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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K/A (Amendment No. 1)
AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
For the year ended: December 31, 2002 Commission File No.: 0-25581
priceline.com Incorporated
(Exact name of Registrant as specified in its charter)
DELAWARE 06-1528493
(State or other Jurisdiction of Incorporation) (I.R.S. Employer
800 CONNECTICUT AVENUE Identification No.)
NORWALK, CONNECTICUT
(Address of Principal Executive Offices) 06854
(Zip Code)
Registrant's telephone number, including area code: (203) 299-8000
---------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.008 per share
---------------
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes /X/ No / /
The aggregate market value of common stock held by non-affiliates of
priceline.com as of June 28, 2002 was approximately $339 million based upon the
closing price reported for such date on the Nasdaq National Market. For purposes
of this disclosure, shares of common stock held by persons who are known by
priceline.com to own more than 5% of the outstanding shares of common stock on
June 28, 2002 and shares held by executive officers and directors of
priceline.com on June 28, 2002 have been excluded because such persons may be
deemed to be affiliates of priceline.com. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
The number of outstanding shares of priceline.com's common stock was 224,968,699
as of March 26, 2003.
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DOCUMENTS INCORPORATED BY REFERENCE
None.
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EXPLANATORY NOTE
This amendment to priceline.com Incorporated's Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 (the "priceline.com 10-K"), as filed
by priceline.com on March 31, 2003, is being filed for the purpose of including
the information required by Part III of Form 10-K (with the exception of Item 14
("Controls and Procedures") and the disclosure required by Item 201(d) of
Regulation S-K, each of which was included in the priceline.com 10-K), which is
required to be filed with the Securities and Exchange Commission within 120 days
after the end of priceline.com's fiscal year. Priceline.com's annual meeting of
stockholders will be held on June 9, 2003 and not on May 22, 2003, as set forth
in the priceline.com 10-K.
INDEX
PART III
<Table>
Item 10. Directors and Executive Officers of the Registrant...................................................3
Item 11. Executive Compensation...............................................................................7
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters......17
Item 13. Certain Relationships and Related Transactions......................................................19
Signatures........................................................................................................23
Certifications....................................................................................................25
</Table>
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is biographical information for each Director of priceline.com
Incorporated ("we" or "priceline.com" or the "Company").
RICHARD S. BRADDOCK, age 61, has served as Chairman of the Board of
Directors of priceline.com since August 1998 and was, most recently, Chief
Executive Officer from May 2001 to November 2002. Mr. Braddock was also Chief
Executive Officer of priceline.com from August 1998 to May 2000. In March 2003,
Mr. Braddock joined Mid Ocean Partners, an independent equity firm, as a
partner. From December 1997 to January 1999, he served as the non-executive
Chairman of True North Communications, Inc., an advertising company. From
September 1996 to August 1997, he served as a special advisor to General
Atlantic Partners, LLC, a private equity investment firm. Mr. Braddock was a
principal of Clayton, Dubilier & Rice, a private equity fund, from June 1994
through September 1995. He also served as Chief Executive Officer of Medco
Containment Services during 1993. From 1973 to 1992, Mr. Braddock held a variety
of positions at Citicorp and its principal subsidiary, Citibank, N.A., including
President and Chief Operating Officer. Mr. Braddock also serves as a director of
Eastman Kodak Company, an imaging products company; Cadbury Schweppes plc, a
global beverage and confectionery manufacturer; MphasiS-BFL Limited; Lincoln
Center for the Performing Arts; and Lennox Hill Hospital and is a trustee of the
Cancer Research Institute.
JEFFERY H. BOYD, age 46, has served as a Director of priceline.com since
October 2001. Mr. Boyd has been President of priceline.com since May 2001 and
Chief Executive Officer since November 2002. Mr. Boyd was President and Co-Chief
Executive Officer from August 2002 to November 2002 and Chief Operating Officer
from November 2000 to August 2002. He previously served as Executive Vice
President, General Counsel and Secretary of priceline.com from January 2000 to
October 2000. In 1995, Mr. Boyd joined Oxford Health Plans, Inc. as its
Executive Vice President, General Counsel and Secretary, where he served in such
capacities through December 1999.
PAUL A. ALLAIRE, age 64, has served as a Director of priceline.com since
February 1999. Mr. Allaire was Chief Executive Officer of Xerox Corporation, a
company offering document processing services and products, from May 2000 to
August 2001. Mr. Allaire had previously served as Chief Executive Officer of
Xerox Corporation from 1990 to May 1999. Mr. Allaire retired as Chairman of the
Board and as a director of Xerox Corporation in December 2001. Since 1991, he
was the Chairman of the Board of Directors and the Chairman of the Executive
Committee of Xerox Corporation. Mr. Allaire serves as a director of Lucent
Technologies Inc., a global communications systems and software company; and
Glaxo SmithKline, a healthcare company. Mr. Allaire is a member of the Business
Council and is a member of the board of directors of the Council on
Competitiveness and is Chairman of the Board of the Ford Foundation.
RALPH M. BAHNA, age 60, has served as a Director of priceline.com since
July 1998. Since 1992, Mr. Bahna has been the President of Masterworks
Development Corp., a company he founded to develop an international group of
hotels named Club Quarters(TM). Club Quarters are private, city-center
facilities designed for the business travelers of cost conscious organizations.
Since 1993, Mr. Bahna has served as the Chairman of Club Quarters(TM). From 1980
to 1989, Mr. Bahna served as the Chief Executive Officer of Cunard Lines, Ltd.,
and the Cunard Group of
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Companies. Prior to Cunard, Mr. Bahna was employed by Trans World Airlines,
Inc., where he developed and launched its highly successful Ambassador Service.
HOWARD W. BARKER, JR., age 56, joined the priceline.com Board of Directors
in January 2003. Mr. Barker was a partner of the auditing firm KPMG LLP from
July, 1982 until September, 2002, when he retired. He is a member of the
American Institute of Certified Public Accountants, the Connecticut Society of
Certified Public Accountants and the Florida Institute of Certified Public
Accountants. He was on the Board of Governors of the New York City Chapter of
the Institute for Internal Auditors from 1985 to 1986 and is currently a member
of the Presidents Club of Florida State University. He currently serves as
Treasurer and member of the Board of Directors of Senior Services of Stamford
and served as President and member of the Board of Directors of the Volunteer
Center from 1990 to 1996 and member of the Board of Directors of the Darien
United Way and Person to Person from 1997 to 1999 and 1998 to 2000,
respectively.
JEFFREY E. EPSTEIN, age 47, joined the priceline.com Board of Directors in
April 2003. Mr. Epstein has been Senior Vice President and Chief Financial
Officer of VNU's Media Measurement and Information (MMI) Group, whose businesses
include Nielsen Media Research, since March 2002. Mr. Epstein is responsible for
all financial functions of VNU's $1 billion MMI Group. MMI Group provides data,
research and insight to the world's leading media companies through its
businesses, which include Nielsen Media Research, Monitor Plus, SRDS,
Scarborough (50%), IMS, MRP, Nielsen//NetRatings and Nielsen Entertainment. In
addition to his financial responsibilities, Mr. Epstein is a member of the MMI
Group Media Board and Entertainment Board, and is a member of the Board of
Directors of NetRatings. From February 1998 to March 2002, Mr. Epstein held
senior management positions with DoubleClick, including Chief
Financial Officer.
