The Priceline Group
PRICELINE COM INC (Form: DEF 14A, Received: 04/29/2008 16:28:38)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A (Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

 

priceline.com Incorporated

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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priceline.com ®

 

April 28, 2008

 

Dear Stockholder:

 

You are cordially invited to attend the 2008 Annual Meeting of Stockholders (the “Annual Meeting”) of priceline.com Incorporated (the “Company”) to be held at 2:00 p.m. on Wednesday, June 4, 2008 at the DoubleTree Hotel, 789 Connecticut Avenue, Norwalk, Connecticut 06854.

 

This booklet includes the Notice of Annual Meeting and Proxy Statement.  The Proxy Statement provides information about priceline.com in addition to describing the business we will conduct at the meeting.

 

We hope you will be able to attend the Annual Meeting.  Whether or not you plan to attend the Annual Meeting, please mark, sign, date and return your proxy card in the enclosed envelope as soon as possible.  Your stock will be voted in accordance with the instructions you have given in your proxy card.  You may attend the Annual Meeting and vote in person even if you have previously returned your proxy card.  All stockholders who attend the meeting will be required to present valid picture identification, such as a driver’s license or a passport .  We hope you are able to join us on June 4.

 

 

 

Sincerely,

 

 

 

/s/ Ralph M. Bahna

 

 

 

Ralph M. Bahna

 

Chairman of the Board

 

 

IMPORTANT

 

                A proxy card is enclosed.  We urge you to complete and mail the card promptly in the enclosed envelope, which requires no postage if mailed in the United States.  Any stockholder attending the Annual Meeting may personally vote on all matters that are considered, in which event the signed and mailed proxy will be revoked.

 

IT IS IMPORTANT THAT YOU VOTE YOUR STOCK

 

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priceline.com Incorporated

800 Connecticut Avenue

Norwalk, Connecticut 06854

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON WEDNESDAY, JUNE 4, 2008

 

To the Stockholders of priceline.com Incorporated:

 

We hereby notify you that the Annual Meeting of Stockholders of priceline.com Incorporated (the “Company”) will be held on Wednesday, June 4, 2008 at 2:00 p.m. local time at the DoubleTree Hotel, 789 Connecticut Avenue, Norwalk, Connecticut 06854 for the following purposes:

 

·                   To elect eight Directors to hold office until the next annual meeting of stockholders or until their respective successors are elected and qualified.

 

·                   To approve amendments to the Company’s 1999 Omnibus Plan.

 

·                   To ratify the selection of Deloitte & Touche LLP as independent registered public accounting firm of the Company for our fiscal year ending December 31, 2008.

 

·                   To consider and vote upon a stockholder proposal concerning special stockholder meetings.

 

·                   To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.

 

These business items are more fully described in the Proxy Statement accompanying this Notice.

 

The Board of Directors has fixed the close of business on April 21, 2008 as the record date for identifying those stockholders entitled to notice of, and to vote at, this Annual Meeting and at any adjournment or postponement of this meeting.

 

 

 

By Order of the Board of Directors

 

 

 

/s/ Peter J. Millones

 

 

 

Peter J. Millones

 

Executive Vice President, General Counsel

 

and Corporate Secretary

 

Norwalk, Connecticut

 

April 28, 2008

 

 

All Stockholders are cordially invited to attend the meeting in person.  Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy as promptly as possible to ensure your representation at the meeting.  A return envelope (which is postage prepaid if mailed in the United States) is enclosed for that purpose.  Even if you have given your proxy, you may still vote in person if you attend the meeting.  Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain from the record holder a proxy issued in your name.

 



 

PRICELINE.COM INCORPORATED

PROXY STATEMENT

TABLE OF CONTENTS

 

PROXY STATEMENT

 

 

General

3

 

Solicitation

3

 

Voting Rights and Outstanding Shares; Approval

3

 

Revocability of Proxies

4

 

Internet Availability of Proxy Materials and Annual Report

4

 

How to Attend the Annual Meeting

4

 

 

 

PROPOSAL 1: ELECTION OF DIRECTORS

4

PROPOSAL 2:  AMENDMENTS TO THE PRICELINE.COM INCORPORTED 1999 OMNIBUS PLAN

7

CORPORATE GOVERNANCE AND BOARD MATTERS

15

 

The Board of Directors

15

 

Corporate Governance

15

 

Committees of the Board of Directors

17

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

20

 

Section 16(a) Beneficial Ownership Reporting Compliance

22

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

23

 

Executive Compensation Program Philosophy and Objectives

23

 

The Role of Management

23

 

The Role of the Compensation Consultant

24

 

Benchmarking

24

 

Components of Executive Compensation in 2007

25

 

Other Matters

34

 

Compensation Committee Report

36

 

 

 

COMPENSATION OF NAMED EXECUTIVE OFFICERS

37

 

Summary Compensation Table

37

 

Grants of Plan-Based Awards Table

38

 

Outstanding Equity Awards at 2007 Year-End Table

40

 

Option Exercises and Stock Vested Table

42

 

 

 

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL ARRANGEMENTS

42

 

 

 

POTENTIAL PAYMENTS UPON A CHANGE OF CONTROL AND/OR TERMINATION

48

 

 

 

2007 NON-EMPLOYEE DIRECTOR COMPENSATION AND BENEFITS

52

 

 

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

54

 

 

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

55

 

 

 

PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

57

 

 

 

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

58

 

 

 

AUDITOR INDEPENDENCE

60

 

 

 

PROPOSAL 4: STOCKHOLDER PROPOSAL CONCERNING SPECIAL STOCKHOLDER MEETINGS

61

STOCKHOLDER PROPOSALS

63

OTHER MATTERS

63

APPENDIX A

64

DIRECTIONS

77

 

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priceline.com Incorporated

800 Connecticut Avenue

Norwalk, Connecticut 06854

 

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON WEDNESDAY, JUNE 4, 2008

 

General

 

The enclosed proxy is solicited on behalf of the Board of Directors of priceline.com Incorporated (“we,” “priceline.com” or the “Company”) for use at the Annual Meeting of Stockholders to be held on Wednesday, June 4, 2008, at 2:00 p.m. local time (the “Annual Meeting”), or at any adjournment or postponement of this meeting, for the purposes set forth in this proxy statement and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at the DoubleTree Hotel, 789 Connecticut Avenue, Norwalk, Connecticut 06854.  We intend to mail this proxy statement and accompanying proxy card on or about May 6, 2008 to all stockholders entitled to vote at the Annual Meeting.

 

Solicitation

 

We will pay for the entire cost of proxy solicitations, including preparation, assembly, printing and mailing of proxy solicitation materials.  We will provide copies of solicitation materials to banks, brokerage houses, fiduciaries and custodians holding in their names shares of priceline.com common stock beneficially owned by others to forward these materials to the beneficial owners of common stock.  We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials.  Directors, officers or other regular employees of ours may also solicit proxies by telephone, telegram or in-person.  We will not additionally compensate directors, officers or other regular employees for these services.  We have retained Mellon Investor Services LLC, 44 Wall Street, New York, New York 10005 to aid in the solicitation of proxies from brokers, banks, nominees and other institutional holders.  A fee of $8,500 plus expenses will be paid to Mellon Investor Services LLC for these services.

 

Voting Rights and Outstanding Shares; Approval

 

Only stockholders of record at the close of business on April 21, 2008 will be entitled to notice of and to vote at the Annual Meeting.  At the close of business on April 21, 2008, 38,516,876 shares of common stock were outstanding and entitled to vote.  Each holder of record of common stock on April 21, 2008 will be entitled to one vote for each share held on all matters to be voted upon at the Annual Meeting.

 

The inspector of election appointed for the meeting will tabulate all votes and will separately tabulate affirmative and negative votes, abstentions and broker non-votes.  Stockholders who are present at the Annual Meeting in person or by proxy and who abstain and proxies relating to shares held in “street name” that are not voted (referred to as “broker non-votes”) will be treated as present for purposes of determining whether a quorum is present.  Abstentions will have the same effect as votes against the proposals and broker non-votes will not be counted for any purpose in determining whether the proposals have been approved.  A majority of the outstanding shares of common stock, present in person or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting.

 

The nominees for election to the Board of Directors who receive the greatest number of votes cast for the election of Directors by the shares of common stock present, in person or by proxy, and entitled to vote at the Annual Meeting shall be elected Directors.  Holders of common stock are not allowed to cumulate their votes in the election of Directors.  The affirmative vote of the holders of a majority of the shares present, in person or represented by proxy, and entitled to vote at the Annual Meeting will be required to approve the proposed amendments to the 1999 Omnibus Plan and ratify the selection of Deloitte & Touche LLP. The Board of Directors recommends a vote FOR each of the Board of Director’s nominees, FOR the proposed amendments to the 1999 Omnibus Plan, FOR ratification of Deloitte & Touche LLP as the Company’s

 

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independent registered public accounting firm and AGAINST the proposal concerning special stockholder meetings that was submitted by a stockholder.

 

Revocability of Proxies

 

Any person giving a proxy in response to this solicitation has the power to revoke it at any time before it is voted.  Proxies may be revoked by any of the following actions:

 

·             filing a written notice of revocation with our Corporate Secretary at our principal executive office (800 Connecticut Avenue, Norwalk, Connecticut 06854);

 

·             filing with our Corporate Secretary at our principal executive office (800 Connecticut Avenue, Norwalk, Connecticut 06854) a properly executed proxy showing a later date; or

 

·             attending the meeting and voting in person (attendance at the meeting will not, by itself, revoke a proxy).  Please note that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain from the record holder a proxy issued in your name.

 

Internet Availability of Proxy Materials and Annual Report

 

This proxy statement and our 2008 Annual Report are also available on our website at www.pricelineannualreport.com.  In accordance with the new rules of the SEC, we may deliver proxy materials for our 2009 Annual Meeting of Stockholders to you electronically, unless you specifically request a paper copy.  Should we decide to deliver proxy materials electronically, before our 2009 Annual Meeting of Stockholders, you will receive a notice in the mail which explains how to access the proxy materials over the Internet and also how to request a paper copy of the materials if you so choose.

 

How to Attend the Annual Meeting

 

If you plan to attend the meeting, in accordance with our security procedures, you will be asked to present a picture identification to enter the meeting.  Directions to the meeting can be found at the end of the proxy statement.

 

Proposal 1

 

Election of Directors

 

In accordance with the Company’s Bylaws, the Board of Directors has fixed the number of Directors constituting the entire Board of Directors at eight.  The Board of Directors has proposed that the following eight nominees be elected at the Annual Meeting, each of whom will hold office until his or her successor has been elected and qualified: Jeffery H. Boyd, Ralph M. Bahna, Howard W. Barker, Jr., Jeffrey E. Epstein, James M. Guyette, Nancy B. Peretsman, Craig W. Rydin and Jan L. Docter . Unless otherwise instructed, it is the intention of the persons named as proxies on the accompanying proxy card to vote shares represented by properly executed proxies for such nominees.  Although the Board of Directors anticipates that the eight nominees will be available to serve as Directors of the Company, if any of them should be unwilling or unable to serve, it is intended that the proxies will be voted for the election of such substitute nominee or nominees as may be designated by the Board of Directors.  If elected at the Annual Meeting, each of the nominees would serve until the 2009 annual meeting and until his or her successor is elected and has qualified, or until his or her earlier death, resignation or removal.  Each person nominated for election has agreed to serve if elected.  Management has no reason to believe that any nominee will be unable to serve.

 

The nominees for election to the Board of Directors who receive the greatest number of votes cast for the election of Directors by the shares of common stock present, in person or by proxy, shall be elected Directors.  Holders of common stock are not allowed to cumulate their votes in the election of Directors.  The Board of Directors recommends a vote FOR Proposal 1 .

 

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Set forth below is biographical information for each person nominated to serve as a Director of the Company.

 

Jeffery H. Boyd , age 51, 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.

 

Ralph M. Bahna , age 65, has served as a Director of priceline.com since July 1998 and Chairman of the Board of Directors since April 8, 2004.  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 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 61, has served as a Director of priceline.com since 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 currently serves as a member of the Board of Directors of Medco Health Solutions, Inc. where he chairs the Audit Committee and is a member of the Compensation Committee and a member of the Board of Directors of Chiquita Brands International, Inc., where he chairs the Audit Committee.  He has also served as Treasurer and a member of the Board of Directors of Senior Services of Stamford and served as President and a member of the Board of Directors of the Volunteer Center of Lower Fairfield County, Connecticut 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.

 

Jan L. Docter, age 58, has served as a Director of priceline.com since November 2007.  Mr. Docter currently serves as a consultant to several companies, including Booking.com B.V.  Mr. Docter has been self-employed since mid-2006.  Mr. Docter served as the interim Chief Financial Officer of Corio NV, a Dutch real estate investment company, from mid-2005 to mid-2006.  From 2003 to mid-2005, Mr. Docter was self-employed.  Prior to that, he was Chief Financial Officer of Getronics NV, a Dutch information and communications technology services company, from 1988 to 2003.  From 1985 to 1988, he was Chief Financial Officer of Centrafarm Group NV, a European producer and distributor of generic pharmaceuticals and other drugs.  From 1979 to 1984, he served in a variety of financial positions for the recording/entertainment company Polygram NV.  Mr. Docter also was an Industry Special Grants Officer for the Dutch Ministry of Economics Affairs.

 

Jeffrey E. Epstein , age 51, has served as a Director of priceline.com since April 2003.  Mr. Epstein is Executive Vice President and Chief Financial Officer of Oberon Media, Inc., a leading global provider of casual games and game platforms, which he joined in April 2007.  From June 2005 until its sale in March 2007, Mr. Epstein was Executive Vice President and Chief Financial Officer of ADVO, Inc., the largest direct mail media company in the United States.  Mr. Epstein was the Chairman of the Board, Acting President and Chief Executive Officer, or member of the Board of Directors of Revonet, Inc., a B2B marketing and database company from January 2004 through June 2005.  Mr. Epstein was the Senior Vice President and Chief Financial Officer of VNU’s Media Measurement and Information (MMI) Group, whose businesses include Nielsen Media Research, from March 2002 until December 2003.  From March 1998 to February 2002, Mr. Epstein held senior management positions with DoubleClick, including Chief Financial Officer.  Mr. Epstein is a member of the Board of Directors of MDC Partners Inc., a marketing communications company with over 30 businesses, including Crispin, Porter & Bogusky.

 

James M. Guyette , age 63, has served as a Director of priceline.com since November 2003.  Mr. Guyette is currently Chairman, President and Chief Executive Officer of Rolls-Royce North America Inc., a world-leading supplier of power systems to the global aerospace, defense, marine and energy markets, a position he has held since 1997.  Prior to joining Rolls-Royce, Mr. Guyette was Executive Vice President – Marketing and Planning for United Airlines.  He held a number of other senior roles in his nearly 30 years with the carrier.  Mr. Guyette serves on the boards of Rolls-Royce plc, International Aero Engines and PrivateBancorp Inc.  He is

 

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a member of the Boards of Directors of the Wings Club, the Smithsonian Museum – Air and Space Museum Board, the U.S. Chamber of Commerce, the Flight Safety Foundation, St. Mary’s College – Moraga CA – Board of Regents, and is a member of the Board of Governors for the Aerospace Industries Association.

 

Nancy B. Peretsman, age 54, has served as a Director of priceline.com since February 1999.  Since June 1995, she has been a Managing Director of Allen & Company LLC, an investment bank.  Prior to joining Allen & Company, Ms. Peretsman had been an investment banker since 1983 at Salomon Brothers Inc., where she was a Managing Director from 1990 to 1995.  Ms. Peretsman serves on the Board of Directors for several private companies.  She is a member of the Board of Trustees of The New School.  Ms. Peretsman is a Trustee of the Institute of Advanced Study, and a member of the Board of Trustees of Princeton University.  She is also a National Board Member of Teach for America.

 

Craig W. Rydin , age 56, has served as a Director of priceline.com since January 2005.  Mr. Rydin has been Chairman of the Board of Directors of The Yankee Candle Company, Inc. since February 2003, and its Chief Executive Officer and a director of Yankee Candle since April 2001.  Prior to joining Yankee Candle, Mr. Rydin was the President of the Away From Home food services division of Campbell Soup Company, a position he held from 1998 to 2001. From 1996 to 1998, Mr. Rydin served as the President of the Godiva Chocolatiers division of Campbell. Prior to his position with Godiva, Mr. Rydin held a number of senior management positions at Pepperidge Farm, Inc., also a part of Campbell.  Mr. Rydin serves on the board of Philips-Van Heusen (PVH – NYSE) and is a member of their compensation committee.

 

Set forth below is biographical information for executive officers of the Company (each an “executive officer”), other than executive officers who are nominated to serve as Directors of the Company and whose biographical information is set forth above.

 

Daniel Finnegan , age 46, has been the Company’s Senior Vice President, Controller and Chief Accounting Officer since October 2005.  Mr. Finnegan joined priceline.com in April 2004 as Vice President and Chief Compliance Officer.  Prior to joining priceline.com, Mr. Finnegan served as Chief Financial Officer for CS Technology, Inc., a consulting company, from October 2000 to April 2004 and as Chief Financial Officer for Coty US, Inc., a manufacturer of cosmetics and fragrances, from November 1996 to October 2000.

 

Brett Keller , age 40, 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 38, is 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.  Since 2003, Mr. Millones has been responsible for priceline.com’s U.S. human resources department.  From September 1995 through March 2000, Mr. Millones was with the law firm of Latham & Watkins.

 

Robert J. Mylod Jr. , age 41, 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 EverBank Financial Corp.

 

Stef Norden , age 39, has served as Chief Executive Officer of Booking.com B.V. since July 2003.  From February 2002 to June 2003, Mr. Norden co-owned Bookingsportal B.V., which was an affiliate of Bookings. From 1998 to 2000, Mr. Norden served as a director of BBV, an integrated optics company of which he was a co-founder.  In 2000, BBV merged with Scotland-based Kymata and was subsequently acquired by Alcatel.

 

Ronald V. Rose , age 57, 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

 

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led the development of many Internet initiatives within the Financial Information Services area and chaired the Internet Architecture Council.

 

Christopher L. Soder , age 48, has been President, North American Travel since February 2007.  Mr. Soder was Executive Vice President, Travel Services from March 2005 to February 2007 and had been Executive Vice President, Lodging and Vacation Products from July 2002 to March 2005.  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.

 

Proposal  2

 

Amendments to the priceline.com Incorporated 1999 Omnibus Plan

 

In February 1999, the Company adopted the priceline.com Incorporated 1999 Omnibus Plan (the “1999 Omnibus Plan” or the “Plan”).  Since the Plan’s adoption, awards have been made under the Plan to certain officers, other employees, consultants and directors of the Company or its subsidiaries from time to time.   The maximum number of shares of common stock currently reserved for the grant or settlement of awards under the 1999 Omnibus Plan is 7,895,833.  Assuming the maximum number of possible shares underlying outstanding performance share units are issued, as of March 31, 2008, there were no shares of common stock available for future grants under the 1999 Omnibus Plan.

