "Priceline Call Notice" has the meaning set forth in Section
9.1(b) hereof.
1.62 "Priceline Common Stock" means the common stock, par value $.008
per share, of Priceline.
1.63 "Priceline Funds" has the meaning set forth in Section 3.3(b)
hereof.
1.64 "Priceline Site" has the meaning set forth in the Recitals to
this Agreement.
1.65 "PricelineMortgage" means National Mortgage Center LLC (d.b.a.
"pricelinemortgage"), a limited liability company organized under the laws
of the State of Delaware for the purpose of carrying on the Business.
1.66 "PricelineMortgage Interest" means, as to any Person, the
percentage interest represented by the Shares held by such Person,
determined by dividing the number of Shares then held by such Person by all
then outstanding Shares.
1.67 "Put Price" has the meaning set forth in Section 9.2(b) hereof.
1.68 "Receiving Party" has the meaning set forth in Section 6.8(a)
hereof.
1.69 "Registration Rights Agreement" has the meaning set forth in
Section 9.4(a) hereof.
1.70 "RESPA" means the Real Estate Settlement Procedures Act, 12
U.S.C. section 2601 et seq., and the Department of Housing and Urban
Development's implementing regulation, Regulation X, 24 C.F.R. section 3500
et seq.
1.71 "Securities Act" means the Securities Act of 1933, as amended
from time to time.
1.72 "Shares" means equity interests in PricelineMortgage as
authorized by the LLC Agreement.
1.73 "Start-up Expenses" means, collectively, any attorneys' fees paid
or incurred by Alliance or Priceline for or on behalf of PricelineMortgage
in connection with the formation of PricelineMortgage as a limited
liability company or any related licensing, RESPA or other compliance
issues; provided, however, that Start-up Expenses shall not include any
amounts expended by any Party in connection with the preparation,
negotiation or execution of this Agreement and the other Transaction
Documents.
1.74 "Tax Payment" has the meaning set forth in Section 9.4(b)(ii)
hereof.
1.75 "Term" has the meaning set forth in Section 10.1 hereof.
1.76 "Transaction Documents" means this Agreement, the LLC Agreement,
the Note, the Licensing Agreement, the Advertising Agreement, the Pledge
Agreement and the Option Agreement.
1.77 "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, assignment, pledge, encumbrance or other disposition; and,
as a verb, voluntarily or involuntarily to sell, assign, transfer, grant,
give away, hypothecate, pledge, encumber or otherwise dispose of, and shall
include any transfer by will, gift or intestate succession.
1.78 "Year 4" means the calendar year ended December 31, 2003.
1.79 "Year 5" means the calendar year ended December 31, 2004.
1.80 "Year 5 Income" has the meaning set forth in Section 9.1(a)
hereof.
2. PRICELINEMORTGAGE
2.1 Establishment of PricelineMortgage. Prior to the date hereof,
Alliance has filed, or caused to be filed, with the Secretary of State of
the State of Delaware a Certificate of Formation pursuant to which
PricelineMortgage was formed as a limited liability company organized under
the laws of the State of Delaware. At the Closing, Alliance shall cause
FAB to execute the LLC Agreement and, except as expressly set forth herein,
the operations of PricelineMortgage shall thereafter be governed by the LLC
Agreement.
2.2 Purpose of PricelineMortgage. PricelineMortgage has been formed
for the primary purpose of effectuating the Plan. Pursuant to the Plan,
PricelineMortgage shall offer its loan products and the loan products of
FAB, its Affiliates and of other lenders under a variety of delivery
channels. PricelineMortgage shall pursue mortgage loan investor,
correspondent and wholesale relationships with non-affiliated companies as
well as participation by other lending concepts (such as LendingTree) in
order to provide optimal product and pricing alternatives for
PricelineMortgage's customers.
2.3 Capitalization of PricelineMortgage. PricelineMortgage shall
have the authority to issue an aggregate of One Hundred (100) Shares with
the rights set forth in the LLC Agreement. PricelineMortgage's initial
equity shall be funded as follows:
(a) FAB Initial Subscription. In one or more payments at or
prior to the date hereof, FAB has contributed Three Million Dollars
($3,000,000) to PricelineMortgage in exchange for Fifty-One (51) Shares,
which Shares shall initially represent a one-hundred-percent (100%)
PricelineMortgage Interest; provided, however, that from and after the
Investment Date, such Shares shall represent a fifty-one-percent (51%)
PricelineMortgage Interest.
(b) AllPrice Purchase. On a date within fifteen (15) days after
the date hereof mutually agreed to by the Parties (the "Investment Date"),
Alliance shall cause AllPrice to contribute to PricelineMortgage an amount
in cash equal to (i) the Priceline Funds minus (ii) (A) the aggregate
amount of all Pilot Program Costs reimbursed by AllPrice to Priceline and
Alliance pursuant to Section 6.7(b) hereof and (B) the amount of interest
payable to Priceline by AllPrice under the Note during the year 2000 in
exchange for Forty-Nine (49) Shares, which Shares shall represent a
forty-nine-percent (49%) PricelineMortgage Interest. On or prior to the
Investment Date, Alliance shall cause AllPrice to execute the LLC
Agreement, thereby agreeing to be bound by the terms thereof.
2.4 Purchase of Pilot Program Assets. Within five (5) Business Days
of the later to occur of (a) termination of the Pilot Program and (b) the
Investment Date, Alliance shall cause PricelineMortgage to purchase the
Pilot Program Assets from each of Alliance Mortgage and Priceline at a
purchase price equal to the net book value of such assets.
2.5 Financial Assistance. Pursuant to the terms of the LLC
Agreement, the Board may, by written notice to FAB and AllPrice, request
that FAB and AllPrice provide additional financial assistance to
PricelineMortgage in order to meet the regulatory capital requirements of
the OTS directly applicable to PricelineMortgage, including financial
assistance in the form of credit support or loans. Subject to the terms of
the LLC Agreement, any such financial assistance provided shall be provided
on a pro rata basis by FAB and AllPrice.
2.6 FAB Interest. The Parties acknowledge that it is their intent
that FAB's PricelineMortgage Interest shall, at all times during the Term,
be not less than fifty-one percent (51%).
3. ALLPRICE
3.1 Establishment of AllPrice. Prior to the date hereof, Alliance
has caused AMC Acquisitions to file a Certificate of Incorporation with the
Secretary of State of the State of Delaware pursuant to which AllPrice was
formed as a corporation organized under the laws of the State of Delaware.
3.2 Purpose of AllPrice. AllPrice shall be formed for the purpose of
(i) acquiring and holding Shares representing a forty-nine-percent (49%)
PricelineMortgage Interest, (ii) borrowing the Priceline Funds from
Priceline pursuant to the Note and (iii) entering into the Licensing
Agreement with Priceline and PricelineMortgage.
3.3 Capitalization of AllPrice. AllPrice shall have authorized
capital stock consisting of one class of shares designated as Common Stock
with the rights set forth in the AllPrice Certificate. The AllPrice
Certificate shall initially provide for One Million (1,000,000) authorized
shares of AllPrice Common Stock. AllPrice's initial equity shall be funded
as follows:
(a) AMC Acquisitions Initial Subscription. Prior to the
Closing, AMC Acquisitions shall have purchased One Hundred (100) shares of
AllPrice Common Stock, representing a one-hundred-percent (100%) interest
in AllPrice, for an aggregate purchase price of $1.00.