PATRICIA L. FRANCY, age 57, joined the priceline.com Board of Directors
since April 2003. Ms. Francy has been Treasurer & Controller of Columbia
University since 1989. She has been affiliated with the University since 1968,
and has served as Director of Finance and Director of Budget Operations. She has
served on the boards of various University-affiliated not-for-profits, including
Reid Hall in Paris, a junior year abroad program and advanced learning center.
Ms. Francy is Director and Treasurer of Outward Bound USA, Expeditionary
Learning Outward Bound, and Junior Achievement, Inc. She is Director and former
Chair of the Women's Economic Round Table. Ms. Francy is also Director of the
Siebert Financial Corporation, one of the nation's first retail discount
brokerage firms.
EDMOND TAK CHUEN IP, age 50, is Cheung Kong (Holdings) Limited's
representative on priceline.com's Board of Directors, a position he has held
since July 2001. Mr. Ip has been an Executive Director of Cheung Kong (Holdings)
Limited since 1993. He is also Deputy Chairman of Cheung Kong Infrastructure
Holdings Limited, and an Executive Director of CK Life Sciences Int'l.,
(Holdings) Inc. and a Non-executive Director of TOM.COM LIMITED. Mr. Ip sits on
the board of directors of a number of publicly and privately held companies in
Hong Kong. Cheung Kong (Holdings) Limited received the right to select a
representative to serve as a member of priceline.com's Board of Directors in
connection with Cheung Kong (Holdings) Limited's purchase of priceline.com
common stock in July 2001.
DOMINIC KAI MING LAI, age 49, is one of Hutchison Whampoa Limited's two
representatives on priceline.com's Board of Directors, a position he has held
since July 2001. Mr. Lai is an Executive Director of Hutchison Whampoa Limited
and also the Deputy Chairman of Hutchison Harbour Ring Limited and a Director of
Vanda Systems & Communications
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Holdings Limited. Hutchison Whampoa Limited received the right to select a
second representative to serve as a member of priceline.com's Board of Directors
in connection with Hutchison Whampoa Limited's purchase of priceline.com common
stock in July 2001.
MARSHALL LOEB, age 73, has served as a Director of priceline.com since July
1998. He is a columnist for, and member of the Advisory Board of, CBS
MarketWatch.com, an on-line financial news and analysis service. Mr. Loeb also
is a broadcast commentator for the CBS Radio Network. From 1996 to 1999, Mr.
Loeb was the Editor of the COLUMBIA JOURNALISM REVIEW. He served as the Managing
Editor of Fortune magazine from 1986 to 1994 and as the Managing Editor of Money
magazine from 1980 to 1984. He also has served as the Business Editor, Nation
Editor and Economy Editor of TIME magazine. Mr. Loeb is a member of the Advisory
Board of Bagehot Fellows Program at Columbia University. He is also the author
of 14 books, most recently 52 WEEKS TO FINANCIAL FITNESS.
N. J. NICHOLAS, JR., age 63, has served as a Director of priceline.com
since July 1998. Mr. Nicholas is a private investor and from 1990 to 1992 was
the co-Chief Executive Officer of Time Warner Inc. From 1986 to 1990, he was
President of Time Inc. Mr. Nicholas also is a director of DB Capital Partners,
an affiliate of Deutsche Bank; Boston Scientific Corporation, a developer,
manufacturer and marketer of medical devices; and Xerox Corporation, a document
processing company. He is also Chairman of the Advisory Board of the Columbia
University Graduate School of Journalism.
NANCY B. PERETSMAN, age 49, has served as a Director of priceline.com since
February 1999. Since June 1995, she has been a Managing Director and Executive
Vice President of Allen & Company LLC, an investment bank. Prior to joining
Allen & Company LLC, Ms. Peretsman had been an investment banker since 1983 at
Salomon Brothers Inc., where she was a Managing Director since 1990. Ms.
Peretsman serves on the Board of Directors for Charter Communications and for
several private companies in which Allen & Company LLC has an investment. She is
Vice Chairman of the Board of The New School. Ms. Peretsman is a Trustee of the
Institute of Advanced Study. Ms. Peretsman served for fourteen years on the
Board of Trustees of Princeton University and is currently an Emerita Trustee.
IAN F. WADE, age 63, is one of Hutchison Whampoa Limited's two
representatives on priceline.com's Board of Directors, a position he has held
since February 2001. Since March 1982, Mr. Wade has been Group Managing Director
of Hutchison Whampoa Limited's A.S. Watson & Co., Limited. Mr. Wade sits on the
boards of directors of a number of privately held companies and institutions,
including the Board of the Community Chest of Hong Kong and the Hong Kong Red
Cross Advisory Committee. Hutchison Whampoa Limited received the right to select
a representative to serve as a member of priceline.com's Board of Directors in
connection with Hutchison Whampoa Limited's purchase of priceline.com common
stock in February 2001.
William E. Ford retired as a member of the Board of Directors on
January 24, 2003, after five years of service.
Set forth below is biographical information for each executive officer of
the Company (each an "executive officer"), other than executive officers who are
Directors of the Company and whose biographical information is set forth above.
THOMAS P. D'ANGELO, age 43, has been Senior Vice President, Finance and
Controller of priceline.com since October 1997. From April 1993 to October 1997,
he was Chief Financial Officer of Direct Travel, Inc., a corporate travel
agency. Mr. D'Angelo has spent the last 23 years
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in the travel industry holding various financial management positions with
travel management companies.
BRETT KELLER, age 35, has been Chief Marketing Officer of priceline.com
since January 2002. He previously served as Senior Vice President, Marketing of
priceline.com and in other positions from February 1999 through December 2001.
From 1997 to 1999, Mr. Keller served as Director of Online Travel at Cendant.
PETER J. MILLONES, age 33, is the Executive Vice President, General Counsel
and Corporate Secretary of priceline.com. Mr. Millones has been General Counsel
and Corporate Secretary of priceline.com since January 2001. He previously
served as Vice President and Associate General Counsel of priceline.com from
March 2000 to January 2001. From September 1995 through March 2000, Mr. Millones
was with the law firm of Latham & Watkins.
ROBERT J. MYLOD JR., age 36, has been the Chief Financial Officer of
priceline.com since November 2000. From May 2000 to October 2000, Mr. Mylod was
acting Chief Financial Officer for WebHouse Club, Inc., a privately held
e-commerce company and a licensee of priceline.com. From January 1999 to
May 2000, Mr. Mylod held several different positions within priceline.com's
finance department, including Senior Vice President, Finance. Prior to joining
priceline.com, Mr. Mylod was a Principal at Stonington Partners, a private
equity investment firm that manages over $1 billion of institutional capital
dedicated to venture capital investments and leveraged buyouts. Mr. Mylod is on
the board of directors of Alliance Capital Partners Inc. and Findwhat.com Inc.,
an Internet search engine.
RONALD V. ROSE, age 51, has been the Chief Information Officer of
priceline.com since March 1999. From September 1995 to March 1999, Mr. Rose
served in various capacities with Standard & Poor's, a financial services
company, including Chief Technology Officer of Retail Markets. While at Standard
& Poor's, Mr. Rose led the development of many Internet initiatives within the
Financial Information Services area and chaired the Internet Architecture
Council.
CHRISTOPHER L. SODER, age 43, has been Executive Vice President, Lodging
and Vacation Products since July 2002. From February 2000 to July 2002, Mr.
Soder was President of priceline.com's hotel service. Before joining
priceline.com, Mr. Soder was Western Region Vice President, Business Markets,
for AT&T, where he was responsible for the company's complete technology
portfolio sales to over 20,000 business customers across a 10-state region.