 

The purpose of the 1999 Omnibus Plan is to increase stockholder value by aligning the selected participants’ interests with those of the Company, its affiliates and its stockholders through increased stock ownership, by assisting the Company in attracting, retaining and motivating the best available talent for the successful conduct of its business and, in some cases, by providing a performance incentive by conditioning the vesting of awards on the achievement of specified business goals.  The 1999 Omnibus Plan is structured to allow the Compensation Committee broad discretion in selecting criteria for the vesting of awards granted under the 1999 Omnibus Plan.

 

The 1999 Omnibus Plan is essential to the Company’s success in recruiting and retaining critical talent.  The Board of Directors believes that providing directors, officers and employees with equity incentives such as restricted stock units and performance share units will contribute substantially to the Company’s continued success by further aligning the interests of management with those of the Company’s stockholders. Additionally, the Company’s overall compensation philosophy places significant emphasis on equity compensation to reward, incentivize and retain management and key employees.  Providing employees with the opportunity to share in the success of priceline.com through equity participation has been a key component in the Company’s success, which could not have been achieved without the dedication and productivity of the Company’s employees.  As priceline.com continues to grow and return stockholder value, the Company will continue to be dependent upon recruiting and retaining employees that can perform at the highest levels.  It is critical that priceline.com continue to motivate its key employees as it seeks to attain future growth.

 

In addition, the constructive use of equity grants has increased the Company’s strategic flexibility and been a fundamental component of the Company’s recent growth.  For example, priceline.com’s ability to grant equity incentives to certain key employees of recently acquired businesses, including Booking.com Limited in 2004, Booking.com B.V. in 2005, the Agoda companies in 2007 and others, was critical to the Company’s ability to acquire such businesses.  In addition, priceline.com’s ability to grant performance-based equity incentives such as performance share units has been critical to retaining and motivating members of the senior management team of Booking.com B.V. and the Agoda companies.

 

In view of the critical importance of the 1999 Omnibus Plan, the Board of Directors proposes that the 1999 Omnibus Plan be amended to increase the maximum number of shares of common stock reserved for the grant or settlement of awards under the Plan from 7,895,833 to 9,195,833, subject to adjustment pursuant to the terms of the Plan.  In 2000, 2001 and 2005, the Plan was amended and restated to increase the number of shares available under the Plan, and we believe that the proposed increase in the number of shares available for grant at this time under the 1999 Omnibus Plan would not only support the Company’s continued growth, but also provide the Company with continued flexibility should the opportunity to consummate future strategic transactions present itself.  Accordingly, the Board of Directors recommends a vote FOR Proposal 2 .

 

7



 

The proposed amendments to the 1999 Omnibus Plan would make a variety of other changes to update and improve the Plan.  The principal changes are as follows:

 

·                   Confirm the Compensation Committee’s authority to delegate certain duties or powers with respect to the Plan to officers or agents of the Company;

·                   Specify that certain shares of common stock will not be added to the aggregate plan limit;

·                   Require stockholder approval of certain amendments to the Plan;

·                   Remove the Company’s ability to grant reload options under the Plan;

·                   Expressly prohibit the repricing of any “underwater” options; and

·                   Extend the term of the Plan for another ten years.

 

The amended and restated version of the Plan makes a number of other changes, including the removal of the provision that automatically granted options to Non-Employee Directors.  In addition, the amended and restated version of the Plan provides that any restricted stock or other stock-based award granted under the Plan that vests based only on the passage of time will vest at least three years from the date of grant, although vesting may occur earlier in certain specified circumstances, and that the Company may grant restricted stock or other stock-based awards that vest upon a different vesting schedule so long as such grant amounts do not exceed 10% of the maximum number of additional shares of common stock in the aggregate available under the Plan.  The proposed amendments also include a new set of provisions that require the Plan and any grants made under it to comply with Section 409A of the Internal Revenue Code and a new provision that explicitly provides for the Company to make any changes necessary for awards granted to non-U.S. participants.

 

A description of the 1999 Omnibus Plan, as it is proposed to be amended, follows.  This description is only a summary and is qualified in its entirety by the provisions of the 1999 Omnibus Plan, which is attached hereto as Appendix A. Terms not defined herein have the meanings given to such terms in the 1999 Omnibus Plan.  A majority of the outstanding shares of common stock present, in person or by proxy, at the Annual Meeting voting in favor of the proposed amendments to the 1999 Omnibus Plan is required for its approval.

 

Summary of priceline.com Incorporated 1999 Omnibus Plan

 

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

 

General

 

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

 

Stock Subject to the Plan

 

The maximum number of shares of common stock originally reserved for the grant or settlement of awards under the 1999 Omnibus Plan was 1,562,500.  On April 24, 2000, at the Company’s 2000 Annual Meeting, the Plan was amended to, among other things, increase the maximum number of shares of common stock reserved for the grant or settlement of awards under the Plan from 1,562,500 to 4,229,166.  On May 21, 2001, at the Company’s 2001 Annual Meeting, the Plan was amended to, among other things, increase the maximum number of shares of common stock reserved for the grant or settlement of awards under the Plan from 4,229,166 to 5,895,833.  On January 24, 2005, at the Company’s 2005 Special Meeting, the Plan was amended to, among other things, increase the maximum number of shares of common stock reserved for the grant or settlement of awards under the Plan from 5,895,833 to 7,895,833.

 

8


 

The maximum number of shares of common stock reserved for the grant or settlement of awards under the 1999 Omnibus Plan is currently 7,895,833 subject to adjustment as provided in the Plan. As described above, it is proposed that the maximum number of shares of common stock reserved for the grant or settlement of awards under the 1999 Omnibus Plan be increased to 9,195,833.

 

No more than 1,250,000 shares of stock may be awarded in respect of Options, no more than 416,666 shares of stock may be awarded in respect of Restricted Stock and no more than 833,334 shares of stock may be awarded in respect of Other Stock-Based Awards to a single individual in any given year during the life of the Plan.  Awards (either as options, restricted stock or other awards) will be made in a manner consistent with Section 162(m) of the Internal Revenue Code of 1986, generally referred to as the “Code.”  Shares of common stock acquired upon the exercise or settlement of awards may, in whole or in part, be authorized but unissued shares or shares that shall have been or may be reacquired by priceline.com in the open market, in private transactions or otherwise.  If any shares subject to an award are forfeited, canceled, exchanged or surrendered or if an award otherwise terminates or expires without a distribution of shares to the holder of such award, the shares of common stock with respect to such award will, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for awards under the 1999 Omnibus Plan.

 

In addition, the following shares of Stock shall not be added to the aggregate plan limit described above: (a) shares of Stock tendered in payment of the exercise price of an Option; (b) shares of Stock withheld by the Company to satisfy any tax withholding obligations; and (c) shares of Stock that are repurchased by the Company with Option proceeds.

 

Except as provided in an agreement evidencing the grant of an award, in the event that the Compensation Committee determines that any dividend or other distribution (whether in the form of cash, common stock, or other property), recapitalization, stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of holders of awards under the 1999 Omnibus Plan, then the Compensation Committee will make such equitable changes or adjustments as it deems necessary or appropriate to any or all of the:

 

·        number and kind of shares of common stock or other property (including cash) that may thereafter be issued in connection with awards,

 

·        number and kind of shares of common stock or other property, including cash, issued or issuable in respect of outstanding awards,

 

·        exercise price, grant price, or purchase price relating to any awards, provided that, with respect to incentive stock options, such adjustment shall be made in accordance with Section 424(h) of the Code,

 

·        performance criteria with respect to an award, and

 

·        individual limitations applicable to awards.

 

Administration

 

The 1999 Omnibus Plan is administered by the Compensation Committee, the composition of which is intended to satisfy the provisions of Section 162(m) of the Code and Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, which is generally referred to as the “Exchange Act”.  The Compensation Committee has the authority, among other things, to administer, and exercise all the powers and authorities either specifically granted to it under the 1999 Omnibus Plan or necessary or advisable in the administration of the 1999 Omnibus Plan, in its sole discretion, including, without limitation, the authority to grant awards; select grantees; determine the type, terms, conditions, restrictions and number of awards to be granted; make adjustments in the performance goals in recognition of unusual or non-recurring events affecting priceline.com or the financial statements of priceline.com, to the extent not inconsistent with Section 162(m) of the Code, if applicable, or in response to changes in applicable laws, regulations, or accounting principles; construe and interpret the 1999 Omnibus Plan and any award; prescribe, amend and rescind rules and regulations

 

9



 

relating to the 1999 Omnibus Plan; determine the terms and provisions of agreements evidencing awards; and make all other determinations deemed necessary or advisable for the administration of the 1999 Omnibus Plan.

 

The Compensation Committee may, in its absolute discretion, without amendments to the 1999 Omnibus Plan:

 

(1)     accelerate the date on which any option granted under the Plan becomes exercisable, waive or amend the operation of the Plan provisions respecting exercise after termination of employment or otherwise adjust any of the terms of such option,

 

(2)     accelerate the vesting or waive any condition imposed with respect to any restricted stock, and

 

(3)     otherwise adjust any of the terms applicable to any award.

 

The Compensation Committee may, to the extent permitted by law, also delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, such duties or powers as it may deem advisable, and the Compensation Committee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Board, the Committee or such person may have under the Plan.  However, in the case of awards that are intended to comply with Section 162(m) of the Code, officers may not grant awards to any persons subject to Section 162(m) of the Code.

 

Eligibility

 

All officers and directors (who are also employees of the Company), independent contractors, key employees and non-employee directors of the Company, its Subsidiaries or Affiliates are eligible to receive awards under the 1999 Omnibus Plan.

 

Awards Under the 1999 Omnibus Plan

 

Stock Options.  With respect to an option, the Compensation Committee shall specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary before the option or installments thereof will become exercisable.  The “option exercise price,” which is the purchase price per share payable upon the exercise of an option, will be established by the Compensation Committee; provided , however , that the option exercise price may be no less than the “fair market value” of a share of common stock on the date of grant, which is determined as the closing sales price of a share of common stock on the NASDAQ Stock Market for the date immediately preceding the date of grant on which there was a sale of common stock.  The option exercise price is payable by any one of the following methods or a combination thereof:

 

(1)     in cash or by personal check, certified check, bank cashier’s check or wire transfer;

 

(2)     in shares of common stock owned by the optionee for at least six months prior to the date of exercise and valued at their fair market value on the effective date of such exercise; or

 

(3)     in such other manner as the Compensation Committee may from time to time authorize.

 

The Board will not, without the further approval of the stockholders of the Company, authorize the amendment of any outstanding Option to reduce its exercise price.  Furthermore, no Option will be cancelled and replaced with an award having a lower exercise price, or cancelled in exchange for cash or other awards, without further approval of the stockholders of the Company.

 

Unless specified otherwise in an option agreement, an option will expire on the tenth anniversary of the date the option is granted.

 

Restricted Stock.  The Compensation Committee may authorize the Company to issue restricted shares of common stock to such persons, in such amounts, and subject to such terms and conditions, including the attainment of Performance Goals.  The amended and restated version of the 1999 Omnibus Plan provides that restricted shares of common stock with vesting conditions based solely on the passage of time shall vest at least

 

10



 

three years from the date of grant, although they may vest ratably during the three-year period and may vest earlier in case of death, disability, retirement, a change in control, a termination with “cause” or other special circumstances.  The Compensation Committee may grant restricted shares of common stock with a different vesting schedule so long as the aggregate amount of such award, taken together with similar other stock-based awards, does not exceed 10% of the maximum number of additional shares of common stock in the aggregate that are available under the Plan. Unless the Compensation Committee determines otherwise, termination of employment during the restricted period will result in the forfeiture by the participant of all shares still subject to restrictions.

 

Other Awards.  Other awards valued in whole or in part by reference to, or otherwise based on, shares of common stock may be granted either alone or in addition to other awards under the 1999 Omnibus Plan.  Subject to the provisions of the 1999 Omnibus Plan, the Compensation Committee has the sole and complete authority to determine the persons to whom and the time or times at which such other awards will be granted, the number of shares of common stock to be granted pursuant to such other awards and all other conditions of such other awards, including the attainment of Performance Goals.  Awards granted under this provision include performance share units.  The amended and restated version of the 1999 Omnibus Plan provides that such other awards with vesting conditions based solely on the passage of time shall vest at least three years from the date of grant, although they may vest ratably during the three-year period and may vest earlier in case of death, disability, retirement, a change in control, a termination with “cause” or other special circumstances.  The Compensation Committee may grant other stock-based awards with a different vesting schedule so long as the aggregate amount of such award, taken together with restricted stock awards, does not exceed 10% of the maximum number of additional shares of common stock in the aggregate that are available under the Plan.

 

Performance Goals.  In the case of restricted stock and other awards  intended to comply with Section 162(m) of the Code, the 1999 Omnibus Plan requires that the Compensation Committee establish “Performance Goals,” which may be based upon one or more of the following criteria: pre-tax or after-tax income; operating profit; return on equity, assets, capital or investment; earnings or book value per share; sales or revenues; operating expenses; and stock price appreciation; as the Compensation Committee may determine in its discretion.  Where applicable, the Performance Goals may be expressed in terms of attaining a specified level of the particular criteria or the attainment of a percentage increase or decrease in the particular criteria, and may be applied to one or more of the Company, a subsidiary or affiliate, or a division or strategic business unit of the Company, or may be applied to the performance of the Company relative to a market index, a group of other companies or a combination thereof, all as determined by the Compensation Committee.  The Performance Goals may include a threshold level of performance below which no vesting will occur, levels of performance at which specified vesting will occur, and a maximum level of performance at which full vesting will occur.  The Committee shall have the authority to make equitable adjustments to the Performance Goals in recognition of, among other things, unusual or non-recurring events affecting the Company or any subsidiary or affiliate or the financial statements of the Company or any subsidiary or affiliate, in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles.

 

One of the requirements of “performance-based compensation” for purposes of Section 162(m) of the Code is that the material terms of the plan’s performance goals must be approved by the company’s stockholders and that such terms be reapproved by the company’s stockholders every five years.  In order to make awards to a recipient who is, or is likely to become, a “covered employee” within the meaning of Section 162(m)(3) of the Code under a plan that will meet the requirements of Section 162(m), the 1999 Omnibus Plan’s performance goals are being submitted to the Company’s stockholders for reapproval.  In the event that such approval is not obtained, no awards subject to the stockholder reapproval requirement under Section 162(m) will be made after the Company’s 2010 Annual Meeting.

 

Compliance with Section 409A of the Code

 

To the extent applicable, it is intended that the 1999 Omnibus Plan and any grants made thereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the participants.  The 1999 Omnibus Plan and any grants made under the 1999 Omnibus Plan shall be administered in a manner consistent with this intent.  Any reference in the 1999 Omnibus Plan to Section 409A of the Code will also include any regulations or any other formal guidance

 

11



 

promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.

 

Neither a participant nor any of a participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under the 1999 Omnibus Plan and grants under the 1999 Omnibus Plan to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a participant or for a participant’s benefit under the 1999 Omnibus Plan and grants under the 1999 Omnibus Plan may not be reduced by, or offset against, any amount owing by the participant to the Company or any of its subsidiaries or other affiliates.

 

If, at the time of a participant’s separation from service (within the meaning of Section 409A of the Code) (1) the participant shall be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (2) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the first business day of the seventh month after such six-month period.

 

Notwithstanding any provision of the 1999 Omnibus Plan and grants under the 1999 Omnibus Plan to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to the 1999 Omnibus Plan and grants under the 1999 Omnibus Plan as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code.  In any case, a participant shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on him or her for his or her account in connection with the 1999 Omnibus Plan and grants under the 1999 Omnibus Plan (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its subsidiaries or other affiliates shall have any obligation to indemnify or otherwise hold the participant harmless from any or all of such taxes or penalties.

 

Certain Federal Income Tax Consequences

 

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

 

Non-Qualified Stock Options.   An optionee will not recognize any taxable income upon the grant of a non-qualified stock option.  Upon exercise of a non-qualified stock option by a domestic employee, the excess of the fair market value of the common stock on the exercise date over the option exercise price will be taxable as compensation income to the optionee and will be subject to applicable withholding taxes.  The optionee’s tax basis for the common stock received pursuant to the exercise of a non-qualified stock option will equal the sum of the compensation income recognized and the exercise price.

 

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

 

Incentive Stock Options.     An optionee will not recognize any taxable income at the time of grant or timely exercise of an incentive stock option unless the optionee is subject to alternative minimum tax described below.  Priceline.com will not be entitled to a corporate tax deduction with respect to such grant or exercise.

 

If the optionee holds the stock acquired upon exercise of an incentive stock option for more than one year after the date the option was exercised and for more than two years after the date the option was granted, the optionee generally will realize long-term capital gain or loss (rather than ordinary income or loss) upon disposition of the incentive stock option.  This gain or loss will be equal to the difference between the amount realized upon such disposition and the amount paid for shares underlying the incentive stock option.

 

If such sale or exchange takes place within two years after the date of grant of the incentive stock option or within one year from the date of transfer of the incentive stock option shares to the optionee, such sale

 

12



 

or exchange will generally constitute a “disqualifying disposition” of such shares that will have the following results: any excess of (a) the lesser of (i) the fair market value of the shares at the time of exercise of the incentive stock option and (ii) the amount realized on such disqualifying disposition of the shares over (b) the option exercise price of such shares, will be ordinary income to the optionee.   Any further gain or loss after the date of exercise generally will be treated as capital gain or loss.   A disposition of incentive stock option shares for this purpose includes not only a sale or exchange, but also a gift or other transfer of legal title (with certain exceptions).

 

Alternative Minimum Tax.   Generally, the difference between the fair market value of stock purchased by exercise of an incentive stock option (generally measured as of the date of exercise) and the amount paid for that stock upon exercise of the incentive stock option is an adjustment to income for purposes of the alternative minimum tax.  An alternative minimum tax adjustment applies unless a “disqualifying disposition” of shares occurs in the same calendar year as exercise of the incentive stock option.   In general, the alternative minimum tax (imposed to the extent it exceeds the taxpayer’s regular tax) is 26% of an individual taxpayer’s alternative minimum taxable income for alternative minimum taxable income up to $175,000 and 28% thereafter.  Alternative minimum taxable income is determined by adjusting regular taxable income for certain items, increasing that income by certain tax preference items and reducing this amount by the applicable exemption amount.

 

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

 

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

 

Other Types Of Awards.   The tax-treatment of any other stock-based award will vary depending on the terms of the Awards.

 

Tax Consequences to Company or Subsidiary or Affiliate.   In general, to the extent that a participant recognizes ordinary income in the circumstances described above, the Company or subsidiary or affiliate for which the participant performs services will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code.

