Priceline 2010 Annual Report Download - page 186

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Administrative Proceedings and Other Possible Actions
At various times, the Company has also received inquiries or proposed tax assessments from municipalities
and other taxing jurisdictions relating to its charges and remittance of amounts to cover state and local hotel
occupancy and other related taxes. Among others, the City of Philadelphia, Pennsylvania; the City of Phoenix,
Arizona (on behalf of itself and 12 other Arizona cities); the City of St. Louis, Missouri; the City of Paradise Valley,
Arizona; and the City of Denver, Colorado; and state tax officials from Florida, Hawaii, Indiana, Louisiana, New
Mexico, Pennsylvania, Texas, West Virginia, Wisconsin, and Wyoming have begun formal or informal
administrative procedures or stated that they may assert claims against the Company relating to allegedly unpaid
state or local hotel occupancy or related taxes. Since late 2008, the Company has received audit notices from more
than forty cities in the state of California. The Company is engaged in audit proceedings in each of those cities. The
Company has also been contacted for audit by five counties in the state of Utah.
Litigation Related to Securities Matters
On March 16, March 26, April 27, and June 5, 2001, respectively, four putative class action complaints
were filed in the U.S. District Court for the Southern District of New York naming priceline.com, Inc., Richard S.
Braddock, Jay Walker, Paul Francis, Morgan Stanley Dean Witter & Co., Merrill Lynch, Pierce, Fenner & Smith,
Inc., BancBoston Robertson Stephens, Inc. and Salomon Smith Barney, Inc. as defendants (01 Civ. 2261, 01 Civ.
2576, 01 Civ. 3590 and 01 Civ. 4956). Shives et al. v. Bank of America Securities LLC et al., 01 Civ. 4956, also
names other defendants and states claims unrelated to the Company. The complaints allege, among other things,
that the Company and the individual defendants violated the federal securities laws by issuing and selling
priceline.com common stock in its March 1999 initial public offering without disclosing to investors that some of
the underwriters in the offering, including the lead underwriters, had allegedly solicited and received excessive and
undisclosed commissions from certain investors. After extensive negotiations, the parties reached a comprehensive
settlement on or about March 30, 2009. On April 2, 2009, plaintiffs filed a Notice of Motion for Preliminary
Approval of Settlement. On June 9, 2009, the court granted the motion and scheduled the hearing for final approval
for September 10, 2009. The settlement, previously approved by a special committee of the Company’s Board of
Directors, compromised the claims against the Company for approximately $0.3 million. The court issued an order
granting final approval of the settlement on October 5, 2009. Notices of appeal of the Court’s order have been filed
with the Second Circuit. All but one of the appeals has been resolved. The remaining appeal is still pending.
The Company intends to defend vigorously against the claims in all of the proceedings described in this
Note 16. The Company has accrued for certain legal contingencies where it is probable that a loss has been incurred
and the amount can be reasonably estimated. Except as disclosed, such amounts accrued are not material to the
Consolidated Balance Sheets and provisions recorded have not been material to the Company’s consolidated results
of operations. The Company is unable to estimate the potential maximum range of loss.
From time to time, the Company has been, and expects to continue to be, subject to legal proceedings and
claims in the ordinary course of business, including claims of alleged infringement of third party intellectual property
rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and managerial
resources, divert management’s attention from the Company’s business objectives and could adversely affect its
business, results of operations, financial condition and cash flows.
Employment Contracts
The Company has employment agreements with certain members of senior management that provide for
cash severance payments of up to approximately $28 million, accelerated vesting of equity instruments, including
without limitation, restricted stock, restricted stock units and performance share units upon, among other things,
death or termination without “cause” or “good reason”, as those terms are defined in the agreements, and a gross-up
for the payment of “golden parachute” excise taxes. In addition, certain of the agreements provide for the extension
of health and insurance benefits after termination for periods up to three years.
Operating Leases
The Company leases certain facilities and equipment through operating leases. Rental expense for leased
office space was approximately $10.4 million, $7.8 million and $6.4 million for the years ended December 31, 2010,
2009 and 2008, respectively. The Company’s executive, administrative, operating offices and network operations