Exhibit 10.4

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Opening Transaction

To:

 

priceline.com Incorporated

 

 

800 Connecticut Avenue

 

 

Norwalk, Connecticut 06854

 

 

 

A/C:

 

066213118

 

 

 

From:

 

Merrill Lynch International

 

 

 

Re:

 

Issuer Capped Share Call Option Transaction (5-Year)

 

 

 

Ref. No:

 

06818735

 

 

 

Date:

 

September 21, 2006

 

 

 

Dear Sir(s):

The purpose of this communication (this “Confirmation”) is to set forth the
terms and conditions of the above-referenced transaction entered into on the
Trade Date specified below (the “Transaction”) between Merrill Lynch
International (“Dealer”), Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“Agent”) and priceline.com Incorporated (“Counterparty”).  This communication
constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below.

1.     This Confirmation is subject to, and incorporates, the definitions and
provisions of the 2000 ISDA Definitions (including the Annex thereto) (the “2000
Definitions”) and the definitions and provisions of the 2002 ISDA Equity
Derivatives Definitions (the “Equity Definitions”, and together with the 2000
Definitions, the “Definitions”), in each case as published by the International
Swaps and Derivatives Association, Inc. (“ISDA”).  In the event of any
inconsistency between the 2000 Definitions and the Equity Definitions, the
Equity Definitions will govern.

Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.

This Confirmation evidences a complete and binding agreement between Dealer and
Counterparty as to the terms of the Transaction to which this Confirmation
relates.  This Confirmation shall be subject to an agreement (the “Agreement”)
in the form of the 1992 ISDA Master Agreement as if Dealer and Counterparty had
executed an agreement in such form on the date hereof (but without any Schedule
except for (i) the election of Loss and Second Method, New York law (without
regard to the conflicts of law principles) as the governing law and US Dollars
(“USD”) as the Termination Currency, (ii) the election that subparagraph (ii) of
Section 2(c) will not apply to Transactions and (iii) the election that the
“Cross Default” provisions of Section 5(a)(vi) will apply to Counterparty with a
“Threshold Amount” of USD 50 million).  The parties hereby agree that no
Transactions other than the Transaction to which this Confirmation relates and
the other transaction between the parties with the same trade date regarding
options on Shares expiring in 2013 (the “Other Transaction”) shall be governed
by the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein.  In the event of
any inconsistency between this Confirmation and the Definitions or the
Agreement, as the case may be, this Confirmation shall govern.

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2.     THIS TRANSACTION CONSTITUTES A SHARE OPTION TRANSACTION FOR PURPOSES OF
THE EQUITY DEFINITIONS.  THE TERMS OF THE PARTICULAR TRANSACTION TO WHICH THIS
CONFIRMATION RELATES ARE AS FOLLOWS:

General Terms:

Trade Date:

 

September 21, 2006

 

 

 

 

 

 

Components:

 

The Transaction will be divided into individual Components, each with the terms
set forth in this Confirmation, and, in particular, with the Number of Options
and Expiration Date set forth in this Confirmation. The payments and deliveries
to be made upon settlement of the Transaction will be determined separately for
each Component as if each Component were a separate Transaction under the
Agreement.

 

 

 

 

 

Option Style:

 

European

 

 

 

 

 

 

Option Type:

 

Call

 

 

 

 

 

 

Seller:

 

Dealer

 

 

 

 

 

 

Buyer:

 

Counterparty

 

 

 

 

 

 

Shares:

 

Common Stock (par value $0.008 per Share) of Counterparty (Ticker: “PCLN”)

 

 

 

 

 

Number of Options:

 

For each Component, as provided in Annex A to this Confirmation.

 

 

 

 

 

 

Option Entitlement:

 

One Share per Option

 

 

 

 

 

 

Strike Price 1:

 

40.38

 

 

 

 

 

 

Strike Price 2:

 

50.47

 

 

 

 

 

 

Premium:

 

USD 4,792,500

 

 

 

 

 

 

Premium Payment Date:

 

September 27, 2006

 

 

 

 

 

 

Exchange:

 

NASDAQ Global Select Market

 

 

 

 

 

 

Related Exchange

 

All Exchanges

 

 

 

 

 

Procedures for Exercise:

 

 

 

 

 

 

 

 

Expiration Time:

 

Valuation Time

 

 

 

 

 

 

Expiration Date:

 

As provided in Annex A to this Confirmation (or, if such date is not a Scheduled
Trading Day, the next following Scheduled Trading Day that is not already an
Expiration Date for another Component); provided that, notwithstanding anything
to the contrary in the Equity Definitions, if that date is a Disrupted Day, the
Calculation Agent may determine that the Expiration Date for such Component is a
Disrupted Day in whole or in part, in which case the Calculation Agent shall, in
its discretion, determine the number of Options for which such day shall be the
Expiration Date and (i) allocate the remaining Options for such Expiration Date
to one or more of the remaining Expiration Dates, (ii) designate the

 

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first succeeding Scheduled Trading Day that is not a Disrupted Day and is not or
is not deemed to be an Expiration Date in respect of any other Component of the
Transaction hereunder as the Expiration Date for such remaining Options, or
(iii) a combination thereof; provided further  that if the Expiration Date for a
Component (including any portion of a Component whose Expiration Date was
postponed as a result of clause (ii) or (iii) above) has not occurred as of the
Final Disruption Date, (a) the Final Disruption Date shall be deemed to be the
Expiration Date and Valuation Date for each such Component, and (b) the
Calculation Agent shall determine the VWAP Price on the basis of its good faith
estimate of the trading value for the relevant Shares. Section 6.6 of the Equity
Definitions shall not apply to any Valuation Date occurring on an Expiration
Date.

 

 

 

 

 

 

Final Disruption Date:

 

October 28, 2011

 

 

 

 

 

 

Market Disruption Event:

 

Section 6.3(a) of the Equity Definitions is hereby amended by deleting the words
“during the one hour period that ends at the relevant Valuation Time, Latest
Exercise Time, Knock-in Valuation Time or Knock-out Valuation Time, as the case
may be,” in clause (ii) thereof.

 

 

 

 

 

 

Automatic Exercise:

 

Applicable; and means that the Number of Options for the corresponding
Expiration Date will be deemed to be automatically exercised at the Expiration
Time on such Expiration Date if at such time such Options are In-the-Money, as
determined by the Calculation Agent, unless Buyer notifies Seller (by telephone
or in writing) prior to the Expiration Time on such Expiration Date that it does
not wish Automatic Exercise to occur, in which case Automatic Exercise will not
apply to such Expiration Date. “In-the-Money” means that the VWAP Price is
greater than Strike Price 1.