 

Benefits to Named Executive Officers and Others

 

Because the grant of awards pursuant to the Plan will be within the discretion of the Compensation Committee, it is not possible to determine the awards that will be made under the Plan.

 

The following table sets forth with respect to each individual and group listed below (i) the number of shares of common stock issuable pursuant to stock options granted under the Plan, (ii) the number of shares of restricted stock and restricted stock units awarded under the Plan and (iii) the “target” number of performance share units awarded under the Plan, in each case since the Plan’s inception in 1999 and as of March 31, 2008.  The table only includes awards made under the Plan, it does not include any grants made under any other equity plans.

 

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Name

 

Option Shares
Granted Since
Adoption of Plan

 

Restricted Stock
and Restricted
Stock Units
Granted Since
Adoption of Plan

 

Performance Share
Units Granted Since
Adoption of Plan(1)

 

Jeffery H. Boyd, President
and Chief Executive Officer

 

704,165

 

341,333

 

96,038

 

Robert J. Mylod Jr.,
Chief Financial Officer

 

162,499

 

65,333

 

55,548

 

Stef Norden,
CEO Booking.com B.V.

 

65,806

 

19,000

 

31,108

 

Christopher L. Soder,
President, North American Travel

 

245,832

 

40,333

 

17,098

 

Peter J. Millones,
Executive Vice President,
General Counsel

 

141,665

 

30,666

 

17,598

 

All current executive officers as a group

 

1,819,962

 

636,998

 

239,801

 

Current non-employee directors

 

153,995

 

44,040

 

5,000

 

All current employees, including all current officers who are not executive officers, as a group

 

1,560,577

 

478,254

 

365,006

 

 


(1)            This column represents the “target” number of shares underlying performance share units. The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the applicable performance period.

 

Equity Compensation Plans

 

The table below presents information as of December 31, 2007 on the company’s equity plans:

 

Plan Category

 

Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights (1)(2)

 

Weighted-average
exercise price of
outstanding
options, warrants
and rights

 

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in the first
column)

 

 

 

 

 

 

 

 

 

Equity Compensation plans approved by security holders

 

 

 

 

 

 

 

1999 Omnibus Plan

 

1,840,306

 

$

78.40

 

383,858

 

1997 Plan

 

20,945

 

$

24.41

 

0

 

 

 

 

 

 

 

 

 

Equity Compensation plans not approved by security holders

 

 

 

 

 

 

 

2000 Plan (3)

 

43,749

 

$

17.51

 

31,172

 

 

 

 

 

 

 

 

 

Total:

 

1,905,000

 

$

76.41

 

415,030

 

 


(1)                                   Excludes an aggregate of 1,712,704 unvested shares of restricted stock, unvested restricted stock units and unvested performance share units outstanding at December 31, 2007.  With respect to performance share units, this table assumes that the maximum number of shares underlying the performance share units will be issued at the end of the relevant performance periods. The actual

 

14



 

number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the applicable performance periods.

 

(2)                                   As of March 31, 2008:  (a) the aggregate number of stock options outstanding was 1,832,262, with a weighted average exercise price of $78.55 and a weighted average remaining term of 4.16 years;  (b) an aggregate of 2,056,934 unvested shares of restricted stock, unvested restricted stock units and unvested performance shares were outstanding.  With respect to performance share units, this assumes that the maximum number of shares underlying the performance share units will be issued at the end of the relevant performance periods.  The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the applicable performance periods; (c) assuming the maximum number of shares underlying outstanding performance share units is issued, there were no shares remaining available for grant under the 1999 Omnibus Plan; and (d) the number of shares of priceline.com common stock outstanding was 38,514,267.

 

(3)                                   The 2000 Plan was adopted in connection with the company’s turnaround in 2000 and the company no longer issues equity awards under the 2000 Plan.

 

Corporate Governance and Board Matters

 

The Board of Directors

 

The Board of Directors is elected by and accountable to the stockholders and is responsible for the strategic direction, oversight and control of priceline.com.  Regular meetings of the Board of Directors are generally held at least five times per year and special meetings are scheduled when necessary.  Five members of the Company’s Board of Directors, representing a majority of directors nominated for re-election, are “independent,” as determined by priceline.com’s Board of Directors, based on the NASDAQ Stock Market’s listing rules.  The independent directors conduct at least two regularly scheduled executive sessions each year.   The Board of Directors held eight meetings in 2007.  All directors attended at least 75% of the meetings of the Board of Directors and the Board committees of which they were members during 2007.  The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee and has adopted written charters for each of these committees.

 

Corporate Governance

 

Corporate Governance Principles .  The Company operates under corporate governance principles that are designed to maximize long-term stockholder value, align the interests of the Board of Directors and management with those of priceline.com’s stockholders and promote high ethical conduct among priceline.com’s directors and employees.  A copy of the Company’s Corporate Governance Principles is available on the Investor Relations section of the Company’s website (www.priceline.com) under the tab “Corporate Governance.”  The Board of Directors’ current corporate governance principles include the following:

 

·                   A majority of the Board of Directors will consist of directors who are neither officers nor employees of the Company or its subsidiaries (and have not been officers or employees within the previous three years), do not have a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and who are otherwise “independent” under the rules of the Nasdaq Stock Market, Inc.

 

·                   At least annually, the Nominating and Corporate Governance Committee will review and concur on a succession plan, developed by management, addressing the policies and principles for selecting a successor to the Chief Executive Officer, both in an emergency situation and in the ordinary course of business.

 

·                   The Board of Directors and each committee have the power to hire independent legal, financial and other advisors as they may deem necessary, at priceline.com’s expense.

 

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·                   The independent directors will have at least two regularly scheduled executive sessions each year, and more frequently as necessary or desirable, in conjunction with regularly scheduled meetings of the Board, at which only independent directors are present.

 

·                   The Compensation Committee meeting in executive session will evaluate the performance of the Chief Executive Officer and the Company against the Company’s goals and objectives and will determine, or recommend to the Board of Directors for determination, the compensation of the Chief Executive Officer.

 

·                   Continuing education of directors is encouraged and financed, as necessary, and will be reviewed by the Nominating and Corporate Governance Committee.

 

Director Independence .  The Nominating and Corporate Governance Committee recommended to the Board of Directors, and the Board of Directors determined that each of Ralph M. Bahna, Howard W. Barker, Jr., Jeffrey E. Epstein, James M. Guyette and Craig W. Rydin is “independent” within the meaning of the rules of the NASDAQ Stock Market, Inc. and, in the case of the Audit Committee members, the rules of the Securities and Exchange Commission as well.  In connection with the independence determination for Mr. Bahna, the Board of Directors considered the ordinary-course transactions involving the supply of hotel rooms to priceline.com customers by Club Quarters, an international group of hotels, of which Masterworks Development Corporation, controlled by Mr. Bahna, is a minority stakeholder.  The Board of Directors concluded that these transactions did not impair Mr. Bahna’s independence because, among other reasons, the amounts in question were considerably below the thresholds set forth in the NASDAQ Stock Market, Inc.’s independence standards.

 

Director Nominees .    The Nominating and Corporate Governance Committee identifies, evaluates and recommends director candidates to the Board of Directors.  In identifying and recommending nominees for positions on the Board of Directors, the Nominating and Corporate Governance Committee places primary emphasis on the criteria set forth under “Selection of Directors — Nominations and Appointments” in our Corporate Governance Principles, namely: (i) highest personal and professional ethics and integrity; (ii) relevant business, professional or managerial skills and experience (including team-building and communication skills) useful to the oversight of the Company’s business; (iii) demonstrated leadership skills through involvement in business, professional, charitable or civic affairs; (iv) current knowledge and contacts in the communities in which the Company does business and in the Company’s industry or other industries relevant to the Company’s business; (v) ability and willingness to commit adequate time to fulfilling Board and committee duties and responsibilities; (vi) ability and willingness to exercise independent judgment, ask probing questions and express tough opinions; (vii) the fit of the individual’s expertise, skills, knowledge, experience and personality with those of other directors and potential directors in building a Board of Directors that is effective, collegial and responsive to the needs of the Company; and (viii) diversity of viewpoints, backgrounds, experiences and other demographics.

 

The Nominating and Corporate Governance Committee does not set specific, minimum qualifications that nominees must meet in order for the committee to recommend them to the Board of Directors, but rather believes that each nominee should be evaluated based on his or her individual merits, taking into account the needs of priceline.com and the composition of the Board of Directors. Members of the Nominating and Corporate Governance Committee discuss and evaluate possible candidates in detail, and suggest individuals to explore in more depth.  Outside consultants may also be employed to help in identifying candidates.  Once a candidate is identified whom the committee wants to seriously consider and move toward nomination, the Chairperson of the Nominating and Corporate Governance Committee, or his or her designee, enters into a discussion with that nominee. The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders. The policy adopted by the Nominating and Corporate Governance Committee provides that nominees recommended by stockholders are given appropriate consideration in the same manner as other nominees recommended by the Nominating and Corporate Governance Committee. Stockholders who wish to submit nominees for director for consideration by the Nominating and Corporate Governance Committee for election at the company’s 2009 Annual Meeting of stockholders may do so by submitting in writing such nominees’ names, in compliance with the procedures and along with the other information required by our By-laws, to the Secretary of our Board of Directors, c/o Office of the General Counsel, priceline.com Incorporated, 800 Connecticut Avenue, Norwalk, Connecticut, no earlier than March 6, 2009 and no later than April 5, 2009.

 

Communications with the Board of Directors Stockholders may contact any of the Company’s directors, a committee of the Board of Directors, the Board of Directors’ non-employee directors as a group, or

 

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the Board of Directors as a whole by writing to them c/o Office of the General Counsel, priceline.com Incorporated, 800 Connecticut Avenue, Norwalk, Connecticut 06854.  Stockholders should indicate how many shares of priceline.com common stock they own as of the date of their communication.  Communications received in this manner will be handled in accordance with procedures developed and approved by a majority of the Company’s “independent” directors.

 

Attendance at Annual Meetings .  The Company expects directors to make every effort to attend the Company’s annual meeting of stockholders.  With the exception of Jan L. Docter, who joined the board effective November 1, 2007, all of the current members of the Company’s Board of Directors attended priceline.com’s 2007 annual meeting of stockholders in June 2007.

 

Code of Ethics .  The Company has adopted a Code of Business Conduct and Ethics and requires all employees to adhere to the Code of Business Conduct and Ethics in discharging their work-related responsibilities.  A copy of the Company’s Code of Business Conduct and Ethics is available on the Investor Relations/Corporate Governance section of priceline.com’s Web site located at www.priceline.com.  There were no amendments to or waivers of the Code of Business Conduct and Ethics in 2007.

 

Rights Plan Policy .  The Company does not have a stockholder rights plan, sometimes refered to as a “poison pill.”

 

Committees of the Board of Directors

 

Audit Committee .  The Audit Committee of the Board of Directors consists of Howard W. Barker, Jr., Jeffrey E. Epstein and Craig W. Rydin.  Mr. Barker is Chairman of the Audit Committee.  Each member of the Audit Committee is an independent director as determined by priceline.com’s Board of Directors, based on the NASDAQ Stock Market’s listing rules.  Each member of the committee also satisfies the Securities and Exchange Commission’s additional independence requirements for members of audit committees.  In addition, the Company’s Board of Directors has determined that Mr. Barker is an “audit committee financial expert,” as defined by SEC rules.  The Audit Committee’s responsibilities include, among other things, reviewing priceline.com’s financial statements and accounting practices, overseeing the Company’s relationship with the independent registered public accounting firm, including making all decisions relating to appointing, determining funding for and overseeing the independent registered public accounting firm, overseeing internal audit, and reviewing the results and scope of the audit and other services provided by priceline.com’s independent registered public accounting firm.  A copy of the Audit Committee’s Charter is available on the Investor Relations section of the Company’s website (www.priceline.com) under the tab “Corporate Governance.”  The Audit Committee met eight times in 2007.

 

Compensation Committee .  The Compensation Committee of the Board of Directors consists of Messrs. Jeffrey E. Epstein, Craig W. Rydin and James M. Guyette.  Mr. Epstein is Chairman of the Compensation Committee.  Each member of the Compensation Committee is an independent director as determined by priceline.com’s Board of Directors, based on the NASDAQ Stock Market’s listing rules.  The Compensation Committee’s responsibilities include, among other things, setting, or recommending to the Board of Directors for determination, the salary of the Company’s Chief Executive Officer, reviewing and approving the compensation of all other “executive officers” of the Company, administering priceline.com’s employee benefit plans and making recommendations to the Board of Directors with respect to the Company’s incentive compensation plans.  The Compensation Committee has delegated limited authority to the Chief Executive Officer, Chief Financial Officer and the General Counsel to determine whether and to what extent certain restricted stock and restricted stock and performance share units held by non-executive officers may be settled, canceled, forfeited, or surrendered pursuant to their terms (for instance, the Chief Executive Officer has the authority to determine whether an employee’s termination was, pursuant to the terms of a relevant agreement, “with” or “without cause”).   A copy of the Compensation Committee’s Charter is available on the Investor Relations section of the Company’s website (www.priceline.com) under the tab “Corporate Governance.”

 

The Compensation Committee meets as often as necessary to perform its duties and responsibilities.  The Compensation Committee met eight times in 2007.  Mr. Epstein works with the Chief Executive Officer and General Counsel to establish meeting agendas.  The Compensation Committee typically meets with the Chief Executive Officer, Chief Financial Officer and General Counsel and with outside advisors.  The Compensation Committee also regularly meets in executive session without management following each meeting.

 

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The Compensation Committee receives and reviews materials in advance of each meeting.  These materials include information that management believes will be helpful to the Compensation Committee as well as materials that the Compensation Committee has specifically requested.  Management plays a significant role in the compensation planning process.  The most significant aspects of management’s role are:

 

·                   Evaluating employee performance (other than the Chief Executive Officer’s);

·                   Helping to establish business performance targets and objectives (other than the Chief Executive Officer’s);

·                   Recommending salary levels, bonus targets/amounts and equity awards (other than the Chief Executive Officer’s); and

·                   Helping to design the structure, terms and conditions of bonus plans and equity instruments.

 

The Compensation Committee has the authority to appoint and dismiss its advisors and compensation consultants and approve their compensation.  These advisors report directly to the Compensation Committee. The Compensation Committee has retained Mercer Inc. (formerly Mercer Human Resource Consulting Inc.) (“Mercer”) as its independent compensation consultant.  While Mercer reported directly to the Compensation Committee, the Compensation Committee authorized Mercer to communicate and work with management during the compensation planning process.

 

With respect to the specific 2007 compensation initiatives detailed in the Compensation Discussion and Analysis of this proxy statement (i.e., 2007 base salaries, bonus targets (and subsequent payouts) and equity grants), the compensation planning process started in October 2006.  Between the beginning of October 2006 and the end of February 2007, the Compensation Committee met on six occasions to review and discuss executive compensation matters.  In February 2007, the Compensation Committee met to discuss senior executive compensation with the Board of Directors and to formally review and have the Board Directors approve the proposed compensation of the Chief Executive Officer.

 

In October 2006, the Compensation Committee met to discuss and plan the steps to be taken during the compensation planning process over the following months.  The Compensation Committee settled on, among other things, Mercer’s and senior management’s role in the planning process and agreed that  management (primarily the Chief Financial Officer and General Counsel) would act as the primary liaisons with Mercer to provide necessary information for Mercer’s review and discuss and review compensation proposals before formal presentation to the Compensation Committee.  The Compensation Committee met three times in January 2007, at first to evaluate and discuss the general structure or underlying philosophy of, among other things, the 2007 bonus plan and equity grants, and subsequently to discuss more detailed aspects of the plans, from individual bonus targets and equity grants, to specific funding and vesting provisions.  The Compensation Committee met in February 2007 to review and give final approval to the initiatives related to the 2007 planning process.

 

During the compensation process, the General Counsel and, to a lesser extent, the Chief Financial Officer, interacted often with Mercer outside the context of Compensation Committee meetings to discuss a range of issues, from specific compensation proposals for executives, the structure of equity grant instruments (i.e., the structure of the performance share units described in the Compensation Discussion and Analysis of this proxy statement) or proposed funding mechanisms or structure of a bonus plan.

 

In connection with the specific recommendations on the design of the 2007 bonus plan and 2007 equity grants (i.e., number of shares/units to be granted, specific performance thresholds, etc.), the Chief Executive Officer developed recommendations based on guidance given by the Compensation Committee.  Those specific recommendations were reviewed with Mercer, and revised accordingly, if appropriate, before presentation and detailed review by the Compensation Committee.  The final elements of the 2007 bonus plan and equity grants were the result of an iterative process and aspects of each were refined and changed during the process as a result of the Compensation Committee’s direction.

 

In early 2008, as described more fully in the Compensation Discussion and Analysis of this proxy statement, the Compensation Committee determined funds to be allocated to the 2007 bonus pool and amounts to be paid to individual executive officers.

 

Additional information on the Compensation C ommittee’s consideration of executive compensation is addressed in the Compensation Discussion and Analysis in this proxy statement.

 

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Nominating and Corporate Governance Committee .  The Nominating and Corporate Governance Committee consists of Messrs. James M. Guyette, Howard W. Barker, Jr. and Ralph M. Bahna.  Mr. Guyette is Chairman of the Nominating and Corporate Governance Committee.  Each member of the Nominating and Corporate Governance Committee is an independent director as determined by priceline.com’s Board of Directors, based on the NASDAQ Stock Market’s listing rules.  The Nominating and Corporate Governance Committee’s primary purposes are to:  (a) identify individuals believed to be qualified to become members of the Board of Directors, consistent with criteria approved by the Board of Directors, and to select, or recommend to the Board of Directors, the nominees to stand for election as directors at the annual meeting of stockholders; (b) identify members of the Board of Directors qualified to fill vacancies on any committee of the Board of Directors (including the Nominating and Corporate Governance Committee) and to recommend that the Board of Directors appoint the identified member or members to the respective committee; (c) assess whether candidates to join the Board of Directors would be “independent” under the rules of the NASDAQ Stock Market, Inc.; (d) establish procedures to receive prompt notification of changes in a director’s circumstances that may affect his or her qualifications or independence as a director and review such information and make recommendations as deemed appropriate; (e) develop and recommend to the Board of Directors a set of corporate governance principles applicable to the Company, and to review and consider the effectiveness of those principles at least once a year; (f) review, at least annually, priceline.com’s Code of Business Conduct and Ethics and, if appropriate, make recommendations to the Board of Directors of suggested modifications or changes;  (g) assist management in the preparation of the disclosure in priceline.com’s proxy statement regarding the operations of the Nominating and Corporate Governance Committee and (h) designing a process for the Board to conduct a self-evaluation.

 

A copy of the Nominating and Corporate Governance Committee’s Charter is available on the Investor Relations section of the Company’s website (www.priceline.com) under the tab “Corporate Governance.”   The Nominating and Corporate Governance Committee met five times in 2007.  The Nominating and Corporate Governance Committee approved and recommended to the Board of Directors the eight director nominees currently standing for re-election at the Annual Meeting.