MITCHELL L. TRUWIT, age 34, has been priceline.com's Chief Operating
Officer since July 2002. He joined the company in July 1999 as Senior Vice
President, Corporate Development and was promoted to Executive Vice President,
Operations, in November 2000. Before coming to priceline.com, Mr. Truwit was
Director of Business Development for Oxford Health Plans. Before joining Oxford,
Mr. Truwit was Executive Director of the Tennis and Baseball Foundations of
Connecticut.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our Directors and executive
officers, and persons who own more than ten percent of a registered class of our
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of priceline.com common
stock and other equity securities of the Company. Officers, Directors and
greater than ten percent stockholders are required by Securities and Exchange
Commission regulations to furnish us with copies of all Section 16(a) forms they
file.
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To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the fiscal year ended December 31, 2002, our officers, directors and
greater than ten percent beneficial owners complied with the Section 16(a)
filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows compensation earned during fiscal 2000, 2001 and
2002 by each of the individuals who served as our Chief Executive Officer during
fiscal 2002 and the next four most highly-compensated executive officers serving
at the end of fiscal 2002. These people are referred to as the "named executive
officers." Unless otherwise indicated, titles shown in the table are titles held
as of December 31, 2002.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- ----------------------------
NUMBER OF
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($)(a) OPTIONS(#) ($)
- -------------------------- ---- --------- -------- ------------ ---------- ------------
Jeffery H. Boyd, President 2002 300,000 -- -- 500,000 --
and Chief Executive Officer........ 2001 304,167 -- -- 1,725,000 --
2000 260,192 -- 3,412,500 800,000(b) 2,131,200(c)
Richard S. Braddock, (d) 2002 -- -- -- -- --
Chairman........................... 2001 -- -- -- 750,000(e) --
2000 262,500 -- 1,148,400 -- 293,582(f)
Robert J. Mylod Jr., (g) 2002 300,000 -- -- -- --
Chief Financial Officer............ 2001 300,000 -- -- 125,000 --
2000 191,667 -- 1,706,250 550,000 --
Ronald V. Rose, Chief 2002 300,000 -- -- -- --
Information Officer................ 2001 300,000 -- -- 125,000 --
2000 247,564 -- 765,600 1,250,000 --
Mitchell L. Truwit, 2002 270,833 -- -- 500,000 --
Chief Operating Officer............ 2001 250,000 -- -- 250,000 --
2000 230,208 250,000 487,500 690,000 --
Trey Urbahn, (h) 2002 250,000 -- -- 200,000(i) --
Chairman Travel Services Group..... 2001 250,000 -- -- 250,000 --
2000 240,000 250,000 487,500 760,000 --
</Table>
(a) Represents the dollar value of an award of restricted common stock,
whether the award is vested or unvested, calculated by multiplying the
closing market price of the Company's unrestricted common stock on the
date of grant by the number of shares awarded. No dividends were paid on
shares of restricted common stock and all shares of restricted stock
reflected below vested in November 2001 in connection with the
anticipated achievement of earnings performance targets established at
the time of grant. As of December 31, 2002, there were no outstanding
shares of restricted common stock.
(b) The options granted to Mr. Boyd in 2000 were returned to the Company in
the fourth quarter 2000.
(c) Represents the forgiveness of principal and interest on a loan to Mr.
Boyd.
(d) Mr. Braddock, the Chairman of the Board of Directors, was Chief
Executive Officer or Co-Chief Executive Officer until November 2002.
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(e) Represents options granted to Mr. Braddock in connection with his
promotion to Chief Executive Officer in May 2001. The exercise price of
the options was approximately 30% above the fair market value of
priceline.com's common stock on the date of grant to Mr. Braddock.
(f) Represents forgiveness of interest on a $3.3 million loan that was
repaid to the Company by Mr. Braddock in 2000.
(g) Excludes any amounts paid to Mr. Mylod in his capacity as acting Chief
Financial Officer of WebHouse Club during 2000.
(h) Mr. Urbahn stepped down as Chairman Travel Services Group in January
2003.
(i) The options issued to Mr. Urbahn in 2002 were returned to the Company at
the time of Mr. Urbahn's departure from the Company. Of the 250,000
options issued to Mr. Urbahn in 2001, 69,445 of the options, which have
a strike price of $5.02, and 45,140 of the options, which have a strike
price of $4.26, are vested and exercisable through July 31, 2004. The
remaining 135,415 options were returned to the Company at the time of
Mr. Urbahn's departure from the Company. Of the 760,000 options issued
to Mr. Urbahn in 2000, 500,000 of the options, which have a strike price
of $2.44, are vested and exercisable through July 31, 2004. The
remaining 160,000 options were returned to the Company at the time of
Mr. Urbahn's departure from the Company.
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The following table sets forth information concerning the grant of stock
options during the fiscal year ended December 31, 2002 to the named executive
officers.
OPTION GRANTS LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM (a)
----------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN OR BASE EXPIRATION
NAMES GRANTED(#) FISCAL YEAR(b) PRICE($/SH) DATE 5% 10%
- ----- ---------- --------------- ----------- ---------- ------ -------
Jeffery H. Boyd....... 500,000(c) 25.7% 2.42 08/21/12 60,500 121,000
Richard S. Braddock... - 0.0% - - - -
Robert J. Mylod Jr.... - 0.0% - - - -
Ronald V. Rose........ - 0.0% - - - -
Mitchell L. Truwit.... 500,000(d) 25.7% 2.42 08/21/12 60,500 121,000
Trey Urbahn........... 200,000(e) 10.3% 2.42 08/21/12 24,200 48,400
</Table>
(a) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and
therefore are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
(b) The Compensation Committee of the Board of Directors approved a broad
based grant of stock options in December 2002 which was made to
employees in early January 2003. Most of the Company's executive
officers and key employees participated in the January 2003 grant;
however, Messrs. Boyd, Mylod, Truwit and Urbahn did not participate in
the January 2003 broad based grant. If the broad based grant approved in
December 2002 had been made to employees during 2002, the 2002 grants to
Messrs. Boyd, Truwit and Urbahn would have represented 11.4%, 11.4% and
4.6%, respectively, of the total options granted to the Company's
employees in 2002.
(c) On August 22, 2002, in connection with his promotion to Co-Chief
Executive Officer, Mr. Boyd was granted options to purchase 500,000
shares of common stock. One-third of the shares underlying the options
vest and are exercisable one year after the date of grant and the
remaining shares underlying the options vest and are exercisable pro
rata each month thereafter through August 8, 2005. The options expire
August 21, 2012.
(d) On August 22, 2002, in connection with his promotion to Chief Operating
Officer, Mr. Truwit was granted options to purchase 500,000 shares of
common stock. One-third of the shares underlying the options vest and
are exercisable one year after the date of grant and the remaining
shares underlying the options vest and are exercisable pro rata each
month thereafter through August 8, 2005. The options expire August 21,
2012.
(e) On August 22, 2002, Mr. Urbahn was granted options to purchase 200,000
shares of common stock. Mr. Urbahn stepped down as Chairman Travel
Services Group in January 2003 and all 200,000 options were returned to
the Company at the time of Mr. Urbahn's departure.
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The following table sets forth information concerning the exercise of stock
options during the fiscal year ended December 31, 2002, and the fiscal year-end
value of stock options, held by the named executive officers.