(b) Priceline Investment. At the Closing, (i) Priceline shall
provide financing to AllPrice in the aggregate principal amount of Three
Million Six Hundred Twenty Thousand Dollars ($3,620,000) (the "Priceline
Funds") by wire transfer of immediately available funds to an account
designated by AllPrice and (ii) AllPrice shall execute and deliver the Note
in favor of Priceline.
4. THE CLOSING
4.1 Closing. A closing (the "Closing") shall be held at 10:00 a.m.,
local time, on the date hereof at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, located at One Rodney Square, Wilmington, Delaware
19801, for the purpose of consummating the transactions contemplated by
this Agreement.
4.2 Closing Deliveries.
(a) Deliveries by Alliance. At or before the Closing, Alliance
shall, or shall cause its Affiliates, as designated below, to, take the
following actions:
(i) Alliance shall execute and deliver this Agreement;
(ii) FAB shall transfer Three Million Dollars
($3,000,000) to PricelineMortgage as a capital contribution;
(iii) PricelineMortgage shall issue to FAB a
certificate representing 51 Shares;
(iv) AMC Acquisitions shall transfer One Dollar ($1.00)
to AllPrice as a capital contribution;
(v) AllPrice shall issue to AMC Acquisitions a
certificate representing One Hundred (100) shares of AllPrice
Common Stock;
(vi) AllPrice shall execute and deliver the Note;
(vii) PricelineMortgage shall execute and deliver
the Advertising Agreement;
(viii) AllPrice and PricelineMortgage shall each
execute and deliver the Licensing Agreement;
(ix) FAB shall execute and deliver the LLC Agreement;
(x) AMC Acquisitions shall execute and deliver the
Option Agreement;
(xi) AllPrice shall execute and deliver the Pledge
Agreement;
(xii) FAB shall provide Priceline with
documentation, in form and substance reasonably satisfactory to
Priceline, evidencing the approval by the OTS of the formation of
PricelineMortgage as an operating subsidiary of FAB; and
(xiii) FAB shall provide Priceline with
documentation, in form and substance reasonably satisfactory to
Priceline, evidencing the approval of any other Governmental
Authority required to be obtained by Alliance, FAB,
PricelineMortgage or any Affiliate of any of the foregoing in
connection with the formation and/or operation of
PricelineMortgage.
(b) Deliveries by Priceline. At the Closing, Priceline shall
take the following actions:
(i) Priceline shall execute and deliver this
Agreement;
(ii) Priceline shall transfer the Priceline Funds to
AllPrice by wire transfer of immediately available funds to an
account designated by AllPrice;
(iii) Priceline shall execute and deliver the
Advertising Agreement;
(iv) Priceline shall execute and deliver the Licensing
Agreement;
(v) Priceline shall execute and deliver the Pledge
Agreement; and
(vi) Priceline shall execute and deliver the Option
Agreement.
5. OPERATION AND MANAGEMENT OF PRICELINEMORTGAGE
5.1 Operation of PricelineMortgage. Alliance and, from and after the
Conversion Date, Priceline hereby agree to take, and to cause each of their
respective Affiliates to take, all actions necessary to ensure that
PricelineMortgage shall be operated in accordance with the terms of this
Agreement and the other Transaction Documents, including, without
limitation, to vote all Shares held directly or indirectly by any such
entity (and to cause all Shares held by its permitted transferees under
Section 8.1 hereof to be voted) to effect the terms hereof and thereof.
5.2 Actions of Members. In order to effectuate the provisions of
this Article 5, each of the Parties (a) hereby agrees that when any action
or vote is required to be taken by the members of PricelineMortgage
pursuant to this Agreement or the LLC Agreement, such Party shall, or shall
cause its Affiliate to, use its best efforts to call, or cause the
appropriate officers and directors of PricelineMortgage to call, a meeting
of the members of PricelineMortgage, or to execute or cause to be executed
a written consent to effectuate such action, (b) shall use its best efforts
to cause the Board to adopt, either at a meeting of the Board or by
unanimous written consent of the Board, all the resolutions necessary to
effectuate the provisions of this Agreement, and (c) shall use its best
efforts to cause the Board to cause the Secretary of PricelineMortgage, or
if there be no Secretary, such other officer of PricelineMortgage as the
Board may appoint to fulfill the duties of Secretary, not to record any
vote or consent contrary to the terms of this Article 5.
5.3 Multi-Lender Model and Allocation Rules. PricelineMortgage shall
select the delivery channel and lender for each loan using its reasonable
judgment based on a best execution analysis. PricelineMortgage shall use
the execution method(s) that it determines will provide the highest likely
closing ratio within the target revenue and profitability ranges for
PricelineMortgage agreed to by the Parties from time to time, subject to
Applicable Law. Terms and conditions of transactions between
PricelineMortgage and Alliance or any of its Affiliates will be on an
arm's-length basis for purposes of this analysis, and PricelineMortgage
will not be required to deliver any minimum percentage of loans to Alliance
or any of its Affiliates.
5.4 Board of Directors. PricelineMortgage shall be managed by the
Board in accordance with the terms of the LLC Agreement and Applicable Law.
Pursuant to the terms of the LLC Agreement, from the date hereof until the
Investment Date, the Board shall consist of four (4) Directors and FAB
shall be entitled to elect all four (4) Directors to the Board. On the
Investment Date, the size of the Board shall be increased to five (5)
Directors. From the Investment Date until the Conversion Date, FAB shall
be entitled to elect four (4) Directors to the Board and AllPrice shall be
entitled to elect one (1) Director to the Board. From and after the
Conversion Date, FAB shall be entitled to elect three (3) Directors to the
Board and AllPrice shall be entitled to elect two (2) Directors to the
Board. All Directors, whether elected by FAB ("FAB Directors") or elected
by AllPrice ("AllPrice Directors"), shall serve until their respective
successors have been duly elected and qualified, or until their earlier
removal, resignation, death or disability; provided, however, that as soon
as practicable following the Conversion Date, Alliance shall cause FAB to
remove one (1) FAB Director from the Board such that the AllPrice Director
to be elected to the Board as provided above shall be elected to fill the
vacancy created by such removal. FAB may remove any FAB Director from the
Board at any time, with or without cause, and AllPrice may remove any
AllPrice Director from the Board at any time, with or without cause. Any
Director may resign at any time upon written notice to the Board. Alliance
shall cause AllPrice to comply with the terms and provisions of the Note
regarding the appointment of Priceline's designees to the Board.
5.5 Annual Plan. PricelineMortgage shall prepare, and the Board
shall approve, an Annual Plan with respect to each fiscal year of
PricelineMortgage no later than sixty (60) days prior to the commencement
of the relevant fiscal year; provided, however, that the initial Annual
Plan shall be approved on or prior to the date hereof and shall cover the
period from the date hereof until the end of the first full fiscal year of
PricelineMortgage.
5.6 Financial Statements and Accounting Records. Alliance shall
cause to be prepared financial statements for PricelineMortgage, including,
without limitation, a balance sheet, income statement, statement of cash
flows and statement of members' capital accounts, which shall be submitted
by PricelineMortgage to each of the Parties (a) within forty-five (45) days
after the end of each three (3) month period of each fiscal year for such
three (3) month period and for the year to date period and (b) within
ninety (90) days after the end of each fiscal year for such year. Each of
the annual financial statements shall be audited and certified by the
Independent Auditor retained by PricelineMortgage, selected by Alliance and
approved by Priceline. All financial statements shall be prepared in
accordance with United States generally accepted accounting principles
(although quarterly statements need not include footnotes and may be
subject to year-end adjustments). At Priceline's request, Alliance shall
cause PricelineMortgage to provide Priceline with such additional financial
information as Priceline may reasonably request, including any such
information Priceline deems necessary or desirable for purposes of
complying with Priceline's periodic reporting obligations under the federal
securities law.