 

 

 

 

 

 

Seller’s Telephone Number

 

 

 

and Telex and/or Facsimile Number

 

 

 

and Contact Details for purpose of

 

 

 

Giving Notice:

 

To be provided by Dealer.

 

 

 

 

 

Settlement Terms:

 

 

 

 

 

 

 

In respect of any Component:

 

 

 

 

 

 

 

 

Settlement Currency:

 

USD

 

 

 

 

 

 

Settlement Method:

 

Net Share Settlement

 

 

 

 

 

 

Settlement Date:

 

For all Components, the Settlement Date shall be the third Scheduled Trading Day
after the final Expiration Date (or, in respect of all or part of its obligation
to deliver the Number of Shares to be Delivered, such other earlier date or
dates (or, if Section 14 below is applicable, such later dates) as the Dealer
shall determine in its sole discretion).

 

 

 

 

 

 

Net Share Settlement:

 

On the Settlement Date, Dealer shall deliver to Counterparty a number of Shares
equal to the sum of the Number of Shares to be Delivered for all Components to
the account specified by

 

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Counterparty and cash in lieu of any fractional shares for any Component valued
at the VWAP Price on the Expiration Date for such Component.

 

 

 

 

 

 

Number of Shares to be Delivered:

 

In respect of any Exercise Date for any Component, subject to the last sentence
of Section 9.5 of the Equity Definitions:

 

 

 

 

 

 

 

 

 

(i) if the VWAP Price for such Component exceeds Strike Price 1 but is less than
Strike Price 2, a number of Shares equal to (i) the product of (A) the excess of
such VWAP Price over Strike Price 1, (B) the Number of Options for such
Component and (C) the Option Entitlement, divided by (ii) such VWAP Price;

 

 

 

 

 

 

 

 

 

(ii) if the VWAP Price for such Component equals or exceeds Strike Price 2, a
number of Shares equal to (i) the product of (A) the excess of Strike Price 2
over Strike Price 1, (B) the Number of Options for such Component and (C) the
Option Entitlement, divided by (ii) such VWAP Price; or

 

 

 

 

 

 

 

 

 

(iii) if the VWAP Price for such Component is less than or equal to Strike Price
1, a number of Shares equal to zero.

 

 

 

 

 

 

VWAP Price:

 

For any Expiration Date, as determined by the Calculation Agent based on the
NASDAQ Volume Weighted Average Price per share of the Shares for the regular
trading session (including any extensions thereof) of the Exchange on such
Expiration Date (without regard to pre-open or after hours trading outside of
such regular trading session) as published by Bloomberg at or around 4:15 p.m.
New York time on such date, on Bloomberg page “PCLN.Q <Equity> AQR_SEC” (or any
successor thereto).

 

 

 

 

 

 

Other Applicable Provisions:

 

The provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity
Definitions will be applicable, except that all references in such provisions to
“Physical Settlement” shall be read as references to “Net Share Settlement”;
provided that the Representation and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding any representations therein
relating to restrictions, obligations, limitations or requirements under
applicable securities laws as a result of the fact that Buyer is the issuer of
any Shares.

 

 

 

 

 

Share Adjustments:

 

 

 

 

 

 

 

 

Method of Adjustment:

 

Calculation Agent Adjustment

 

 

 

 

 

Extraordinary Events:

 

 

 

 

 

 

New Shares:

 

In the definition of “New Shares” in Section 12.1(i) of the Equity Definitions,
the text in subsection (i) shall be deleted in its entirety and replaced with:
“publicly quoted, traded or listed on any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market or the NASDAQ Global
Market (or their respective successors)”.

 

 

 

 

 

Consequences of Merger Events:

 

 

 

 

 

 

 

 

(a)

Share-for-Share:

 

Calculation Agent Adjustment

 

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(b)

Share-for-Other:

 

Cancellation and Payment (Agreed Model) on that portion of the Other
Consideration that consists of cash; Calculation Agent Adjustment on the
remainder of the Other Consideration.

 

 

 

 

 

 

(c)

Share-for-Combined:

 

Component Adjustment

 

 

 

 

 

 

Stock Loan Rate:

 

USD-LIBOR-BBA

 

 

 

 

 

Tender Offer:

 

Applicable; provided that (a) Section 12.1(d) of the Equity Definitions is
hereby amended by adding “, or of the outstanding Shares,” before “of the
Issuer” in the fourth line thereof and (b) Sections 12.1(e) and 12.1(l)(ii) of
the Equity Definitions are hereby amended by adding “or Shares, as applicable,”
after “voting shares”.

 

 

 

 

 

Consequences of Tender Offers:

 

 

 

 

 

 

 

 

(a)

Share-for-Share:

 

Calculation Agent Adjustment

 

 

 

 

 

 

(b)

Share-for-Other:

 

Cancellation and Payment (Agreed Model) on that portion of the Other
Consideration that consists of cash; Calculation Agent Adjustment on the
remainder of the Other Consideration.

 

 

 

 

 

 

(c)

Share-for-Combined:

 

Component Adjustment

 

 

 

 

 

 

Stock Loan Rate:

 

USD-LIBOR-BBA

 

 

 

 

 

Nationalization, Insolvency or Delisting:

 

Cancellation and Payment (Agreed Model); provided that in addition to the
provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also
constitute a Delisting if the Exchange is located in the United States and the
Shares are not immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select
Market or the NASDAQ Global Market (or their respective successors); if the
Shares are immediately re-listed, re-traded or re-quoted on any such exchange or
quotation system, such exchange or quotation system shall be deemed to be the
Exchange.

 

 

 

 

 

 

Stock Loan Rate:

 

USD-LIBOR-BBA

 

 

 

 

 

 

Additional Disruption Events:

 

 

 

 

 

 

 

 

(a)

Change in Law:

 

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by adding “other than increased cost due to Securities Act
registration requirements relating to sales by Dealer of the Shares acquired by
Dealer for the purpose of hedging its obligations pursuant to the Transaction”
after the parenthetical in the last line thereof.