 

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Security Ownership of

Certain Beneficial Owners and Management

 

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, 2008 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 of priceline.com; (3) priceline.com’s Chief Executive Officer, Chief Financial Officer and each of its other three most highly compensated executive officers; and (4) all executive officers and Directors as a group.  The percentage of shares owned is based on 38,514,267 shares outstanding as of March 31, 2008.

 

 

 

SHARES BENEFICIALLY OWNED (a)

 

NAME OF BENEFICIAL OWNER

 

NUMBER

 

PERCENT

 

Jeffery H. Boyd (b)

 

613,867

 

1.574

%

Ralph M. Bahna (c)

 

104,624

 

 

*

Howard W. Barker, Jr.(d)

 

14,000

 

 

*

Jan L. Docter (e)

 

17,500

 

 

*

Jeffrey E. Epstein (f)

 

28,666

 

 

*

James M. Guyette (g)

 

26,333

 

 

*

Nancy B. Peretsman (h)

 

157,994

 

 

*

Craig W. Rydin (i)

 

22,000

 

 

*

Robert J. Mylod Jr. (j)

 

261,496

 

 

*

Stef Norden (k)

 

36,460

 

 

*

Peter J. Millones (l)

 

63,441

 

 

*

Chris Soder (m)

 

79,591

 

 

*

FMR LLC (n)

 

4,518,706

 

11.733

%

Stephen F. Mandel, Jr. (o)

 

3,122,903

 

8.108

%

Viking Global Performance LLC (p)

 

2,027,200

 

5.264

%

PAR Investment Partners, L.P. (q)

 

2,534,802

 

6.581

%

Prince Alwaleed Bin Talal Abdulaziz Al Saud (r)

 

1,993,567

 

5.175

%

All directors and executive officers as a group (15 persons) (s)

 

1,651,134

 

4.168

%

 


*   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. Stock options that are currently exercisable or exercisable within 60 days after March 31, 2008 and restricted stock units that vest by their terms within 60 days after March 31, 2008, are deemed to be outstanding and to be beneficially owned by the person holding such stock options and/or restricted stock units 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.  Shares of restricted stock are deemed to be issued and outstanding.  Performance share units issued to each of the named executive officers are not considered issued or outstanding, unless distributable within 60 days.

 

(b)    Includes (1) 166 shares held by an immediate family member of Mr. Boyd, of which Mr. Boyd disclaims beneficial ownership; and (2) 487,499 shares that Mr. Boyd has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(c)    Includes 50,873 shares that Mr. Bahna has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(d)    Includes 8,000 shares that Mr. Barker has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(e)    Includes 17,500 of priceline.com Incorporated stock held by Doomstoorn B.V., of which Mr. Docter is the sole shareholder.

 

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(f)     Includes 22,666 shares that Mr. Epstein has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(g)    Includes 19,333 shares that Mr. Guyette has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(h)    Does not include: (1) 1,301 shares held in custodial accounts for the benefit of certain members of Ms. Peretsman’s family; and (2) 95,320 shares held by a foundation for which Ms. Peretsman serves as a trustee.  Includes 32,873 shares that Ms. Peretsman has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.  Allen & Company LLC disclaims beneficial ownership of the shares and options referred to above.

 

(i)     Includes 16,000 shares that Mr. Rydin has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(j)     Includes 147,499 shares that Mr. Mylod has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(k)    Includes 33,261 shares that Mr. Norden has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(l)     Includes 44,445 shares that Mr. Millones has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(m)   Includes 62,333 shares that Mr. Soder has the right to acquire under stock options currently exercisable or exercisable within 60 days after March 31, 2008.

 

(n)    Based solely on a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2008 by FMR LLC and Edward C. Johnson 3d.  FMR LLC lists its address as 82 Devonshire Street, Boston, Massachusetts 02109.

 

(o)    Based solely on a Schedule 13G filed with the Securities and Exchange Commission on February 14, 2008 by Lone Spruce, L.P., Lone Balsam, L.P., Lone Sequoia, L.P., Lone  Cascade, L.P., Lone Sierra, L.P., Lone Pine Associates LLC, Lone Pine Members LLC, Lone Pine Capital LLC and Stephen F. Mandel, Jr., each of which lists its address as Two Greenwich Plaza, Greenwich, Connecticut 06830.  Mr. Mandel is the Managing Member of Lone Pine Associates LLC, which is the beneficial owner of 257,839 shares of the Company’s common stock, Lone Pine Members LLC, which is the beneficial owner of 800,535 shares of the Company’s common stock, and Lone Pine Capital LLC, which is the beneficial owner of 2,064,529 shares of the Company’s common stock.

 

(p)    Based solely on a Schedule 13G filed with the Securities and Exchange Commission on February 22, 2008, by Viking Global Performance LLC, Viking Global Investors LP, Viking Global Equities LP, Viking Global Equities II LP, O. Andreas Halvorsen, David C. Ott, Thomas W. Purcell,  Jr. and Daniel J. Cahill.  Viking Global Performance LLC lists its address as 55 Railroad Avenue, Greenwich, Connecticut 06850.

 

(q)    Based solely on a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2008 by PAR Investment Partners, L.P., PAR Group L.P. and PAR Capital Management Inc.  PAR Investment Partners, L.P. lists its address as One International Place, Suite 2401, Boston, MA  02110.

 

(r)     Based solely on a Schedule 13G filed with the Securities and Exchange Commission on September 28, 2001 (and after giving effect to the June 2003 one-for-six stock split) 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.

 

(s)    Includes shares beneficially owned by all Directors and executive officers of priceline.com, including the named executive officers, as a group.

 

21



 

The address of all Directors, officers and other individual stockholders (except as otherwise set forth above) is 800 Connecticut Avenue, Norwalk, Connecticut 06854.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, 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 SEC 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 SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

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, 2007, each of our officers, directors and greater than ten percent beneficial owners complied with the Section 16(a) filing requirements.

 

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Compensation Discussion and Analysis

 

Executive Compensation Program Philosophy and Objectives

 

Priceline.com’s goal is to be the leading worldwide on-line hotel reservation service.  To achieve this goal, it is critical that priceline.com be able to attract, motivate and retain highly talented individuals at all levels of the organization.  All of priceline.com’s compensation and benefits programs described below are designed to accomplish these objectives and, in turn, enhance long-term stockholder value.

 

The Compensation Committee of the priceline.com Board of Directors (the “Committee”) believes that total compensation should be based on the level of job responsibility, individual performance and company performance.  As employees progress to higher levels in priceline.com, an increasing proportion of their pay should be linked to priceline.com’s performance, because they are more able to affect the company’s results.  The Committee believes that compensation should reflect the value of the job in the marketplace and, as discussed in more detail below, generally tries to set total “target” compensation for the named executive officers at or below “market” levels of comparative pay.  Because the Committee believes that compensation should reward performance, a significant percentage of executive officer compensation is “at risk” — in other words, if performance targets are not met, payouts are reduced or eliminated.  However, the Committee also recognizes that the company’s compensation program must motivate high-achieving individuals even during periods of temporary downturns in company performance and, as a result, seeks to ensure that there is a balance between performance elements and retention elements.  Ultimately, priceline.com’s compensation program for executive officers and employees should foster long-term focus, which the Committee believes is required for success in the rapidly evolving on-line travel industry.

 

Different elements of the priceline.com compensation program are designed to engender different behaviors:

 

·       Base salary and benefits are designed to attract and retain employees over time.

 

·       Award opportunities under priceline.com’s annual performance based bonus plan are designed to focus employees on priceline.com’s financial and other objectives for a particular year, the important goals for departments, such as Hotel, Rental Car and Customer Service, and individual objectives in connection with each executive’s individual performance goals.

 

·       Long-term incentives - performance share units (“PSUs”), restricted stock and restricted stock units - under the stockholder-approved priceline.com 1999 Omnibus Plan, focus executives’ efforts on the areas that the Committee believes are necessary to ensure the long-term success of priceline.com, as reflected in, among other things, increases to priceline.com’s stock price over a period of several years, growth in its earnings and accomplishment of long-term performance goals.

 

·       Severance agreements and change of control provisions in the company’s equity instruments are designed to facilitate priceline.com’s ability to attract and retain executives as priceline.com competes for talented employees in the very competitive marketplace for experienced Internet executives, where these protections are often offered.  The severance benefits described below provide benefits to ease the consequences of an unexpected employment termination by priceline.com due to on-going changes in priceline.com’s employment needs.  The change of control benefits described below encourage employees to remain focused on priceline.com’s business in the event of rumored or actual fundamental corporate change and, in many instances, to provide assistance during any transition.

 

The Role of Management

 

The Chief Executive Officer, Chief Financial Officer and Executive Vice President and General Counsel provide significant input to the Committee when developing the structure of and setting performance metrics for the company’s annual performance based bonus plan and annual equity grants.  The Chief Executive Officer provides detailed recommendations to the Committee of base salary, annual performance based bonus plan opportunities and awards and long-term incentive award values for the executive officers.  For the named executive officers other than the Chief Executive Officer, the Committee receives an oral performance assessment and compensation recommendation from the Chief Executive Officer in executive session without the

 

23



 

presence of the other executive officers.  The Committee gives significant weight to the Chief Executive Officer’s judgment when assessing each of the other executive officers’ performance and determining appropriate compensation levels and incentive awards because he is particularly able to assess the other executive officers’ performance and contributions to the company.   See “ Corporate Governance and Board Matters – The Compensation Committee ” in this proxy statement for details on the 2007 compensation planning process.

 

The Board of Directors meets annually at the beginning of the year with the Chief Executive Officer to agree upon his performance objectives (which are generally stated in terms of company objectives) for the year.  At the beginning of the following year, the Chief Executive Officer presents to the Committee a summary of his and the company’s performance over the past year.  The Committee then meets in executive session without the presence of management to review the performance of, and develop compensation recommendations for, the Chief Executive Officer.  The Committee Chairperson then discusses with the Board of Directors in executive session the Chief Executive Officer’s performance and the Committee’s compensation recommendations.  The Board of Directors then deliberates, discusses the review to be given to the Chief Executive Officer and sets the Chief Executive Officer’s compensation.  The Chairperson of the Committee then meets with the Chief Executive Officer to conduct a performance review of the Chief Executive Officer based on his achievement of the agreed-upon objectives, contribution to the company’s performance, and other leadership accomplishments.  Neither the Chief Executive Officer nor other members of management make any proposals to the Committee or the Board of Directors with respect to the Chief Executive Officer’s base pay, performance based cash bonus opportunity or awards, or equity incentives.

 

The Role of the Compensation Consultant

 

The Committee engaged Mercer Inc. (formerly Mercer Human Resource Consulting Inc.), an outside global human resources consulting firm, to advise and counsel the Committee on the company’s compensation program for the named executive officers.  Mercer has been working with the Committee for approximately eight years in connection with the Committee’s review of senior executive compensation.  Mercer provides no services to the company other than those related to the company’s compensation program.

 

At the direction of the Committee, management generally provides all Committee materials to Mercer and discusses all materials and recommendations with Mercer in advance of each Committee meeting.  Mercer considers the information presented to the Committee and discusses the information with the Committee.  Mercer attends all Committee meetings and, at the end of most meetings, meets in executive session with the Committee without management present.

 

With the support of the Committee, management (generally the Executive Vice President and General Counsel and, to a lesser extent, the Chief Financial Officer) regularly asks Mercer to provide calculations and market data used by the Committee in its decision-making process.  The Committee periodically requests the Executive Vice President and General Counsel and his staff to seek Mercer’s input or recommendation with respect to a specific compensation practice, program or arrangement being considered by the Committee.  The Committee’s Chairperson and/or management may also independently seek Mercer’s advice on various matters to assist the Committee in its decision-making process.

 

During 2007, among other things, Mercer assisted the Committee on the following matters:

 

·       Advised the Committee on the composition of the Compensation Peer Group

 

·       Prepared analyses of named executive officer compensation levels as compared to the Compensation Peer Group

 

·       Evaluated the design and opined on the appropriateness of the Company’s 2007 performance based bonus plan and performance share units and provided suggested design changes and recommendations

 

·       Prepared tally sheets and IRS Section 280(g) analysis (“excise parachute payments”)

 

Benchmarking

 

In making compensation decisions, the Committee compares each element of total compensation against a peer group of publicly-traded companies.  The Committee reviews annually the appropriateness of the companies comprising the peer group.  In determining the appropriate peer group of companies to be used in connection

 

24



 

with the 2007 compensation planning process, the Committee looked closely at, among other things, companies included in the prior year’s peer group and the Goldman, Sachs & Co. Internet Sector index.  In deciding whether to add or substitute companies from the index, the Committee focused on companies in the index with revenues and/or gross profit that were approximately half to two times priceline.com’s.  In addition, the Committee sought to include in the peer group direct competitors of the Company, such as Expedia and Sabre Holdings Corp, which operates the on-line travel services company, Travelocity.  After discussion with Mercer, the Committee determined that the eighteen companies listed below, which are primarily Internet services, travel services and e-commerce companies, would comprise the 2007 peer group (the “ Compensation Peer Group ”):

 

·       Expedia Inc.

·       Sabre Holdings Corp

·       Earthlink Inc.

·       United Online Inc.

·       Netflix Inc.

·       1-800-Flowers.com

·       ValueClick Inc.

·       RealNetworks Inc.

·       Monster Worldwide Inc.

·       Digital River Inc.

·       Move Inc.

·       FTD Group Inc.

·       GSI Commerce Inc.

·       CNET Networks Inc.

·       InfoSpace Inc.

·       Digitas Inc.

·       aQuantive Inc.

·       Overstock.com Inc.

 

For comparison purposes, the Committee focused on priceline.com’s gross profit versus the Compensation Peer Group.  Based on the four most recent quarters of data that were available at the time that the Committee initiated its review (for most companies, the third quarter 2005 through the second quarter 2006), priceline.com’s gross profit ranked at approximately the 68 th percentile of the Compensation Peer Group.  In comparing priceline.com’s compensation against the Compensation Peer Group, the Committee considered the 68 th percentile of executive pay for the Compensation Peer Group to be a general proxy for “market” compensation.  Mercer adjusted the compensation information from the Compensation Peer Group, which was primarily from fiscal year 2005, to account for projected pay increases over the 2005-2007 timeframe.

 

A number of the companies in the Compensation Peer Group had chief executive officers who were also founders of their respective companies.  While these “founder” chief executive officers typically had low base salaries – in one instance, no base salary – they often had very significant equity stakes in their companies that the Committee believed were generally attributable to their roles in starting the companies.  Consistent with its view during the prior year’s compensation review, the Committee did not believe that the compensation paid to these executives was necessarily representative of the compensation paid to “non-founder” chief executives.  As a result, the Committee thought it was prudent as part of its analysis to focus on compensation paid to “non-founder” chief executive officers in determining the appropriate compensation range for Mr. Boyd.

 

The Committee used the data of the Compensation Peer Group primarily to ensure that the priceline.com executive compensation program as a whole is competitive, meaning generally at or below “market” levels, as described above, of comparative pay of the Compensation Peer Group when the company achieves the targeted performance levels and, in many cases, above “market” levels if performance exceeds targets.  The Compensation Peer Group provides the Committee with guidance, but does not dictate the setting of the named executive officers’ compensation.  The difference in compensation paid to the Chief Executive Officer versus the other named executive officers is primarily due to the higher level of responsibility for the Chief Executive Officer and the market level of compensation paid to chief executives in the Compensation Peer Group.

 

Components of Executive Compensation in 2007

 

The Committee annually reviews each named executive officer’s total direct compensation, which consists of base pay, performance based cash bonus opportunity, and equity incentives. In addition to these primary compensation elements, the Committee reviews any other compensation, to the extent applicable, and payments that would be required under various severance and change-in-control scenarios.  In making compensation decisions, the Committee also takes into consideration historical compensation, including the vested and unvested value of unexercised stock options and the unvested value of other outstanding equity (restricted stock, restricted stock units and performance share units) under different scenarios and at different prices.

 

Before giving final approval to the annual compensation initiatives, the Committee reviews a presentation of total compensation, a “tally sheet,” prepared by Mercer.  The tally sheet generally summarizes each officer’s total “target” compensation for the applicable year and, using a current stock price, estimates the payments to be made to the officer under certain termination of employment and change of control scenarios.  In

 

25



 

2007, the Committee made no adjustments as a result of the tally sheet analysis based on its assessment that the program continued to meet the objectives described above.

 

Base salary

 

Base salary ranges for named executive officers are determined based on, among other things:

 

·       information from the Compensation Peer Group described above;

 

·       individual performance of the executive, including level of responsibility and breadth of knowledge; and

 

·       internal review of the executive’s total compensation, both individually and relative to other senior executives.

 

The relative importance of these factors varies depending on the individual whose salary is being reviewed.  Salary levels are typically considered annually as part of the Company’s performance review process as well as upon a promotion or other change in job responsibility.

 

In establishing Mr. Boyd’s base salary for 2007, the Committee and the Board of Directors considered the company’s and Mr. Boyd’s accomplishments of objectives that had been established at the beginning of 2006 and its own subjective assessment of his performance.  In addition to considering Mr. Boyd’s leadership qualities and breadth of knowledge and skill, the Committee and Board of Directors noted, among other things, that:

 

·       under Mr. Boyd’s leadership, the company’s pro forma net income per share, which is discussed in more detail below, and which is one of the primary internal and external metrics upon which the company judges its performance, increased approximately 48% in 2006 over the prior year and significantly exceeded the financial plan provided by Mr. Boyd to the Board of Directors at the beginning of 2006;

 

·       the company’s 2006 pro forma earnings growth significantly exceeded that of its primary competitors in the on-line travel industry; and

 

·       priceline.com had successfully integrated U.K.-based Active Hotels Ltd. and Amsterdam-based Bookings B.V., giving priceline.com one of the largest and fastest growing on-line hotel businesses in Europe.

 

Based on the Committee’s review of the Compensation Peer Group, Mr. Boyd’s annual base salary at the time of the review, which was $500,000, was approximately 16% below the “market” base salary (approximately the 68 th percentile, as discussed above) for non-founder chief executive officers.  In recognition of these factors and Mr. Boyd’s continued strong leadership, the Committee recommended to the Board of Directors, and the Board of Directors authorized, an increase in Mr. Boyd’s annual base salary from $500,000 to $550,000.

 

Mr. Boyd recommended, and the Committee approved, base salary increases for Messrs. Mylod and Millones of approximately 5% (to $420,000) and 5.45% (to $290,000), respectively.  In addition, in recognition of his promotion to President, North American Travel, Mr. Soder received a 10% salary increase (to $330,000).   Mercer noted that, even after giving effect to the salary increases, the annual base salaries for those officers were below “market.”

