Stock Purchase Agreement - priceline.com Inc., General Atlantic Partners 48 LP and GAP Coinvestment Partners LP
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Execution Copy
STOCK PURCHASE AGREEMENT
by and among
PRICELINE.COM INCORPORATED,
GENERAL ATLANTIC PARTNERS 48, L.P.
and
GAP COINVESTMENT PARTNERS, L.P.
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Dated: July 31, 1998
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TABLE OF CONTENTS
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ARTICLE 1DEFINITIONS.................................................................1
1.1 Definitions........................................................1
1.2 Accounting Terms; Financial Statements.............................9
1.3 Knowledge of the Company...........................................9
ARTICLE 2PURCHASE AND SALE OF PREFERRED STOCK.......................................10
2.1 Purchase and Sale of Preferred Stock to the Purchasers............10
2.2 Certificate of Designation........................................10
2.3 Closing...........................................................10
2.4 Purchase Price Adjustment.........................................10
ARTICLE 3REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................12
3.1 Corporate Existence and Power.....................................12
3.2 Authorization; No Contravention...................................12
3.3 Governmental Authorization; Third Party Consents..................12
3.4 Binding Effect....................................................13
3.5 Litigation........................................................13
3.6 Compliance with Laws..............................................13
3.7 Capitalization....................................................14
3.8 No Default or Breach; Contractual Obligations.....................15
3.9 Title to Properties...............................................15
3.10 FIRPTA............................................................15
3.11 Financial Statements..............................................15
3.12 Taxes.............................................................16
3.13 No Material Adverse Change; Ordinary Course of Business...........16
3.14 Investment Company................................................16
3.15 Private Offering..................................................17
3.16 Labor Relations...................................................17
3.17 Employee Benefit Plans............................................17
3.18 Title to Assets...................................................17
3.19 Liabilities.......................................................18
3.20 Intellectual Property.............................................18
3.21 Year 2000 Compliance..............................................20
3.22 Network Redundancy and Computer Back-Up...........................20
3.23 Privacy of Customer Information...................................20
3.24 Potential Conflicts of Interest...................................20
3.25 Trade Relations...................................................21
3.26 Outstanding Borrowing.............................................21
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3.27 Insurance.........................................................21
3.28 Environmental Matters.............................................21
3.29 Broker's, Finder's or Similar Fees................................22
3.30 WAMP Assets.......................................................22
3.31 Breitenbach Agreement.............................................22
3.32 Affiliate Payments................................................22
3.33 Employees.........................................................22
3.34 Financial Projections.............................................22
3.35 Disclosure........................................................22
ARTICLE 4REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................23
4.1 Existence and Power...............................................23
4.2 Authorization; No Contravention...................................23
4.3 Governmental Authorization; Third Party Consents..................23
4.4 Binding Effect....................................................23
4.5 Purchase for Own Account..........................................24
4.6 Restricted Securities.............................................25
4.7 Broker's, Finder's or Similar Fees................................25
4.8 Accredited Investor...............................................25
4.9 Litigation........................................................25
ARTICLE 5CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE....................25
5.1 Representations and Warranties....................................26
5.2 Compliance with this Agreement....................................26
5.3 Secretary's Certificate...........................................26
5.4 Officer's Certificate.............................................26
5.5 Filing of Certificate of Designation..............................26
5.6 Stockholders Agreement............................................26
5.7 Registration Rights Agreement.....................................26
5.8 Opinion of Counsel................................................27
5.9 Purchased Shares..................................................27
5.10 Consents and Approvals............................................27
5.11 No Material Judgment or Order.....................................27
5.12 No Litigation.....................................................27
5.13 Incorporation of the Company......................................27
5.14 Chief Executive Officer...........................................28
5.15 Side Agreement....................................................28
ARTICLE 6CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE.......................28
6.1 Representation and Warranties.....................................29
6.2 Compliance with this Agreement....................................29
6.3 General Partners' Certificates....................................29
6.4 Stockholders Agreement............................................29
6.5 Registration Rights Agreement.....................................29
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6.6 Opinion of Purchasers' Counsel....................................29
6.7 No Material Judgment or Order.....................................29
6.8 Payment of Purchase Price.........................................30
6.9 Qualifications....................................................30
ARTICLE 7INDEMNIFICATION............................................................30
7.1 Indemnification...................................................30
7.2 Indemnification by Purchasers.....................................31
7.3 Seller's Limitation of Liability..................................31
7.4 Notification......................................................31
7.5 Exclusivity of Remedies...........................................32
ARTICLE 8AFFIRMATIVE COVENANTS......................................................33
8.1 Preservation of Existence.........................................33
8.2 PriceLine Travel Reorganization...................................33
8.3 Financial Statements and Other Information........................33
8.4 Annual Budget.....................................................34
8.5 Reservation of Common Stock.......................................34
8.6 Insurance.........................................................34
8.7 Books and Records.................................................35
8.8 Back-Ups of Computer Software.....................................35
8.9 Personnel and Assets..............................................35
8.10 Breitenbach Agreement.............................................35
8.11 Stock Option Plan.................................................35
ARTICLE 9MISCELLANEOUS..............................................................35
9.1 Survival of Representations and Warranties........................35
9.2 Notices...........................................................36
9.3 Successors and Assigns; Third Party Beneficiaries.................37
9.4 Amendment and Waiver..............................................37
9.5 Counterparts......................................................37
9.6 Headings..........................................................38
9.7 GOVERNING LAW.....................................................38
9.8 Severability......................................................38
9.9 Entire Agreement..................................................38
9.10 Fees..............................................................38
9.11 Publicity.........................................................38
9.12 Further Assurances................................................39
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EXHIBITS
A-1 Certificate of Incorporation
A-2 By-laws
B Form of Certificate of Designations
C Form of Stockholders Agreement
D Form of Registration Rights Agreement
E Form of Opinion of Counsel to the Company
F Form of Opinion of Counsel to the Purchasers
G Braddock Term Sheet
SCHEDULES
2.1 Purchased Shares and Purchase Price
3.3 Governmental Authorizations; Third Party Consents
3.5 Litigation
3.7(a) List of Stockholders and Capital Stock and Stock Equivalents.
3.8 Defaults or Breaches of Contractual Obligations; Contractual
Obligations
3.13 Dividends and Distributions
3.17 Employee Benefit Plans
3.18 Title to Assets of the Company
3.20(a)(ii) Intellectual Property Owned by the Company or the Subsidiary and
Applications therefor
3.20(a)(iii) Intellectual Property Licenses under which the Company or the
Subsidiary is a Licensor or Licensee
3.20(a)(iv) Infringements of the Company or the Subsidiary
3.20(a)(v) Intellectual Property Litigation
3.20(b) Infringement or Violations of Intellectual Property Rights
3.20(d) License Agreements which require a Material Royalty Payment
3.22 Network Redundancy and Computer Back-up
3.24 Potential Conflicts of Interests
3.26 Outstanding Borrowing
3.27 Insurance
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated July 31, 1998 (the
"Agreement"), among priceline.com Incorporated, a Delaware corporation (the
"Company"), General Atlantic Partners 48, L.P., a Delaware limited partnership
("GAP LP"), and GAP Coinvestment Partners, L.P., a New York limited partnership
("GAP Coinvestment" and, together with GAP LP, the "Purchasers").
WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue and sell to (a) GAP LP, for an
aggregate purchase price of $17,600,000 (subject to adjustment as more
specifically provided herein), an aggregate of 15,214,042 shares of Series A
Convertible Preferred Stock, par value $0.01 per share, of the Company (the
"Preferred Stock") and (b) GAP Coinvestment, for an aggregate purchase price of
$2,400,000 (subject to adjustment as more specifically provided herein), an
aggregate of 2,074,642 shares of Preferred Stock;
WHEREAS, each share of Preferred Stock is convertible (subject
to adjustment) into one share of Common Stock; and
WHEREAS, the transactions contemplated by this Agreement and
the Agreement of Merger, dated July 31, 1998, between priceline.com LLC and the
Company constitute part of a single integrated transaction and are pursuant to a
single integrated plan intended to qualify as a tax-free transaction under
Section 351 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants and
agree ments set forth herein and for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Adjusted Price Per Share" has the meaning set forth in
Section 2.4 of this Agreement.
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act. The following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC, the
members of GAP LLC
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and the limited partners of GAP LP; (b) any Affiliate of the limited partners of
GAP LP; and (c) any limited liability company or partnership a majority of whose
members or partners, as the case may be, are members of GAP LLC. GAP LP and GAP
Coinvestment shall be deemed to be Affiliates of one another.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Assets" has the meaning set forth in Section 3.18 of this
Agreement.
"Balance Sheets" has the meaning set forth in Section 3.11
hereto.
"Board of Directors" means the Board of Directors of the
Company.