 

 

 

 

 

 

(b)

Failure to Deliver:

 

Applicable

 

 

 

 

 

 

(c)

Insolvency Filing:

 

Applicable

 

 

 

 

 

 

(d)

Hedging Disruption:

 

Applicable

 

 

 

 

 

 

 

Hedging Party:

 

Dealer

 

 

 

 

 

 

Determining Party:

 

Dealer

 

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Non-Reliance:

 

Applicable

 

 

 

 

 

 

Agreements and Acknowledgements

 

 

 

Regarding Hedging Activities:

 

Applicable

 

 

 

 

 

 

Additional Acknowledgements:

 

Applicable

 

 

 

 

 

 

Dealer Payment Instructions:

 

To be provided by Dealer.

 

 

 

 

 

 

Counterparty Payment and Delivery Instructions:

 

To be provided by Counterparty.

 

 

 

 

 

 

3.        CALCULATION AGENT:  DEALER

4.        OFFICES:

(a)                                  The Office of Dealer for this Transaction
is: Merrill Lynch Financial Centre, 2 King Edward Street London EC1A 1HQ.

(B)                                 THE OFFICE OF COUNTERPARTY FOR THIS
TRANSACTION IS: 800 CONNECTICUT AVENUE, NORWALK, CONNECTICUT 06854.

5.        NOTICES:  FOR PURPOSES OF THIS CONFIRMATION:

(a)

Address for notices or communications to Counterparty:

 

 

 

To:

priceline.com Incorporated

 

 

800 Connecticut Avenue

 

 

Norwalk, Connecticut 06854

 

Attn:

Robert J. Mylod, Jr.

 

 

Chief Financial Officer

 

Telephone:

(203) 299-8301

 

Facsimile:

(203) 299-8975

 

With a copy to:

 

 

 

 

 

Attn:

Peter J. Millones

 

 

General Counsel

 

Facsimile:

(203) 299-8915

 

 

 

(b)

Address for notices or communications to Dealer:

 

 

 

 

To:

Merrill Lynch International

 

 

Merrill Lynch Financial Centre

 

 

2 King Edward Street

 

 

London EC1A 1HQ

 

Attn:

Manager, Fixed Income Settlements

 

Telephone:

44 207 995 2004

 

Facsimile:

44 207 995 3769

 

6.        REPRESENTATIONS, WARRANTIES AND AGREEMENTS:

(a)      In addition to the representations and warranties in the Agreement and
those contained elsewhere herein, Counterparty represents and warrants to and
for the benefit of, and agrees with, Dealer as follows:

(i)            On the Trade Date, (A) none of Counterparty and its officers and
directors is aware of any material nonpublic information regarding Counterparty
or the Shares and (B) all reports and other documents filed by Counterparty with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of

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1934, as amended (the “Exchange Act”), when considered as a whole (with the more
recent such reports and documents deemed to amend inconsistent statements
contained in any earlier such reports and documents), do not contain any untrue
statement of a material fact or any omission of a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading.

(ii)           Counterparty intends that this Transaction qualifies as an equity
instrument for it for purposes of EITF Issue No. 00-19.  Notwithstanding the
foregoing and without limiting the generality of Section 13.1 of the Equity
Definitions, Counterparty acknowledges that neither Dealer nor any of its
affiliates is making any representations or warranties with respect to the
treatment of the Transaction under FASB Statements 128, 133, 149 or 150, EITF
Issue No. 00-19 (or any successor issue statements) or under FASB’s Liabilities
& Equity Project.

(iii)          Prior to the Trade Date, Counterparty shall deliver to Dealer a
resolution of Counterparty’s board of directors authorizing the Transaction and
such other certificate or certificates as Dealer shall reasonably request.  Any
repurchases of Shares pursuant to the Transaction are pursuant to a Share
repurchase program publicly announced on or before the Trade Date.

(iv)          Counterparty has not received notice that it is the subject of a
tender offer made under Section 14(d)(1) of the Exchange Act.

(v)           Counterparty is not entering into this Confirmation to create
actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for Shares) or to raise or depress or otherwise manipulate
the price of the Shares (or any security convertible into or exchangeable for
Shares) in violation of the Exchange Act.

(vi)          Counterparty is not, and after giving effect to the transactions
contemplated hereby will not be, an “investment company” as such term is defined
in the Investment Company Act of 1940, as amended.

(vii)         On the Trade Date (A) the assets of Counterparty at their fair
valuation exceed the liabilities of Counterparty, including contingent
liabilities, (B) the capital of Counterparty is adequate to conduct the business
of Counterparty and (C) Counterparty has the ability to pay its debts and
obligations as such debts mature and does not intend to, or does not believe
that it will, incur debt beyond its ability to pay as such debts mature.

(viii)        The representations and warranties of Counterparty set forth in
Section 3 of the Agreement and Section 1 of the Purchase Agreement dated as of
the Trade Date between Counterparty and Dealer as representative of the several
purchasers party thereto (the “Purchase Agreement”), are true and correct and
are hereby deemed to be repeated to Dealer as if set forth herein.

(ix)           (A) On the Trade Date and during the period starting on the first
Expiration Date and ending on the last Expiration Date (the “Settlement
Period”), the Shares or securities that are convertible into, or exchangeable or
exercisable for Shares, are not, and shall not be, subject to a “restricted
period,” as such term is defined in Regulation M under the Exchange Act
(“Regulation M”) and (B) Counterparty shall not engage in any “distribution,” as
such term is defined in Regulation M, other than a distribution meeting the
requirements of the exceptions set forth in sections 101(b)(10) and 102(b)(7) of
Regulation M, until the second Exchange Business Day immediately following the
Trade Date or the Settlement Period, as the case may be.

(x)            On the Trade Date and during the Settlement Period, neither
Counterparty nor any “affiliate” or “affiliated purchaser” (each as defined in
Rule 10b-18 under the Exchange Act (“Rule 10b-18”)) shall directly or indirectly
(including, without limitation, by means of any cash-settled or other derivative
instrument) purchase, offer to purchase, place any bid or limit order that would
effect a purchase of, or commence any tender offer relating to, any Shares (or
an equivalent interest, including a unit of beneficial interest in a trust or
limited partnership or a depository share) or any security convertible into or
exchangeable or exercisable for Shares.