5.7 Right of Inspection. During the regular office hours of
PricelineMortgage, and upon reasonable notice to PricelineMortgage, so long
as any Party maintains, directly or indirectly, at least a twenty percent
(20%) PricelineMortgage Interest or, in the case of Priceline, the Note
remains outstanding, such Party shall have (a) full access to all
properties, books of account and records of PricelineMortgage, and (b) the
right to make copies from such books and records at its own expense. Any
information obtained by the Parties through exercise of rights granted
under this Section 5.7 shall, to the extent constituting Confidential
Information hereunder, be subject to the confidentiality provisions set
forth in Section 6.8 hereof.
6. ADDITIONAL COVENANTS
6.1 Services to be Provided by Priceline.
(a) In accordance with the terms of the Licensing Agreement,
Priceline shall provide PricelineMortgage with a license to use the
Priceline Business Model and the names "priceline" and "pricelinemortgage"
in connection with services to be provided by PricelineMortgage.
(b) In accordance with the terms of the Advertising Agreement,
Priceline shall provide certain advertising and technical support services
to PricelineMortgage in connection with its brokerage and offering of
residential mortgage products through the Priceline Site.
**********
6.3 Systems Development.
(a) Priceline, with the advice and guidance of Alliance, shall
develop the required screen flows and customer interfaces needed to capture
consumer data, obtain an automated underwriting decision and deliver this
decision to the consumer. Priceline will structure the screen flow and
marketing efforts with the intent of generating closed loan volume in
accordance with the projected closed loan volumes agreed to by the Parties
from time to time; provided, however, that by performing its obligations
pursuant to this Section 6.3(a), Priceline does not make any guaranty that
the projected closed loan volumes agreed to by the Parties from time to
time will be achieved.
(b) Alliance and Priceline shall jointly develop and own
software for use by PricelineMortgage. Without the express written consent
of the other party hereto, which consent shall not be unreasonably
withheld, neither Alliance nor Priceline shall use any of the applications
developed for PricelineMortgage for any purpose other than in furtherance
of the Plan or in connection with the Business; provided, however, that
each of Alliance and Priceline shall be entitled to use any pricing engine
developed for use by PricelineMortgage or in connection with the Business
generally in furtherance of other business lines in which either such Party
is engaged. In the event that: (i) prior to the Conversion, Priceline
terminates its affiliation with AllPrice and/or assigns its rights under
one or more of the Transaction Documents to an unaffiliated third party,
(ii) prior to the Conversion, Alliance sells its interest in AMC
Acquisitions to an unaffiliated third party, (iii) prior to the Conversion,
AMC Acquisitions sells its interest in AllPrice to an unaffiliated third
party, (iv) following the Conversion, Priceline sells its interest in
AllPrice to an unaffiliated third party, (v) FAB or AllPrice sells its
interest in PricelineMortgage to an unaffiliated third party, (vi) Alliance
sells its interest in FAB and/or assigns its rights under one or more of
the Transaction Documents to an unaffiliated third party,
(vii) PricelineMortgage ceases to conduct its business, or (viii) the
Licensing Agreement and the Advertising Agreement are terminated or expire
and are not renewed, Priceline and Alliance will share equally all rights
to any screen flow, product and pricing engine and any other technologies
or intellectual property developed for and owned by PricelineMortgage;
provided, however, that neither Priceline nor Alliance shall be entitled to
use any such screen flow, product and pricing engine or other technologies
or intellectual property to the extent that such use conflicts with any
intellectual property and patent rights owned by the other Party prior to
the formation of PricelineMortgage. If any of the events described in
clauses (i) through (viii) of this Section 6.3(b) shall occur, Priceline
and Alliance shall each use their commercially reasonable efforts to enter
into an agreement, as soon as practicable following the occurrence of such
event, governing the terms of their respective ownership and rights in and
to the screen flow, product and pricing engine and other technologies and
intellectual property described in this Section 6.3(b).
6.4 Ancillary Revenues. The Parties acknowledge that consumers
accessing the Loan Path may wish to procure services or enter into
relationships which are outside the scope of the Business and, in
connection therewith, PricelineMortgage may have the opportunity to refer
consumers to other service providers, whether Internet-based or otherwise,
and derive revenue therefrom. The Parties further acknowledge that
PricelineMortgage may enter into agreements or relationships with such
other service providers pursuant to which PricelineMortgage shall generate
revenue outside the scope of the Business (e.g., agreements linking
PricelineMortgage to other related websites or directing consumers to other
service providers). The Parties hereby agree that, to the extent that
PricelineMortgage shall generate additional or ancillary revenues on the
Loan Path from business agreements constructed outside the scope of the
Transaction Documents, PricelineMortgage shall be the beneficiary of all
such revenue and associated income.
6.5 Priceline Exclusivity. During the Term, provided (i) each of the
Parties continues to hold, directly or indirectly, at least a twenty
percent (20%) PricelineMortgage Interest or (ii) in the case of Priceline,
the Note remains outstanding, Priceline shall not distribute residential
first mortgage brokerage services or residential first mortgage loan
services through any distribution channel other than PricelineMortgage
without the express written consent of Alliance; provided, however, that
Priceline shall not be deemed to be in breach of this Section 6.5, and
Alliance's consent shall not be required, as a result of any existing
contractual arrangements between LendingTree and Priceline. Priceline
shall use its commercially reasonable efforts to assign its rights under
any agreements between Priceline and LendingTree to PricelineMortgage or
cooperate with PricelineMortgage and LendingTree to establish a new
agreement with LendingTree on terms satisfactory to the Parties.
6.6 Alliance Non-Competition. During the Term, provided (i) prior to
the Conversion Date, the Note remains outstanding; or (ii) from and after
the Conversion Date, Priceline continues to hold, directly or indirectly,
at least a twenty-percent (20%) PricelineMortgage Interest, Alliance shall
not, directly or indirectly, operate or invest in any Internet mortgage
service or any other e-commerce company that provides services
substantially similar to those provided by PricelineMortgage without the
express written consent of Priceline; provided, however, that nothing
contained herein shall be construed to prohibit Alliance or any of its
Affiliates from engaging in Internet mortgage origination in the ordinary
course of their respective businesses, so long as any such Internet
mortgage originations do not involve a consumer proposition substantially
similar to the "Name Your Price" proposition provided by PricelineMortgage.
6.7 Reimbursement of Expenses. Except as set forth below,
PricelineMortgage shall bear all operating expenses of PricelineMortgage.
(a) Development Costs. Alliance shall cause PricelineMortgage
to purchase all Development Assets, whether in existence on the date hereof
or hereafter created, at a price equal to 100% of the aggregate Development
Costs.
(b) Pilot Program Costs. Alliance shall cause AllPrice to
reimburse to each of Alliance and Priceline all Pilot Program Costs.