AGGREGATED OPTION EXERCISES IN 2002 AND
FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
NUMBER OF SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS
12/31/02 (#) AT 12/31/02 ($) (a)
---------------- -------------------
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
Names (#) ($)(b) UNEXERCISABLE UNEXERCISABLE
---------------------- ----------- -------- ----------------- -------------
Jeffery H. Boyd....... - - 1,641,667/583,333 0/0
Richard S. Braddock... - - 6,255,350/500,000 4,804,280/0
Robert J. Mylod Jr.... - - 541,667/83,333 0/0
Ronald V. Rose........ 175,000 575,290 1,163,058/199,442 43,000/0
Mitchell L. Truwit.... 75,000 186,858 676,531/685,969 0/0
Trey Urbahn........... - - 821,530/388,470 0/0
</Table>
(a) Assumes a fiscal year-end market price of $1.60 per share.
(b) Value before income taxes payable as a result of exercise.
OTHER
The Company has been served with a complaint that purports to be a
shareholder derivative action against its Board of Directors and certain of its
current and former executive officers, as well as the Company (as a nominal
defendant). The complaint alleges breach of fiduciary duty and waste of
corporate assets. The action is captioned Mark Zimmerman v. Richard Braddock, J.
Walker, D. Schulman, P. Allaire, R. Bahna, P. Blackney, W. Ford, M. Loeb, N.
Nicholas, N. Peretsman, and priceline.com Incorporated 18473-NC (Court of
Chancery of Delaware, County of New Castle, State of Delaware). On February 6,
2001, all defendants moved to dismiss the complaint for failure to make a demand
upon the Board of Directors and failure to state a cause of action upon which
relief can be granted. Pursuant to a stipulation by the parties, an amended
complaint was filed on June 21, 2001. Defendants renewed their motion to dismiss
on August 20, 2001, and plaintiff served his opposition to that motion on
October 26, 2001. Defendants filed their reply brief on January 7, 2002. On
December 20, 2002, the Court granted Defendants' motion without prejudice.
Plaintiffs filed an amended complaint on April 24, 2003. The Company intends to
defend vigorously against this action.
COMPENSATION OF DIRECTORS
Directors who are also employees of priceline.com receive no compensation
for serving on the Board of Directors. In April 2003, the Company worked with an
outside compensation consultant and reviewed, among other things, the
compensation paid to the Company's non-employee Directors and to non-employee
directors of comparably situated companies. Based on that review, the Company
changed the compensation paid to its non-employee Directors. Non-employee
Directors receive an annual retainer of $25,000 and an annual grant of 20,000
stock options that vest over three years. In addition, the chairman of the
Company's audit committee receives a retainer of $7,500 a year and the chairman
of the Company's compensation committee
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receives a retainer of $3,500 a year. The Company reimburses non-employee
Directors for all travel and other expenses incurred in connection with
attending Board of Directors and committee meetings.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment agreements with each of the following named
executive officers: Jeffery H. Boyd, the Company's President and Chief Executive
Officer and a member of the Company's Board of Directors, Robert J. Mylod Jr.,
the Company's Chief Financial Officer, Ronald V. Rose, the Company's Chief
Information Officer, and Mitchell L. Truwit, the Company's Chief Operating
Officer. The agreements, which provide for a minimum salary of $300,000 per year
for each such executive officer, are year-to-year contracts, with the exception
of Mr. Truwit's, which expires in August 2004 and then converts to a
year-to-year contract.
Each of the agreements provides (a) for the accelerated vesting of certain
stock options and (b) an eighteen (18) month period to exercise such stock
options, in the event of a termination without "CAUSE," "TERMINATION FOR GOOD
REASON," "TERMINATION FOR DEATH OR DISABILITY" or a "CHANGE OF CONTROL" of
priceline.com, each as defined in the agreement. The following options are
covered by the foregoing provisions: 1,600,000 fully vested options issued to
Mr. Boyd in May 2001 with an exercise price of $5.11; 500,000 fully vested
options issued to Mr. Mylod in November 2000 with an exercise price of $2.43;
625,000 fully vested options issued to Mr. Rose in December 2000 with an
exercise price of $1.53; and 500,000 unvested options issued to Mr. Truwit in
August 2002 with an exercise price of $2.42. In the event of a termination
without "CAUSE" or a "TERMINATION FOR GOOD REASON," these executive officers
will be entitled to receive, among other things, two times his base salary and
target bonus, if any, over a twelve month period following his termination.
Subject to certain limitations, if severance remuneration payable under the
agreements is held to constitute an "excess parachute payment" and the executive
officer becomes liable for any tax penalties on that payment, priceline.com will
make a cash payment to him in an amount equal to the tax penalties plus an
amount equal to any additional tax for which he will be liable as a result of
receipt of the payment for such tax penalties and payment for such reimbursement
for additional tax. The agreements contain non-solicitation and
non-disparagement provisions in the event of such executive officer's
termination of employment.
The term "CAUSE", as used in the employment agreements, includes, among
other things, (i) willful misconduct by such executive with regard to the
Company which has a material adverse effect on the Company; (ii) the willful
refusal of such executive to attempt to follow the proper written direction of
the Board of Directors or a more senior officer of the Company, provided that
the foregoing refusal shall not be "cause" if such executive in good faith
believes that such direction is illegal, unethical or immoral and promptly so
notifies the Board of Directors or the more senior officer (whichever is
applicable); (iii) substantial and continuing willful refusal by such executive
to attempt to perform the duties required of him (other than any such failure
resulting from incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to such executive by the Board
of Directors or a more senior officer of the Company which specifically
identifies the manner in which it is believed that such executive has
substantially and continually refused to attempt to perform his duties; or (iv)
such executive being convicted of a felony (other than a felony involving a
traffic violation or as a result of vicarious liability). A notice by the
Company of a non-renewal of the employment agreement will be considered an
involuntary termination of such executive without "cause." A notification of a
termination for "cause" from the Company to such executive must include a copy
of a resolution duly adopted by at least two-thirds (2/3) of the entire
membership of the Board of
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Directors at a meeting of the Board which was called for the purpose of
considering such termination and which such executive and his representative had
the right to attend and address the Board of Directors, finding that, in the
good faith of the Board of Directors, such executive engaged in conduct set
forth in the definition of "cause" above and specifying the particulars thereof
in reasonable detail.
The term "GOOD REASON", as used in the employment agreements, includes,
among other things, (i) any material diminution of such executive's positions,
duties or responsibilities (except in each case in connection with the
termination of such executive's employment for "cause" or disability or as a
result of such executive's death, or temporarily as a result of such executive's
illness or other absence), or, the assignment to such executive of duties or
responsibilities that are inconsistent with such executive's then position; (ii)
removal of, or the non-reelection of, such executive from the officer positions
with the Company specified in the employment agreement without election to a
higher position or removal of such executive from any of his then officer
positions; (iii) a relocation of the Company's executive office in Connecticut
to a location more than thirty-five (35) miles from its current location or more
than thirty-five (35) miles further from such 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 such 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 such executive with substantially
similar benefits are not substituted ("Substitute Plans"), or (B) to continue
such 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 such 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 the employment agreement; or (vi) failure of any successor
to the Company to assume in a writing delivered to such executive upon the
assignee becoming such, the obligations of the Company hereunder. In addition,
under the terms of Mr. Boyd's employment agreement, a voluntary resignation by
Mr. Boyd would be considered a termination for good reason for purposes of his
employment agreement.