"Breitenbach Agreement" means the Employment Agreement dated
January 1, 1998 among Paul Breitenbach, Jay Walker, WDC and the Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the
Closing Date substantially in the form attached hereto as Exhibit A-2, as the
same may be amended from time to time.
"Capital Lease Obligations" of any Person shall mean, as of
the date of determination, the obligations of such Person to pay rent or other
amounts under any lease (or other arrangement conveying the right to use) of
real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such Person under GAAP and, for the purposes of this Agreement, the amount of
such obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP consistently applied.
"Certificate of Designations" means the Certificate of
Designations with respect to the Preferred Stock adopted by the Board of
Directors and filed with the Secretary of State of the State of Delaware on or
before the Closing Date substantially in the form attached hereto as Exhibit B.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company substantially in the form attached hereto as
Exhibit A-1, as the same may be amended from time to time.
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"Chief Executive Officer" has the meaning set forth in Section
5.15 of this Agreement.
"Claims" has the meaning set forth in Section 3.5 of this
Agreement.
"Closing" has the meaning set forth in Section 2.3 of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.3 of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Company" has the meaning set forth in the recitals to this
Agreement.
"Condition of the Company" means the assets, business,
properties, operations or financial condition of the Company.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, or (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation, or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Contingent Obligation is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof.
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"Contractual Obligations" means as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
"Defined Benefit Plan" means a defined benefit plan within the
meaning of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded
or unfunded, qualified or nonqualified (whether or not subject to ERISA or the
Code).
"Election Notice" has the meaning set forth in Section 2.4 of
this Agreement.
"Environmental Laws" means federal, state, local and foreign
laws, principles of common law, civil law, regulations and codes, as well as
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person that is treated as a single
employer with the Company under Section 414(b), (c), (m) or (o) of the Code.
"Excess Option Shares" has the meaning set forth in Section
2.4 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Excluded Issuances" means (a) the conditional future grant to
Richard S. Braddock, as described in the term sheet dated July 17, 1998 attached
hereto as Exhibit G, of a warrant to purchase three million shares of Common
Stock, vesting upon the earlier to occur of (i) the Company achieving a public
market capitalization of $750 million, and (ii) the Company earning pre-tax
operating income of $70 million for a twelve month period occurring over four
consecutive fiscal quarters, and (b) any performance-based warrants to purchase
shares of Common Stock.
"Financial Statements" has the meaning set forth in Section
3.11 of this Agreement.
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"GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
"GAP Coinvestment" has the meaning set forth in the recitals
to this Agreement.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP, and any successor
to such entity.
"GAP LP" has the meaning set forth in the recitals to this
Agreement.
"Grant Notice" has the meaning set forth in Section 2.4
hereto.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person evidenced by notes, bonds, debentures or similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable and accrued commercial or trade
liabilities arising in the ordinary course of business, (d) all interest rate
and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (e) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (f) all obligations of
such Person under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (g) all indebtedness secured by any Lien (other than
Liens in favor of lessors under leases other than leases included in clause (f))
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person, and (h) any Contingent Obligation of
such Person.
"Indemnified Party" has the respective meanings set forth in
Sections 7.1 and 7.3 of this Agreement.
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"Indemnifying Party" has the respective meanings set forth in
Sections 7.1 and 7.3 of this Agreement.
"Initial Public Offering" means the initial public offering of
the shares of Common Stock of the Company pursuant to an effective Registration
Statement filed under the Securities Act.
"Intellectual Property" has the meaning set forth in Section
3.20 of this Agreement.
"International Carriers" means Scandinavian Airlines System,
Denmark-Norway-Sweden, a Scandinavian consortium, Aer Lingus, Virgin Atlantic
Airways, Ltd., Iberia Airlines, Malaysia Airlines and Icelandair.
"Internet Assets" means any internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html or
other code incorporated in such sites.
"Liabilities" has the meaning set forth in Section 3.19 of
this Agreement.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease Obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
"OEM" has the meaning set forth in Section 3.5 hereto.
"Orders" has the meaning set forth in Section 3.2 of this
Agreement.
"Omnibus Plan" has the meaning set forth in Section 8.11
hereto.
"Option Ceiling" has the meaning set forth in Section 2.4 of
this Agreement.
"Patents" means any foreign or United States patents and
patent applications, including any divisions, continuations,
continuations-in-part, substitutions or reissues thereof, whether or not patents
are issued on such applications and whether or not such applications are
modified, withdrawn or resubmitted.
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"Permitted Liens" means (i) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business with respect to liabilities that are not yet due or delinquent, (ii)
Liens for Taxes, assessments and other governmental charges which are not due
and payable or which may hereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings and (iii) other imperfections
of title or encumbrances, if any, which imperfections of title or other
encumbrances, individually or in the aggregate, would not be reasonably expected
to impair the ability of the Company to use the property or asset to which it
relates in substantially the same manner as it was used on the Closing Date.
"Permits" has the meaning set forth in Section 3.6(b)(i) of
this Agreement.
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"PISA" has the meaning set forth in Section 3.31 hereto.
"Plans" has the meaning set forth in Section 3.17 of this
Agreement.
"Preferred Stock" has the meaning set forth in the recitals to
this Agreement.
"Priceline LLC" means priceline.com LLC, a Delaware limited
liability company.
"PriceLine Travel" means PriceLine Travel, Inc., a [Delaware]
corporation.
"Purchased Shares" has the meaning set forth in Section 2.1 of
this Agreement.
"Purchaser Indemnified Party" has the meaning set forth in
Section 7.2 hereto.
"Purchaser Indemnifying Party" has the meaning set forth in
Section 7.2 hereto.
"Purchasers" has the meaning set forth in the recitals to this
Agreement.
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"Registration Rights Agreement" means the Registration Rights
Agreement substantially in the form attached hereto as Exhibit D.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"Regulations" means the Treasury Regulations promulgated under
the Code.
"Reimbursement Amount" has the meaning set forth in Section
2.4 of this Agreement.
"Requirements of Law" means, as to any Person, any law,
statute, treaty, rule, regulation, right, privilege, qualification, license or
franchise or determination of an arbitrator or a court or other Governmental
Authority or stock exchange, in each case applicable or binding upon such Person
or any of its property or to which such Person or any of its property is subject
or pertaining to any or all of the transactions contemplated or referred to
herein.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Side Agreement" has the meaning set forth in Section 5.15
hereto.
"Side Parties" has the meaning set forth in Section 5.15
hereto.
"Software" means any computer software program, source code,
object code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.
"Statements of Operations and Capital" has the meaning set
forth in Section 3.11 hereto.
"Stock Equivalents" means any security or obligation which is
by its terms convertible into or exchangeable for shares of common stock or
other capital stock or securities of the Company, and any option, warrant or
other subscription or purchase right with respect to common stock or such other
capital stock or securities.
"Stockholders" means Jay Walker and certain other stockholders
of the Company.
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"Stockholders Agreement" means the Stockholders Agreement
substantially in the form attached hereto as Exhibit C.
"Subsidiary Date" has the meaning set forth in Section 5.15
hereto.
"Taxes" has the meaning set forth in Section 3.12 of this
Agreement.
"Trade Secrets" means any trade secrets, research records,
processes, procedures, manufacturing formulae, technical know-how, technology,
blue prints, designs, plans, inventions (whether patentable and whether reduced
to practice), invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos,
corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
"Transaction Documents" means collectively, this Agreement,
the Stockholders Agreement, the Registration Rights Agreement and the Side
Agreement.
"WAMP" means Walker Asset Management Limited Partnership, a
Connecticut limited partnership.
"WDC" means Walker Digital Corporation, a Delaware
corporation.
1.2 Accounting Terms; Financial Statements. All accounting
terms used herein not expressly defined in this Agreement shall have the
respective meanings given to them in accordance with sound accounting practice.
The term "sound accounting practice" shall mean such accounting practice as, in
the opinion of the independent certified public accountants regularly retained
by the Company, conforms at the time to GAAP applied on a consistent basis
except for changes with which such accountants concur.
1.3 Knowledge of the Company. All references to the knowledge
of the Company shall mean knowledge of Jay Walker, Chairman of the Company,
Jesse Fink, Chief Operating Officer of the Company, Paul E. Francis, Chief
Financial Officer of the Company, Timothy Brier and any other officer who was
present at the due diligence meeting with General Atlantic personnel held on
Thursday, July 23, 1998.
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ARTICLE 2
PURCHASE AND SALE OF PREFERRED STOCK
2.1 Purchase and Sale of Preferred Stock to the Purchasers.
Subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to each of the Purchasers, and each of the Purchasers agrees that
it will purchase from the Company, on the Closing Date, the aggregate number of
shares of Preferred Stock set forth opposite such Purchaser's name on Schedule
2.1 hereto, for the aggregate purchase price set forth opposite such Purchaser's
name on Schedule 2.1 hereto (all of the shares of Preferred Stock being
purchased by the Purchasers listed on Schedule 2.1 being referred to herein as
the "Purchased Shares"), subject to the terms of Section 2.4 below. Immediately
after the Closing, the Purchased Shares shall represent not less than 16.39% of
the total number of shares of Common Stock outstanding on a fully diluted basis
(including, without limitation, the grant and exercise of all options subject to
the Company's stock option plans and assuming the conversion of all the
Purchased Shares).