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(xi)           Without the consent of Dealer, Counterparty agrees (i) during the
Designated Period, not to purchase or agree to purchase Shares if such purchase
would cause its outstanding Shares to be below 36.35 million and (ii) during the
Designated Period, not to purchase or agree to purchase Shares if such purchase
along with all other purchases during the Designated Period would exceed 3.85
million in the aggregate. The Share numbers in this provision shall be subject
to adjustment as the Calculation Agent determines appropriate to account for any
Potential Adjustment Event or Extraordinary Event. “Designated Period” means the
period from and including the Trade Date to and including the date that is the
30th Prospectus Useable Day (or such longer number agreed by the parties)
occurring after the 60th day following the Trade Date.  An Exchange Business Day
is a Prospectus Useable Day unless on such day Dealer determines in its good
faith discretion that the Registration Statement and Prospectus referred to in
the Underwriting Agreement dated September 5, 2006 between, among others,
Dealer, as representative of the several underwriters, and Counterparty (the
“Underwriting Agreement”), is not or may not be available for use in compliance
with applicable law.

(b)           Each of Dealer and Counterparty agrees and represents that it is
an “eligible contract participant” as defined in Section 1a(12) of the U.S.
Commodity Exchange Act, as amended.

(c)           Each of Dealer and Counterparty acknowledges that the offer and
sale of the Transaction to it is intended to be exempt from registration under
the Securities Act of 1933, as amended (the “Securities Act”), by virtue of
Section 4(2) thereof.  Accordingly, Counterparty represents and warrants to
Dealer that (i) it has the financial ability to bear the economic risk of its
investment in the Transaction and is able to bear a total loss of its investment
and its investments in and liabilities in respect of the Transaction, which it
understands are not readily marketable, are not disproportionate to its net
worth, and it is able to bear any loss in connection with the Transaction,
including the loss of its entire investment in the Transaction, (ii) it is an
“accredited investor” as that term is defined in Regulation D as promulgated
under the Securities Act, (iii) it is entering into the Transaction for its own
account without a view to the distribution or resale thereof, (iv) the
assignment, transfer or other disposition of the Transaction has not been and
will not be registered under the Securities Act and is restricted under this
Confirmation, the Securities Act and state securities laws, (v) its financial
condition is such that it has no need for liquidity with respect to its
investment in the Transaction and no need to dispose of any portion thereof to
satisfy any existing or contemplated undertaking or indebtedness and is capable
of assessing the merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the terms,
conditions and risks of the Transaction.

(d)           Each of Dealer and Counterparty agrees and acknowledges (A) that
this Confirmation is (i) a “securities contract,” as such term is defined in
Section 741(7) of Title 11 of the United States Code (the “Bankruptcy Code”),
with respect to which each payment and delivery hereunder is a “settlement
payment,” as such term is defined in Section 741(8) of the Bankruptcy Code, and
(ii) a “swap agreement,” as such term is defined in Section 101(53B) of the
Bankruptcy Code, with respect to which each payment and delivery hereunder is a
“transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code,
and (B) that Dealer is entitled to the protections afforded by, among other
sections, Section 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and 560 of the
Bankruptcy Code.

(e)           Counterparty shall deliver to Dealer an opinion of counsel, dated
as of the Trade Date and reasonably acceptable to Dealer in form and substance,
with respect to the matters set forth in Section 3(a) of the Agreement.

(f)            Each party acknowledges and agrees to be bound by the Conduct
Rules of the National Association of Securities Dealers, Inc. applicable to
transactions in options, and further agrees not to violate the position and
exercise limits set forth therein.

7.     REPURCHASE NOTICES.  COUNTERPARTY SHALL, ON ANY DAY ON WHICH COUNTERPARTY
EFFECTS ANY REPURCHASE OF SHARES, PROMPTLY GIVE DEALER A WRITTEN NOTICE OF SUCH
REPURCHASE (A “REPURCHASE NOTICE”) ON SUCH DAY IF FOLLOWING SUCH REPURCHASE, THE
NOTICE PERCENTAGE AS DETERMINED ON SUCH DAY IS GREATER BY 0.5% THAN THE NOTICE
PERCENTAGE INCLUDED IN THE IMMEDIATELY PRECEDING REPURCHASE NOTICE (OR, IN THE
CASE OF THE FIRST SUCH REPURCHASE NOTICE, GREATER THAN THE NOTICE PERCENTAGE AS
OF THE DATE HEREOF).  IN THE EVENT THAT COUNTERPARTY FAILS TO PROVIDE DEALER
WITH A REPURCHASE NOTICE ON THE DAY AND IN THE MANNER SPECIFIED IN THIS SECTION
THEN COUNTERPARTY AGREES TO INDEMNIFY AND HOLD HARMLESS DEALER, ITS AFFILIATES
AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND CONTROLLING
PERSONS (DEALER AND EACH SUCH PERSON BEING AN “INDEMNIFIED PARTY”) FROM AND
AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES AND LIABILITIES (OR ACTIONS IN
RESPECT THEREOF), JOINT OR SEVERAL, TO WHICH SUCH INDEMNIFIED PARTY MAY BECOME
SUBJECT, UNDER SECTION 16 OF THE EXCHANGE ACT, RELATING TO OR ARISING OUT OF
SUCH FAILURE.  IF FOR ANY REASON THE FOREGOING INDEMNIFICATION IS UNAVAILABLE TO
ANY

 

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INDEMNIFIED PARTY OR INSUFFICIENT TO HOLD HARMLESS ANY INDEMNIFIED PARTY, THEN
COUNTERPARTY SHALL CONTRIBUTE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, TO THE
AMOUNT PAID OR PAYABLE BY THE INDEMNIFIED PARTY AS A RESULT OF SUCH LOSS, CLAIM,
DAMAGE OR LIABILITY.  IN ADDITION, COUNTERPARTY WILL REIMBURSE ANY INDEMNIFIED
PARTY FOR ALL EXPENSES (INCLUDING REASONABLE COUNSEL FEES AND EXPENSES) AS THEY
ARE INCURRED (AFTER NOTICE TO COUNTERPARTY) IN CONNECTION WITH THE INVESTIGATION
OF, PREPARATION FOR OR DEFENSE OR SETTLEMENT OF ANY PENDING OR THREATENED CLAIM
OR ANY ACTION, SUIT OR PROCEEDING ARISING THEREFROM, WHETHER OR NOT SUCH
INDEMNIFIED PARTY IS A PARTY THERETO AND WHETHER OR NOT SUCH CLAIM, ACTION, SUIT
OR PROCEEDING IS INITIATED OR BROUGHT BY OR ON BEHALF OF COUNTERPARTY.  THIS
INDEMNITY SHALL SURVIVE THE COMPLETION OF THE TRANSACTION CONTEMPLATED BY THIS
CONFIRMATION AND ANY ASSIGNMENT AND DELEGATION OF THE TRANSACTION MADE PURSUANT
TO THIS CONFIRMATION OR THE AGREEMENT SHALL INURE TO THE BENEFIT OF ANY
PERMITTED ASSIGNEE OF DEALER.  THE “NOTICE PERCENTAGE” AS OF ANY DAY IS THE
FRACTION (A) THE NUMERATOR OF WHICH IS THE AGGREGATE OF THE PRODUCTS OF THE
OUTSTANDING NUMBER OF OPTIONS AND THE OPTION ENTITLEMENT UNDER THIS TRANSACTION
AND THE OTHER TRANSACTION AND (B) THE DENOMINATOR OF WHICH IS THE NUMBER OF
SHARES OUTSTANDING ON SUCH DAY.