The Company's 1999 Omnibus Plan, as amended (the "1999 Omnibus Plan"),
provides that in the event of a change in control of the Company (as defined in
the 1999 Omnibus Plan) all options granted prior to April 25, 2000 which were
not previously exercisable and vested shall become fully exercisable and vested,
and any restrictions relating to such options shall lapse. In general, with the
exception of options granted between April and November 2000 and options granted
in 2003, options become fully exercisable and vested six months after the date
of a change in control, so long as the holder of such options is employed by the
Company on the date of the change in control and on the date that is six months
from the change in control. The purchaser or purchasers of the Company's assets
or stock may elect to deliver to the holders of options granted under the 1999
Omnibus Plan the same kind of consideration that is delivered to the
stockholders of the Company as a result of such sale, conveyance or change in
control, or the Board of Directors of the Company may cancel all outstanding
options in exchange for consideration equal to the higher of the fair market
value of the securities the holder of such options would have received had such
options been exercised prior to such sale, conveyance or change in control (less
the exercise price therefor), and the fair market value of the securities the
holder of such options would have received had such options been exercised
immediately following such sale, conveyance or change in control (less the
exercise price therefor).
12
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee is comprised of four
non-employee directors: Messrs. Allaire, Bahna, Loeb and Nicholas, Jr. No member
of the Compensation Committee is or was formerly an officer or an employee of
the Company. No interlocking relationship exists between the Board of Directors
or the Compensation Committee and the board of directors or the compensation
committee of any other company, nor has such interlocking relationship existed
in the past.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
We constitute the Compensation Committee of the Board of Directors of
priceline.com Incorporated. None of us has been an officer or employee of
priceline.com. We are responsible for establishing the compensation for the
executive officers, including the Chief Executive Officer, of priceline.com.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The goals of priceline.com's compensation program are to align compensation
with the Company's and each executive's business objectives and performance and
to enable priceline.com to attract, retain and reward executive officers and
other key employees who contribute to priceline.com's long-term success and to
motivate them to enhance long-term stockholder value. Priceline.com's
compensation emphasizes equity based incentive compensation through stock
options or, in certain instances, restricted stock, rather than high levels of
fixed or variable cash compensation.
We worked with priceline.com's senior executive officers and outside
compensation consultants to develop a compensation program designed to achieve
these goals and we approved a compensation program that consists of a mix of
salary and equity incentives, including stock options.
COMPENSATION COMPONENTS
BASE SALARY. We meet at least annually to review and approve each executive
officer's salary for the ensuing year. When reviewing base salaries, we consider
the following factors: base salaries for comparable positions of a broad peer
group, including companies similar in size and business, individual performance
against goals, levels of responsibility, breadth of knowledge and prior
experience. The relative importance of these factors varies, depending on the
individual whose salary is being reviewed.
BONUSES. During 2002, due to general economic conditions and the challenges
facing the Company and the travel industry since September 11, 2001, no cash
bonuses were paid to any executive officers of the Company.
STOCK OPTIONS. Priceline.com's stock option plans are designed to provide
its employees and directors with an incentive that aligns their interests with
those of priceline.com's stockholders in achieving the Company's long-term
goals. Initial grants of stock options are generally made to eligible employees
upon commencement of employment, with additional grants being made to certain
employees periodically or following a significant change in job
responsibilities, scope or title. Stock options under the option plans generally
vest over a three-year period and expire ten years from the date of grant. The
exercise price of options granted under the plans is the fair market value of
the Company's common stock on the date of grant. The Compensation Committee
approved a broad based grant of stock options in December 2002 which was made to
employees in early January 2003. Most of the Company's executive officers and
key employees participated in the January 2003 grant; however, the Company's
Chief Financial Officer elected not to receive a grant and other executive
officers, including the Company's Chief Executive Officer and Chief Operating
Officer, who received option grants in August 2002 in connection with promotions
they received at that time, did not participate in the January 2003 broad based
grant.
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The number of stock options granted to each participant under the option
plans is generally determined by guidelines reviewed by the Committee. These
guidelines combine several factors, including the performance and salary level
of each participant as well as the market price of the stock at the time of
grant.
RESTRICTED STOCK. The Company did not make any grants of restricted stock
during 2002.
2002 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
In July 2002, Jeffery H. Boyd was named President and Co-Chief Executive
Officer of the Company and in November 2002 he was named President and Chief
Executive Officer. From July 2002 until November 2002, Mr. Boyd shared Chief
Executive Officer responsibilities with Richard S. Braddock, Chairman of the
Company's Board of Directors. For 2002, we paid Mr. Boyd $300,000 in salary,
which is the annual salary rate that has been in effect for him since January
2001. In connection with Mr. Boyd's promotion to Co-Chief Executive Officer in
July 2002, after consulting with our outside compensation consultant, we granted
Mr. Boyd options to purchase 500,000 shares of priceline.com common stock. The
options vest over a three-year period and the exercise price of the options was
the fair market value of priceline.com's common stock at the time of grant. Mr.
Boyd received no other compensation in connection with his promotion to Co-Chief
Executive Officer and no additional compensation in connection with his
promotion to Chief Executive Officer in November 2002.
As discussed above, we believe that stock options, when used judiciously,
are an effective incentive and retention tool and contribute to long-term
stockholder value by linking executive pay to the performance of the Company's
stock price. The Committee made the stock option award to Mr. Boyd in
recognition of Mr. Boyd's promotion to Co-Chief Executive Officer. We believe
that Mr. Boyd's compensation package is appropriate in light of his role in
leading the Company through a very difficult post-September 11, 2001 travel
environment and his leadership in developing a strategy for the Company to
enhance long-term stockholder value by, among other things, building and growing
the Company's hotel business and introducing new products, including vacation
packages and retail travel products in an effort to diversify the Company's
revenue streams and broaden the Company's overall customer appeal.
Mr. Braddock, who served as Co-Chief Executive Officer until November 2002,
did not receive a salary and received no stock option or restricted stock grants
during 2002.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986 limits deductions for
federal income tax purposes to $1 million of compensation paid to certain named
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation." We do not expect this
limitation to affect the Company in 2003. The Company reserves the right to
utilize compensation plans which will not qualify as "performance-based
compensation" and for which deductibility will be so limited.
Compensation Committee
N.J. Nicholas, Jr.(Chairman)
Paul A. Allaire
Ralph M. Bahna
Marshall Loeb
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PERFORMANCE MEASUREMENT COMPARISON
The following graph shows the total stockholder return through December 31,
2002 of an investment of $100 in cash on March 30, 1999 (one day following
priceline.com's initial public offering) for priceline.com common stock and an
investment of $100 in cash on March 30, 1999 for (i) the NASDAQ National Market
Index and (ii) the Media General Internet Software and Services Index. The Media
General Internet Software and Services Index is an index of 212 stocks
representing the Internet industry, including Internet software and services
companies and e-commerce companies. Historic stock performance is not
necessarily indicative of future stock price performance. All values assume
reinvestment of the full amount of all dividends and are calculated as of the
last day of each month:
[CHART]
CUMULATIVE TOTAL RETURN
PRICELINE.COM INCORPORATED,
NASDAQ MARKET INDEX AND MG GROUP INDEX
ASSUMES $100 INVESTED ON MAR. 30, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC.31, 2002
<Table>
<Caption>
Media General
Measurement priceline.com Internet Software and
Point Incorporated Services Index NASDAQ
----------- ------------- --------------------- -------
03/30/99 100.00 100.00 100.00
03/31/99 120.11 100.00 100.00
06/30/99 167.48 100.70 108.81
09/30/99 93.48 97.45 110.58
12/31/99 68.66 177.25 163.32
03/31/00 115.94 173.33 185.83
06/30/00 55.05 108.70 159.83
09/30/00 17.21 97.56 147.49
12/31/00 1.90 42.07 99.12
03/31/01 3.67 25.80 74.73
06/30/01 13.12 33.10 87.58
09/30/01 5.49 17.44 60.82
12/31/01 8.43 26.16 79.27
03/31/02 7.58 22.52 75.14
06/30/02 4.04 17.09 60.26
09/30/02 2.12 13.41 48.34
12/31/02 2.32 17.21 55.20
</Table>
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's common stock as of March
31, 2003 by (1) each stockholder known by priceline.com to be the beneficial
owner of more than 5% of the Company's common stock; (2) each Director and
nominee for Director of priceline.com; (3) all individuals serving as
priceline.com's Chief Executive Officer during the fiscal year ended December
31, 2002 and each of priceline.com's other four most highly compensated
executive officers (based on salary and bonus during the fiscal year ended
December 31, 2002); and (4) all executive officers and Directors as a group.