2.2 Certificate of Designation. The Purchased Shares shall
have the preferences and rights set forth in the Certificate of Designations.
2.3 Closing. The closing of the sale and purchase of the
Purchased Shares (the "Closing") shall take place at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, no later than 4:00 p.m., New York time, on the date
hereof, or at such other time, place and date that the Company and the
Purchasers may agree in writing (the "Closing Date"). At the Closing, the
Company shall deliver to each Purchaser a certificate representing the Purchased
Shares being purchased by such Purchaser against delivery by such Purchaser to
the Company of the aggregate purchase price therefor by wire transfer of
immediately available funds.
2.4 Purchase Price Adjustment. The aggregate purchase price
set forth on Schedule 2.1 hereto shall be subject to adjustment pursuant to this
Section 2.4. The Company has represented in Section 3.7(a) hereof that, as of
the date hereof, options or warrants to purchase a total of 14,100,000 shares of
Common Stock (the "Option Ceiling") have been granted by the Company, or are
reserved for grant under the Company's existing stock option plans, as described
in Schedule 3.7(a). Except for Excluded Issuances, if the Company at any time on
or after the date of execution of this Agreement, but prior to the Initial
Public Offering (a) grants to any of its employees, officers, directors or
consultants shares of Common Stock (restricted or unrestricted) or options or
warrants to purchase shares of Common Stock, including, without limitation, the
issuance to Richard S. Braddock of a warrant to purchase 2,000,000 shares of
Common Stock, vesting upon the earlier to occur of the Initial Public Offering
and the issuance by the Company of at least $50 million of equity securities at
a Company pre-money
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valuation of not less than $450 million, as described in the term sheet dated
July 17, 1998 attached hereto as Exhibit G, in excess of the Option Ceiling or
(b) reserves for grant to any of its employees, officers, directors or
consultants shares of Common Stock (restricted or unrestricted) or options to
purchase shares of Common Stock in excess of the Option Ceiling by amending its
existing stock option plans or creating any new stock option plans or employee
benefit arrangements (other than such amendments, plans or arrangements that are
in contemplation of the Initial Pubic Offering; provided that nothing is granted
until after the Initial Public Offering) (in either case, such shares of Common
Stock or shares of Common Stock issuable upon the exercise of options or
warrants in excess of the Option Ceiling being referred to herein as the "Excess
Option Shares"), then the Company shall reimburse each of the Purchasers an
amount (each a "Reimbursement Amount") equal to the product of (a) the excess of
(i) $1.156826 or, if a Reimbursement Amount has previously been paid, the
Adjusted Price Per Share (calculated as part of the immediately preceding
Reimbursement Amount calculation), over (ii) a fraction (such fraction, the
"Adjusted Price Per Share") (x) the numerator of which is $100 million and (y)
the denominator of which is the sum of the number of shares of Common Stock
outstanding immediately prior to the Closing on a fully diluted basis plus the
aggregate number of Excess Option Shares, multiplied by (b) the aggregate number
of Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
hereto. Within seven (7) days of the grant, reservation or creation of any
Excess Option Shares, the Company shall send written notice thereof to each of
the Purchasers (the "Grant Notice"). The Reimbursement Amounts shall be paid
promptly, but not later than five (5) days following delivery of the Grant
Notice by the Company, in shares of Preferred Stock. In paying the Reimbursement
Amounts, the Company shall pay to each Purchaser the number of fully paid and
non-assessable shares of Preferred Stock equal to the excess of (a) a fraction
(i) the numerator of which is the aggregate purchase price set forth opposite
such Purchaser's name on Schedule 2.1 hereto and (ii) the denominator of which
is the Adjusted Price Per Share, over (b) the aggregate number of Purchased
Shares set forth opposite such Purchaser's name on Schedule 2.1 hereto. The
Company shall make reimbursements any time additional Excess Option Shares are
granted, reserved or created.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as of
the date hereof as follows:
3.1 Corporate Existence and Power. The Company (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of
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its incorporation; (b) has all requisite power and authority to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is proposed to be, engaged; (c) is duly
qualified as a foreign corporation, licensed and in good standing under the laws
of each jurisdiction in which its ownership, lease or operation of property or
the conduct of its business requires such qualification, except to the extent
that the failure to do so would not have a material adverse effect on the
Condition of the Company; and (d) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party. The Company has not
received notice from any jurisdiction, other than those referred to in clause
(c) above, in writing or otherwise, that the Company is required to qualify as a
foreign corporation therein, and the Company does not file any franchise, income
or other tax returns in any other jurisdiction based upon its ownership or use
of property therein or its derivation of income therefrom. The Company does not
own or lease property in any jurisdiction other than its jurisdiction of
incorporation and the jurisdictions referred to in clause (c) above.
3.2 Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each of the other
Transaction Documents and the transactions contemplated hereby and thereby (a)
have been duly authorized by all necessary corporate or other comparable action
of the Company; (b) do not contravene the terms of the Certificate of
Incorporation or the By-laws; (c) do not violate, conflict with or result in any
breach or contravention of, or the creation of any Lien under, any material
Contractual Obligation of the Company, or any material Requirement of Law
applicable to the Company; and (d) do not violate any judgment, injunction,
writ, award, decree or order of any nature (collectively, "Orders") of any
Governmental Authority against, or binding upon, the Company.
3.3 Governmental Authorization; Third Party Consents. Except
as set forth in Schedule 3.3, no approval, consent, compliance, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, and no lapse of a waiting period under a
Requirement of Law, is necessary or required in connection with the execution,
delivery or performance (including, without limitation, the sale, issuance and
delivery of the Purchased Shares) by, o enforcement against, the Company of this
Agreement and the other Transaction Documents or the transactions contemplated
hereby and thereby.
3.4 Binding Effect. This Agreement and each of the other
Transaction Documents have been duly executed and delivered by the Company, and
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles
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of equity relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
3.5 Litigation. Except as set forth on Schedule 3.5, (a) there
are no actions, suits, proceedings, claims, complaints, disputes, arbitrations
or investigations (collectively, "Claims") pending or, to the knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company, and (b) the Company has not received
any notices or other communications, whether written or oral, (i) from any
automobile dealership or airline that ha been participating in the Company's
internet commerce system either (x) stating that such entity does not wish to
participate in the Company's internet commerce system, or (y) threatening the
Company with any type of Claim with respect to any Company solicitations,
inquiries or other communications, or (z) stating that such entity has been
notified by an original equipment manufacturer ("OEM") that such OEM does not
wish for such entity to participate in the Company's internet commerce system,
or (ii) fro any OEM that such OEM does not wish any of its automobile
dealerships to participate in the Company's internet commerce system. No Order
has been issued by any court or other Governmental Authority against the Company
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any of the other Transaction Documents.
3.6 Compliance with Laws.
(a) The Company is in compliance with all
Requirements of Law including, without limitation, any general consumer
protection statutes and any state travel agent registration requirements, and
all Orders issued by any court or Governmental Authority against the Company
that are not expressly covered by any other representation or warranty of the
Company set forth in Section 3 hereof in all respects, except to the extent that
the failure to comply with such Requirements of Law or Orders would not have a
material adverse effect on the Condition of the Company.
(b) (i) The Company has all material licenses,
permits and approvals of any Governmental Authority (collectively, "Permits")
that are necessary for the conduct of the business of the Company; (ii) such
Permits are in full force and effect; and (iii) no violations are or have been
recorded in respect of any Permit.
(c) No material expenditure is presently required by
the Company to comply with any existing Requirement of Law or Order.