8.     TRANSFER OR ASSIGNMENT.  NEITHER PARTY MAY TRANSFER ANY OF ITS RIGHTS OR
OBLIGATIONS UNDER THIS TRANSACTION WITHOUT THE PRIOR WRITTEN CONSENT OF THE
NON-TRANSFERRING PARTY; PROVIDED THAT DEALER MAY ASSIGN, TRANSFER AND SET OVER
ALL RIGHTS, TITLE AND INTEREST, POWERS, PRIVILEGES AND REMEDIES OF DEALER UNDER
THIS TRANSACTION, IN WHOLE OR IN PART, TO AN AFFILIATE OF DEALER THAT IS
GUARANTEED BY MERRILL LYNCH & CO., INC. WITHOUT THE CONSENT OF COUNTERPARTY;
PROVIDED FURTHER THAT IF THE EQUITY PERCENTAGE EXCEEDS 7%, DEALER MAY
IMMEDIATELY, IN ITS SOLE DISCRETION, TRANSFER OR ASSIGN A NUMBER OF OPTIONS
SUFFICIENT TO REDUCE THE EQUITY PERCENTAGE TO 6.5% TO ANY THIRD PARTY WITH (OR
WITH A GUARANTOR THAT HAS) A RATING FOR ITS LONG-TERM, UNSECURED AND
UNSUBORDINATED INDEBTEDNESS BY STANDARD & POOR’S RATINGS SERVICES OR ITS
SUCCESSOR (“S&P”) THAT IS NOT LOWER THAN THE RATING BY S&P FOR THE LONG-TERM,
UNSECURED AND UNSUBORDINATED INDEBTEDNESS OF MERRILL LYNCH & CO., INC. (“ML
DEBT”), OR BY MOODY’S INVESTORS SERVICE, INC. (“MOODY’S”) THAT IS NOT LOWER THAN
THE RATING BY MOODY’S FOR ML DEBT OR, IF EITHER S&P OR MOODY’S CEASES TO RATE
SUCH DEBT, AT LEAST AN EQUIVALENT RATING OR BETTER BY A SUBSTITUTE AGENCY RATING
MUTUALLY AGREED BY COUNTERPARTY AND DEALER.  IF, IN THE DISCRETION OF DEALER,
DEALER IS UNABLE TO EFFECT SUCH TRANSFER OR ASSIGNMENT AFTER ITS COMMERCIALLY
REASONABLE EFFORTS ON PRICING TERMS REASONABLY ACCEPTABLE TO DEALER, DEALER MAY
DESIGNATE ANY SCHEDULED TRADING DAY AS AN EARLY TERMINATION DATE WITH RESPECT TO
A PORTION (THE “TERMINATED PORTION”) OF THIS TRANSACTION, ALLOCATED TO
COMPONENTS AS DEALER DETERMINES IN ITS DISCRETION, SUCH THAT THE EQUITY
PERCENTAGE FOLLOWING SUCH PARTIAL TERMINATION WILL BE EQUAL TO OR LESS THAN 7%. 
IN THE EVENT THAT DEALER SO DESIGNATES AN EARLY TERMINATION DATE WITH RESPECT TO
A PORTION OF THIS TRANSACTION, A PAYMENT SHALL BE MADE PURSUANT TO SECTION 6 OF
THE AGREEMENT AS IF (I) AN EARLY TERMINATION DATE HAD BEEN DESIGNATED IN RESPECT
OF A TRANSACTION HAVING TERMS IDENTICAL TO THIS TRANSACTION AND A NUMBER OF
OPTIONS EQUAL TO THE TERMINATED PORTION, (II) COUNTERPARTY SHALL BE THE AFFECTED
PARTY WITH RESPECT TO SUCH PARTIAL TERMINATION AND (III) SUCH PORTION OF THIS
TRANSACTION SHALL BE THE ONLY TERMINATED TRANSACTION.  THE “EQUITY PERCENTAGE”
AS OF ANY DAY IS THE FRACTION (A) THE NUMERATOR OF WHICH IS THE NUMBER OF SHARES
THAT DEALER OR ANY OF ITS AFFILIATES THAT ARE SUBJECT TO AGGREGATION WITH DEALER
BENEFICIALLY OWN (WITHIN THE MEANING OF SECTION 13 OF THE EXCHANGE ACT) ON SUCH
DAY AND (B) THE DENOMINATOR OF WHICH IS THE NUMBER OF SHARES OUTSTANDING ON SUCH
DAY.

9.     BENEFICIAL OWNERSHIP.  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE
AGREEMENT OR THIS CONFIRMATION, IN NO EVENT SHALL DEALER BE ENTITLED TO RECEIVE,
OR SHALL BE DEEMED TO RECEIVE, ANY SHARES IF, UPON SUCH RECEIPT OF SUCH SHARES,
THE “BENEFICIAL OWNERSHIP” (WITHIN THE MEANING OF SECTION 13 OF THE EXCHANGE ACT
AND THE RULES PROMULGATED THEREUNDER) OF SHARES BY DEALER OR ANY OF ITS
AFFILIATES THAT ARE SUBJECT TO AGGREGATION WITH DEALER (COLLECTIVELY, “DEALER
GROUP”) WOULD BE EQUAL TO OR GREATER THAN 9.5% OR MORE OF THE OUTSTANDING
SHARES.  IF ANY DELIVERY OWED TO DEALER HEREUNDER IS NOT MADE, IN WHOLE OR IN
PART, AS A RESULT OF THIS PROVISION, COUNTERPARTY’S OBLIGATION TO MAKE SUCH
DELIVERY SHALL NOT BE EXTINGUISHED AND COUNTERPARTY SHALL MAKE SUCH DELIVERY AS
PROMPTLY AS PRACTICABLE AFTER, BUT IN NO EVENT LATER THAN ONE EXCHANGE BUSINESS
DAY AFTER, DEALER GIVES NOTICE TO COUNTERPARTY THAT SUCH DELIVERY WOULD NOT
RESULT IN DEALER GROUP DIRECTLY OR INDIRECTLY SO BENEFICIALLY OWNING IN EXCESS
OF 9.5% OF THE OUTSTANDING SHARES.