<Table>
<Caption>
SHARES BENEFICIALLY OWNED (a)
-------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
-------------------------------------- ----------- -------
Richard S. Braddock (b)................... 17,747,595 7.68%
Jeffery H. Boyd (c)....................... 2,436,529 *
Paul A. Allaire (d)....................... 86,201 *
Ralph M. Bahna (e)........................ 339,751 *
Howard W. Barker, Jr...................... 0 *
Jeffrey E. Epstein........................ 0 *
Patricia L. Francy........................ 0 *
Edmond Tak Chuen Ip (f)................... 76,421,101 33.96%
Dominic Kai Ming Lai (g).................. 38,227,773 16.99%
Marshall Loeb (h)......................... 62,251 *
N.J. Nicholas, Jr. (i).................... 3,246,251 1.44%
Nancy B. Peretsman (j).................... 1,917,218 *
Ian F. Wade (g)........................... 38,227,773 16.99%
Robert J. Mylod Jr. (k)................... 1,059,279 *
Ronald V. Rose (l)........................ 1,371,963 *
Mitchell L. Truwit (m).................... 751,530 *
Trey Urbahn (n)........................... 615,585 *
Cheung Kong (Holdings) Limited (f)........ 76,421,101 33.96%
Hutchison Whampoa Limited (g)............. 38,227,773 16.99%
Prince Alwaleed Bin Talal Abdulaziz Al
Saud (o)................................ 11,961,400 5.32%
All directors and executive officers
as a group (21 persons) (p)............ 107,351,252 45.15%
</Table>
* Represents beneficial ownership of less than one percent.
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes sole voting and
investment power with respect to securities, except as discussed in the
footnotes below. Shares of common stock and options that are currently
exercisable or exercisable within 60 days after March 31, 2003 are
deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage
ownership of such person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(b) Includes: (1) 120,000 shares owned by the Richard and Susan Braddock
Family Foundation Inc. as to which Mr. Braddock expressly disclaims
beneficial ownership; (2) 552,236 shares owned by Mr. Braddock as
Trustee of The Richard S. Braddock 1999 Annuity Trust; (3) 6,000 shares
owned by Mr. Braddock's immediate family member as to which Mr. Braddock
expressly disclaims beneficial ownership; and (4) 6,255,350 shares that
Mr. Braddock has the right to acquire under stock options currently
exercisable or exercisable within 60 days after March 31, 2003.
(c) Includes 1,659,029 shares that Mr. Boyd has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
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(d) Includes 67,501 shares that Mr. Allaire has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
(e) Includes 61,251 shares that Mr. Bahna has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
(f) Includes (1) 17,546,622 shares held by Prime Pro Group Limited and
20,627,816 shares held by Potton Resources Limited, each of which is an
indirect wholly owned subsidiary of Cheung Kong (Holdings) Limited; (2)
18,890 shares that Mr. Ip, an Executive Director of Cheung Kong
(Holdings) Limited, has the right to acquire under stock options
currently exercisable or exercisable within 60 days after March 31,
2003; (3) 17,546,622 shares held by Forthcoming Era Limited and
20,627,815 shares held by Ultimate Pioneer Limited, each of which is an
indirect wholly owned subsidiary of Hutchison Whampoa Limited; (4)
18,890 shares that Mr. Lai, an Executive Director of Hutchison Whampoa
Limited, has the right to acquire under stock options currently
exercisable or exercisable within 60 days after March 31, 2003; and (5)
34,446 shares that Mr. Wade, the Group Managing Director of the A.S.
Watson Group of Hutchison Whampoa Limited, has the right to acquire
under stock options currently exercisable or exercisable within 60 days
after March 31, 2003. Cheung Kong (Holdings) Limited is a 49.97%
shareholder of Hutchison Whampoa Limited. Each of Cheung Kong (Holdings)
Limited, Potton Resources Limited and Prime Pro Group Limited disclaims
beneficial ownership of the shares referred to in clauses (3) through
(5) above. Mr. Ip disclaims beneficial ownership of the shares referred
to in clauses (1), (3), (4) and (5) above, except to the extent of his
pecuniary interest therein. The address of Cheung Kong (Holdings)
Limited is 7th Floor, Cheung Kong Center, 2 Queen's Road Central, Hong
Kong.
(g) Includes (1) 17,546,622 shares held by Forthcoming Era Limited and
20,627,815 shares held by Ultimate Pioneer Limited, each of which is an
indirect wholly owned subsidiary of Hutchison Whampoa Limited; (2)
18,890 shares that Mr. Lai, an Executive Director of Hutchison Whampoa
Limited, has the right to acquire under stock options currently
exercisable or exercisable within 60 days after March 31, 2003; and (3)
34,446 shares that Mr. Wade, the Group Managing Director of the A.S.
Watson Group of Hutchison Whampoa Limited, has the right to acquire
under stock options currently exercisable or exercisable within 60 days
after March 31, 2003. Each of Mr. Lai and Mr. Wade disclaims beneficial
ownership of the shares beneficially owned by Hutchison Whampoa Limited,
Forthcoming Era Limited, Ultimate Pioneer Limited, Cheung Kong
(Holdings) Limited, Prime Pro Group Limited, Potton Resources Limited,
Mr. Ip and one another except to the extent of his pecuniary interest
therein. The address of Hutchison Whampoa Limited is 22nd Floor,
Hutchison House, 10 Harcourt Road, Hong Kong.
(h) Includes: (1) 1,000 shares held by an immediate family member of Mr.
Loeb; (2) 31,250 shares subject to vested options which are held by Mr.
Loeb's daughter, as to which Mr. Loeb disclaims beneficial ownership;
and (3) 30,001 shares that Mr. Loeb has the right to acquire under stock
options currently exercisable or exercisable within 60 days after March
31, 2003.
(i) Includes: (1) 3,145,000 shares held by Gore Creek Trust, as to which Mr.
Nicholas disclaims beneficial ownership; (2) 40,000 shares owned by an
immediate family member of Mr. Nicholas, as to which Mr. Nicholas
disclaims beneficial ownership; and (3) 61,251 shares that Mr. Nicholas
has the right to acquire under stock options currently exercisable or
exercisable within 60 days after March 31, 2003.