(c) Start-up Expenses. Alliance shall cause PricelineMortgage
to reimburse each of Alliance and Priceline for all Start-up Expenses;
(d) Schedule I attached hereto sets forth the aggregate amount
of all (i) Development Costs, (ii) Pilot Program Costs and (iii) Start-up
Expenses paid or incurred by each of the Parties prior to the date hereof
and, with respect to Start-up Expenses, the election of such Party with
respect to whether such Party's Start-up Expenses shall be treated as (i) a
reimbursable expense, as provided in Section 6.7(c) hereof; or (ii) a
contribution of capital to PricelineMortgage with a corresponding increase
to FAB's capital account, in the case of Alliance, or AllPrice's capital
account, in the case of Priceline, but no commensurate issuance of Shares.
6.8 Confidentiality.
(a) The Parties recognize that, in connection with the
performance of this Agreement, each Party or their respective Affiliates
(in such capacity, the "Disclosing Party") may disclose Confidential
Information to the other Party or such Party's Affiliates (the "Receiving
Party"). For purposes of this Agreement "Confidential Information" means
(i) proprietary information (whether owned by the Disclosing Party or a
third party to whom the Disclosing Party owes a non-disclosure obligation)
regarding the Disclosing Party's business or (ii) information which is
marked as confidential at the time of disclosure to the Receiving Party, or
if in oral form, is identified as confidential at the time of oral
disclosure and reduced in writing or other tangible (including electronic)
form including a prominent confidentiality notice and delivered to the
Receiving Party within thirty (30) days of disclosure. "Confidential
Information" shall not include information which: (A) was known to the
Receiving Party prior to the disclosure by the Disclosing Party; (B)
becomes publicly known through no wrongful act of the Receiving Party; (C)
has rightfully been received by the Receiving Party from a third party; or
(D) has been independently developed by the Receiving Party. The Receiving
Party agrees (x) not to use any such Confidential Information for any
purpose other than in the performance of its obligations under this
Agreement or any other Transaction Document and (y) not to disclose any
such Confidential Information, except (1) to its employees who are
reasonably required to have the Confidential Information in connection
herewith or with any of the other Transaction Documents, (2) to its agents,
representatives, lawyers and other advisers that have a need to know such
Confidential Information and (3) pursuant to, and to the extent of, a
request or order by a Governmental Authority. The Receiving Party agrees
to take all reasonable measures to protect the secrecy and confidentiality
of, and avoid disclosure or unauthorized use of, the Disclosing Party's
Confidential Information.
(b) Each Party acknowledges and agrees that (i) its obligations
under this Section 6.8 are necessary and reasonable to protect the other
Party and its business, (ii) any violation of these provisions could cause
irreparable injury to the other Party for which money damages would be
inadequate, and (iii) as a result, the other Party shall be entitled to
obtain injunctive relief against the threatened breach of the provisions of
this Section 6.8 without the necessity of proving actual damages. The
Parties agree that the remedies set forth in this Section 6.8 are in
addition to and in no way preclude any other remedies or actions that may
be available at law or under this Agreement.
6.9 Publicity. The Parties shall consult with each other, in
advance, with regard to the terms of all proposed press releases, public
announcements and other public statements with respect to the transactions
contemplated hereby. Except as may be required by Applicable Law, court
process or by obligations pursuant to any listing agreement or similar
arrangement with any national securities exchange or automated quotation
system, neither Party shall issue any press release, public announcement or
other public statement with respect to the transactions contemplated hereby
without the prior consent of the other Party, which consent shall not be
unreasonably withheld.
6.10 Regulatory Approvals. Alliance shall use its commercially
reasonable efforts to obtain such approvals, consents and similar actions
from Governmental Authorities, including the approval of the OTS, as may be
necessary or appropriate in order for Alliance and each of its Affiliates,
including PricelineMortgage, to consummate the transactions contemplated by
the Transaction Documents. Each Party shall provide such assistance as the
other Party may reasonably request in connection with such consents and
approvals.
6.11 Performance of Alliance Affiliates. Alliance shall use its
best efforts to cause each of its Affiliates to fully perform all of their
respective obligations under each of the Transaction Documents to which any
such Affiliate is a party and to otherwise comply in all respects with the
terms and conditions of any such Transaction Document applicable to any
such Affiliate.
7. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
7.1 Representations and Warranties of Priceline. Priceline hereby
represents and warrants to Alliance, as of the date hereof, as follows:
(a) Organization. Priceline is a corporation duly organized and
validly existing under the laws of the State of Delaware, and has the
corporate power and authority to enter into and perform this Agreement and
the other Transaction Documents to which it is a party.
(b) Authorization. All corporate action on the part of
Priceline necessary for the authorization, execution and delivery of this
Agreement and the other Transaction Documents to which it is a party and
for the performance of all of its obligations hereunder and thereunder has
been taken. This Agreement constitutes, and any such other Transaction
Documents, when fully executed and delivered, shall each constitute a
valid, binding and enforceable obligation of Priceline, except that (i)
such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(c) Government and Other Consents. Other than any consents,
licenses, permits, certifications, authorizations, registrations or
approvals of, or exemptions or other actions by, any Governmental Authority
or any other Person (collectively, "Consents") (i) which may be required in
order for PricelineMortgage to provide residential mortgage lending and
consumer loan origination services in compliance with Applicable Law, (ii)
which may be required from any state Governmental Authority responsible for
banking, mortgage or other lending activities as a result of the conduct of
the Business (including the provision of technical support or advertising
services in connection with the Business) in such Governmental Authority's
state of jurisdiction, or (iii) which may be required from LendingTree and,
in each case, as to which Priceline makes no representation or warranty, no
Consent of any Governmental Authority or any other Person is required in
connection with the execution, delivery and performance by Priceline or any
of its Affiliates of this Agreement or the other Transaction Documents to
which Priceline or any such Affiliate is a party, other than any such
Consent, the failure of which to be obtained would not materially and
adversely affect Priceline's ability to perform its obligations under this
Agreement or the other Transaction Documents to which it is a party.
(d) Effect of Agreement. Priceline's execution, delivery and
performance of this Agreement and the other Transaction Documents to which
it is a party will not (i) violate the Certificate of Incorporation of
Priceline or Applicable Law (other than any statute, law, rule, regulation,
directive, treaty, judgment, order, decree or injunction of any
Governmental Authority that becomes applicable to or binding upon Priceline
or any of its properties as a result of the conduct of the Business
(including the provision of technical support or advertising services in
connection with the Business) in any jurisdiction, as to which Priceline
makes no representation or warranty), (ii) violate any judgment, order,
writ, injunction or decree of any court applicable to Priceline, or (iii)
result in the breach of, give rise to a right of termination, cancellation
or acceleration of any obligation with respect to (presently or with the
passage of time), or otherwise be in conflict with any term of, or affect
the validity or enforceability of, any agreement or other commitment to
which Priceline is a party, other than such violations, breaches,
terminations, cancellations, accelerations or conflicts which would not
materially and adversely affect Priceline's ability to perform its
obligations under this Agreement or the other Transaction Documents to
which it is a party; provided, however, that certain Consents of
Governmental Authorities may be required in connection with the operation
of PricelineMortgage as a broker and/or lender of mortgage loans and
Priceline makes no representation or warranty with respect to any such
Consents.
(e) Litigation. There are no actions, suits or proceedings
pending or, to Priceline's knowledge, threatened, against Priceline before
any Governmental Authority which relate to Priceline's right to enter into
or perform this Agreement or any other Transaction Document to which it is
a party, or which relate to the validity of this Agreement or any of the
other Transaction Documents.