10.   EXTENSION OF SETTLEMENT.   DEALER MAY DIVIDE ANY COMPONENT INTO ADDITIONAL
COMPONENTS AND DESIGNATE THE EXPIRATION DATE AND THE NUMBER OF OPTIONS FOR EACH
SUCH COMPONENT IF DEALER DETERMINES, IN ITS REASONABLE DISCRETION, THAT SUCH
FURTHER DIVISION IS NECESSARY OR ADVISABLE TO PRESERVE DEALER’S HEDGING ACTIVITY
HEREUNDER IN LIGHT OF EXISTING LIQUIDITY CONDITIONS OR TO ENABLE DEALER TO
EFFECT PURCHASES OF SHARES IN CONNECTION WITH ITS HEDGING ACTIVITY HEREUNDER IN
A MANNER THAT WOULD, IF DEALER WERE COUNTERPARTY OR AN AFFILIATED PURCHASER OF
COUNTERPARTY, BE COMPLIANCE WITH APPLICABLE LEGAL AND REGULATORY REQUIREMENTS.

 

9

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11.   MATTERS RELATING TO AGENT.

(a)           Agent will be responsible for the operational aspects of the
Transactions effected through it, such as record keeping, reporting, and
confirming Transactions to Counterparty and Dealer.

(b)           Unless Counterparty is a “major U.S. institutional investor,” as
defined in Rule 15a-6 under the Exchange Act, neither Counterparty nor Dealer
will contact the other without the direct involvement of Agent.

(c)           Agent’s sole role under this Agreement and with respect to any
Transaction is as an agent of Counterparty and Dealer on a disclosed basis and
Agent shall have no responsibility or liability to Counterparty or Dealer
hereunder except for gross negligence or willful misconduct in the performance
of its duties as agent.  Agent is authorized to act as agent for Dealer, but
only to the extent expressly required to satisfy the requirements of Rule 15a-6
under the Exchange Act in respect of the Transaction described hereunder.  Agent
shall have no authority to act as agent for Counterparty generally or with
respect to transactions or other matters governed by this Agreement, except to
the extent expressly required to satisfy the requirements of Rule 15a-6 or in
accordance with express instructions from Counterparty.

12.   EQUITY RIGHTS.  DEALER ACKNOWLEDGES AND AGREES THAT THIS CONFIRMATION IS
NOT INTENDED TO CONVEY TO IT RIGHTS WITH RESPECT TO THE TRANSACTION THAT ARE
SENIOR TO THE CLAIMS OF COMMON STOCKHOLDERS IN THE EVENT OF COUNTERPARTY’S
BANKRUPTCY.  FOR THE AVOIDANCE OF DOUBT, THE PARTIES AGREE THAT THE PRECEDING
SENTENCE SHALL NOT APPLY AT ANY TIME OTHER THAN DURING COUNTERPARTY’S BANKRUPTCY
TO ANY CLAIM ARISING AS A RESULT OF A BREACH BY COUNTERPARTY OF ANY OF ITS
OBLIGATIONS UNDER THIS CONFIRMATION OR THE AGREEMENT.  FOR THE AVOIDANCE OF
DOUBT, THE PARTIES ACKNOWLEDGE THAT THIS CONFIRMATION IS NOT SECURED BY ANY
COLLATERAL THAT WOULD OTHERWISE SECURE THE OBLIGATIONS OF COUNTERPARTY HEREIN
UNDER OR PURSUANT TO ANY OTHER AGREEMENT.

13.   ALTERNATIVE CALCULATIONS AND PAYMENT ON EARLY TERMINATION AND ON CERTAIN
EXTRAORDINARY EVENTS.  IF, SUBJECT TO SECTION 14 BELOW, DEALER SHALL OWE
COUNTERPARTY ANY AMOUNT PURSUANT TO SECTION 12.2 OF THE EQUITY DEFINITIONS AND
“CONSEQUENCES OF MERGER EVENTS” ABOVE, OR SECTIONS 12.3, 12.6, 12.7 OR 12.9 OF
THE EQUITY DEFINITIONS (EXCEPT IN THE EVENT OF A TENDER OFFER OR A MERGER EVENT,
IN EACH CASE, IN WHICH THE CONSIDERATION OR PROCEEDS TO BE PAID TO HOLDERS OF
SHARES CONSISTS SOLELY OF CASH) OR PURSUANT TO SECTION 6(D)(II) OF THE AGREEMENT
(EXCEPT IN THE EVENT OF AN EVENT OF DEFAULT IN WHICH COUNTERPARTY IS THE
DEFAULTING PARTY OR A TERMINATION EVENT IN WHICH COUNTERPARTY IS THE AFFECTED
PARTY, THAT RESULTED FROM AN EVENT OR EVENTS WITHIN COUNTERPARTY’S CONTROL) (A
“PAYMENT OBLIGATION”), COUNTERPARTY SHALL HAVE THE RIGHT, IN ITS SOLE
DISCRETION, TO REQUIRE DEALER TO SATISFY ANY SUCH PAYMENT OBLIGATION BY THE
SHARE TERMINATION ALTERNATIVE (AS DEFINED BELOW) BY GIVING IRREVOCABLE
TELEPHONIC NOTICE TO DEALER, CONFIRMED IN WRITING WITHIN ONE SCHEDULED TRADING
DAY, BETWEEN THE HOURS OF 9:00 A.M. AND 4:00 P.M. NEW YORK CITY TIME ON THE
MERGER DATE, TENDER OFFER DATE, ANNOUNCEMENT DATE, EARLY TERMINATION DATE OR
OTHER DATE OF TERMINATION, AS APPLICABLE (“NOTICE OF SHARE TERMINATION”). 
WITHIN A COMMERCIALLY REASONABLE PERIOD OF TIME FOLLOWING RECEIPT OF A NOTICE OF
SHARE TERMINATION, DEALER SHALL DELIVER TO COUNTERPARTY A NUMBER OF SHARE
TERMINATION DELIVERY UNITS HAVING A CASH VALUE EQUAL TO THE AMOUNT OF SUCH
PAYMENT OBLIGATION (SUCH NUMBER OF SHARE TERMINATION DELIVERY UNITS TO BE
DELIVERED TO BE DETERMINED BY THE CALCULATION AGENT AS THE NUMBER OF WHOLE SHARE
TERMINATION DELIVERY UNITS THAT COULD BE PURCHASED OVER A COMMERCIALLY
REASONABLE PERIOD OF TIME WITH THE CASH EQUIVALENT OF SUCH PAYMENT OBLIGATION)
(THE “SHARE TERMINATION ALTERNATIVE”).