3.7 Capitalization.
(a) On the Closing Date, after giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
Company shall
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consist of (i) 150,000,000 shares of Common Stock, of which
74,409,902 shares are issued and outstanding and (ii) 30,000,000 shares of
Preferred Stock, of which 17,288,684 shares are outstanding and issued to the
Purchasers. Schedule 3.7(a) sets forth, as of the Closing Date, a true and
complete list of (x) the stockholders of th Company (including any trust or
escrow agent arrangement created in connection with any employee stock option
plan) and, opposite the name of each stockholder, the amount of all outstanding
capital stock and Stock Equivalents owned by such stockholder and (y) the
holders of Stock Equivalents (other than the stockholders set forth in clause
(x) above) and, opposite the name of each such holder, the amount of all Stock
Equivalents owned by such holder. As of the date of this Agreement, options or
warrants to purchase a total of 14,100,000 shares of Common Stock have been
granted, or are reserved for grant under the Company's existing stock option
plans. The Company has reserved an aggregate of 17,288,684 shares of Common
Stock for issuance upon conversion of the Purchased Shares. Except as set forth
on Schedule 3.7(a), there are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued, unauthorized or
treasury shares of the Company's capital stock, (ii) any Stock Equivalents or
(iii) other securities of the Company. The Purchased Shares are duly authorized,
and when issued and sold to the Purchasers after payment therefor, will be
validly issued, fully paid and non-assessable, and, subject to the truth and
accuracy of each Purchaser's representations and warranties set forth in Section
4 hereof, will be issued in compliance with the registration and qualification
requirements of all applicable federal, state and foreign securities laws or
pursuant to a valid exemption therefrom. The shares of Common Stock issuable
upon conversion of the Purchased Shares are duly authorized and, when issued in
compliance with the provisions of the Certificate of Incorporation and the
Certificate of Designation, will be validly issued, fully paid and
non-assessable. The issued and outstanding shares of Common Stock are all duly
authorized, validly issued, fully paid and non-assessable, and wer issued in
compliance with the registration and qualification requirements of all
applicable federal, state and foreign securities laws or pursuant to a valid
exemption therefrom.
(b) The Company does not directly or indirectly own
and has not made any investment in any of the capital stock of, or any other
proprietary interest in, any Person.
3.8 No Default or Breach; Contractual Obligations. Except as
set forth in Schedule 3.8, the Company has not received written notice of any
default under, or is in default under, any Contractual Obligation listed on
Schedule 3.8. Schedule 3.8 (a) lists all of the Contractual Obligations to which
the Company is a party, whether written or oral, (i) which involve an amount in
excess of $25,000, (ii) which the Company has entered into with any airline or
airline reservation system or any automobile manufacturer, distributor or
dealership, or (iii) which are otherwise material to the
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Condition of the Company, (b) states opposite the name of each such Contractual
Obligation the amount of inventory guaranteed or committed to the Company, if
applicable, and (c) identifies with an asterisk each such Contractual Obligation
that is oral. All such Contractual Obligations are valid, subsisting, in full
force and effect and binding upon the Company and, to the knowledge of the
Company, the other parties thereto, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability,
and the Company has paid in full or accrued all amounts due thereunder and has
satisfied in full or provided for all of its liabilities and obligations
thereunder to the extent such payment, liabilities or obligations were due, or
required performance, as applicable, from or by the Company. To the knowledge of
the Company, no other party to any such Contractual Obligation is in default
thereunder, nor does any condition exist that with notice or lapse of time or
both would constitute a default thereunder.
3.9 Title to Properties. The Company has good, record and
marketable title in fee simple to, or holds interests in as lessee or sublessee
under leases or subleases in full force and effect, all real property used in
connection with its business or otherwise owned or leased or subleased by it,
except for such defects in title and leasehold interests as would not,
individually or in the aggregate, have a material adverse effect on the
Condition of the Company, or a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or the other Transaction
Documents.
3.10 FIRPTA. The Company is not a "foreign person" within the
meaning of Section 1445 of the Code.
3.11 Financial Statements. The Company has delivered to the
Purchasers unaudited statements (i) of the financial condition of Priceline LLC
as of December 31, 1997 and June 30, 1998 (collectively, the "Balance Sheets")
and (ii) of operations and changes in members' capital for the one-year period
ended December 31, 1997 and the six-month period ended June 30, 1998
(collectively, the "Statements of Operations and Capital," and, together with
the Balance Sheets, the "Financial Statements"). Each of the Financial
Statements has been prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated, except for normal year-end adjustments
and the omission of footnotes. Each of the Balance Sheets fairly presents the
financial position of Priceline LLC as of the date thereof. Each of the
Statements of Operations and Capital fairly presents, in all material respects,
the results of operations and changes in members' capital, for the period then
ended. The Financial Statements consist of all the financial statements of the
Company since its inception.
3.12 Taxes. (a) The Company has paid all federal, state,
county, local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes,
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excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes,
employment and payroll related taxes, property taxes and import duties, whether
or not measured in whole or in part by net income (hereinafter, "Taxes" or,
individually, a "Tax") which have come due and are required to be paid by it
through the date hereof, and all deficiencies or other additions to Tax,
interest and penalties owed by it in connection with any such Taxes; (b) the
Company has timely filed or caused to be filed all returns for Taxes that it is
required to file on and through the date hereof (including all applicable
extensions), and all such Tax returns are accurate and complete; (c) the Company
has not received any notice of deficiency with respect to any Tax return and, to
the knowledge of the Company, no audit is in progress with respect to any return
for Taxes, no extension of time is in force with respect to any date on which
any return for Taxes was or is to be filed and no waiver or agreement is in
force for the extension of time for the assessment or payment of any Tax; (d)
all liabilities for Taxes of the Company attributable to periods prior to or
ending on the Closing Date have been provided for on the Financial Statements in
accordance with GAAP; and (e) there are no Liens for Taxes on the assets of the
Company except for Liens for current Taxes not yet due or with respect to Taxes
being disputed in good faith by the Company.
3.13 No Material Adverse Change; Ordinary Course of Business.
Since January 1, 1998, (a) there has not been any material adverse change nor,
to the knowledge of the Company is any such material adverse change threatened,
in the Condition of the Company, (b) the Company has not declared, paid or made
any dividend or any distribution to its stockholders except as set forth on
Schedule 3.13 and (c) the Company has not increased the compensation of any of
its officers or the rate of pay of any of its employees, except as part of
regular compensation increases in the ordinary course of business.
3.14 Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
3.15 Private Offering. No form of general solicitation or
general advertising was used by the Company or its representatives in connection
with the offer or sale of the Purchased Shares. Subject in part to the truth and
accuracy of each Purchaser's representations and warranties set forth in Section
4 hereof, no registration of the Purchased Shares, pursuant to the provisions of
the Securities Act or any state securities or "blue sky" laws, will be required
by the offer, sale or issuance of the Purchased Shares. The Company agrees that
neither it, nor anyone acting on its behalf, shall offer to sell the Purchased
Shares or any other securities of the Company so as to require the registration
of the Purchased Shares pursuant to the provisions of the Securities Act or any
state securities or "blue sky" laws, unless such Purchased Shares or other
securities are so registered.
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3.16 Labor Relations. (a) The Company is not engaged in any
unfair labor practice; (b) there is (i) no grievance or arbitration proceeding
arising out of or under collective bargaining agreements pending or, to the
knowledge of the Company, threatened against the Company, and (ii) no strike,
labor dispute, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against the Company; (c) the Company is not a party to any collective
bargaining agreement; (d) there is no union representation question existing
with respect to the employees of the Company, and (e) to the knowledge of the
Company, no union organizing activities are taking place at any facility of the
Company.
3.17 Employee Benefit Plans. Neither the Company nor any of
its ERISA Affiliates has any actual or contingent, direct or indirect, liability
in respect of any employee benefit plan or arrangement, including any plan
subject to ERISA, other than to make contributions under or pay benefits
pursuant to the plans listed on Schedule 3.17 (collectively, the "Plans"). All
of the Plans are in material compliance with all applicable Requirements of Law.
Except as set forth on Schedule 3.1 no Plan (a) is subject to Title IV of ERISA,
or is otherwise a Defined Benefit Plan, or is a multiple employer plan (within
the meaning of Section 413(c) of the Code); or (b) provides for post-retirement
welfare benefits or a "parachute payment" (within the meaning of Section 280G(b)
of the Code). The execution and delivery of this Agreement and each of the other
Transaction Documents, the purchase and sale of the Purchased Shares and the
consummation of the transactions contemplated hereby and thereby will not result
in any prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code.
3.18 Title to Assets. Except as set forth on Schedule 3.18,
the Company owns and has good, valid, and marketable title to all of its
properties and assets used in its business and reflected as owned on the
Financial Statements or so described in Schedule 3.18 (collectively, the
"Assets"), in each case free and clear of all Liens other than Permitted Liens
and Liens specifically described on the notes to the Financial Statements.
3.19 Liabilities. The Company does not have any direct or
indirect obligation or liability (the "Liabilities") other than (a) Liabilities
fully and adequately reflected or reserved against on the Financial Statements
and (b) Liabilities incurred since July 1, 1997 in the ordinary course of
business.
3.20 Intellectual Property.
(a) (i) The Company is the owner of, or has the
license or right to use, sell and license, all of the Copyrights, Patents, Trade
Secrets, Trademarks, Internet Assets, Software and other proprietary rights
(collectively, "Intellectual Property") that are used in connection with its
business as presently conducted or contemplated in its business plan.
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(ii) Schedule 3.20(a)(ii) sets forth all of the
Intellectual Property owned by the Company, and filings and applications for any
of the above filed by the Company or WAMP. Except as set forth on Schedule
3.20(a)(ii), none of the Intellectual Property listed on Schedule 3.20(a)(ii) is
subject to any outstanding Order, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, threatened, whic challenges the validity,
enforceability, use or ownership of any item of the Intellectual Property.