7.2 Representations and Warranties of Alliance. Alliance hereby
represents and warrants to Priceline, on behalf of itself and its
Affiliates, as follows:
(a) Organization. Alliance and each of its Affiliates is duly
organized and validly existing under the laws of the state of its
organization. Alliance and each of its Affiliates has the requisite power
and authority to enter into and perform this Agreement and the other
Transaction Documents to which it is a party.
(b) Authorization. All action (corporate or other) on the part
of Alliance and each of its Affiliates necessary for the authorization,
execution and delivery of this Agreement and the other Transaction
Documents to which Alliance or such Affiliate is a party and for the
performance of all of its obligations hereunder and thereunder has been
taken. This Agreement constitutes, and any such other Transaction
Document, when fully executed and delivered, shall each constitute a valid,
binding and enforceable obligation of Alliance or such Affiliate, except
that (i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(c) Government and Other Consents. No Consent of any
Governmental Authority or any other Person is required in connection with
the execution, delivery and performance by Alliance or any of its
Affiliates of this Agreement or the other Transaction Documents to which it
is a party, other than any such Consent, the failure of which to be
obtained would not materially and adversely affect the ability of Alliance
or any of its Affiliates to perform its obligations under this Agreement or
the other Transaction Documents to which Alliance or any such Affiliate is
a party. On or prior to the date hereof, Alliance has obtained, or caused
to be obtained, all Consents, whether from the OTS or any other
Governmental Authority having jurisdiction over such matters, required in
order to (i) form PricelineMortgage as an operating subsidiary of FAB; (ii)
operate the Business as contemplated by the Transaction Documents; and
(iii) consummate the other transactions contemplated by this Agreement and
the other Transaction Documents.
(d) Effect of Agreement. The execution, delivery and
performance by Alliance or any of its Affiliates of this Agreement or the
other Transaction Documents to which Alliance or any such Affiliate is a
party will not (i) violate the Partnership Agreement, Certificate of
Incorporation or comparable organizational document of Alliance or any such
Affiliate or Applicable Law, (ii) violate any judgment, order, writ,
injunction or decree of any court applicable to Alliance or any such
Affiliate, or (iii) result in the breach of, give rise to a right of
termination, cancellation or acceleration of any obligation with respect to
(presently or with the passage of time), or otherwise be in conflict with,
any term of, or affect the validity or enforceability of any agreement or
other commitment to which Alliance or any such Affiliate is a party, other
than, in each case, any such violations, breaches, terminations,
cancellations, accelerations or conflicts which would not materially and
adversely affect the ability of Alliance or any of its Affiliates to
perform its obligations under this Agreement or the other Transaction
Documents to which Alliance or any such Affiliate is a party.
(e) Litigation. There are no actions, suits or proceedings
pending or, to Alliance's knowledge, threatened, against Alliance or any of
its Affiliates before any Governmental Authority which relate to the right
of Alliance or any such Affiliate to enter into or perform this Agreement
or any other Transaction Document to which Alliance or such Affiliate is a
party, or which relate to the validity of this Agreement or any of the
other Transaction Documents.
(f) Operations of AllPrice. AllPrice has been formed solely for
the purpose of engaging in the transactions contemplated by this Agreement
and by the other Transaction Documents, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement and by the other Transaction Documents.
8. TRANSFER RESTRICTIONS
8.1 General Restriction. Alliance and, from and after the Conversion
Date, Priceline shall hold, and shall cause each of their respective
Affiliates to hold, its Shares during the Term and shall not, directly or
indirectly, Transfer or in any way alienate any of such Shares or any right
or interest therein, other than (a) in the case of a direct Transfer, any
such Transfer made in compliance with the terms and provisions of the LLC
Agreement or (b) in the case of an indirect Transfer, (i) any such Transfer
made to an Affiliate of such Party or (ii) any such Transfer agreed to in
writing by the other Party (each, a "Permitted Transfer"). In the case of
any Permitted Transfer, the transferring Party shall deliver to the other
Party (a) at least twenty (20) Business Days prior to such Transfer, a
written notice stating its intention to Transfer the Shares to be
transferred, the name of the transferee, whether such transferee is an
Affiliate, the number of Shares to be transferred, and the price and other
material terms and conditions of the Transfer, and (b) except as otherwise
specifically provided herein, on or prior to the effective date of the
Transfer and in a form reasonably acceptable to the other Party and its
counsel, the transferee's written acknowledgment of and agreement to be
bound by, and to vote the transferred Shares at all times in accordance
with, the terms of this Agreement and the LLC Agreement.
8.2 Initial Public Offering. The restrictions set forth in Section
8.1 hereof shall cease to be of any further force or effect upon the
closing date of an Initial Public Offering of PricelineMortgage or any
successor thereto.
8.3 Board Approval. To the extent required under the LLC Agreement,
the Parties shall cause each Director it has appointed to vote to approve
any Transfer of Shares effected in accordance with Section 8.1 hereof.
9. ANCILLARY RIGHTS
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(b) The Priceline Call shall be exercisable for a period of
ninety (90) days from and after the receipt by Priceline and/or any
Priceline Successor of notice from PricelineMortgage that PricelineMortgage
has received from the Independent Auditor audited financial statements for
Year 5, which notice shall include a copy of such financial statements.
Such notice and statements shall be delivered to Priceline (and/or any
Priceline Successor) and Alliance (and/or any Alliance Successor) no later
than ninety (90) days after the end of Year 5. In the event that Priceline
(and/or any Priceline Successor) elects to exercise the Priceline Call,
Priceline and/or such Priceline Successor shall provide notice (the
"Priceline Call Notice") to the party or parties from whom the
PricelineMortgage Interest or Interests are to be purchased (including
Alliance, if Alliance shall still hold, directly or indirectly, a
PricelineMortgage Interest at such time, and any Alliance Successor). The
Priceline Call Notice shall set forth Priceline's (or such Priceline
Successor's) calculation of the Call Price and the basis for such
calculation. Any disagreement regarding the Call Price or any other matter
related to the exercise of the Priceline Call shall be resolved in
accordance with the provisions of Section 11.1 hereof. In the event that
Priceline or any such Priceline Successor elects to exercise the Priceline
Call, the Parties shall, and shall cause their respective Affiliates to,
cooperate as fully as reasonably practicable with one another to consummate
the Priceline Call transaction as soon as reasonably practicable following
the receipt of the Priceline Call Notice by the party or parties to the
Priceline Call transaction. In the event that Priceline (and/or any
Priceline Successor) elects not to exercise the Priceline Call, Priceline
(and/or such Priceline Successor) shall promptly provide notice of such
election to Alliance and/or any Alliance Successor holding the
PricelineMortgage Interest or Interests that would otherwise have been
subject to the Priceline Call.