 

Performance based cash bonus

 

In 2007, the Committee approved a 2007 performance based cash bonus plan (the “ 2007 Bonus Plan ”) applicable to priceline.com’s domestic employees and international employees.

 

What metric was used ?  The 2007 Bonus Plan was based upon the accomplishment of certain pro forma EBITDA targets.  For purposes of the plan, EBITDA is operating income before interest, tax, depreciation and amortization expense and includes foreign currency gains/losses associated with hedging activities and income/loss from pricelinemortgage.  Pro forma EBITDA excludes stock based compensation expense, option payroll tax expense and other items which, in the sole judgment of the Committee, are “one time” or “non-recurring” in nature, whether favorable or unfavorable (for example, in 2007, the benefit associated with a

 

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federal airline excise tax refund and the expense associated with the settlement of the company’s 2000 securities litigation were both excluded from pro forma EBITDA).

 

These adjustments to EBITDA are generally consistent with the adjustments made by priceline.com in the calculation of pro forma net income, which is disclosed in the company’s quarterly and annual earnings announcements and is referenced by many of the financial analysts that follow priceline.com.  The adjustments are intended to ensure that any payments under the 2007 Bonus Plan represent the underlying growth of priceline.com’s core business and are not inflated or deflated due to non-cash, “one time” or “non-recurring” items.  The Committee believes that this measure is effective as it focuses employees on the company’s core earnings so that they can be directly rewarded for business growth and productivity improvements.  The Committee believes that this measure is also an effective motivator because it is relatively easy to track and generally understood by employees

 

How did the 2007 Bonus Plan work?   The 2007 Bonus Plan was composed of three separate “sub” pools - one for U.S.-based employees, which was based on priceline.com’s “domestic” pro forma EBITDA, one for Booking.com employees, which was based on Booking.com’s pro forma EBITDA, and one for those U.S.-based executives, including the named executive officers other than Mr. Norden, who had responsibility for the company’s “consolidated” operations, which was based on priceline.com’s consolidated pro forma EBITDA.  As priceline.com met and/or exceeded the pre-established pro forma EBITDA targets, an increasing percentage of the 2007 bonus pools funded.  Under the terms of the plan, lower level employees reached full funding at lower targets than executives.

 

As adopted in early 2007, bonus pools under the 2007 Bonus Plan were to fund as follows:

 

·       maximum funding for the “domestic” bonus pool would only be achieved when 2007 year-over-year pre-bonus pro forma “domestic” EBITDA growth exceeded 20%; on the other hand, if “domestic” pre-bonus pro forma EBITDA growth was 10%, only 7% of the pool for senior executive officers would be funded.

 

·       maximum funding for the “consolidated” bonus pool would only be achieved when 2007 year-over-year pre-bonus pro forma “consolidated” EBITDA growth exceeded 25%; on the other hand, if “consolidated” pre-bonus pro forma EBITDA growth was 10%, only 5% of the pool for senior executive officers would be funded.

 

·       maximum funding for the Booking.com B.V. bonus pool would only be achieved when Booking.com B.V.’s year-over-year 2007 pre-bonus pro forma EBITDA growth exceeded 30%; on the other hand, if Booking.com B.V.’s pre-bonus pro forma EBITDA growth was 10%, there would be no funding of the bonus pool for senior executive officers.

 

As the growth targets above illustrate, significant funding of the 2007 Bonus Pool for the company’s named executive officers would only occur upon the achievement by the company of significant double-digit-year-over-year earnings growth.  The Committee believed at the time of adoption that the growth rates required for meaningful funding of the bonus pools for executive officers would exceed those which would be achieved by the company’s on-line travel competitors.  As a result, the Committee believed that the bonus component of each executive’s annual cash compensation was at significant risk in 2007.

 

Individual Bonus Targets .  Bonus targets for the named executive officers were based on job responsibilities, internal relativity, and data for the Compensation Peer Group.  The Committee’s objective was to set bonus targets such that total annual cash compensation would fall at approximately the “market” level of competitive pay only if the company’s domestic and international businesses achieved their performance targets.  Accordingly, a substantial portion of that compensation was linked to priceline.com’s performance.  Consistent with our executive compensation policy, individuals with greater job responsibilities had a greater proportion of their total cash compensation tied to priceline.com’s performance through the 2007 Bonus Plan.  The Committee established bonus targets for 2007 (expressed as a percentage of annual base salary) for the named executive officers ranging from 50% to 150% and maximum amounts ranging from 75% to, in the case of Priceline Europe’s Chief Executive Officer, 300%.  The Committee reserved the right in its complete discretion to decrease payouts below “target” or “maximum” amounts, notwithstanding priceline.com’s financial performance, and increase the “maximum” amounts paid out under the 2007 Bonus Plan.

 

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Priceline.com’s 2007 Performance and Funding of the 2007 Bonus .  In the Committee’s judgment, 2007 was an extraordinary year for priceline.com.  The company significantly out-performed, often by double-digits, many of the financial targets established at the beginning of the year as part of the company’s 2007 financial forecast (i.e., consolidated gross travel bookings, consolidated gross profit, and consolidated pro forma EBITDA and net income).  In addition, the company’s earnings growth significantly exceeded that of its other public company competitors.  Finally, as discussed below, the company significantly exceeded the pro forma EBITDA targets established as part of the 2007 Bonus Plan.  As a result, the 2007 Bonus Plan, and all three constituent pools, was fully funded.

 

Given the company’s significant over-performance versus both the maximum funding thresholds in the 2007 Bonus Plan and the accomplishment of many of the corporate objectives identified at the beginning of the year, which are described in more detail below, the Committee authorized additional funding for the 2007 bonus pools over amounts contemplated by the 2007 Bonus Plan.  The Committee believed that the extent of the over-performance justified the allocation of additional funds to the 2007 bonus pools to reward the company’s employees for the company’s significant achievements.  The Committee authorized increasing the funding of the U.S. pools for 2007 by an aggregate of approximately 9% and the funding for the Booking.com B.V. pool by approximately 23%.

 

Priceline.com’s 2007 consolidated pro forma EBITDA exceeded the maximum targets required for full funding by more than 35% and – after giving effect to the increase to the bonus pool described above and the payment of bonuses – grew by more than 100% year-over-year.  In addition, Booking.com’s 2007 consolidated pro forma EBITDA exceeded the maximum targets required for full funding by approximately 50% and – after giving effect to the increase to the bonus pool described above and the payment of bonuses – more than doubled year-over-year.

 

Individual Bonus Amounts .  In early 2008, the Committee reviewed the company’s 2007 results and worked with the Chief Executive Officer to develop appropriate bonus amounts for the company’s executive officers, other than Mr. Boyd.  As described above, the Committee also worked in executive session with Mercer and the Board of Directors to develop appropriate bonus amounts for Mr. Boyd.  The bonuses paid to the named executive officers were paid in March 2008 and appear in the Summary Compensation Table under the “ Non-equity Incentive Plan Compensation ” column.

 

Mr. Boyd .  Based on the company’s performance in 2007 and Mr. Boyd’s strong leadership, the Committee and the Board of Directors authorized the company to pay Mr. Boyd a $1,350,000 bonus for 2007, which was $250,000 higher than the maximum amount provided for by the bonus plan adopted in early 2007.  In addition to considering the significant over-achievement of the maximum funding thresholds in the 2007 Bonus Plan, the Committee and the Board of Directors considered, among other things, the following in arriving at Mr. Boyd’s bonus:

 

·                   the company significantly exceeded its primary consolidated financial performance goals and achieved the majority of the corporate goals established at the beginning of 2007.  In early 2007, the Committee and Board agreed with Mr. Boyd on specific company objectives for 2007.  Those goals included, among other things:

 

·                   to grow gross travel bookings by approximately 20% to 25% year-over-year (gross travel bookings grew by approximately 45%), achieve significant year-over-year growth in domestic, international and consolidated pro forma EBITDA (which, as described above, was achieved), and maintain the company’s consolidated pro forma EBITDA and pro forma net income as a percentage of gross profit (all of which were achieved);

 

·                   goals tied to the company’s primary services (air, hotel, rental car and vacation packages), such as to maintain access to airline content through new supply agreements with major airline carriers (the company signed a number of new agreements with carriers in 2007) and achieve specific gross profit growth targets for the company’s air, hotel, rental car and vacation package services (which were achieved for hotel and rental car, but not for air and vacation packages);

 

·                   goals tied to the company’s on-line and off-line marketing initiatives, including achieving improvements in return on domestic online marketing expense (achieved);

 

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·                   goals tied to the geographic expansion of the company’s international business (achieved); and

 

·                   a number of other subjective and qualitative factors, such as, among other things, Mr. Boyd’s integrity, vision for the corporation, people management skills, investor and Board communication skills, stock price appreciation, and governance and succession planning.

 

The goals described above are not an exhaustive list of the corporate goals established at the beginning of 2007 or a complete list of all the factors considered in establishing Mr. Boyd’s 2007 bonus amount, but they are representative of the material considerations reviewed and discussed by the Committee and the Board of Directors.  After balancing the company’s performance against the company’s 2007 goals, the company’s position in the market relative to its major competitors, and the accomplishment and over-performance of the 2007 Bonus Plan financial thresholds, the Committee and Board of Directors thought that priceline.com’s performance in 2007 was exceptional and, therefore, that the actual bonus amount authorized by the Board of Directors and paid to Mr. Boyd was appropriate .

 

Other Named Executive Officers.

 

The bonuses paid to the named executive officers below reflected the company’s strong performance during 2007, which is described in detail above.  The bonus amounts also reflect the factors described below.

 

Mr. Mylod’s award reflects Mr. Mylod’s important role in advising the Board of Directors and Chief Executive Officer on the company’s strategic direction, key role in developing the company’s annual financial plan and overseeing the achievement of that plan, success in helping to identify and complete the acquisition of Agoda in November 2007 and in developing and maintaining strong relationships with the investment and analyst community.

 

Mr. Norden’s award reflects his role leading the company’s international operations and the extraordinary growth experienced by Booking.com B.V. in 2007, which is summarized above.

 

Mr. Soder’s award reflects the strong performance of priceline.com’s domestic business, which grew year-over-year at higher rates than the company’s public company competitors, the strong performance of the domestic hotel and rental car services, which achieved attractive growth rates in 2007, and successful oversight of negotiations with a number of the company’s service providers, including a number of major airline carriers.

 

Mr. Millones’ award is in recognition of, among other things, his oversight of the company’s litigation, legal support for the acquisition of Agoda in November 2007, and oversight of the company’s U.S. human resource department.

 

In determining bonus amounts for the executives above, in addition to considering the factors described above, the Committee discusses and considers with the Chief Executive Officer a range of other subjective factors including each executive’s ability to act and think strategically, ability to get results and ability to demonstrate a strong leadership style.

 

Equity incentives

 

Overview .  Equity incentive grants to the named executive officers are based on job responsibilities and potential for individual contribution, with reference to the “market” levels, as described above, of total “target” direct compensation (total “target” cash compensation plus the “target” value of long-term equity incentives) of executives within the Compensation Peer Group.  When it makes grants, the Committee also considers the size and current value of previous grants, in particular the current unvested value of previous grants.  As with the determination of base salaries and bonus awards, the Committee exercises judgment and discretion in view of the above criteria and its general policies.

 

In connection with the 2007 compensation planning process, the Committee authorized and the company granted two primary forms of equity incentives:  PSUs and restricted stock/restricted stock units; the grants to the named executive officers are described below under PSUs tied to priceline.com’s 2007 through 2009 consolidated performance and Restricted stock and restricted stock units.   In addition, in late 2007, in connection with the beginning of the 2008 compensation planning process, the Committee authorized a grant of

 

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PSUs to Mr. Norden and other Booking.com B.V. employees, which is described below under PSUs tied to Booking.com’s 2008 through 2010  performance.

 

The Committee believes that the PSUs described below closely align senior management with priceline.com’s achievement of longer-term - in the case of each of the PSU grants, three years - financial objectives that enhance stockholder value.  The Committee also believes that the restricted stock and/or restricted stock units described below, especially when balanced with PSUs, serve a similar role, however, with a greater emphasis on retention, than bottom-line company performance.

 

PSUs tied to priceline.com’s 2007 through 2009 consolidated performance .  In 2007, each of the named executive officers, other than Mr. Norden, was granted PSUs that were based on the company’s consolidated performance over the three year period ending December 31, 2009.  The number of shares that could be issued at the end of the three-year performance period ranges from zero to two times the “target” grant, depending on the company’s performance over that period.

 

The Committee established pro forma net income per share as the performance measure to judge priceline.com’s performance over the three year performance period.  The calculation of pro forma net income per share is intended to be substantially consistent with the calculation used by priceline.com in its quarterly and annual earnings announcements and referenced by many of the financial analysts that follow priceline.com.  The calculation of pro forma net income per share is similar to the calculation of pro forma EBITDA described above; the Committee believes that pro forma net income per share is an appropriate performance measure for many of the same reasons described above with respect to the adoption of pro forma EBITDA.  The Committee believes that pro forma net income is a good complement to the pro forma EBITDA metric described above and used in connection with the performance based bonus plan because it focuses executives on different financial drivers of the business and is impacted by, among other things, payments under the company’s bonus plans.

 

The PSUs will vest and be earned at the end of the three year performance period if the consolidated pro forma net income per share hurdles below are accomplished:

 

If consolidated pro forma
net income per share for
the three-year period
ending December 31,
2009 is:

 

Then, the number of shares
that will be issued is:

 

Pro forma net income per
share target expressed as a
multiple of consolidated pro
forma net income per share
for the three-year period
ending December 31, 2006:

 

Less than $8.00

 

0

 

1.83x

 

Between $8.00 and $8.88

 

.75x to 1x the “target” grant

 

1.83x to 2.04x

 

Between $8.89 and $10.89

 

1x to 2x the “target” grant

 

2.04x to 2.50x

 

More than $10.89

 

2x the “target” grant

 

2.50x

 

 

The PSUs will be forfeited and no shares will be issued to the executives if two minimum performance hurdles are not met:

 

·                   As set forth in the chart above, over the three year performance period (2007 through 2009), priceline.com must increase its pro forma net income per share earnings by at least approximately 83%

 

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over its pro forma net income per share earnings over the three year period ending December 31, 2006 (2004 through 2006); and

 

·                   In 2009, the final year of the performance period, priceline.com must generate a minimum of $2.00 of pro forma net income per share earnings, which is roughly equivalent to priceline.com’s pro forma net income per share generated in 2006 ($2.03 per share).

 

At the time of adoption, the Committee believed that these minimum forfeiture thresholds would represent meaningful hurdles for the company.  The $2.00 minimum threshold was established to ensure that the PSUs would not be earned if, notwithstanding potentially significant earnings generation in the first two years of the performance period, there was what the Committee believes would likely represent “disappointing” growth in 2009, the final year of the performance period.

 

The Committee believed at the time of adoption – based on information available in early 2007 and the public forecasts of the company’s major on-line competitors – that the three year performance thresholds set forth above represented significant growth hurdles.  In addition, the Committee believed that if “target” pro forma earnings were achieved (i.e., $8.88 per share), which would result in a “target” grant for executives (i.e, 1x), it would represent leading growth rates for the company’s on-line travel competitors.  Accordingly, the Committee believed that if priceline.com were to achieve the pro form net income hurdles above the stockholders of the company would be rewarded.  The Committee believed that the three-year performance period focuses executives on longer-term performance and serves as a significant retention device.  With respect to individual equity grants, the Committee increased Mr. Mylod’s “target” performance share unit grant slightly above “market” levels at the recommendation of the Chief Executive Officer and in recognition of Mr. Mylod’s broad contributions to the company beyond the strict role of chief financial officer.

 

Restricted stock and restricted stock units .  In 2007, the Committee also granted restricted stock (or, with respect to certain European-based employees, restricted stock units) to certain of the named executive officers.  The restricted stock granted in 2007 to these officers is scheduled to vest on the third anniversary of the date of grant if the executive is employed by priceline.com at that time.  The Committee believes that restricted stock and restricted stock units are an effective incentive for priceline.com’s executives to remain with the company, even during periods of volatility in priceline.com’s stock.

 

PSUs tied to Booking.com’s 2008 through 2010 performance.   At the end of 2007, certain employees of the company’s principal international subsidiary, Booking.com B.V., including Mr. Norden, were granted PSUs.  The PSUs granted to Mr. Norden are based on the achievement of pro forma EBITDA by Booking.com B.V. over a three year period, 2008 through 2010.  The calculation of pro forma EBITDA is substantially similar to the calculation described above.  If the minimum performance thresholds established by the Committee are not met, the PSUs will not vest or be earned.  The number of shares that could be issued at the end of the three-year performance period ranges from zero to three times the “target” grant, depending on the company’s performance over that period.    In connection with the PSU grant, the recipients of the PSUs agreed not to compete with Booking.com B.V. or solicit its employees for a one-year period following the employee’s separation from the company.

 

With respect to performance goals for Mr. Norden:

 

If Booking.com B.V.’s pro forma EBITDA for the
three-year period ending December 31, 2010 is:

 

Then, the number of shares
that will be issued is:

 

Less than approximately 1.53x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

0

 

Between approximately 1.53x and approximately 2.02x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

0x to 1x the “target” grant

 

Between approximately 2.02x and approximately 2.70x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

1x the “target” grant

 

 

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Between approximately 2.70x and approximately 2.83x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

1x to 2x the “target” grant

 

Between approximately 2.83x and approximately 3.03x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

2x to 3x the “target” grant

 

More than approximately 3.03x Booking.com B.V.’s pro forma EBITDA for the three year period ending December 31, 2007

 

3x the “target” grant

 

 

Based on information available in early 2007 and the public forecasts of the company’s major on-line competitors, the Committee believed at the time of adoption that the three year performance thresholds set forth above represented significant growth hurdles and that if the targets were achieved they would represent leading growth rates for the company’s on-line travel competitors in Europe.  Accordingly, the Committee believed that if Booking.com B.V. were to achieve the pro forma EBITDA hurdles above the stockholders of the company would be rewarded.  The Committee believed that the three-year performance period focuses executives on longer-term performance and serves as a significant retention device.

 

The issuance of the PSUs to Mr. Norden and members of the Booking.com B.V. management team was intended to serve as a transition from the investment structure that was implemented at the time of the acquisition of Booking.com in 2005, which was largely focused on the performance of the subsidiary European operations.  As Booking.com’s business becomes more integrated with that of priceline.com’s, the Committee believed that it was important to give employees responsible for running the international business a meaningful stake in priceline.com’s consolidated business and align their long-term interests with those of the company’s stockholders.  The Committee believed that the PSUs struck the appropriate balance by focusing the executives on Booking.com B.V.’s financial performance for which they are directly responsible, but, to the extent the relevant thresholds are met, rewarding them in priceline.com common stock, which, the Committee believed, aligns their interests with those of the company’s stockholders.  Finally, the Committee believed that with Booking.com B.V.’s success and increasing profile, the non-competes received in return for the PSUs would have long-term value for the company.