Share Termination Delivery Unit:

 

In the case of a Termination Event, Event of Default, Delisting or Additional
Disruption Event, one Share or, in the case of an Insolvency, Nationalization,
Merger Event or Tender Offer, one Share or a unit consisting of the number or
amount of each type of property received by a holder of one Share (without
consideration of any requirement to pay cash or other consideration in lieu of
fractional amounts of any securities) in such Insolvency, Nationalization,
Merger Event or Tender Offer. If such Insolvency, Nationalization, Merger Event
or Tender Offer involves a choice of consideration to be received by holders,
such holder shall be deemed to have elected to receive the maximum possible
amount of cash.

 

Failure to Deliver:
                                                                                                  
Applicable

Other applicable provisions:                                        If Share
Termination Alternative is applicable, the provisions of Sections 9.8, 9.9,
9.10, 9.11 and 9.12 of the Equity Definitions will be applicable, except that
all

10

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references in such provisions to “Physical Settlement” shall be read as
references to “Share Termination Alternative” and all references to “Shares”
shall be read as references to “Share Termination Delivery Units”; and provided
that the Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by excluding any representations therein relating
to restrictions, obligations, limitations or requirements under applicable
securities laws as a result of the fact that Buyer is the issuer of any Share
Termination Delivery Units (or any part thereof).

14.   NET SHARE SETTLEMENT ON EARLY TERMINATION AND CERTAIN EXTRAORDINARY
EVENTS.

(A)           NOTWITHSTANDING SECTION 6(E) OF THE AGREEMENT OR SECTIONS 12.7 OR
12.8 OF THE EQUITY DEFINITIONS, IF, WITH RESPECT TO THE TRANSACTION CONTEMPLATED
HEREUNDER, (A) AN EARLY TERMINATION DATE WITH RESPECT TO ANY EVENT OF DEFAULT OR
ANY TERMINATION EVENT, (B) A MERGER DATE WITH RESPECT TO ANY MERGER EVENT OR
TENDER OFFER DATE WITH RESPECT TO A TENDER OFFER, (C) A CLOSING DATE WITH
RESPECT TO AN EVENT DESCRIBED IN SECTION 12.6 OF THE EQUITY DEFINITIONS, OR (D)
DATE AS OF WHICH THE TRANSACTION IS, OR IS DEEMED TO HAVE BEEN, TERMINATED OR
CANCELLED AS A RESULT OF AN APPLICABLE ADDITIONAL DISRUPTION EVENT (ANY SUCH
DATE, THE “RELEVANT DATE”) SHALL OCCUR, THEN IN LIEU OF CALCULATING ANY PAYMENTS
HEREUNDER PURSUANT TO SECTION 6(E) OF THE AGREEMENT OR SECTIONS 12.7 OR 12.8 OF
THE EQUITY DEFINITIONS, AS APPLICABLE, THE CALCULATION AGENT, IN ITS SOLE
DISCRETION, SHALL DETERMINE THE AMOUNT PAYABLE BY DEALER TO COUNTERPARTY ON THE
FOLLOWING BASIS:

(I)  SUCH RELEVANT DATE SHALL BE THE SOLE EXERCISE DATE HEREUNDER AND AUTOMATIC
EXERCISE SHALL BE APPLICABLE TO THE NUMBER OF OPTIONS IN EACH OF THE COMPONENTS
FOR WHICH AN EXPIRATION DATE HAS NOT OCCURRED (THE “UNEXPIRED NUMBER”);

(II)  DEALER SHALL DELIVER TO THE COUNTERPARTY THE NET SHARE SETTLEMENT AMOUNT
ON THE SETTLEMENT DATE WITH RESPECT TO SUCH RELEVANT DATE; AND

(III)  “NET SHARE SETTLEMENT AMOUNT” SHALL MEAN A NUMBER OF SHARES EQUAL TO (A)
THE NUMBER OF SHARES TO BE DELIVERED (AS DEFINED BELOW) MINUS (B) THE PRODUCT OF
(X) THE ADDITIONAL SHARES PER OPTION (THE “ADDITIONAL SHARES”) DETERMINED BY
REFERENCE TO THE TABLE ATTACHED AS ANNEX B HERETO BASED ON THE DATE ON WHICH
SUCH RELEVANT DATE OCCURS AND THE VWAP PRICE ON SUCH DATE, (Y) THE UNEXPIRED
NUMBER, AND (Z) THE OPTION ENTITLEMENT.

(B)           SOLELY FOR PURPOSES OF THIS SECTION 14, IN RESPECT OF ANY EXERCISE
DATE DEEMED TO OCCUR PURSUANT TO PARAGRAPH (A) OF THIS SECTION 14, SUBJECT TO
THE LAST SENTENCE OF SECTION 9.5 OF THE EQUITY DEFINITIONS, “NUMBER OF SHARES TO
BE DELIVERED” SHALL MEAN, THE PRODUCT OF (I) THE UNEXPIRED NUMBER, (II) THE
OPTION ENTITLEMENT AND (III) (A) THE EXCESS OF THE LOWER OF (X) STRIKE PRICE 2
AND (Y) THE VWAP PRICE ON THE VALUATION DATE OCCURRING ON SUCH EXERCISE DATE
OVER STRIKE PRICE 1 DIVIDED BY (B) SUCH VWAP PRICE.  NOTWITHSTANDING ANYTHING TO
THE CONTRARY IN THE EQUITY DEFINITIONS, IF THERE IS A MARKET DISRUPTION EVENT ON
ANY VALUATION DATE, THEN THE CALCULATION AGENT SHALL DETERMINE THE VWAP PRICE
FOR SUCH VALUATION DATE ON THE BASIS OF ITS GOOD FAITH ESTIMATE, DETERMINED IN A
COMMERCIALLY REASONABLE MANNER, OF THE MARKET VALUE FOR THE RELEVANT SHARES ON
SUCH VALUATION DATE.