(c) At its sole election, Priceline shall be entitled to pay the
Call Price in cash, in shares of Priceline Common Stock or in any
combination of the foregoing. In the event that Priceline elects to pay
all or a portion of the Call Price in cash, as promptly as reasonably
practicable following the distribution to Alliance of the Priceline Call
Notice, Priceline shall pay to Alliance (and/or any Alliance Successor that
shall be entitled to receipt of all or a portion of such Call Price), by
wire transfer of immediately available funds to an account or accounts
designated in writing by Alliance (or any such Alliance Successor), an
amount in cash equal to the Call Price or the portion of the Call Price
which Priceline has elected to pay in cash. In the event that Priceline
elects to pay all or a portion of the Call Price in shares of Priceline
Common Stock, as promptly as reasonably practicable following its election
to exercise the Priceline Call, and upon the Parties being able to fully
consummate the transactions contemplated by Priceline's exercise of the
Priceline Call, Priceline shall deliver to Alliance (and/or any Alliance
Successor that shall be entitled to receipt of all or a portion of such
Call Price) a certificate or certificates representing that number of whole
shares of Priceline Common Stock having a Fair Market Value equal to the
Call Price or the portion of the Call Price which Priceline has elected to
pay in shares of Priceline Common Stock.
(d) In the event Priceline exercises the Priceline Call, for a
period of one (1) year thereafter, Priceline shall not cause
PricelineMortgage to engage in any Change in Control Transaction without
the prior written consent of Alliance, which consent shall not be
unreasonably withheld.
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(c) The Alliance Put shall become exercisable upon the earlier
to occur of (i) the date on which Alliance has received written notice from
Priceline of both (x) Priceline's election not to exercise the Priceline
Call and (y) Priceline's election not to renew the Licensing Agreement and
the Advertising Agreement and (ii) the expiration of the Priceline Call,
the Licensing Agreement and the Advertising Agreement in accordance with
their respective terms. The Alliance Put shall remain exercisable until
the later of (i) June 30, 2005 or (ii) thirty (30) days from and after the
date on which the Alliance Put first becomes exercisable. In the event
that Alliance (and/or any Alliance Successor) elects to exercise the
Alliance Put, Alliance (and/or such Alliance Successor) shall provide
notice (the "Alliance Put Notice") to the party or parties to whom the
PricelineMortgage Interest or Interests are to be sold (including
Priceline, if Priceline shall still hold, directly or indirectly, a
PricelineMortgage Interest at such time, and any Priceline Successor). The
Alliance Put Notice shall set forth Alliance's (and/or such Alliance
Successor's) calculation of the Put Price and the basis for such
calculation. Any disagreement regarding the Put Price or any other matter
related to the exercise of the Alliance Put shall be resolved in accordance
with the provisions of Section 11.1 hereof. In the event that Alliance
(and/or such Alliance Successor) elects to exercise the Alliance Put, the
Parties shall, and shall cause their respective Affiliates to, cooperate as
fully as reasonably practicable with one another to consummate the Alliance
Put transaction as soon as reasonably practicable following the receipt of
the Alliance Put Notice by the party or parties to the Alliance Put
transaction. In the event that more than one party is required to purchase
a PricelineMortgage Interest pursuant to the Alliance Put, such parties
shall each be required to purchase a portion of the PricelineMortgage
Interest or Interests subject to the Alliance Put in proportion to the
PricelineMortgage Interests of such parties at the time of consummation of
the Alliance Put transaction. In the event Alliance (and/or any Alliance
Successor) elects not to exercise the Alliance Put, Alliance (and/or such
Alliance Successor) shall promptly provide notice to the party or parties
that would otherwise be required to purchase the PricelineMortgage Interest
or Interests subject to the Alliance Put.
(d) At its sole election, Priceline shall be entitled to pay the
Put Price in cash, in shares of Priceline Common Stock or in any
combination of the foregoing. In the event that Priceline elects to pay
all or a portion of the Put Price in cash, as promptly as reasonably
practicable following the receipt by Priceline of the Alliance Put Notice,
Priceline shall pay to Alliance (and/or any Alliance Successor that shall
be entitled to receipt of all or a portion of such Put Price), by wire
transfer of immediately available funds to an account or accounts
designated in writing by Alliance (or any such Alliance Successor), an
amount in cash equal to the Put Price or the portion of the Put Price which
Priceline has elected to pay in cash. In the event that Priceline elects
to pay the Put Price in shares of Priceline Common Stock, as promptly as
reasonably practicable following the receipt by Priceline of the Alliance
Put Notice, and upon the Parties being able to fully consummate the
transactions contemplated by Alliance's exercise of the Alliance Put,
Priceline shall deliver to Alliance (and/or any Alliance Successor that
shall be entitled to receipt of all or a portion of such Put Price) a
certificate or certificates representing that number of whole shares of
Priceline Common Stock having a Fair Market Value equal to the Put Price or
the portion of the Put Price which Priceline has elected to pay in shares
of Priceline Common Stock.
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(b) The Alliance Call shall be exercisable for a period of
ninety (90) days from and after the receipt by Alliance (and/or any
Alliance Successor) from Priceline (and/or any Priceline Successor) that
such party or parties have elected not to exercise the Priceline Call. In
the event that Alliance elects to exercise the Alliance Call, Alliance
shall provide notice (the "Alliance Call Notice") to the party or parties
from whom the PricelineMortgage Interest or Interests are to be purchased
(including Priceline, if Priceline shall still hold a PricelineMortgage
Interest at such time, and any Priceline Successor). The Alliance Call
Notice shall set forth Alliance's calculation of the price payable pursuant
to the Alliance Call and the basis for such calculation. Any disagreement
of the Parties regarding the price payable pursuant to the Alliance Call or
any other matter related to the exercise of the Alliance Call shall be
resolved in accordance with the provisions of Section 11.1 hereof. In the
event that Alliance elects to exercise the Alliance Call, the Parties
shall, and shall cause their respective Affiliates to, cooperate as fully
as reasonably practicable with one another to consummate the Alliance Call
transaction as soon as reasonably practicable following the receipt of the
Alliance Call Notice.
9.4 Registration Rights.
(a) In the event that Priceline elects to deliver shares of
Priceline Common Stock in full or partial payment of the Call Price or the
Put Price, as the case may be, as provided in Sections 9.1(c) and 9.2(c)
hereof, Priceline shall provide registration rights to the recipient of
such shares on terms and conditions mutually acceptable to Priceline and
the recipient of such shares. At Priceline's election, the registration
rights granted pursuant to this Section 9.4 shall be substantially to the
effect set forth in (i) the Registration Rights Agreement attached hereto
as Exhibit A (the "Registration Rights Agreement") or (ii) the Priceline
registration rights agreement that currently is in effect, a copy of which
is attached hereto as Exhibit B, including by causing Alliance and/or any
Alliance Successor that shall be entitled to receive shares of Priceline
Common Stock to become a party thereto; provided, however, that, in either
case, Alliance and any such Alliance Successors, collectively, shall be
limited, in the aggregate, to (a) one demand registration right on the
terms and conditions set forth in Section 3.1 of the Registration Rights
Agreement and (b) unlimited incidental or "piggy-back" registration rights.
Notwithstanding anything to the contrary contained herein, no provision of
this Agreement shall, or is intended by the Parties hereto, to prohibit or
otherwise restrict the ability of Priceline to grant registration rights to
other Persons from time to time.
(b) The registration rights contemplated by this Section 9.4
shall be subject to the terms and provisions of (i) the Registration Rights
Agreement and (ii) any registration rights agreement to which Priceline is
a party as of the date hereof. If, as a result of the terms and conditions
of the Registration Rights Agreement (including any "blackout" provisions
contained therein), Priceline is not able to effect a Demand Registration
(as defined in the Registration Rights Agreement) prior to the date on
which the tax liability incurred by Alliance (or any Alliance Successor) in
connection with the receipt of the Call Price or the Put Price, as
applicable, becomes due and payable, then Priceline and Alliance (or any
such Alliance Successor) shall use their respective commercially reasonable
efforts to consummate the Priceline Call or the Alliance Put, as
applicable, such that the Demand Registration can be effected prior to such
tax liability becoming due and payable (including by delaying the
consummation of the Priceline Call or Alliance Put, as the case may be,
until the next applicable tax year).