(iii) Schedule 3.20(a)(iii) sets forth all
Intellectual Property licenses, sublicenses, distributor agreements and other
agreements under which the Company is either a licensor, licensee or
distributor, except such licenses, sublicenses and other agreements relating to
off-the-shelf software which are commercially available on a retail basis and
used solely on the computers of the Company. The Company has substantially
performed all obligations imposed upon it thereunder,
and the Company is not, and to the knowledge of the Company no other party
thereto is, in breach of or default thereunder in any respect, nor is there any
event which with notice or lapse of time or both would constitute a default
thereunder. All of the Intellectual Property licenses listed on Schedule
3.20(a)(iii) are valid, enforceable and in full force and effect against the
Company and, to the knowledge of the Company, against the other parties to such
licenses, and will continue to be so on identica terms immediately following the
Closing except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity relating to enforceability.
(iv) To the knowledge of the Company, other than as
set forth on Schedule 3.20(a)(iv), none of the Intellectual Property currently
sold or licensed by the Company to any Person or used by or licensed to the
Company infringes upon or otherwise violates any Intellectual Property rights of
others.
(v) Except as set forth on Schedule 3.20(a)(v), no
litigation is pending and no Claim has been received by the Company or, to the
knowledge of the Company, is threatened, contesting the right of the Company to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company.
(b) Except as set forth on Schedule 3.20(b), to the
knowledge of the Company, no Person is infringing upon or otherwise violating
the Intellectual Property rights of the Company.
(c) No former employer of any employee of the
Company, and no current or former client of any consultant of the Company, has
made a claim against the Company or, to the knowledge of the Company, against
any former employer of such
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employee or consultant, that such employee or such consultant is utilizing for
the benefit of the Company Intellectual Property of such former employer or
client.
(d) Except as set forth on Schedule 3.20(d), the
Company is not a party to or bound by, any license or other agreement requiring
the payment of any material royalty payment, excluding such agreements relating
to software licensed for use solely on the computers of the Company.
(e) To the knowledge of the Company, no employee of
the Company is in violation in any material respect of any Requirement of Law
applicable to such employee, or any term of any employment agreement, patent or
invention disclosure agreement or other contract or agreement relating to the
relationship of such employee with the Company.
(f) To the knowledge of the Company, none of the
Trade Secrets, wherever located, the value of which is contingent upon
maintenance of confidentiality thereof, has been disclosed to any Person not a
party to a non-disclosure or confidentiality agreement with the Company other
than employees, representatives and agents of the Company, except as required
pursuant to the filing of a patent application by the Company.
(g) It is not necessary for the Company's business to
use any Intellectual Property owned by any director, officer, employee or
consultant of the Company (or persons the Company presently intends to hire). At
no time during the conception or reduction to practice of any of the Company's
Intellectual Property was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any Governmental Authority
or subject to any employment agreement, invention assignment, nondisclosure
agreement or other Contractual Obligation with any third party that could
adversely affect the Company's rights to its Intellectual Property.
3.21 Year 2000 Compliance. To the knowledge of the Company,
the proprietary Software used by the Company will, and no material expenditure
is required by the Company to make such Software, (a) accurately process date
information before, during and after January 1, 2000, including, but not limited
to, accepting date input, providing date output and performing calculations on
dates or portions of dates; (b) function accurately and without interruption
before, during and after January 1, 2000 without any change in operations
associated with the advent of the new century; (c) respond to two (2) digit year
date input in a way that resolves the ambiguity as to century in a disclosed,
defined and predetermined manner; and (d) store and provide output of date
information in ways that are unambiguous as to century.
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3.22 Network Redundancy and Computer Back-Up. Except as set
forth on Schedule 3.22.
(a) The server hardware and supporting equipment
(including communications equipment, terminals and hook-ups that interface with
airline computer reservation systems) used in the Company's services network
provide redundancy and meet industry standards relating to high availability;
and
(b) The Company has made back-ups of all material
computer Software and databases utilized by it and maintain such Software and
databases at a secure off-site location.
3.23 Privacy of Customer Information. The Company does not use
any of the customer information it receives through its website in an unlawful
manner or in a manner violative of the rights of privacy of its customers. The
Company has reasonably adequate security measures in place to protect the
customer information it receives through its website from illegal use by third
parties or use by third parties in a manner violative of the rights of privacy
of its customers. The Company represents to its customers that it keeps secure
the customer information its receives through its website, but does not
guarantee security.
3.24 Potential Conflicts of Interest. Except as set forth on
Schedule 3.24, no officer, director or stockholder of the Company, no spouse of
any such officer, director or stockholder, and, to the knowledge of the Company,
no relative of such spouse or of any such officer, director or stockholder and
no Affiliate of any of the foregoing (a) owns, directly or indirectly, any
interest in (excepting less than 1% stock holdings for investment purposes in
securities of publicly held and traded companies), or is an officer, director,
employee or consultant of, any Person which is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent or customer of,
or lender to or borrower from, the Company; (b) owns, directly or indirectly, in
whole or in part, any tangible or intangible property that the Company has used,
or that the Company will use, in the conduct of business; or (c) has any cause
of action or other claim whatsoever against, or owes or has advanced any amount
to, the Company, except for claims in the ordinary course of business such as
for accrued vacation pay, accrued benefits under employee benefit plans, and
similar matters and agreements existing on the date hereof.
3.25 Trade Relations. There exists no actual or, to the
knowledge of the Company, threatened termination, cancellation or limitation of,
or any adverse modification or change in, the business relationship of the
Company, or the business of the Company, with any customer or supplier or any
group of customers or suppliers including, without limitation, Transworld
Airlines, America West Airlines or any International Carrier, whose purchases or
inventories provided to the Company's business
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are individually or in the aggregate material to the Condition of the Company,
and there exists no present condition or state of fact or circumstances that
would materially adversely affect the Condition of the Company or materially
prevent the Company from conducting such business relationships or such business
with any such customer, supplier or group of customers or suppliers in
substantially the same manner as heretofore conducted by the Company.
3.26 Outstanding Borrowing. Schedule 3.26 sets forth (a) the
amount of all Indebtedness of the Company as of the date hereof, (b) the Liens
that relate to such Indebtedness and that encumber the Assets and (c) the name
of each lender thereof.
3.27 Insurance. Schedule 3.27 lists all of the insurance
policies held by or on behalf of the Company, with the effective date and
coverage amounts indicated thereon. Such policies and binders are valid and
enforceable in accordance with their terms and are in full force and effect and
covers all risks associated with the Company's business that are customarily
insured against in the industry in such amounts as are customary in the
industry. None of such policies will be affected by, or terminate or lapse by
reason of, any transaction contemplated by this Agreement or any of the other
Transaction Documents.
3.28 Environmental Matters. The Company is in compliance in
all material respects with all applicable Environmental Laws. There is no civil,
criminal or administrative judgment, action, suit, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter pending
or, to the knowledge of the Company, threatened against the Company pursuant to
Environmental Laws which would reasonably be expected to result in a fine,
penalty or other obligation, cost o expense that would have a material adverse
affect on the Condition of the Company; and, to the knowledge of the Company,
there are no past or present events, conditions, circumstances, activities,
practices, incidents, agreements, actions or plans of or relating to the Company
which may prevent compliance with, or which have given rise to or will give rise
to liability under, Environmental Laws that would have a material adverse affect
on the Condition of the Company.
3.29 Broker's, Finder's or Similar Fees. There are no
brokerage commissions, finder's fees or similar fees or commissions payable by
the Company in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any action taken by
any such Person.
3.30 WAMP Assets. WAMP owns no assets used by, or necessary
for the conduct of business of, the Company.
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3.31 Breitenbach Agreement. The option granted to Paul
Breitenbach in Section 3(e) of the Breitenbach Agreement relates only to a
potential business unit of WDC, not the Company.
3.32 Affiliate Payments. All payments made by the Company to
WDC pursuant to the Purchase and Intercompany Services Agreement (the "PISA"),
dated as of April 6, 1998, among WAMP, WDC, the Company and PriceLine Travel,
for services provided by WDC are made on the same basis as if the Company were
paying an unaffiliated third party for similar services pursuant to an arm's
length transaction.
3.33 Employees. The Company employs, or contracts with
consultants for, all personnel necessary for the operation of its business.
3.34 Financial Projections. The financial projections provided
to the Purchasers by the Company regarding airline ticket sales were reasonably
prepared based upon the best available information and the Financial Statements.