 

The Committee noted that the 2007 “target” PSU grant to Mr. Norden placed Mr. Norden’s total 2007 compensation at the very high end of the range of compensation relative to the Compensation Peer Group.  In making the grant, the Committee considered, among other things, that Mr. Norden’s personal ownership interest in Booking.com B.V.’s holding company, which Mr. Norden purchased at the time of the acquisition of Booking.com B.V., was scheduled to be sold in 2008.  The Committee believed it was important to put in place meaningful long-term incentive compensation for Mr. Norden to attempt to retain him beyond 2008.  Given Mr. Norden’s important role overseeing the growth of the company’s international subsidiary, which generated a substantial portion of the company’s 2007 earnings, the Committee thought the grant was appropriately structured to align Mr. Norden’s interests with those of the company’s stockholders.

 

    Stock Options .  Since the adoption by priceline.com of FAS 123(R) on January 1, 2006, the company has not issued any stock options and currently does not intend to do so.

 

Change of control and severance benefits

 

Change of Control .  Most of the company’s recent equity grants, including the PSUs and restricted stock/restricted stock units described above, provide for accelerated vesting upon a change of control.  As a general matter, upon a change of control, the vesting of outstanding PSUs and restricted stock/restricted stock units will be accelerated to the earlier to occur of six months after the change of control (as long as the employee is employed by the company on that date) or the date on which the employee is terminated “without cause” following a change of control.  In certain circumstances, Mr. Boyd’s employment arrangement provides for different accelerated vesting provisions.  See the description of Mr. Boyd’s employment agreement beginning on page 42 for more information on the acceleration of certain of his awards.

 

The accelerated vesting is intended to preserve employee morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change of control of the company. In addition, for executives, the prospect of accelerated vesting is intended to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the company without undue concern over whether the transactions may

 

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jeopardize the executives’ own employment.  The delay in vesting until six months after the consummation of a change of control is intended to aid any acquirer by keeping employees engaged and employed during an initial transition period, which supports a compelling business need during uncertain times.  Finally, with respect to the PSUs, the Committee believes it would be unfair to convert the PSUs into an award based on the surviving company’s pro forma metric, over which employees may have little control and the drivers of which may be very different.

 

Priceline.com will provide gross-ups for the named executive officers who are based in the United States from any taxes due as a result of the imposition of Section 280(g) of the Internal Revenue Code (“excise parachute payments”) because the effects of Section 280(g) generally are unpredictable and can have widely divergent and unexpected effects based on an executive’s personal compensation history.  The Committee believes that the gross up payments are appropriate for the company’s most senior executives.

 

See the section entitled “ Potential Payments Upon a Change of Control and/or Termination ” beginning on page 48.

 

Severance benefits .  Each of the named executive officers is entitled to receive severance benefits upon a termination “without cause” or “for good reason” (or similar concept, in the case of Mr. Norden).  The arrangements with the company’s executive officers provide severance payments in an amount that the Committee believes is appropriate, taking into account, among other things, the time it is expected to take a separated employee to find another job and marketplace practices.  The payments and other benefits are provided because the Committee considers a termination “without cause” or for “good reason,” as those terms are used in the employment arrangements, to be company initiated that under different circumstances would not have occurred and which are beyond the control of the separated individual.  The severance and other benefits are intended to ease the consequences to an executive of an unexpected termination of employment.  See the section entitled “ Employment Contracts, Termination of Employment and Change-of-Control Arrangements ” beginning on page 42.

 

Benefits

 

Priceline.com’s health care and other insurance programs are the same for all eligible employees, including executive officers.  For all eligible domestic employees, priceline.com has a 401(k) plan.  The 401(k) plan allows all eligible employees to contribute up to 75% of their base salary and bonus, up to limits imposed by the Internal Revenue Code – $225,000 for 2007 – on a pre-tax basis.  Effective January 1, 2007, priceline.com added a cash match to its 401(k) plan for all participants, including those executive officers who participate in the plan.  Priceline.com matches 50% of the first 6% of compensation deferred as before-tax contributions.  The 401(k) match made to each of the Named Executive Officers is reflected in the All Other Compensation column on the Summary Compensation Table.

 

Perquisites

 

Priceline.com does not maintain any material perquisites or personal benefits for any of the named executive officers, such as company planes, cars, security or financial services or country club memberships.

 

33



 

Other Matters

 

Share Retention Guidelines; Short-Selling Prohibition

 

Priceline.com does not have formal stock ownership guidelines for its executive officers.  However, in February 2005, the Company’s Chief Executive Officer and Chief Financial Officer voluntarily agreed to hold 200,000 and 100,000 shares, respectively, of priceline.com common stock and/or vested stock options, as long as they were employed by the company.  Historically, priceline.com has not allowed its executives to speculate in priceline.com’s stock, which includes, but is not limited to, short selling (profiting if the market price of the securities decreases) and/or buying or selling publicly traded options, including writing covered calls.  Priceline.com adopted a formal written policy to this effect in 2007.

 

Equity Issuance Dates

 

As part of its annual compensation planning process, in February 2007, the Committee and the Board of Directors approved the March 2007 grants to the named executive officers described above and, at that time, established March 5, 2007 as the date of grant.  In October 2007, the Committee approved the December 2007 grant of PSUs to Mr. Norden and other Booking.com executives and, in November 2007, the Board of Directors established December 1, 2007 as the date of grant.  Consistent with the terms of the company’s equity grant policy, other equity grants during 2007 were made on the second business day following the deadline for filing the company’s Form 10-Q with the Securities and Exchange Commission and all grants were approved in advance by the Committee.

 

For 2008, the Committee selected the second business day following the deadline for filing the company’s Form 10-K or Form 10-Qs, as appropriate, and the day after the Company’s Annual Meeting of Stockholders in June as the dates of grant for any equity issuances (to the extent the Committee authorizes any issuances) to executives and employees in 2008.  The Committee reserves the right to adjust dates in advance or select additional grant dates in its sole discretion.  All grants are or will be, as applicable, approved in advance by the Committee.

 

Deductibility Cap on Executive Compensation

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, provides that compensation in excess of $1,000,000 paid to each “covered employee” (generally, the chief executive officer and the three other highest paid executive officers other than the chief financial officer) will not be deductible for federal income tax purposes unless such compensation is paid pursuant to one of the enumerated exceptions set forth in Section 162(m).  The Committee’s primary objective in designing and administering priceline.com’s compensation policies is to support and encourage the achievement of the Company’s long-term strategic goals and to enhance stockholder value, all as described above.  When consistent with this compensation philosophy, the Committee also intends to structure the Company’s compensation programs such that compensation paid thereunder will be tax deductible by the Company.  The Committee believes that stockholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses. Accordingly, the Committee has approved, and may in the future approve, compensation arrangements for executive officers that are not fully deductible.

 

For example, payments under the 2007 Bonus Plan, which were funded as the result of significant year-over-year earnings growth, are not deductible under Section 162(m) because the 2007 Bonus Plan allowed the Committee to exercise its discretion to make adjustments to what was included or excluded from the pro forma net income per share metric – discretion that is intended to ensure that the results measured in the bonus plan represent the underlying growth of priceline.com’s core business.

 

34



 

2008 Compensation Decisions

 

In February 2008, the Committee approved the bonus payments to the named executive officers under the 2007 Bonus Plan, which appear in the Summary Compensation Table under the “ Non-equity Incentive Plan Compensation ” column and are described in detail above.  At the same time, the Committee authorized a salary increase for Mr. Millones, approved a bonus plan for 2008 and authorized equity grants to priceline.com’s named executive officers.  Effective April 1, 2008, Mr. Millones’ annual base salary is $330,000.

 

The 2008 bonus plan provides the following “minimums” and “targets” for the named executive officers (each as a percentage of 2008 annual base salary):

 

Name

 

Minimum

 

Target

 

Jeffery H. Boyd

 

0

%

125

%

Robert J. Mylod

 

0

%

100

%

Christopher L. Soder

 

0

%

100

%

Stef Norden

 

0

%

300

%

Peter J. Millones

 

0

%

75

%

 

The Committee reserves the right in its complete discretion to increase or decrease payouts above or below “target”, notwithstanding priceline.com’s financial performance.

 

In addition, on March 5, 2008, the Company granted certain of its employees, including the named executive officers, performance share units in the amounts set forth across their names below:

 

Name

 

“Target” Grant

 

Jeffery H. Boyd

 

18,038

 

Robert J. Mylod

 

12,548

 

Christopher L. Soder

 

5,098

 

Stef Norden

 

6,108

 

Peter J. Millones

 

5,098

 

 

The performance share units are payable in shares of the Company’s common stock. The performance share units granted to Messrs. Boyd, Mylod and Millones will vest upon the attainment of certain performance targets by the Company’s consolidated operations during the period commencing on January 1, 2008 and ending on December 31, 2010 (the “ Performance Period ”).  The performance share units granted to Mr. Soder will vest upon the attainment of certain performance targets by the Company’s unconsolidated domestic operations during the Performance Period.  The performance share units granted to Mr. Norden will vest upon the attainment of certain performance targets by the following of the Company’s subsidiaries during the Performance Period:  Agoda Company Ltd., Agoda Company Pte. Ltd. and Agoda Services Co. Ltd.  The performance share units have possible payouts ranging from zero to two times, in the case of the performance share units issued to Messrs. Boyd, Mylod, Soder and Millones, and zero to 3.2054 times, in the case of the performance share units issued to Mr. Norden.

 

35



 

Compensation Committee Report

 

The Compensation Committee of the Board of Directors, comprised of independent directors, reviewed and discussed the above Compensation Discussion and Analysis with priceline.com’s management.  Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for filing with the Securities and Exchange Commission.

 

 

 

COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS

 

 

 

 

 

Jeffrey E. Epstein, Chairman

 

James M. Guyette

 

Craig W. Rydin

 

36


 

Compensation of Named Executive Officers

 

Summary Compensation Table

 

The following table shows compensation earned during fiscal 2007 and 2006, by our Chief Executive Officer, Chief Financial Officer, and the next three most highly-compensated executive officers serving at the end of fiscal 2007 and 2006.  These individuals are referred to as the “named executive officers.”  Unless otherwise indicated, titles shown in the table are titles held as of December 31, 2007.

 

Summary Compensation Table

 

Name and Principal
Position

 

Year

 

Salary
($)

 

Bonus
($)(1)

 

Stock
Awards
($)(2)

 

Option
Awards
($)(3)

 

Non-equity
Incentive Plan
Compensation
($)(4)

 

All Other
Compensation
($)(5)

 

Total
($)

 

Jeffery H. Boyd,
President and Chief Executive Officer

 

2007
2006

 

545,833 491,667

 


 

2,623,084 1,601,398

 

47,708 637,181

 

1,350,000 1,000,000

 

7,212
413

 

4,573,837 3,730,660

 

Robert J. Mylod Jr.,
Chief Financial Officer

 

2007
2006

 

418,333 395,833

 


 

1,433,410 814,798

 

31,806 424,787

 

600,000 400,000

 

7,103
332

 

2,490,652 2,035,750

 

Stef Norden (6), CEO,
Booking.com B.V.

 

2007
2006

 

243,768 223,436

 

20,187 15,399

 

650,376 301,235

 

240,320 240,320

 

822,504 723,932

 

14,323 13,148

 

1,991,478 1,517,470

 

Christopher L. Soder,
President, North American Travel

 

2007
2006

 

327,500 300,000

 


 

542,289 310,135

 

31,806 381,667

 

355,000 300,000

 

7,027
252

 

1,263,622 1,292,054

 

Peter J. Millones,
Executive Vice President, General Counsel

 

2007
2006

 

288,750 272,948

 


 

491,126 326,680

 

15,903 193,471

 

300,000 206,250

 

6,994
229

 

1,102,773 999,578

 

 


(1)           Includes a statutory bonus required under Dutch law ($19,502 in 2007 and $14,896 in 2006) and an annual “holiday” bonus paid to all employees of Booking.com B.V. ($685 in 2007 and $503 in 2006).

 

(2)           This column represents the dollar amount recognized in accordance with SFAS 123R for financial statement reporting purposes with respect to the 2007 and 2006 fiscal years, as applicable, for the grant date fair value of performance share units (“PSUs”), restricted stock and/or restricted stock units.  This column includes awards granted in 2007 and earlier years.  With respect to Mr. Norden, this column also represents the dollar amount recognized for financial statement reporting purposes with respect to the 2007 and 2006 fiscal years, as applicable, for the grant date fair value of restricted stock units of priceline.com International Limited, a majority-owned subsidiary of priceline.com, which were granted to Mr. Norden in July and November 2005.  With respect to Messrs. Boyd, Mylod, Soder and Millones, the table above assumes that the maximum number of shares of priceline.com common stock are issued in connection with the PSUs.  With respect to Mr. Norden, the table above assumes that 2.54 times the “target” grant are issued in connection with the PSUs.  For additional information, including the assumptions used in connection with this valuation, please refer to notes 2 and 4 of the priceline.com financial statements in the Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission. These amounts reflect the company’s accounting expense for these awards, and do not correspond to the actual value, if any, that will be recognized by the named executives.

 

(3)           This column represents the dollar amount recognized in accordance with SFAS 123R for financial statement reporting purposes with respect to the 2007 and 2006 fiscal years, as applicable, for the fair value of stock options granted to each of the named executive officers in prior fiscal years.  The company did not grant any

 

37



 

stock options in 2007 or 2006.  For additional information, including the assumptions used in connection with this valuation, please refer to notes 2 and 4 of the priceline.com Incorporated financial statements in the Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.  These amounts reflect the company’s accounting expense for these awards, and do not correspond to the actual value, if any, that will be recognized by the named executives.

 

(4)           This column represents for 2007 cash awards paid in March 2008 under priceline.com’s 2007 performance based cash bonus plan and, for 2006, cash awards paid in March 2007 under priceline.com’s 2006 performance based cash bonus plan.

 

(5)           With respect to Messrs. Boyd, Mylod, Soder and Millones, this column represents (a) the dollar value of any insurance premiums paid by priceline.com during 2007 and 2006, as applicable, with respect to life insurance for the benefit of such named executive officer and (b) matching contributions made by priceline.com to each individual’s 401(k) plan for the year-ended 2007. With respect to Mr. Norden, this column represents matching contributions made by Booking.com B.V., a majority owned subsidiary of priceline.com, to Mr. Norden’s defined contribution plan in the Netherlands ($12,102 in 2007 and $11,112 in 2006) and a travel allowance ($2,221 in 2007 and $2,036 in 2006).

 

(6)           Mr. Norden’s compensation is translated into U.S. dollars using average exchange rates for 2007 – 1.37084 U.S. dollars to Euros and 2.00170 U.S. dollars to British Pounds, and for 2006 - 1.2565 U.S. dollars to Euros and 1.8439 U.S. dollars to British Pounds.

 

Grants of Plan-Based Awards Table

 

                The following table provides information about equity and non-equity awards granted to the named executive officers in 2007.  The column “ Estimated Possible Payouts under Non-Equity Incentive Plan Awards ” shows the potential cash payouts under priceline.com’s 2007 performance based cash bonus plan at the time the plan was adopted; actual payouts were made in March 2008 based on the company’s attainment of certain performance thresholds and can be found in the Summary Compensation Table in the column entitled Non-Equity Incentive Plan Compensation for the 2007 fiscal year.

 

Grants of Plan-Based Awards

 

 

 

 

 

Date

 

Estimated Possible Payouts Under
Non-Equity Incentive Plan
Awards (1)

 

Estimated Future Payouts Under
Equity Incentive Plan Awards (2)

 

All Other
Stock Awards:
Number of
Shares of
Stock or

 

Grant Date Fair
Value of Stock and 

 

Name

 

Grant
Date

 

Grant
Approved

 

Threshold
($)

 

Target
($)

 

Maximum
($)

 

Threshold
(#)

 

Target
(#)

 

Maximum
(#)

 

Units
(#)(3)

 

Option Awards
($)(4)

 

Jeffery H. Boyd

 

 

 

 

 

0

 

550,000

 

1,100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

0

 

33,000

 

66,000

 

 

3,427,380

 

Robert J. Mylod Jr.

 

 

 

 

 

0

 

315,000

 

420,000

 

 

 

 

 

 

 

 

 

 

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

0

 

23,000

 

46,000

 

 

2,388,780

 

Stef Norden (5)

 

 

 

 

 

0

 

789,809

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

9,000

 

467,370

 

 

 

12/1/2007

 

10/10/2007

 

 

 

 

 

 

 

0

 

25,000

 

75,000

 

 

 

7,226,300

 

Christopher L. Soder

 

 

 

 

 

0

 

247,500

 

300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

5,000

 

259,650

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

0

 

5,000

 

10,000

 

 

 

519,300

 

Peter J. Millones

 

 

 

 

 

0

 

145,000

 

217,500

 

 

 

 

 

 

 

 

 

 

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

 

 

 

 

 

 

7,500

 

389,475

 

 

 

3/5/2007

 

2/20/2007

 

 

 

 

 

 

 

0

 

2,500

 

5,000

 

 

 

259,650

 

 


(1)           These columns show the potential value, at the time the plan was adopted, of the payout for each named executive officer under priceline.com’s 2007 performance based cash bonus plan.  The actual payments for 2007 for each named executive officer are included in the column entitled Non-equity Incentive Plan Compensation of the Summary Compensation Table.  The potential payouts were performance-driven and therefore completely at risk.  The business measurements and performance goals for determining the payouts are described in the Compensation Discussion and Analysis beginning on page 23.

 

38



 

(2)           These columns show the “Threshold,” “Target” and “Maximum” number of shares of priceline.com common stock that could be issued in connection with the PSUs granted in 2007.  For the grants made to Messrs. Boyd, Mylod, Soder and Millones, the performance period commenced on January 1, 2007 and ends on December 31, 2009 and for the grant made to Mr. Norden, the performance period commenced on January 1, 2008 and ends on December 31, 2010.  For all of these PSU grants, if there is a  “change of control,” as such term is described in the PSUs, or a termination without “cause,” the issuance of shares underlying the PSUs may be accelerated.    The performance criteria for determining the number of shares of priceline.com common stock to be issued, if any, in connection with the PSUs are described in the Compensation Discussion and Analysis beginning on page 29.

 

(3)           This column shows the number of shares of restricted stock granted in 2007 to Messrs. Soder and Millones and the number of restricted stock units granted in 2007 to Mr. Norden.  Messrs. Soder’s and Millones’ shares and Mr. Norden’s restricted stock units vest in March 2010, subject to accelerated vesting in certain circumstances, including if there is a “change in control” and certain terminations of employment.