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(c) The Parties hereby acknowledge and agree that the Priceline
Call and the Alliance Put, to the extent either such transaction is
consummated, shall be structured so as to comply with the applicable rules
and regulations of the OTS and Applicable Law. Subject to the foregoing,
in the event that Priceline is prohibited from issuing shares of Priceline
Common Stock in full or partial satisfaction of the Call Price or the Put
Price, as applicable, whether as a result of applicable OTS rules and
regulations or otherwise, then the Parties shall use their respective
commercially reasonable efforts to structure the Priceline Call or the
Alliance Put, as the case may be, in such a manner as to (i) enable
Priceline, to the greatest extent possible, to pay the Call Price or the
Put Price, as applicable, in shares of Priceline Common Stock and (ii)
minimize the amount of cash which must be remitted by Priceline in
connection therewith, including, at Priceline's election, through the
issuance by Priceline of an unsecured promissory note containing terms and
conditions mutually satisfactory to the parties to the Priceline Call or
the Alliance Put, as applicable. In the event that Priceline is prohibited
both from (i) issuing shares of Priceline Common Stock and (ii) executing
an unsecured promissory note (as contemplated by clause (ii) of the
preceding sentence), in each case, in full or partial satisfaction of the
Put Price, whether as a result of applicable OTS rules and regulations or
otherwise, then Priceline shall be entitled to pay the Put Price in
quarterly installment payments over a two-year period commencing at the end
of the first full fiscal quarter following the date on which the Parties
finally determine that the Put Price cannot be paid in either shares of
Priceline Common Stock or an unsecured promissory note.
10. TERM AND TERMINATION
10.1 Term. This Agreement shall be effective as of the date hereof,
and shall continue in full force and effect until terminated pursuant to
Section 10.2 hereof (the "Term").
10.2 Termination. This Agreement shall terminate as follows:
(a) On the fifth (5th) anniversary of the date hereof, without
any action on the part of either Party hereto; provided, however, that in
the event that, pursuant to the terms of the Licensing Agreement and the
Advertising Agreement, Priceline elects to renew each of the Licensing
Agreement and the Advertising Agreement for one (1) additional five-year
term, this Agreement shall remain in full force and effect until the tenth
(10th) anniversary of the date hereof unless earlier terminated in
accordance with the other provisions of this Section 10.2.
(b) Upon the mutual written agreement of Priceline and Alliance.
(c) By either Priceline or Alliance, effective immediately upon
written notice of termination to the other Party, if (i) the other Party or
any of its Affiliates breaches in any material respect this Agreement or
any of the other Transaction Documents to which such Party or any such
Affiliate is a party, including, in the case of Priceline, any default by
AllPrice under the Note, and (ii) except in the case of any breach or
default that is subject to a cure period under the terms of the Transaction
Document under which it arises, such breach or default continues for a
period of thirty (30) days after the delivery of written notice of such
breach, describing the breach or default in reasonable detail.
(d) By either Priceline or Alliance, effective immediately upon
written notice of termination to the other Party and PricelineMortgage, in
the event that the other Party is dissolved, liquidated or declared
bankrupt or a voluntary or involuntary bankruptcy filing is made by such
Party, in each case, pursuant to an order which remains unstayed and in
effect for a period of sixty (60) days.
(e) By Alliance, in the event that PricelineMortgage shall have
generated net losses for the fourth quarter of fiscal year 2000.
(f) By either Priceline or Alliance, from and after the first
anniversary of the date hereof, in the event that: (i) the close rate on
PricelineMortgage's customer offers falls below 10% for two consecutive
quarters and, at Alliance's option, the deficiency in such close rate is
not cured within one (1) additional quarter such that, following the end of
the third such quarter, the average close rate on PricelineMortgage's
customer offers for such three-quarter period is greater than or equal to
10% or (ii) PricelineMortgage's annual application volume falls below
36,000 applications.
(g) Upon the consummation of the Priceline Call, the Alliance
Put, the Alliance Call or any other transaction pursuant to which,
following the completion of such transaction, either: (i) Priceline
(including, for this purpose, any and all Priceline Successors) shall own,
directly or indirectly, a One-Hundred-Percent PricelineMortgage Interest or
(ii) Alliance (including, for this purpose, any and all Alliance
Successors) shall own, directly or indirectly, a One-Hundred-Percent
PricelineMortgage Interest.
(h) Effective immediately, without any action on the part of
either Party hereto, in the event that PricelineMortgage shall be
liquidated or dissolved in accordance with the terms of the LLC Agreement.
(i) Notwithstanding anything in this Section 10.2 to the
contrary, in the event that Priceline shall not have terminated this
Agreement prior to the expiration of Year 5, this Agreement, the Licensing
Agreement and the Advertising Agreement shall each continue in full force
and effect until the latest to occur of (i) the consummation of the
Priceline Call by Priceline (and/or any Priceline Successor), which shall
occur on or prior to December 31, 2005, (ii) the receipt by Priceline
(and/or any Priceline Successor) of written notice from Alliance (and/or
any Alliance Successor) of Alliance's (and/or any such Alliance
Successor's) election not to exercise the Alliance Put, (iii) the
expiration of the Alliance Put in accordance with the terms set forth
herein, (iv) the consummation of the Alliance Call by Alliance (and/or any
Alliance successor), (v) the expiration of the Alliance Call in accordance
with the terms set forth herein. In the event that, following the
expiration of Year 5, none of the events specified in clauses (i) through
(v) of the preceding sentence shall have occurred and the Parties intend to
(i) negotiate a purchase of all outstanding Shares by one Party, (ii)
negotiate a sale of PricelineMortgage to a third party or (iii) liquidate
PricelineMortgage, in each case in accordance with the provisions of
Section 10.3 hereof, then the Licensing Agreement and the Advertising
Agreement shall each continue in full force and effect until the
consummation of such purchase, sale or liquidation.
10.3 Effect. Upon termination of this Agreement, in the event that
the Priceline Call, the Alliance Put and the Alliance Call (in each case,
as contemplated by Article 9 hereof) have not been exercised, the Parties
shall negotiate in good faith a possible purchase by one Party (and/or its
Affiliates) of all outstanding Shares held by the other Party or the sale
of PricelineMortgage to a third party. In the event that, notwithstanding
their good faith negotiations, the Parties are unable to agree upon such a
purchase or sale within One Hundred Twenty (120) days of the notice of
termination, the Parties shall cooperate to cause PricelineMortgage to be
liquidated as promptly as practical in accordance with Applicable Law.
10.4 Survival of Obligations. The rights and obligations of the
Parties under Sections 6.3 (Systems Development), 6.7 (Reimbursement of
Expenses), 6.8 (Confidentiality) and 6.9 (Publicity) hereof, this Section
10.4 and Sections 10.3, 10.5, 10.6, 11.1 and 11.2 hereof shall survive any
termination of this Agreement.