3.35 Disclosure.
(a) Material Adverse Effects. There is no fact known
to the Company, which the Company has not disclosed to the Purchasers either
orally or in writing, which materially adversely affects, the Condition of the
Company or the ability of the Company to perform its obligations under this
Agreement, any of the other Transaction Documents or any document contemplated
hereby or thereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each of the Purchasers hereby represents and warrants
(severally as to itself and not jointly) to the Company as follows:
4.1 Existence and Power. Such Purchaser (a) is a partnership
duly organized and validly existing under the laws of the jurisdiction of its
formation and (b) has the requisite partnership power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery
and performance by such Purchaser of this Agreement and each of the other
Transaction
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Documents to which it is a party and the transactions contemplated hereby and
thereby, including, without limitation, the purchase of the Purchased Shares,
(a) have been duly authorized by all necessary partnership action, (b) do not
contravene the terms of such Purchaser's organizational documents, or any
amendment thereof, (c) do not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any Requirement of Law applicable to such Purchaser and
(d) do not violate any Order of any Governmental Authority against, or binding
upon, such Purchaser.
4.3 Governmental Authorization; Third Party Consents. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under any Requirement of Law, is necessary or
required in connection with the execution, delivery or performance (including,
without limitation, the purchase of the Purchased Shares) by, or enforcement
against, such Purchaser of this Agreement and each of the other Transaction
Documents to which such Purchaser is a party or the transactions contemplated
hereby and thereby.
4.4 Binding Effect. This Agreement and each of the other
Transaction Documents to which such Purchaser is a party have been duly executed
and delivered by such Purchaser and constitute the valid and binding obligations
of such Purchaser, enforceable against it in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.5 Purchase for Own Account. The Purchased Shares to be
acquired by such Purchaser pursuant to this Agreement, and the Common Stock
acquired upon conversion of the Preferred Stock, are being or will be acquired
for its own account and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the securities laws of the United States of America, or any state. If such
Purchaser should in the future decide to dispose of any of such Purchased
Shares, such Purchaser understands and agrees that it may do so only in
compliance with the Securities Act and applicable state securities laws, as then
in effect. Such Purchaser agrees to the imprinting, so long as required by law,
of legends on certificates representing all of its Purchased Shares and shares
of Common Stock issuable upon conversion of its Purchased Shares to the
following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY
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STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
STOCKHOLDERS AGREEMENT, DATED JULY 31, 1998, AMONG PRICELINE.COM
INCORPORATED, GENERAL ATLANTIC PARTNERS 48, L.P., GAP COINVESTMENT
PARTNERS, L.P. AND THE STOCKHOLDERS NAMED THEREIN. THE COMPANY WILL NOT
REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY
UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE
TERMS OF THE STOCKHOLDERS AGREEMENT. THE COMPANY WILL MAIL A COPY OF
SUCH AGREEMENT, TOGETHER WITH A COPY OF THE EXPRESS TERMS OF THE
SECURITIES AND THE OTHER CLASS OR CLASSES AND SERIES OF SHARES, IF ANY,
WHICH THE COMPANY IS AUTHORIZED TO ISSUE, TO THE RECORD HOLDER OF THIS
CERTIFICATE, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR.
4.6 Restricted Securities. Such Purchaser understands that the
Purchased Shares will not be registered at the time of their issuance under the
Securities Act for the reason that the sale provided for in this Agreement is
exempt pursuant to Section 4(2) of the Securities Act and that the reliance of
the Company on such exemption is predicated in part on such Purchaser's
representations set forth herein. Such Purchaser represents that it is
experienced in evaluating companies such a the Company, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment and has the ability to suffer the total loss
of its investment. Such Purchaser further represents that it has had the
opportunity to ask questions of and receive answers from the Company concerning
the terms and conditions of the offering and to obtain additional information to
such Purchaser's satisfaction.
4.7 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the
Purchasers, in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Purchasers or any action taken
by the Purchasers.
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4.8 Accredited Investor. Each of the Purchasers is an
"Accredited Investor" within the meaning of Rule 501 of Regulation D under the
Securities Act, as presently in effect.
4.9 Litigation. No action, suit, proceeding, claim, complaint,
dispute, arbitration or investigation has been instituted or, to the knowledge
of such Purchaser, is threatened to restrain or prohibit or otherwise challenge
the legality or validity of the transactions contemplated by this Agreement or
any of the other Transaction Documents. No Order has been issued by any court or
other Governmental Authority against such Purchaser purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any of the
other Transaction Documents.
ARTICLE 5
CONDITIONS TO THE OBLIGATION OF
THE PURCHASES TO CLOSE
--------------------------------
The obligation of the Purchasers to purchase the Purchased
Shares, to pay the purchase price therefor at the Closing and to perform any
obligations hereunder shall be subject to the satisfaction as determined by, or
waiver by, the Purchasers of the following conditions on or before the Closing
Date.
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Article 3 hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date.
5.2 Compliance with this Agreement. The Company shall have
performed and complied in all material respects with all of the agreements and
conditions set forth herein that are required to be performed or complied with
by the Company on or before the Closing Date.
5.3 Secretary's Certificate. The Purchasers shall have
received a certificate from the Company, in form and substance reasonably
satisfactory to the Purchasers, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Company, certifying that the attached
copies of the Certificate of Incorporation, the By-laws, the Certificate of
Designation and resolutions of the Board of Directors approving this Agreement
and each of the other Transaction Documents to which the Company is a party and
the transactions contemplated hereby and thereby, are all true, complete and
correct and remain unamended and in full force and effect.
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5.4 Officer's Certificate. The Purchasers shall have received
a certificate from the Company, in form and substance reasonably satisfactory to
the Purchasers, dated the Closing Date and signed by the Chief Executive Officer
and Chief Financial Officer of the Company, certifying that (a) the
representations and warranties of the Company contained in Article 3 hereof are
true and correct in all material respects on the Closing Date and (b) the
Company has performed and complied in al material respects with all of the
agreements and conditions set forth or contemplated herein that are required to
be performed or complied with by the Company on or before the Closing Date.
5.5 Filing of Certificate of Designation. The Certificate of
Designation shall have been duly filed by the Company with the Secretary of
State of the State of Delaware in accordance with the General Corporation Law of
the State of Delaware.
5.6 Stockholders Agreement. The Company and the Stockholders
shall have duly executed and delivered the Stockholders Agreement, substantially
in the form attached hereto as Exhibit C.
5.7 Registration Rights Agreement. The Company and the
Stockholders shall have duly executed and delivered the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit D.
5.8 Opinion of Counsel. The Purchasers shall have received an
opinion of Cummings & Lockwood and/or Skadden, Arps, Slate, Meagher & Flom, LLP,
counsel to the Company, dated the Closing Date, relating to the transactions
contemplated by or referred to herein, substantially in the form attached hereto
as Exhibit E.
5.9 Purchased Shares. The Company shall be prepared to deliver
to the Purchasers certificates in definitive form representing the number of
Purchased Shares set forth opposite such Purchaser's name on Schedule 2.1
hereto, registered in the name of such Purchaser, as applicable.
5.10 Consents and Approvals. The Company shall have provided
the Purchasers with evidence, in form and substance reasonably satisfactory to
the Purchasers, that (a) each consent, exemption, authorization and notice set
forth on Schedule 5.10 has been obtained or made, or that the requirement for
such action has been, to the extent permitted by Applicable Law, waived, and (b)
all applicable waiting periods shall have expired (or early termination of such
waiting periods shall have been obtained).
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<PAGE>
5.11 No Material Judgment or Order. There shall not be on the
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the judgment of the Purchasers, (a) prohibit or restrict (i) the
purchase of the Purchased Shares or (ii) the consummation of the transactions
contemplated by this Agreement, (b) subject the Purchasers to any penalty or
onerous condition under or pursuant to any Requirement of Law if the Purchased
Shares were to be purchased hereunder, or (c) restrict the operation of the
business of the Company as conducted on the date hereof in a manner that would
have a material adverse effect on the Condition of the Company.
5.12 No Litigation. No action, suit, proceeding, claim or
dispute shall have been brought or otherwise arisen at law, in equity, in
arbitration or before any Governmental Authority against the Company which
would, if adversely determined, (a) have a material adverse effect on the
Condition of the Company or (b) have a material adverse effect on the ability of
the Company to perform its obligations under this Agreement or each of the other
Transaction Documents.
5.13 Incorporation of the Company. The Purchasers shall have
received copies of all documents, in form and substance satisfactory to the
Purchasers, evidencing the incorporation of the Company and the succession of
the Company to the business of Priceline LLC.
5.14 Chief Executive Officer. The Company shall have recruited
and hired a new chief executive officer (the "Chief Executive Officer"), the
choice and terms and conditions of which appointment shall be reasonably
acceptable to the Purchasers, subject to the execution of a definitive
employment agreement.