 

(4)           This column shows the full grant date fair value of equity awards under SFAS 123R in 2007.  Generally, the grant date fair value is the full amount that the company would expense in its financial statements over the award’s vesting schedule.  For the PSUs, restricted stock and restricted stock units granted on March 5, 2007, fair value was calculated using the grant date price of $51.93.  For the PSUs granted on December 1, 2007, fair value was calculated using the grant date price of $113.80.  The full grant date fair value for the PSUs is based upon the estimated probable number of shares that will be issued at the end of the performance period.  For Messrs. Boyd, Mylod, Soder and Millones, that number is 2 times the target grant amount and for Mr. Norden that number is 2.54 times the target grant amount.  The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.  For additional information, including the assumptions used in connection with this valuation, please refer to notes 2 and 4 of the priceline.com financial statements in the Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.

 

(5)           The “target cash payout to Mr. Norden was established in Euros and translated into U.S. dollars using an average exchange rate for 2007 of 1.37084 U.S. dollars to Euros.

 

39



 

Outstanding Equity Awards at 2007 Fiscal Year-End Table

 

The following table provides information on the holdings of stock option and stock awards by the named executive officers at fiscal year-end 2007.  This table includes unexercised stock option awards, both vested and unvested; unvested restricted stock and restricted stock units; and/or unvested PSUs with performance conditions that have not yet been satisfied.  The market value of the stock awards is based on the closing market price of priceline.com common stock on December 31, 2007, which was $114.86.

 

Outstanding Equity Awards at 2007 Fiscal Year-End

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable

 

Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable

 

Option
Exercise
Price
($)

 

Option
Expiration
Date

 

Number of
Shares or Units
of Stock that
Have Not
Vested
(#)

 

Market Value
of Shares or
Units of Stock
that Have Not
Vested
($)

 

Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units, or Other rights
that Have Not Vested
(#)

 

Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units, or Other
Rights that Have Not
Vested
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeffery H. Boyd

 

266,666
20,833
50,000
150,000

 

 

 

30.66
25.56
20.28
18.78

 

05/25/2011 12/07/2011 05/07/2013 02/06/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,000

(1)

4,594,400

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

201,000

(2)

23,086,860

 

Robert J. Mylod Jr

 

20,833
33,333
93,333

 

 

 

25.56
20.28
18.78

 

12/07/2011 05/07/2013 02/06/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,000

(1)

2,067,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106,000

(3)

12,175,160

 

Stef Norden

 

20,788
3,333

 

4,298
12,223

(4)
(5)

23.08
24.51

 

07/14/2015 11/08/2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,333
15,619

(6)
(7)

1,416,568 4,674,022

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63,500

(9)

7,293,610

 

Christopher L. Soder

 

20,833
51,500

 

 

 

25.20
18.78

 

12/01/2011 02/06/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,500

(10)

1,665,470

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,000

(11)

3,560,660

 

Peter J. Millones

 

12,500
20,833
11,112

 

 

 

16.12
25.56
18.78

 

02/08/2011 12/07/2011 02/06/2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,500

(12)

1,435,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,000

(13)

4,020,100

 

 


(1)                     Restricted stock that vested on February 28, 2008.

 

(2)                     Represents the estimated probable number of shares of priceline.com common stock that will be issued at the end of the performance period in connection with the PSUs.  Includes 135,000 shares for which the performance period commenced on January 1, 2006 and ends on December 31, 2008 and 66,000 shares for which the performance period commenced on January 1, 2007 and ends on December 31, 2009 (unless there is a “change of control,” as such term is described in the PSUs, or a termination without “cause,” in which case the issuance of shares underlying the PSUs may be accelerated).  The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.

 

(3)                     Represents the estimated probable number of shares of priceline.com common stock that will be issued at the end of the performance period in connection with the PSUs.  Includes 60,000 shares for which the performance period commenced on January 1, 2006 and ends on December 31, 2008 and 46,000 shares for which the performance period commenced on January 1, 2007 and ends on December 31, 2009 (unless there is a “change of control,” as such term is described in the PSUs, or a termination without “cause,” in which case the issuance of shares underlying the PSUs may be accelerated). The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.

 

40



 

(4)                     Stock options that vest monthly through July 14, 2008.

 

(5)                     Stock options that vest monthly through November 8, 2008.

 

(6)                     Represents restricted stock units, of which 3,333 vest on November 8, 2008 and 9,000 vest on March 5, 2010.

 

(7)                     Represents restricted stock units of priceline.com International Limited (“PIL”), a majority-owned subsidiary of priceline.com, which were granted to Mr. Norden in July and November 2005; these restricted stock units vested on February 1, 2008 and can be “put” to priceline.com in August 2008.

 

(8)                     Represents estimated value of restricted stock units of PIL as of December 31, 2007 translated from British Pounds into U.S. dollars at the exchange rate as of that date, which was 1.98430 U.S. dollars to British Pounds.

 

(9)                     Represents the estimated probable number of shares of priceline.com common stock (2.54 times the “target” grant amount) that will be issued at the end of the performance period in connection with the PSUs.  The performance period commenced on January 1, 2008 and ends on December 31, 2010 (unless there is a “change of control,” as such term is described in the PSUs, or a termination without “cause,” in which case the issuance of shares underlying the PSUs may be accelerated).  The actual number to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.

 

(10)               Represents restricted stock, of which 6,500 shares vested on February 28, 2008, 3,000 shares vest on February 28, 2009, and 5,000 shares vest on March 5, 2010.

 

(11)               Represents the estimated probable number of shares of priceline.com common stock that will be issued at the end of the performance period in connection with the PSUs.  Includes 21,000 shares for which the performance period commenced on January 1, 2006 and ends on December 31, 2008 and 10,000 shares for which the performance period commenced on January 1, 2007 and ends on December 31, 2009 (unless there is a “change of control,” as such term is described in the PSUs, or a termination without “cause,” in which case the issuance of shares underlying the PSUs may be accelerated).  The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.

 

(12)               Represents restricted stock, of which 2,500 shares vested on February 28, 2008, 2,500 shares vest on February 28, 2009, and 7,500 shares vest on March 5, 2010.

 

(13)               Represents the estimated probable number of shares of priceline.com common stock that will be issued at the end of the performance period in connection with the PSUs.  Includes 30,000 shares for which the performance period commenced on January 1, 2006 and ends on December 31, 2008 and 5,000 shares for which the performance period commenced on January 1, 2007 and ends on December 31, 2009 (unless there is a “change of control,” as such term is described in the PSUs, or a termination without “cause,” in which case the issuance of shares underlying the PSUs may be accelerated).  The actual number of shares to be issued, if any, has not been determined and will be determined based on the relevant performance criteria over the three-year performance period.

 

41



 

Option Exercises and Stock Vested Table

 

                The following table contains information about stock options exercised by the named executive officers and the vesting of stock awards held by the named executive officers in 2007.

 

Option Exercises and Stock Vested

 

 

 

Option Awards

 

Stock Awards

 

Name

 

Number of
Shares Acquired
on Exercise
(#)(1)

 

Value Realized
on Exercise
($)(2)

 

Number of
Shares Acquired
on Vesting
(#)

 

Value Realized
on Vesting
($)

 

 

 

 

 

 

 

 

 

 

 

Jeffery H. Boyd

 

83,333

 

3,039,188

 

20,500

(3)

1,197,740

 

Robert J. Mylod Jr.

 

90,000

 

5,576,034

 

13,334

(4)

781,108

 

Stef Norden

 

24,444

 

1,281,963

 

3,333

(5)

301,003

 

Christopher L. Soder

 

54,000

 

2,862,834

 

6,500

(6)

339,820

 

Peter J. Millones

 

0

 

0

 

4,500

(7)

235,260

 

 


(1)           This column represents the number of shares underlying stock options exercised.

 

(2)           This column reflects the difference between the fair market value of priceline.com common stock on the date of each exercise and the exercise price of the stock options exercised, multiplied, in each case, by the number of stock options exercised.

 

(3)           Mr. Boyd acquired 8,000 shares with a market price of $52.28 on February 28, 2007 and 12,500 shares with a market price of $62.36 on May 7, 2007, each upon the vesting of shares of restricted stock.

 

(4)           Mr. Mylod acquired 5,000 shares with a market price of $52.28 on February 28, 2007 and 8,334 shares with a market price of $62.36 on May 7, 2007, each upon the vesting of shares of restricted stock.

 

(5)           Mr. Norden acquired 3,333 shares with a market price of $90.31 on November 8, 2007, upon the vesting of restricted stock units.

 

 (6)        Mr. Soder acquired 6,500 shares with a market price of $52.28 on February 28, 2007, upon the vesting of shares of restricted stock.

 

 (7)        Mr. Millones acquired 4,500 shares with a market price of $52.28 on February 28, 2007, upon the vesting of shares of restricted stock.

 

Employment Contracts, Termination of Employment and

Change-of-Control Arrangements

 

The Company and/or its subsidiaries have employment agreements with each of the named executive officers.  The agreements are of varying duration and generally provide for minimum annual base salaries.  In addition, most of the agreements provide that each executive will be eligible to participate at a level commensurate with his position in the Company’s annual bonus and long-term compensation plans generally made available to the Company’s senior executives, and to participate in all benefit plans and arrangements and fringe benefits and perquisite programs generally provided to comparable senior executives of the Company.  Provided below is a summary of each of the named executive officer’s employment agreement followed by a summary of the material terms of any equity instruments held by such executive outstanding at December 31, 2007 that provides for accelerated vesting (or similar provisions) upon a change of control or termination.

 

Mr. Boyd

 

Employment Agreement

 

Termination without “Cause” or for “Good Reason” (No “Change of Control”).   In the event of a termination of Mr. Boyd’s employment by the Company without “Cause” (as defined in the agreement with Mr. Boyd) or by Mr. Boyd for “Good Reason” (as defined in the agreement), in either case other than during the three-year period following a “Change of Control” of the Company (as defined in the agreement), then Mr. Boyd will be entitled to

 

42



 

receive, in addition to his compensation accrued through the date of termination of employment, the following severance compensation and benefits:

 

                (1) two times his base salary and target bonus, if any, paid over a 24-month period following his termination of employment (which, after giving effect to Mr. Boyd’s 2008 target bonus described in the Compensation Discussion and Analysis of this proxy statement, would be approximately $2,475,000);

 

                (2) if a bonus plan is in place, a pro-rata target annual bonus for the year in which termination of employment occurs (which, after giving effect to Mr. Boyd’s 2008 target bonus described in the Compensation Discussion and Analysis of this proxy statement and assuming a termination on the last day of the calendar year, would be approximately $687,500);

 

                (3) continuation for two years following termination of employment of group health, life and disability insurance benefits as if Mr. Boyd were an empl oyee of the Company ;

 

                (4) each outstanding vested Company stock option held by Mr. Boyd will remain exercisable until the earlier of eighteen months following the date of termination of employment or the expiration of the option’s original term; and

 

                (5) each outstanding equity grant (other than the stock options described above) held by Mr. Boyd will deemed to be vested on a pro-rata basis based on the time of the applicable restricted period that has elapsed through the date of his termination of employment plus one year, but only to the extent that this would result in a greater number of shares of Company common stock vesting than would otherwise apply under the existing terms of the equity grant.

 

Termination without “Cause” or for “Good Reason” (“Change of Control”) . In the event of a termination of Mr. Boyd’s employment by the Company without “Cause” or by Mr. Boyd for “Good Reason,” in either case during the three-year period following a “Change of Control” of the Company (including any such termination of employment prior to a “Change of Control” at the request of a third party effecting the “Change of Control”), then Mr. Boyd will be entitled to receive, in addition to his compensation accrued through the date of termination of employment, the following severance compensation and benefits:

 

                (1) a lump sum cash severance payment equal to three times his base salary and target bonus (which, after giving effect to Mr. Boyd’s 2008 target bonus described in the Compensation Discussion and Analysis of this proxy statement, would be approximately $3,712,500) ;

 

                (2) if a bonus plan is in place, a pro-rata target annual bonus for the year in which terminatio n of employment occurs (which, after giving effect to Mr. Boyd’s 2008 target bonus described in the Compensation Discussion and Analysis of this proxy statement and assuming a termination on the last day of the calendar year, would be approximately $687,500) ;

 

                (3) continuation for three years following termination of employment of group health, life and disability insurance benefits as if Mr. Boyd were an employee of the Compa ny ; and

 

                (4) all outstanding Company equity instruments held by Mr. Boyd will be immediately vested, and all Company stock options will remain exercisable until the earlier of 36 months following the date of termination of employment or the expiration of the option’s original term.

 

Termination as the Result of Death or “Disability” . In the event of a termination of Mr. Boyd’s employment as the result of his death or “Disability” (as defined in Mr. Boyd’s agreement), then Mr. Boyd will be entitled to receive, in addition to his compensation accrued through the date of termination of employment, the following severance compensation and benefits:

 

                (1) if a bonus plan is in place, a pro-rata target annual bonus for the year in which termination of employment occurs (which, after giving effect to Mr. Boyd’s 2008 target bonus described in the Compensation Discussion and Analysis of this proxy statement and assuming a termination on the last day of the calendar year, would be approximately $687,500);

 

43



 

                (2) continuation for one year following termination of employment of group health insurance benefits for Mr. Boyd’s dependents in the event of Mr. Boyd’s death (or for Mr. Boyd, if he is terminated as the result of “Disability”) as if Mr. Boyd were an employee of the Company;

 

                (3) in the event of termination of Mr. Boyd’s employment as the result of “Disability,” continuation for one year following termination of employment of group life and disability insurance benefits as if Mr. Boyd were an employee of the Company; and

 

                (4) each outstanding vested Company stock option held by Mr. Boyd will remain exercisable until the earlier of eighteen months following the date of termination of employment or the expiration of the option’s original term.

 

May 2001 Stock Options .  The agreement with Mr. Boyd provides that the options to acquire 266,666 shares of the Company’s common stock that were granted in May 2001 will expire eighteen months after the termination of Mr. Boyd’s employment as a result of his death or “Disability,” termination by the Company without “Cause,” termination by Mr. Boyd for “Good Reason” or the Company’s failure to extend the term of the employment agreement (or 90 days after termination of Mr. Boyd’s employment as a result of a termination by the Company for “Cause,” termination by Mr. Boyd without “Good Reason” or Mr. Boyd’s failure to extend the term of the employment agreement), but in no event later than May 25, 2011.

 

Other.   Mr. Boyd’s employment agreement includes certain non-compete, non-solicitation and non-disparagement provisions.  In addition, subject to certain limitations, if severance remuneration payable under the agreement is held to constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code and Mr. Boyd becomes liable for any excise tax imposed under Section 4999 of the Internal Revenue Code, the Company will make an additional cash gross-up payment to him in an amount such that Mr. Boyd will be in the same after-tax economic position as if such excise tax were not imposed.  The agreement with Mr. Boyd also provides for certain alternative payment arrangements should any installment payments of severance result in the imposition of additional income tax pursuant to Section 409A of the Internal Revenue Code.

 

Equity Instruments

 

2007 PSUs .  The PSUs granted to Mr. Boyd in March 2007 provide for accelerated vesting upon a “Change of Control,” a termination without “Cause,” a termination for “Good Reason,” or a termination as the result of death or “Disability.”  The number of shares to be delivered to Mr. Boyd would depend on the termination event (change of control or termination without cause/good reason/death/disability) and when it occurred.

 

·                   Upon a termination without “Cause,” for “Good Reason,” or as the result of death or “Disability” on or prior to December 31, 2007, Mr. Boyd would receive a pro rata portion of the “target” PSU grant based on the number of full months that had elapsed since the date of grant.

 

·                   Upon a termination without “Cause,” for “Good Reason,” or as the result of death or “Disability” after December 31, 2007, the PSU performance multiplier would be applied to a pro rata portion (based on the number of full months that had elapsed since the date of grant as of the date of the termination) of Mr. Boyd’s “target” PSU grant and could range from 0 to 2x, depending on the company’s performance through the most recently completed fiscal quarter.

 

·                   If a “Change of Control” occurs on or prior to December 31, 2007 and Mr. Boyd remains employed by the Company for six months after the effective date of the “Change of Control,” Mr. Boyd would receive a pro rata portion of the “target” PSU grant based on the number of full months that had elapsed since the date of grant as of the date that is six months after the “Change of Control.”

 

·                   If a “Change of Control” occurs on or prior to December 31, 2007 and Mr. Boyd is terminated without “Cause,” for “Good Reason,” or as the result of death or “Disability” within the six-month period after the effective date of the “Change of Control,” Mr. Boyd would receive a pro rata portion of the “target” PSU grant based on the number of full months that had elapsed since the date of grant as of the date of the termination.

 

44


 

·                   If a “Change of Control” occurs after December 31, 2007 and Mr. Boyd remains employed by the Company for six months after the effective date of the “Change of Control,” the PSU performance multiplier would be applied to a pro rata portion (based on the number of full months that had elapsed since the date of grant as of the date that is six months after the “Change of Control”) of Mr. Boyd’s “target” PSU grant; the performance multiplier could range from 0 to 2x, depending on the Company’s performance through the most recently completed fiscal quarter; if Mr. Boyd remains employed by the Company until the end of the performance period, then Mr. Boyd would also receive a pro rata portion of the remaining “target” PSU grant based on the length of the performance period that had elapsed between the date that is six months after the “Change of Control” and the end of the performance period; if Mr. Boyd is terminated without “Cause,” for “Good Reason,” or as the result of death or “Disability” after the date that is six months after the “Change of Control” but prior to the end of the performance period, then Mr. Boyd would receive a pro rata portion of the remaining “target” PSU grant based on the length of the performance period that had elapsed between the date that is six months after the “Change of Control” and the date of termination.

 

·                   If a “Change of Control” occurs after December 31, 2007 and Mr. Boyd is terminated without “Cause,” for “Good Reason,” or as a result of death or “Disability” within the six-month period after the effective date of the “Change of Control,” the PSU performance multiplier would be applied to a pro rata portion (based on the number of full months that had elapsed since the date of grant as of the effective date of the “Change of Control”) of Mr. Boyd’s “target” PSU grant; the performance multiplier could range from 0 to 2x, depending on the Company’s performance through the most recently completed fiscal quarter; Mr. Boyd would also receive a pro rata portion of Mr. Boyd’s “target” PSU grant  (based on the number of full months that had elapsed since the date of grant as of the effective date of the “Change of Control”).

 

2006 PSUs .  The PSUs granted to Mr. Boyd in February 2006 provide for accelerated vesting upon a “Change of Control,” termination without “Cause,” or a termination as the result of death or “Disability.”  The number of shares to be delivered to Mr. Boyd would depend on the termination event (change of control/ termination without cause/death/disability) and when it occurred.  Upon a termination without “Cause” or a termination as the result of death or “Disability” on or after January 1, 2007, the PSU performance multiplier would be applied to a pro rata portion (based on the length of the performance period that had elapsed as of the date of the termination) of Mr. Boyd’s “target” PSU grant and could range from 0 to 3x, depending on the Company’s performance through the most recently completed fiscal quarter.  If there were a “Change of Control” that occurred on or after January 1, 2007, the PSU performance multiplier would be applied to Mr. Boyd’s “target” PSU grant (as opposed to a pro rata portion of the “target” grant); the performance multiplier could range from 0 to 3x, depending on the company’s performance through the most recently completed fiscal quarter.  Upon a “Change of Control,” the vesting of the shares associated with the PSUs will be accelerated to the earlier to occur of the date that is six months after the “Change of Control” (as long as Mr. Boyd is employed by the company on that date) or the date on which Mr. Boyd is terminated without “Cause” following a “Change of Control.”