10.5 Return of Confidential Information. Upon the termination of this
Agreement, each Party, at its own cost, shall promptly return to the
Disclosing Party any and all documents and materials constituting or
containing Confidential Information of the Disclosing Party which are in
its possession or control, or at its option, shall destroy such documents
and materials and certify such destruction in writing to the Disclosing
Party.
10.6 Continuing Liability. Termination of this Agreement for any
reason shall not release any Party from any liability or obligation which
has already accrued as of the effective date of such termination, and shall
not constitute a waiver or release of, or otherwise be deemed to prejudice
or adversely affect, any rights, remedies or claims, whether for damages or
otherwise, which a Party may have hereunder, at law, equity or otherwise or
which may arise out of or in connection with such termination.
11. GENERAL PROVISIONS
11.1 Governing Law; Dispute Resolution. The validity, construction
and enforceability of this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. All disputes between
the Parties arising out of this Agreement shall be settled by the Parties
amicably through good faith discussions upon the written request of either
Party. In the event that any such dispute cannot be resolved thereby
within a period of sixty (60) days after such notice has been given, such
dispute shall be finally settled by arbitration in Wilmington, Delaware in
accordance with the rules then in effect of the American Arbitration
Association. Any such dispute shall be adjudicated by a panel of three (3)
arbitrators, one (1) of whom shall be appointed by Priceline, one (1) of
whom shall be appointed by Alliance and one (1) of whom shall be selected
by the two (2) previously selected panel members. The arbitrators shall
have the authority to grant specific performance, and to allocate between
the Parties the costs of arbitration in such equitable manner as the
arbitrators may determine. The prevailing Party in the arbitration shall
be entitled to receive reimbursement of its reasonable expenses incurred in
connection therewith. Judgment upon the award so rendered may be entered
in any court having jurisdiction or application may be made to such court
for judicial acceptance of any award and an order of enforcement, as the
case may be. Notwithstanding the foregoing, either Party shall have the
right to institute a legal action in a court of proper jurisdiction for
injunctive relief and/or a decree for specific performance pending final
settlement by arbitration.
11.2 Notices and Other Communications. Any and all notices, requests,
demands and other communications required or otherwise contemplated to be
made under this Agreement shall be in writing and shall be provided by one
or more of the following means and shall be deemed to have been duly given
(a) if delivered personally or by overnight courier service, when received,
or (b) if transmitted by facsimile, upon receipt of a transmittal
confirmation to the facsimile address provided by the receiving Party. All
such notices, requests, demands and other communications shall be addressed
as follows:
If to Priceline:
priceline.com Incorporated
800 Connecticut Avenue, 4th Floor
Norwalk, Connecticut 06854
Attention: General Counsel
Telephone: 203-299-8668
Facsimile: 203-299-8915
with a copy (which copy shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square, 7th Floor
Wilmington, Delaware 19801
Attention: Patricia Moran Chuff, Esq.
Telephone: 302-651-3130
Facsimile: 302-651-3001
If to Alliance:
Alliance Partners, LP
8100 Nations Way
Jacksonville, Florida 32256
Attention: Mr. Patrick McEnerney
Telephone: 904-281-6237
Facsimile: 904-281-6145
with a copy (which copy shall not constitute notice) to:
Kirkpatrick & Lockhart LLP
75 State Street
Boston, Massachusetts 02109
Attention: Michael A. Hickey, Esq.
Telephone: 617-951-9157
Facsimile: 617-951-9151
or to such other address or facsimile number as a Party may have specified
to the other Party in writing delivered in accordance with this Section
11.2.
11.3 Severability. If any provision in this Agreement shall be found
or be held to be invalid or unenforceable, then the meaning of such
provision shall be construed, to the extent feasible, so as to render the
provision enforceable, and if no feasible interpretation would save such
provision, it shall be severed from the remainder of this Agreement which
shall remain in full force and effect unless the severed provision is
essential and material to the rights or benefits received by any Party. In
such event, the Parties shall use best efforts to negotiate, in good faith,
a substitute, valid and enforceable provision or agreement which most
nearly effects the Parties' intent in entering into this Agreement.
11.4 References; Subject Headings. Unless otherwise indicated,
references to Articles, Sections and Schedules herein are to Articles of,
Sections of, and Schedules to, this Agreement. The subject headings of the
Articles and Sections of this Agreement are included for the purpose of
convenience of reference only, and shall not affect the construction or
interpretation of any of its provisions.
11.5 Further Assurances. The Parties shall each perform such acts,
execute and deliver such instruments and documents, and do all such other
things as may be reasonably necessary to accomplish the transactions
contemplated by this Agreement.
11.6 Expenses. Except as set forth in Section 6.7 hereof, each of the
Parties shall bear its own costs and expenses, including, without
limitation, fees and expenses of legal counsel, accountants, brokers,
consultants and other representatives used or hired in connection with the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. All such expenses incurred by
PricelineMortgage shall be borne by PricelineMortgage to the maximum extent
permitted by Applicable Law including, without limitation, expenses
relating to the formation of PricelineMortgage, any transfer taxes for
transfer of the Shares to the Parties or their Affiliates, registration
charges, taxes, fees and expenses relating to required governmental or
regulatory approvals, notary fees and legal fees and expenses.
11.7 No Waiver. No waiver of any term or condition of this Agreement
shall be valid or binding on a Party unless the same shall have been set
forth in a written document, specifically referring to this Agreement and
duly signed by the waiving Party. The failure of a Party to enforce at any
time any of the provisions of this Agreement, or the failure to require at
any time performance by one or both of the other Parties of any of the
provisions of this Agreement, shall in no way be construed to be a present
or future waiver of such provisions, nor in any way affect the ability of a
Party to enforce each and every such provision thereafter.
11.8 Entire Agreement; Amendments. The terms and conditions contained
in this Agreement (including the Schedules and Exhibit hereto) and the
other Transaction Documents constitute the entire agreement between the
Parties and supersede all previous agreements and understandings, whether
oral or written, between the Parties with respect to the subject matter
hereof. No agreement or understanding amending this Agreement shall be
binding upon any Party unless set forth in a written document which
expressly refers to this Agreement and which is signed and delivered by
duly authorized representatives of each Party.
11.9 Assignment. Neither Party shall assign this Agreement without
the other Party's prior written consent. In the event of an assignment
pursuant to this Section 11.9, any such assignee shall assume in writing
the assigning Party's obligations under this Agreement. Notwithstanding
the foregoing, the assigning Party shall remain liable for the assignee's
performance of its obligations hereunder. This Agreement shall inure to
the benefit of, and shall be binding upon, the Parties and their respective
successors and permitted assigns.
11.10 No Third-Party Beneficiaries. Nothing herein express or
implied, is intended to or shall be construed to confer upon or give to any
person, firm, corporation or legal entity, other than the Parties and their
Affiliates who hold Shares or are a party to one or more of the Transaction
Documents, any interests, rights, remedies or other benefits with respect
to or in connection with any agreement or provision contained herein or
contemplated hereby.
11.11 Counterparts. This Agreement may be executed in any number
of counterparts, and each counterpart shall constitute an original
instrument, but all such separate counterparts shall constitute only one
and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Agreement as of the date first
above written.
PRICELINE.COM INCORPORATED ALLIANCE PARTNERS, LP
By:____________________________ By:______________________________
Name: Name:
Title: Title:
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<FISCAL-YEAR-END> DEC-31-2000
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<SECURITIES> 23,625
<RECEIVABLES> 55,826
<ALLOWANCES> (3,075)
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