5.15 Side Agreement. PriceLine Travel and Jay Walker (the
"Side Parties") shall have executed a side agreement (the "Side Agreement")
pursuant to which:
(a) The Side Parties shall agree to cause
PriceLine Travel to become a wholly-owned
subsidiary of the Company by the earlier to
occur of (such date, the "Subsidiary Date"):
(i) December 31, 1998, and (ii) the
effective date of the Initial Public
Offering;
(b) PriceLine Travel shall agree not to issue
any equity securities or securities
convertible into equity securities to any
Person on or before the Subsidiary Date;
(c) Jay Walker shall grant a call option (the
"PriceLine Travel Option") to each of the
Purchasers, such option to be
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exercisable at any time prior to the
Subsidiary Date, to purchase all of Jay
Walker's interests in PriceLine Travel; and
(d) Jay Walker shall agree not to transfer any
of his interests in PriceLine Travel prior
to the Subsidiary Date.
ARTICLE 6
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
-----------------------------
The obligation of the Company to issue and sell the Purchased
Shares and the obligation of the Company to perform its other obligations
hereunder, shall be subject to the satisfaction as determined by, or waiver by,
the Company of the following conditions on or before the Closing Date:
6.1 Representation and Warranties. The representations and
warranties of the Purchasers contained in Article 4 hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date.
6.2 Compliance with this Agreement. Each of the Purchasers
shall have performed and complied in all material respects with all of the
agreements and conditions set forth herein that are required to be performed or
complied with by such Purchaser on or before the Closing Date.
6.3 General Partners' Certificates. The Company shall have
received a certificate from a general partner of each of GAP LP and GAP
Coinvestment, in form and substance reasonably satisfactory to the Company,
dated the Closing Date and signed by such general partner, certifying that (a)
the representations and warranties of GAP LP or GAP Coinvestment, as the case
may be, contained in Article 4 hereof are true and correct in all material
respects on the Closing Date, and (b) GAP LP or GAP Coinvestment, as the case
may be, has performed and complied with all of the agreements and conditions set
forth or contemplated herein that are required to be performed or complied with
by GAP LP or GAP Coinvestment, as the case may be, on or before the Closing
Date.
6.4 Stockholders Agreement. The Purchasers shall have duly
executed and delivered the Stockholders Agreement, substantially in the form
attached hereto as Exhibit C.
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6.5 Registration Rights Agreement. The Purchasers shall have
duly executed and delivered the Registration Rights Agreement, substantially in
the form attached hereto as Exhibit D.
6.6 Opinion of Purchasers' Counsel. The Company shall have
received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, dated the
Closing Date, relating to the transactions contemplated by or referred to
herein, substantially in the form attached hereto as Exhibit F.
6.7 No Material Judgment or Order. There shall not be on the
Closing Date any Order of a court of competent jurisdiction or any ruling of any
Governmental Authority or any condition imposed under any Requirement of Law
which would, in the judgment of the Company, (a) prohibit or restrict (i) the
sale of the Purchased Shares or (ii) the consummation of the transactions
contemplated by this Agreement, or (b) subject the Company to any penalty or
onerous condition under or pursuant to any Requirement of Law if the Purchased
Shares were to be sold hereunder.
6.8 Payment of Purchase Price. Each Purchaser shall have
delivered the purchase price specified in Schedule 2.1 for the purchase of the
Preferred Stock.
6.9 Qualifications. All authorizations, approvals or permits
of any Governmental Authority that are required in connection with the lawful
issuance and sale of the Preferred Stock shall have been obtained and be
effective as of the Closing.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 Indemnification. Except as otherwise provided in this
Article 7, the Company (the "Indemnifying Party") agrees to indemnify, defend
and hold harmless the Purchasers and their Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, Claims (including any
Claim by a third party), damages, expenses (including reasonable fees,
disbursements and other charges of one counsel incurred by the Indemnified Party
in any action between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party or otherwise) or other
liabilities (collectively, "Losses") resulting from, arising out of or relating
to any breach of any representation or warranty, covenant or agreement by the
Company in this Agreement or the other Transaction Documents, including, without
limitation, any legal, administrative or other actions (including actions
brought by the Purchasers or the Company or any
29
<PAGE>
equity holders of the Company or derivative actions brought by any Person
claiming through or in the Company's name), proceedings or investigations
(whether formal or informal), or written threats thereof, based upon, relating
to or arising out of this Agreement or the other Transaction Documents, the
transactions contemplated hereby and thereby, or any Indemnified Party's role
therein or in transactions contemplated thereby; provided, that the Indemnifying
Party shall not be liable under this Section 7.1 to any Indemnified Party to the
extent that it is finally judicially determined that such Losses resulted
primarily from the material breach by any Indemnified Party of any
representation, warranty, covenant or other agreement of an Indemnified Party
contained in this Agreement; and provided, further, that if and to the extent
that such indemnification is unenforceable for any reason, the Indemnifying
Party shall make the maximum contribution to the payment and satisfaction of
such Losses which shall be permissible under applicable laws. The amount of any
payment by the Company to any Indemnified Party herewith in respect of any Loss
shall be of sufficient amount to make such Indemnified Party whole, including
without limitation or duplication, an amount sufficient to make up any
diminution in the value of the Purchased Shares held by such Indemnified Party
resulting from the payment by the Company of such indemnification payment. In
connection with the obligation of the Indemnifying Party to indemnify for
expenses as set forth above, the Indemnifying Party shall, upon presentation of
appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnifie Party and
any third party or otherwise) as they are incurred by such Indemnified Party;
provided, however, that if an Indemnified Party is reimbursed hereunder for any
expenses, such reimbursement of expenses shall be refunded to the extent it is
finally judicially determined that the Losses in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified Party.
7.2 Indemnification by Purchasers. Except as otherwise
provided in this Article 7, each of the Purchasers, severally and not jointly
(each, a "Purchaser Indemnifying Party"), agrees to indemnify, defend and hold
harmless the Company, its officers, directors, agents, employees, subsidiaries
and controlling persons (each, a "Purchaser Indemnified Party") to the fullest
extent permitted by law from and against any and all Losses resulting from,
arising out of or relating to any breach of any representation or warranty set
forth in Article 4 hereto; provided, that the Purchaser Indemnifying Party shall
not be liable under this Section 7.2 to the Purchaser Indemnified Party to the
extent that it is finally judicially determined that such Losses resulted
primarily from the material breach by such Purchaser Indemnified Party of any
representation, warranty, covenant or other agreement of such Purchaser
Indemnified Party contained in this Agreement; and provided, further, that if
and to the extent that such indemnification is unenforceable for any reason, the
Purchaser Indemnifying Party shall
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<PAGE>
make the maximum contribution to the payment and satisfaction of such Losses
which shall be permissible under applicable laws. The aggregate amount of
indemnification payments payable to the Purchaser Indemnified Party shall not
exceed the aggregate purchase price paid by such Purchaser Indemnifying Party
for its Purchased Shares hereunder.
7.3 Seller's Limitation of Liability. (a) Anything in this
Agreement to the contrary notwithstanding, the Indemnifying Party's maximum
liability to any and all of the Indemnified Parties for indemnification under
Section 7.1 (except for Losses resulting from, arising out of or relating to a
breach of any of the representations and warranties set forth in Sections 3.1,
3.2, 3.4, 3.7(a) and 3.9) shall not exceed $20,000,000.
7.4 Notification. Each Indemnified Party or Purchaser
Indemnified Party, as the case may be (for purposes of this Section 7.3, an
"Indemnified Party"), under this Article 7 shall, promptly after the receipt of
notice of the commencement of any action, investigation, claim or other
proceeding against such Indemnified Party in respect of which indemnity may be
sought from the Indemnifying Party or Purchaser Indemnifying Party, as the case
may be (for purposes of this Section 7.3, an Indemnifying Party") under this
Article 7, notify the Indemnifying Party in writing of the commencement thereof.
The omission of any Indemnified Party so to notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it
may have to such Indemnified Party (a) other than pursuant to this Article 7 or
(b) under this Article 7 unless, and only to the extent that, such Indemnifying
Party has been prejudiced thereby. In case any such action, claim or othe
proceeding shall be brought against any Indemnified Party, and it shall notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding the
foregoing, in any action, claim or proceeding in which both the Indemnifying
Party, on the one hand, and an Indemnified Party, on the other hand, are, or are
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the expense of the Indemnifying Party and to
control its own defense of such action, claim or proceeding if, in the
reasonable opinion of counsel to such Indemnified Party, a conflict or potential
conflict exists between the Indemnifying Party, on the one hand, and such
Indemnified Party, on the other hand, that would make such separate
representation advisable; provided, however, that the Indemnifying Party shall
not be liable for the fees and expenses of more than one counsel to all
Indemnified Parties. The Indemnifying Party agrees that it will not, without the
prior written consent of the Purchasers, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if any Indemnified Party is a party
thereto or has been actually threatened to be
31
<PAGE>
made a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Purchasers and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or proceeding.
The Indemnifying Party shall not be liable for any settlement of any claim,
action or proceeding effected against an Indemnified Party without the
Indemnifying Party's written consent, which consent shall not be unreasonably
withheld.