(j) Includes: (1) 926,424 shares held by Allen & Company LLC on its own
behalf and on behalf of certain of its officers, directors and
employees; (2) 7,811 shares held by Allen & Company LLC for the benefit
of certain members of Ms. Peretsman's family; (3) 600,000 shares held by
the NP 2003 Family Trust; and (4) 61,251 shares that Ms. Peretsman has
the right to acquire under stock options currently exercisable or
exercisable within 60 days after March 31, 2003. Excludes 33,333 shares
held by a foundation for which Ms. Peretsman serves as a trustee. Ms.
Peretsman, who is a Managing Director and Executive Vice President of
Allen & Company LLC, disclaims beneficial ownership of the shares
referred to in clause (1) above, except to the extent of her pecuniary
interest therein. Allen & Company LLC disclaims beneficial ownership of
the shares and options referred to in clauses (2), (3) and (4) above.
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(k) Includes 559,029 shares that Mr. Mylod has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
(l) Includes 1,284,863 shares that Mr. Rose has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
(m) Includes 751,530 shares that Mr. Truwit has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003.
(n) Includes 614,585 shares that Mr. Urbahn has the right to acquire under
stock options currently exercisable or exercisable within 60 days after
March 31, 2003. Mr. Urbahn left the Company in the first quarter of
2003.
(o) According to Form 13G, dated September 28, 2001, filed with the
Securities and Exchange Commission by His Royal Highness Prince Alwaleed
Bin Talal Bin Abdulaziz Al Saud. The address of His Royal Highness
Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud is Kingdom Holding
Company, P.O. Box 8653, Riyadh, 11492, Kingdom of Saudi Arabia.
(p) Includes shares beneficially owned by all Directors and executive
officers of priceline.com, including the named executive officers, as a
group. Because Mr. Urbahn was not employed by priceline.com as of March
31, 2003, his beneficial ownership was excluded from the calculation.
The address of all Directors, officers and other individual stockholders (except
as otherwise set forth herein) is 800 Connecticut Avenue, Norwalk,
Connecticut 06854.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company was founded as a limited liability company in July 1997 and
converted to a corporation in July 1998. In connection with this conversion, all
equity units issued by the Company's predecessor were converted into an equal
number of shares of common stock. The following discussion does not distinguish
between the Company and its predecessor and the common stock and the equity
units of the Company's predecessor. The information set forth below also
reflects a 1.25-for-one stock split of the common stock on March 26, 1999.
INTERNATIONAL LICENSEES
ASIA. Hutchison Whampoa Limited and Cheung Kong (Holdings) Limited, which
is a 49.97% shareholder of Hutchison Whampoa Limited, owned approximately 34% of
the Company's outstanding common stock as of December 31, 2002 and have the
right to appoint three representatives to the Board of Directors. Ian F. Wade
and Dominic Kai Ming Lai are Hutchison Whampoa Limited's representatives on the
Board of Directors and Edmond Tak Chuen Ip is Cheung Kong (Holdings) Limited's
representative on the Board of Directors.
In June 2000, the Company entered into definitive agreements with
subsidiaries of Hutchison Whampoa Limited to introduce the Company's services to
several Asian markets. Under the terms of the agreements, the Company licenses
its business model and provides its expertise in technology, marketing and
operations to Hutchison-Priceline Limited. Hutchison-Priceline Limited pays the
Company an annual licensing fee to use the Company's intellectual property and
reimburses the Company for the cost of services provided. While the Company
currently has no equity in Hutchison-Priceline Limited and does not control its
board of directors, the Company has invested in a note convertible into
approximately 35% (on a fully diluted basis) of the equity of
Hutchison-Priceline Limited. During 2002, the Company performed a periodic
evaluation of the progress of the operations of Hutchison-Priceline Limited and
recorded an impairment charge of $12.2 million to reduce the carrying value of
its investment in Hutchison-
19
<Page>
Priceline Limited to its estimated fair value of zero. During the period ended
December 31, 2002, the Company charged Hutchison-Priceline Limited $375,000 in
licensing fees and approximately $199,000 in reimbursable expenses, in
accordance with the Company's agreements with Hutchison-Priceline Limited.
Jeffery H. Boyd, the Company's President and Chief Executive Officer, and Robert
J. Mylod, the Company's Chief Financial Officer, are priceline.com's
representatives on the board of directors of Hutchison-Priceline Limited.
EUROPE. Priceline.com europe Ltd. (together with priceline.com Europe
Holdings, N.V., "Priceline.com Europe") is a majority owned subsidiary of
priceline.com that was established to provide travel services to several
European markets. Priceline.com Europe offers NAME YOUR OWN PRICE(R) hotels,
and, through third-party partners, airfare, vacation packages and car hire at
disclosed prices. During 2002, the Company invested $10.0 million in
Priceline.com Europe, which increased the Company's equity interest in
Priceline.com Europe to approximately 74.6% of the issued and outstanding
shares. The Company recognized Priceline.com Europe's entire loss for the twelve
months ended December 31, 2002 in its consolidated financial statements. During
2002, the Company performed impairment tests and determined that the carrying
amount of goodwill associated with its investment in Priceline.com Europe
exceeded its implied fair value by approximately $12 million and accordingly
recorded an impairment charge of $12 million. The fair value was determined by
third party valuations using generally accepted valuation techniques including
the market value of comparable companies (including revenue multiple
methodology) and discounted cash flow methods.
Certain investment entities affiliated with General Atlantic Partners, LLC
collectively own approximately 22.0% of the issued and outstanding shares of
Priceline.com Europe. William Ford, a principal of General Atlantic Partners,
LLC, was a member of our board of directors and chairman of our audit committee
until he resigned from our board of directors on January 23, 2003. Certain
investors in Priceline.com Europe, including certain affiliates of General
Atlantic Partners, LLC, have the right to put their shares of Priceline.com
Europe to the Company, at fair market value, in the event of a change in
control, as defined, of the Company. These investors own 45,539,999 shares of
Priceline.com Europe.
The management board of Priceline.com Europe consists of the following six
individuals: Richard S. Braddock, Chairman of the Company, Jeffery H. Boyd,
President, Chief Executive Officer and Director of the Company, Glenn D. Fogel,
Senior Vice President--International of the Company, Florian P. Wendelstadt,
managing member of General Atlantic Partners, LLC and Timothy G. Brier, a former
executive officer of the Company.
PRICELINEMORTGAGE.COM
The Company offers home financing services through pricelinemortgage.com, a
broker and/or lender of residential mortgage loans that utilizes the Company's
NAME YOUR OWN PRICE(R) business model. The Company owns a 49% equity interest in
pricelinemortgage.com and holds two seats on its board of directors.
Pricelinemortgage.com is controlled by First Alliance Bank, a federally
chartered savings association supervised by the Office of Thrift Supervision and
a wholly owned subsidiary of Alliance Partners, L.P. Alliance Partners provides
management services to pricelinemortgage.com, including the procurement of
personnel and office space and assistance in obtaining regulatory approvals. At
December 31, 2002, the investment in pricelinemortgage.com consisted of the
Company's original investment of $4.6 million and the Company's cumulative share
of pricelinemortgage.com's earnings of approximately $2.7 million, offset by an
impairment charge of approximately $1 million to reflect the write-down of the
carrying value to the investment's estimated fair value. The Company earned
advertising fees
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<Page>
from pricelinemortgage.com of $1.7 million in 2002. Robert J. Mylod Jr., the
Company's Chief Financial Officer, is a director of, and an investor in,
Alliance Capital Partners Inc., the parent company of Alliance Partners, L.P..
In 1997, Mr. Mylod invested $50,000 in Alliance Capital Partners Inc. and his
investment represents less than 1/10th of one percent of Alliance Capital
Partner Inc.'s outstanding common stock.