 

Messrs. Mylod, Soder and Millones

 

Employment Agreements

 

Termination without “Cause” or for “Good Reason”.   In the event of a termination of such executive’s employment by the Company without “Cause” (as defined in the respective agreement with the executive) or by such executive for “Good Reason” (as defined in the respective agreement), then such executive will be entitled to receive, among other things, in addition to his compensation accrued through the date of termination of employment, the following severance compensation and benefits:

 

                (1) two times his base salary and target bonus, if any, paid over a 12-month period following his termination of employment;

 

                (2) if a bonus plan is in place, a pro-rata target annual bonus for the year in which termination of employment occurs; and

 

45



 

                (3) continuation for one year following termination of employment of group health, life and disability insurance benefits as if he were an employee of the Company, provided that, if such termination is after a “Change of Control” (as the term is defined in each such agreement) the period of benefit continuation will be twenty-four months.

 

Termination as the Result of Death or “Disability” .  In the event of a termination of such executive’s employment as the result of death or “Disability” (as defined in the respective agreement), then such executive will be entitled to receive, among other things, in addition to his compensation accrued through the date of termination of employment, the following severance compensation and benefits:

 

                (1) if a bonus plan is in place, a pro-rata target annual bonus for the year in which termination of employment occurs;

 

                (2) in the event of termination as the result of death, continuation for one year following termination of employment of group health insurance benefits for such executive’s dependents as if he were an employee of the Company; and

 

                (3) in the event of termination as the result of “Disability,” continuation for one year following termination of employment of group health, life and disability insurance benefits, as if he were an employee of the Company.

 

Other.   Subject to certain limitations, if severance remuneration payable under the agreements with Messrs. Mylod, Soder and/or Millones is held to constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code and such executive becomes liable for any excise tax imposed under Section 4999 of the Internal Revenue Code, the Company will make an additional cash gross-up payment to the executive in an amount such that such executive will be in the same after-tax economic position as if such excise tax were not imposed.  The agreement with Messrs. Soder and Millones also provides for certain alternative payment arrangements should any installment payments of severance result in the imposition of additional income tax pursuant to Section 409A of the Internal Revenue Code.  The agreements with each of Messrs. Mylod, Soder and Millones include certain confidentiality and/or non-solicitation provisions.

 

Equity Instruments

 

Mr. Mylod .

 

2007 and 2006 PSUs.   The PSUs granted to Mr. Mylod in March 2007 and February 2006 would be treated in the same fashion as the PSUs held by Mr. Boyd described above under “Mr. Boyd – Equity Instruments.”

 

Messrs. Soder and Millones .

 

2007 and 2006 PSUs .  The PSUs granted to Messrs. Soder and Millones in March 2007 and February 2006 would be treated in the same fashion as the PSUs held by Mr. Boyd described above under “Mr. Boyd – Equity Instruments.”

 

2007 Restricted Stock .  Shares of restricted stock granted to Messrs. Soder and Millones in March 2007 provide for accelerated vesting upon a termination without “Cause,” for “Good Reason,” or as the result of death or “Disability.”  If a termination without “Cause,” for “Good Reason,” or as the result of death or “Disability” occurs, Messrs. Soder and Millones shall receive a pro rata portion of the shares of restricted stock as of the date of termination.  If a “Change of Control” occurs and Messrs. Soder and Millones remain employees of the Company as of the date which is six months after the “Change of Control,” a pro rata portion of the shares of restricted stock will vest as of such six-month date and the remaining portion of shares of restricted stock will vest on the third anniversary of the date of grant.  Upon a termination without “Cause,” for “Good Reason,” or as the result of death or “Disability” that occurs after a “Change of Control” or prior to and in anticipation of a “Change of Control,” vesting of all outstanding shares of restricted stock will be accelerated on the date on which Mr. Soder and/or Mr. Millones, as applicable, is terminated.

 

2006 Restricted Stock .  Shares of restricted stock granted to Mr.  Soder in February 2006 do not provide for accelerated vesting upon a termination without “Cause” or a termination for “Good Reason.”  Upon a

 

46



 

“Change of Control,” the vesting of all outstanding shares of restricted stock will be accelerated to the earlier to occur of the date that is six months after the change of control (as long as Mr. Soder is employed by the company on that date) or the date on which Mr. Soder is terminated without “Cause” in anticipation of or following a “Change of Control.”

 

2005 Restricted Stock Shares of restricted stock granted to Messrs. Soder and Millones in February 2005 do not provide for accelerated vesting upon a termination without “Cause” or a termination for “Good Reason.”  Upon a “Change of Control,” the vesting of all outstanding shares of restricted stock will be accelerated to the earlier to occur of the date that is six months after the “Change of Control” (as long as Mr. Soder and/or Mr. Millones, as applicable, is employed by the company on that date) or the date on which Mr. Soder and/or Mr. Millones, as applicable, is terminated without “Cause” or for death or disability following a “Change of Control.”   In conjunction with these grants of restricted stock, Messrs. Soder and Millones became subject to certain non-competition, non-solicitation, and non-disclosure obligations.  Specifically, while Messrs. Soder and Millones are employees of the Company and for one year following the termination of their employment, neither of them may engage in competitive activity with the Company or solicit customers, clients or employees of the Company.

 

Mr. Norden

 

Employment Agreement

 

The employment agreement between Mr. Norden and Booking.com B.V., an indirect majority owned subsidiary of the Company, which was entered into on July 14, 2005, does not have a fixed term and is terminable at will by either party upon due observance of the statutory notice period in The Netherlands, which is currently one month for an employment relationship under five years. The agreement automatically terminates upon Mr. Norden reaching the age of 65.

 

Termination without “cause.”   Because Mr. Norden’s employment agreement is terminable at will by either party, the agreement does not specifically provide for payments to Mr. Norden if he were terminated without “cause” (and the term “cause” is not specifically provided for in Mr. Norden’s agreement). However, Mr. Norden’s employment agreement is governed by Dutch law, and under Dutch law, a court has discretion to award severance to an employee depending on the facts and circumstances of the termination of the employee (e.g., the reason for the termination).

 

For these reasons, it is difficult to ascertain the maximum liability to which Mr. Norden could be entitled if he were terminated without “cause.”  However, a court could potentially award to Mr. Norden a severance payment, in addition to his compensation accrued but unpaid through the date of termination of employment, based on a formula of A x B x C, in which:

 

A=           the weighted years of service,

B=            the fixed monthly wage payments plus all fixed and agreed salary components ( e.g. holiday allowance, bonus payments if those payments are regular), and

C =           adjustment factor (at the discretion of the court, reflecting the special circumstances of the case).

 

Illness or Other Incapacity to Work .  Should Mr. Norden become unable to perform work due to illness or other medical incapacity, Mr. Norden will be entitled to continued payment of 70% of his most recent gross base salary for a maximum period of 104 weeks commencing on the first day of illness or incapacity.  Such payments will be reduced by financial benefits that Mr. Norden may receive under any contractual or statutory insurance and any other income earned by Mr. Norden.

 

Equity Instruments

 

2007 PSUs .  The PSUs granted to Mr. Norden in December 2007 provide for accelerated vesting upon a “Change of Control,” a termination without “Cause” or a termination as the result of death or “Disability” on the same general terms as the PSUs granted to Mr. Boyd described above except that the following principal terms differ:  Mr. Norden’s PSUs do not provide for accelerated vesting upon a termination for “Good Reason;” Mr. Norden’s PSU performance multiplier ranges from 0 to 3x; Mr. Norden’s performance period runs from January 

 

47



 

1, 2008 through December 31, 2010; and the “change of control” period is limited to the six-month period following the “Change of Control.”

 

Mr. Norden’s priceline.com Incorporated Restricted Stock Units .  The restricted stock units granted to Mr. Norden in March 2007 provide for accelerated vesting upon a “Change of Control,” a termination without “Cause” or a termination as the result of death or “Disability.”  If a termination without “Cause” or a termination as the result of death or “Disability” occurs, Mr. Norden shall receive a pro rata portion of the restricted stock units as of the date of termination.  If a “Change of Control” occurs and Mr. Norden remains an employee of the Company as of the date which is six months after the “Change of Control”, a pro rata portion of the restricted stock units will vest as of such six-month date and the remaining portion of restricted stock units will vest on the third anniversary of the date of grant.  Upon a termination without “Cause” or a termination as the result of death or “Disability” that occurs after a “Change of Control” or prior to and in anticipation of a “Change of Control,” vesting of all outstanding restricted stock units will be accelerated on the date on which Mr. Norden is terminated.  The other priceline.com restricted stock units held by Mr. Norden would be treated in the same fashion as the restricted stock granted to Mr. Soder in February 2006 described above.

 

Mr. Norden’s priceline.com International Limited Restricted Stock Units .  Mr. Norden owns 15,619 restricted stock units in priceline.com International Limited (“PIL”).  In the event of a transfer of 50% or more of the shares of PIL to a third party, the purchaser of the 50% interest is obligated to offer to purchase Mr. Norden’s shares of PIL on terms no less favorable than the terms offered the seller of the 50% interest.  Furthermore, the seller of the 50% interest can also compel Mr. Norden to sell his shares of PIL on terms no less favorable than the terms offered the seller.  The estimated value of Mr. Norden’s restricted stock units of PIL as of December 31, 2007 was approximately $4,674,021 (using the exchange rate as of December 31, 2007).

 

Other .  Mr. Norden entered into a non-competition agreement with the Company in December 2007 pursuant to which Mr. Norden is subject to one-year non-competition and non-solicitation obligations following Mr. Norden’s termination of employment with the Company.

 

Potential Payments Upon a Change of Control and/or Termination

 

The following tables estimate the payments required to be made to each of the named executive officers in connection with (a) a termination of their employment upon specified events or (b) a change of control assuming a $114.86 per share price for our common stock (the closing market price on December 31, 2007).  The amounts shown also assume that the termination or change of control was effective December 31, 2007, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives.  Therefore, amounts shown do not reflect, for instance, any changes to base salaries or bonus targets effective in 2008, changes in the cost of health benefit plans, equity grants made in 2008 or equity that vested subsequent to December 31, 2007.  In addition, amounts shown reflect incremental amounts due to the named executive officer upon the specified event, and do not include amounts that were vested as of December 31, 2007.  The actual amounts paid can only be determined at the time of the termination of the executive’s employment or a change of control.  The terms “cause,” “good reason,” “death” and “disability” have the meanings in the individual employment agreements or equity instruments described above.  In the event of voluntary resignation or retirement on December 31, 2007, the named executive officer would only receive his accrued but unpaid salary through the termination date of employment.

 

48



 

Jeffery H. Boyd

 

Executive Benefits
and Payments
Upon Separation
or Change of
Control

 

Termination
without
“Cause”
(non-Change
of Control)
($)

 

Termination
for “Good
Reason”
(non-Change
of Control)
($)

 

Termination
without
“Cause” or
for “Good
Reason”
(Change of
Control)
($)

 

No
Termination
(Change of
Control)
($)

 

Death
or
Disability
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance:

 

 

 

 

 

 

 

 

 

 

 

Base Salary and Target Bonus

 

2,200,000

 

2,200,000

 

3,300,000

 

 

 

Pro Rated Bonus

 

550,000

 

550,000

 

550,000

 

 

550,000

 

Equity and Benefits:

 

 

 

 

 

 

 

 

 

 

 

Performance Share Units

 

12,644,137

 

16,991,509

 

19,296,480

 

16,453,695

 

11,284,995

 

Restricted Stock/ Restricted Stock Units

 

4,594,400

 

4,594,400

 

4,594,000

 

 

 

Stock Options

 

 

 

 

 

 

Health & Welfare(1)

 

24,764

 

24,764

 

37,146

 

 

12,382

 

Tax Gross-Up

 

 

 

11,696,986

 

 

 

Total:

 

20,013,301

 

24,360,673

 

39,475,012

 

16,453,695

 

11,847,377

 

 


(1)           Benefit amounts are based on 2007 annual premiums paid by the Company for (a) medical, dental and vision coverage, (b) term life insurance and (c) long-term disability insurance.

 

Robert J. Mylod Jr.

 

Executive Benefits
and Payments
Upon Separation
or Change of
Control

 

Termination
without
“Cause”
(non-Change
of Control)
($)

 

Termination
for “Good
Reason”
(non-Change
of Control)
($)

 

Termination
without
“Cause” or
for “Good
Reason”
(Change of
Control)
($)

 

No
Termination
(Change of
Control)
($)

 

Death
or
Disability
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance:

 

 

 

 

 

 

 

 

 

 

 

Base Salary and Target Bonus

 

1,470,000

 

1,470,000

 

1,470,000

 

 

 

Pro Rated Bonus

 

315,000

 

315,000

 

315,000

 

 

315,000

 

Equity and Benefits:

 

 

 

 

 

 

 

 

 

 

 

Performance Share Units

 

5,254,845

 

660,445

 

7,552,045

 

7,552,045

 

5,254,845

 

Restricted Stock/ Restricted Stock Units

 

2,010,050

 

2,010,050

 

2,067,480

 

2,067,480

 

 

Stock Options

 

 

 

 

 

 

Health & Welfare(1)

 

12,273

 

12,273

 

24,546

 

 

12,273

 

Tax Gross-Up

 

 

 

4,566,795

 

 

 

Total:

 

9,062,168

 

4,467,768

 

15,995,866

 

9,619,525

 

5,582,118

 

 


(1)           Benefit amounts are based on 2007 annual premiums paid by the Company for (a) medical, dental and vision coverage, (b) term life insurance and (c) long-term disability insurance.

 

49



 

Christopher L.  Soder

 

Executive Benefits
and Payments
Upon Separation
or Change of
Control

 

Termination
without
“Cause”
(non-Change
of Control)
($)

 

Termination
for “Good
Reason”
(non-Change
of Control)
($)

 

Termination
without
“Cause” or
for “Good
Reason”
(Change of
Control)
($)

 

No
Termination
(Change of
Control)
($)

 

Death
or
Disability
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance:

 

 

 

 

 

 

 

 

 

 

 

Base Salary and Target Bonus

 

1,155,000

 

1,155,000

 

1,155,000

 

 

 

Pro Rated Bonus

 

247,500

 

247,500

 

247,500

 

 

247,500

 

Equity and Benefits:

 

 

 

 

 

 

 

 

 

 

 

Performance Share Units

 

1,751,615

 

143,575

 

2,555,635

 

2,555,635

 

1,751,615

 

Restricted Stock/ Restricted Stock Units

 

143,575

 

143,575

 

1,665,470

 

1,234,745

 

143,575

 

Stock Options

 

 

 

 

 

 

Health & Welfare(1)

 

12,197

 

12,197

 

24,394

 

 

12,197

 

Tax Gross-Up

 

 

 

1,931,666

 

 

 

Total:

 

3,309,887

 

1,701,847

 

7,579,665

 

3,790,380

 

2,154,887

 

 


(1)           Benefit amounts are based on 2007 annual premiums paid by the Company for (a) medical, dental and vision coverage, (b) term life insurance and (c) long-term disability insurance.

 

Stef Norden

 

Executive Benefits
and Payments
Upon Separation
or Change of
Control(1)

 

Termination
without
“Cause”
(non-Change
of Control)
($)

 

Termination
for “Good
Reason”
(non-Change
of Control)
($)

 

Termination
without
“Cause”
(Change of
Control)
($)

 

No
Termination
(Change of
Control)
($)

 

Death
or
Disability
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance:

 

 

 

 

 

 

 

 

 

 

 

Base Salary and Target Bonus

 

 

 

 

 

363,547

 

Pro Rated Bonus

 

 

 

 

 

 

Equity and Benefits:

 

 

 

 

 

 

 

 

 

 

 

Performance Share Units

 

 

 

 

 

 

Restricted Stock/ Restricted Stock Units

 

258,435

 

 

1,416,568

 

641,263

 

258,435

 

PIL Restricted Stock Units (2)

 

 

 

4,674,021

 

4,674,021

 

 

Stock Options

 

 

 

 

 

 

Health & Welfare

 

 

 

 

 

 

Tax Gross-Up

 

 

 

 

 

 

Total:

 

258,435

 

 

6,090,589

 

5,315,284

 

621,982

 

 


(1)           Mr. Norden’s compensation is translated into U.S. dollars using the exchange rates in effect on December 31, 2007, which was 1.98430 U.S. dollars to British Pounds and 1.46030 U.S. dollars to Euros.  As described in more detail in the summary of Mr. Norden’s employment agreement above, the

 

50



 

amounts owed to Mr. Norden would be significantly dependent on the facts and circumstances of the termination and subject to the discretion of a Dutch court.

 

(2)    The column “ Termination without ‘Cause’ (Change of Control) ” in the table above estimates the value of Mr. Norden’s PIL restricted stock units in the event of a change of control of priceline.com Incorporated on December 31, 2007.  The column “ No Termination (Change of Control) ” in the table above estimates the value of Mr. Norden’s PIL restricted stock units in the event of a transfer of 50% or more of the shares of PIL to a third party on December 31, 2007.  See “ Mr. Norden’s priceline.com International Limited Restricted Stock Units ” on page 48 for a description of the vesting provisions associated with the PIL restricted stock units.

 

Peter J. Millones

 

Executive Benefits
and Payments
Upon Separation
or Change of
Control

 

Termination
without
“Cause”
(non-Change
of Control)
($)

 

Termination
for “Good
Reason”
(non-Change
of Control)
($)

 

Termination
without
“Cause” or
for “Good
Reason”
(Change of
Control)
($)

 

No
Termination
(Change of
Control)
($)

 

Death
or
Disability
($)

 

 

 

 

 

 

 

 

 

 

 

 

 

Severance:

 

 

 

 

 

 

 

 

 

 

 

Base Salary and Target Bonus

 

870,000

 

870,000

 

870,000

 

 

 

Pro Rated Bonus

 

145,000

 

145,000

 

145,000

 

 

145,000

 

Equity and Benefits:

 

 

 

 

 

 

 

 

 

 

 

Performance Share Units

 

2,368,988

 

71,788

 

3,517,588

 

3,517,588

 

2,368,988

 

Restricted Stock/ Restricted Stock Units

 

215,363

 

215,363

 

1,148,600

 

789,663

 

215,363

 

Stock Options

 

 

 

 

 

 

Health & Welfare(1)

 

12,164

 

12,164

 

24,328