7.5 Exclusivity of Remedies. The indemnities provided in this
Article 7 shall be the exclusive remedy for breach of this Agreement by any
party hereto other than equitable remedies, including in the form of injunctions
and orders for specific performance.
ARTICLE 8
AFFIRMATIVE COVENANTS
---------------------
Until the effective date of Initial Public Offering, or
earlier, as applicable, the Company hereby covenants and agrees with the
Purchasers as follows:
8.1 Preservation of Existence. The Company shall use its
reasonable commercial efforts to:
(a) preserve and maintain in full force and effect
its existence and good standing under the laws of its jurisdiction of formation
or organization;
(b) preserve and maintain in full force and effect
all material rights, privileges, qualifications, applications, licenses and
franchises necessary in the normal conduct of its business;
(c) use its best efforts to preserve its business
organization;
(d) file or cause to be filed in a timely manner all
reports, applications, estimates and licenses that shall be required by a
Governmental Authority and that, if not timely filed, would be reasonably
expected to have a material adverse effect on the Condition of the Company.
8.2 PriceLine Travel Reorganization. The Company shall cause
PriceLine Travel to become a wholly-owned subsidiary of the Company by the
earlier to occur of: (a) December 31, 1998, and (b) the effective date of the
Initial Public Offering.
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<PAGE>
8.3 Financial Statements and Other Information. The Company
shall deliver to each Purchaser, in form and substance satisfactory to such
Purchaser:
(a) as soon as available, but not later than ninety
(90) days after the end of each fiscal year of the Company, a copy of the
audited balance sheet of the Company as of the end of such fiscal year and the
related statements of operations and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year accompanied by the report of a
nationally recognized independent certified public accounting firm satisfactory
to the Purchasers which report shall state that such financial statements
present fairly the financial condition as of such date and results of operations
and cash flows for the periods indicated in conformity with GAAP applied on a
consistent basis;
(b) commencing with the fiscal period ending on
September 30, 1998, as soon as available, but in any event not later than
forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited balance sheet of the Company, and the related
statements of operations and cash flows for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriat officer of the Company as
presenting fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments, the
absence of a management's discussion and analysis of financial condition section
and the absence of footnotes required by GAAP; and
(c) notwithstanding anything to the contrary set
forth herein, both before and after the effective date of an Initial Public
Offering as promptly as practicable, but not later than five (5) days after a
request by such Purchaser, a certificate signed by the Chief Executive Officer
of the Company that the Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
8.4 Annual Budget. Not less than forty-five (45) days prior to
the end of each fiscal year, the Company shall prepare and submit to its Board
of Directors for its approval an operating budget of the Company for the next
fiscal year.
8.5 Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issue or delivery upon conversion of the Purchased
Shares as provided in the Certificate of Incorporation, the maximum number of
shares of Common Stock that may be issuable or deliverable upon such conversion
or exchange. Such shares of Common Stock are duly authorized and, when issued or
delivered in accordance with the
33
<PAGE>
Certificate of Incorporation and against payment therefor, shall be validly
issued, fully paid and non-assessable. The Company shall issue such shares of
Common Stock in accordance with the terms of the Certificate of Incorporation
and otherwise comply with the terms hereof and thereof.
8.6 Insurance. The Company shall use reasonable best efforts
to maintain insurance with insurance companies or associations with a rating of
"A" or better as established by Best's Rating Guide (or an equivalent rating
with such other publication of a similar nature as shall be in current use) in
such amounts and covering such risks as are usually and customarily carried with
respect to similar businesses according to their respective locations.
8.7 Books and Records. The Company shall keep proper books of
record and account, in accordance with GAAP consistently applied.
8.8 Back-Ups of Computer Software. The Company shall make
back-ups of all material computer software programs and databases and shall
maintain such software programs and databases at a secure off-site location.
8.9 Personnel and Assets. The Company shall within 60 days of
the Closing cause WDC to transfer title to the Company of all assets presently
owned by WDC that are used primarily by the Company.
8.10 Breitenbach Agreement. The Company agrees that,
notwithstanding any obligation pursuant to the Breitenbach Agreement, it shall
not grant an option to Paul Breitenbach to purchase 10% of a business unit of
the Company.
8.11 Stock Option Plan. The Company agrees and covenants to
the Purchasers that within 20 days of the date hereof, the Company shall have
amended Section 3(a) of its stock option plan, the priceline.com LLC 1997
Omnibus Plan, which is attached as Exhibit B to Schedule 3.7(a) (the "Omnibus
Plan"), to reduce the maximum number of shares of Common Stock reserved for
issuance thereunder from 18,000,000 to 14,000,000. If such amendment is not
effected within such time period, the shares of Common Stock reserved for
issuance under the Omnibus Plan in excess of 14,000,000 shall be immediately
treated as Excess Option Shares for purposes of Section 2.4 hereunder, and the
Company shall pay to the Purchasers on the 21st day after the date hereof the
Reimbursement Amounts with respect to such Excess Option Shares.
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<PAGE>
ARTICLE 9
MISCELLANEOUS
-------------
9.1 Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Purchasers
or acceptance of the Purchased Shares, until 60 days after receipt of the
Company's financial statements for the year ended December 31, 1999, and at the
end of such period, such representations and warranties and related
indemnification rights and obligations with respec thereto shall expire;
provided, however, that the representations and warranties set forth in Sections
3.1, 3.2, 3.4, 3.7(a) and 3.9 shall survive without any expiration and Section
3.12 shall survive until the expiration of the applicable statute of
limitations.
9.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to the Company, to:
priceline.com Incorporated
4 High Ridge Park
Stamford, CT 06905
Telecopy: (203) 595-8344
Attention: Mr. Paul E. Francis
with a copy to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, CT 06904
Telecopy: (203) 351-4299
Attention: Melissa M. Taub, Esq.
and to:
Skadden, Arps, Slate, Meagher, & Flom, L.L.P.
One Rodney Square
Wilmington, DE 19801
Telecopy: (302) 651-3001
Attention: Patricia Moran Chuff, Esq.
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(b) if to GAP LP or GAP Coinvestment, to:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-4098
Attention: William E. Ford
David A. Rosenstein, Esq.
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial courier service; five (5) Business Days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied.
9.3 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws,
each of the Purchasers may assign any of its rights under any of the Transaction
Documents to any of its Affiliates. The Company may not assign any of its rights
under this Agreement without the written consent of the Purchasers. Except as
provided in Article 7, n Person other than the parties hereto and their
successors and permitted assigns is intended to be a beneficiary of this
Agreement.
9.4 Amendment and Waiver.
(a No failure or delay on the part of the Company, or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company and the Purchasers at law, in equity or otherwise.
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<PAGE>
(b Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective only if it is made or given
in writing and signed by the Company and the Purchasers.
9.5 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
9.6 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF ANY JURISDICTION.
9.8 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
9.9 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, the Confidentiality Agreement with respect to the
transactions contemplated hereby, and the other Transaction Documents, is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises warranties or undertakings, other than those
set forth or referred to herein or therein. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
9.10 Fees. Upon the Closing, the Company shall reimburse the
Purchasers for their fees, disbursements and other charges of counsel incurred
in connection with the transactions contemplated by this Agreement, provided
that the amount of such reimbursement shall not exceed $50,000.
37
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9.11 Publicity. Except as may be required by applicable
Requirement of Law, none of the parties hereto shall issue a publicity release
or public announcement or otherwise make any disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto (which approval shall not be unreasonably withheld);
provided, however, that nothing in this Agreement shall restrict any Purchaser
from disclosing information (a) that is alread publicly available and (b) to its
attorneys, accountants, consultants and other advisors to the extent necessary
to obtain their services in connection with such Purchaser's investment in the
Company. After the Closing, GAP LLC may disclose on its worldwide web page,
www.gapartners.com, the name of the Company, its address, the identity of the
Chief Executive Officer, a description of the Company's business and the
aggregate dollar amount invested by the Purchasers in the Company. If any
announcement is required by law to be made by any party hereto concerning this
Agreement or the transactions contemplated hereby, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
9.12 Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person, and otherwise fulfilling, or causing the fulfillment of, the
conditions to Closing set forth in Articles 5 and 6) as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement and to consummate and make effective as promptly as possible the
transactions contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
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IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be executed and delivered by their respective officers
hereunto duly authorized on the date first above written.
PRICELINE.COM INCORPORATED
By:
--------------------------------------
Name:
Title:
GENERAL ATLANTIC PARTNERS 48, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By:
--------------------------------
Name:
Title:
GAP COINVESTMENT PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
<PAGE>
Schedule 2.1
------------
Purchased Shares and Purchase Price
-----------------------------------
<TABLE>
<CAPTION>
Purchaser Purchased Shares Purchase Price
<S> <C> <C>
GAP LP 15,214,042 $17,600,000
GAP Coinvestment 2,074,642 $ 2,400,000
Total: 17,288,684 $20,000,000
</TABLE>