ALLEN & COMPANY LLC
On July 31, 2002, the Company announced that its Board of Directors
authorized the repurchase of up to $40 million of the Company's common stock
from time to time in the open market or in privately negotiated transactions. As
of December 31, 2002, the Company had repurchased 5,387,717 shares of its common
stock as part of its stock repurchase program. In connection with the
repurchase, Allen & Company LLC acted as the Company's broker and received
$161,631 in commissions. In addition, from time to time, Allen & Company LLC has
advised the Company on certain financial and strategic issues. Nancy B.
Peretsman is a Managing Director and Executive Vice President of Allen & Company
LLC.
WORLDSPAN
Paul J. Blackney, who stepped down as a Director of the Company in
May 2002, is the President and Chief Executive Officer of Worldspan, L.P., a
global travel distribution system ("GDS"), which was, and continues to be, the
Company's only GDS for booking travel reservations for its customers. The
Company has an agreement with Worldspan that provides for certain penalties and
other financial disincentives in the event that the Company fails to meet the
minimum volume of bookings under the agreement. The agreement also provides for
certain discounts and incentives to be provided by Worldspan to the Company.
OTHER TRANSACTIONS
The Company has granted registration rights to certain stockholders and
warrant holders, including Mr. Braddock, the Company's Chairman, Mr. Walker,
priceline.com's founder, and certain affiliates of Mr. Walker including Walker
Digital and The Jay S. Walker Irrevocable Credit Trust, investment entities
affiliated with General Atlantic Partners, LLC, Vulcan Ventures Incorporated,
Delta Air Lines, Inc., Hutchison Whampoa Limited and Cheung Kong (Holdings)
Limited. Up to all of the shares held by said stockholders, exclusive of options
granted to them under the 1999 Omnibus Plan and the 1997 Omnibus Plan or
acquired in the public market, are entitled to registration rights. See
"Security Ownership Of Certain Beneficial Owners and Management." Additional
shares acquired by these individuals or entities while an affiliate of the
Company may also be entitled to registration rights under the registration
rights agreements. In addition, the holders of the securities registrable
pursuant to the agreements may be entitled under the agreements, subject to
certain limitations, to require the Company to include their registrable
securities in future registration statements the Company files. Registration of
shares of common stock pursuant to the rights granted in these agreements will
result in such shares becoming freely tradeable without restriction under the
Securities Act of 1933. All registration expenses incurred in connection with
the above registrations will be borne by the Company.
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<Page>
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Section 145 of the Delaware General Corporation Law authorizes a
corporation's board of directors to grant indemnity to directors and officers in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the federal securities laws.
As permitted by Delaware law, the Company's amended and restated
certificate of incorporation includes a provision that eliminates the personal
liability of its Directors for monetary damages for breach of fiduciary duty as
a Director, except for liability (1) for any breach of the Director's duty of
loyalty to the Company or its stockholders; (2) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law;
(3) under Section 174 of the Delaware General Corporation Law regarding unlawful
dividends and stock purchases; or (4) for any transaction from which the
Director derived an improper personal benefit.
As permitted by Delaware law, the Company's amended and restated
certificate of incorporation, provides that (1) the Company is required to
indemnify its Directors and officers to the fullest extent permitted by Delaware
law, subject to certain very limited exceptions; (2) the Company is permitted to
indemnify its other employees to the extent that it indemnifies its officers and
Directors, unless otherwise required by law, its amended and restated
certificate of incorporation, its by-laws or agreements; (3) the right to
indemnification includes the right to be paid expenses incurred in connection
with a legal proceeding in advance of its final disposition; and (4) the rights
conferred in the amended and restated certificate of incorporation are not
exclusive.
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<Page>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
PRICELINE.COM INCORPORATED
By: /s/ Jeffery H. Boyd
----------------------------------------
Name: Jeffery H. Boyd
Title: Chief Executive Officer
Date: April 29, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Richard S. Braddock Chairman April 29, 2003
- -------------------------------------- and Director
Richard S. Braddock
/s/ Jeffery H. Boyd President, Chief Executive Officer and April 29, 2003
- -------------------------------------- Director (Principal Executive Officer)
Jeffery H. Boyd
/s/ Thomas P. D'Angelo Senior Vice President, Finance and Controller April 29, 2003
- -------------------------------------- (Principal Accounting Officer)
Thomas P. D'Angelo
/s/ Robert J. Mylod Jr. Chief Financial Officer April 29, 2003
- -------------------------------------- (Principal Financial Officer)
Robert J. Mylod Jr.
/s/ Paul A. Allaire Director April 29, 2003
- --------------------------------------
Paul A. Allaire
/s/ Ralph M. Bahna Director April 29, 2003
- --------------------------------------
Ralph M. Bahna
</Table>
23
<Page>
<Table>
<Caption>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Howard W. Barker, Jr. Director April 29, 2003
- --------------------------------------
Howard W. Barker, Jr.
/s/ Jeffrey E. Epstein Director April 29, 2003
- --------------------------------------
Jeffrey E. Epstein
/s/ Patricia L. Francy Director April 29, 2003
- --------------------------------------
Patricia L. Francy
/s/ Edmond Ip Director April 29, 2003
- --------------------------------------
Edmond Ip
/s/ Dominic Lai Director April 29, 2003
- --------------------------------------
Dominic Lai
/s/ Marshall Loeb Director April 29, 2003
- --------------------------------------
Marshall Loeb
/s/ Nicholas J. Nicholas, Jr. Director April 29, 2003
- --------------------------------------
Nicholas J. Nicholas, Jr.
/s/ Nancy B. Peretsman Director April 29, 2003
- --------------------------------------
Nancy B. Peretsman
/s/ Ian F. Wade Director April 29, 2003
- --------------------------------------
Ian F. Wade
</Table>
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<Page>
CERTIFICATIONS
I, Jeffery H. Boyd, certify that:
1. I have reviewed the amendment of the Annual Report (the "Amended Annual
Report") on Form 10-K of priceline.com Incorporated (the "Registrant");
2. Based on my knowledge, this Amended Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this Amended Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Amended Annual Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Amended Annual Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Amended Annual Report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Amended Annual Report (the "Evaluation
Date"); and
c. presented in this Amended Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the Registrant's auditors and
the audit committee of the Registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or
operation of internal controls which could adversely
affect the Registrant's ability to record, process,
summarize and report financial data and have
identified for the Registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a
significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated
in this Amended Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: April 29, 2003 /s/ Jeffery H. Boyd
---------------------------------------
Name: Jeffery H. Boyd
Title: President & Chief Executive Officer
25
<Page>
CERTIFICATIONS
I, Robert J. Mylod, certify that:
1. I have reviewed the amendment to the Annual Report (the "Amended Annual
Report") on Form 10-K of priceline.com Incorporated (the "Registrant");
2. Based on my knowledge, this Amended Annual Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respect to the period covered by this Amended Annual Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Amended Annual Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Amended Annual Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
Amended Annual Report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this Amended Annual Report (the "Evaluation
Date"); and
c. presented in this Amended Annual Report our conclusions about
the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the Registrant's auditors and
the audit committee of the Registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or
operation of internal controls which could adversely
affect the Registrant's ability to record, process,
summarize and report financial data and have
identified for the Registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves
management or other employees who have a
significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated
in this Amended Annual Report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: April 29, 2003 /s/ Robert J. Mylod
---------------------------------------
Name: Robert J. Mylod
Title: Chief Financial Officer
26