(C)           WITH RESPECT TO THE DETERMINATION OF ADDITIONAL SHARES, IF THE
ACTUAL VWAP PRICE IS BETWEEN TWO VWAP PRICE AMOUNTS IN THE TABLE OR THE RELEVANT
DATE IS BETWEEN TWO RELEVANT DATES IN THE TABLE, THE ADDITIONAL SHARES SHALL BE
DETERMINED BY A STRAIGHT-LINE INTERPOLATION BETWEEN THE NUMBER OF ADDITIONAL
SHARES SET FORTH FOR THE NEXT HIGHER AND NEXT LOWER VWAP PRICE AMOUNTS AND THE
TWO NEAREST RELEVANT DATES, AS APPLICABLE, BASED ON A 365-DAY YEAR.

(D)           WITH RESPECT TO ANY ADJUSTMENT TO THE TERMS OF THE TRANSACTION,
THE CALCULATION AGENT, IN ITS REASONABLE DISCRETION, SHALL CORRESPONDINGLY
ADJUST THE ADDITIONAL SHARES AND/OR THE VWAP PRICES (EACH AS SET FORTH IN THE
TABLE IN ANNEX B HERETO) AS OF ANY DATE OF SUCH ADJUSTMENTS. FOR THE AVOIDANCE
OF DOUBT, ANY ADJUSTMENT MADE TO THE ADDITIONAL SHARES AND/OR THE VWAP PRICES
(EACH AS SET FORTH IN THE TABLE IN ANNEX B HERETO) SHALL BE CONSISTENT WITH (I)
THE ADJUSTMENTS MADE PURSUANT TO THE PROVISIONS OF THIS SECTION 14 IF SUCH
ADJUSTMENTS WERE THE RESULT OF AN EVENT WHICH WAS OUTSIDE OF COUNTERPARTY’S
CONTROL, AND (II) THE ADJUSTMENTS MADE PURSUANT TO THE APPLICABLE PROVISIONS OF
THIS CONFIRMATION IF SUCH ADJUSTMENTS WERE THE RESULT OF AN EVENT WHICH WAS
WITHIN COUNTERPARTY’S CONTROL.

11

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15.   SET-OFF.  THE PARTIES AGREE TO AMEND SECTION 6 OF THE AGREEMENT BY ADDING
A NEW SECTION 6(F) THERETO AS FOLLOWS:

“(f)  Upon the occurrence of an Event of Default or Termination Event with
respect to a party who is the Defaulting Party or the Affected Party (“X”), the
other party (“Y”) will have the right (but not be obliged) without prior notice
to X or any other person to set-off or apply any obligation of X under an Equity
Contract owed to Y (or any Affiliate of Y) (whether or not matured or contingent
and whether or not arising under the Agreement, and regardless of the currency,
place of payment or booking office of the obligation) against any obligation of
Y (or any Affiliate of Y) under an Equity Contract owed to X (whether or not
matured or contingent and whether or not arising under the Agreement, and
regardless of the currency, place of payment or booking office of the
obligation).  Y will give notice to the other party of any set-off effected
under this Section 6(f).

“Equity Contract” shall mean for purposes of this Section 6(f) any Transaction
relating to Shares between X and Y (or any Affiliate of Y) that qualifies as
‘equity’ under applicable accounting rules.

Amounts (or the relevant portion of such amounts) subject to set-off may be
converted by Y into the Termination Currency at the rate of exchange at which
such party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.

If any obligation is unascertained, Y may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained.

Nothing in this Section 6(f) shall be effective to create a charge or other
security interest.  This Section 6(f) shall be without prejudice and in addition
to any right of set-off, combination of accounts, lien or other right to which
any party is at any time otherwise entitled (whether by operation of law,
contract or otherwise).”

16.   AMENDMENTS TO EQUITY DEFINITIONS.

(A)           THE FOLLOWING AMENDMENTS SHALL BE MADE TO THE EQUITY DEFINITIONS
AND TO THE AGREEMENT:

(I)  THE FIRST SENTENCE OF SECTION 11.2(C) OF THE EQUITY DEFINITIONS, PRIOR TO
CLAUSE (A) THEREOF, IS HEREBY AMENDED TO READ AS FOLLOWS: ‘(C) IF “CALCULATION
AGENT ADJUSTMENT” IS SPECIFIED AS THE METHOD OF ADJUSTMENT IN THE RELATED
CONFIRMATION OF A SHARE OPTION TRANSACTION, THEN FOLLOWING THE ANNOUNCEMENT OR
OCCURRENCE OF ANY POTENTIAL ADJUSTMENT EVENT, THE CALCULATION AGENT WILL
DETERMINE WHETHER SUCH POTENTIAL ADJUSTMENT EVENT HAS A MATERIAL EFFECT ON THE
THEORETICAL VALUE OF THE RELEVANT SHARES OR OPTIONS ON THE SHARES AND, IF SO,
WILL (I) MAKE APPROPRIATE ADJUSTMENT(S), IF ANY, TO ANY ONE OR MORE OF:’; AND

(II)   SECTIONS 11.2(A) AND (E)(VII) OF THE EQUITY DEFINITIONS ARE HEREBY
AMENDED BY DELETING THE WORDS “DILUTING OR CONCENTRATIVE” AND REPLACING THEM
WITH “MATERIAL”.

(b)  Solely for purposes of applying the Equity Definitions and for purposes of
this Confirmation, any reference to a Strike Price shall be deemed to be a
reference to any of the Strike Price 1 or the  Strike Price 2, or both, as
appropriate.

17.   DISCLOSURE.  EFFECTIVE FROM THE DATE OF COMMENCEMENT OF DISCUSSIONS
CONCERNING THE TRANSACTION, COUNTERPARTY AND EACH OF ITS EMPLOYEES,
REPRESENTATIVES, OR OTHER AGENTS MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT
LIMITATION OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTION
AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT
ARE PROVIDED TO COUNTERPARTY RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE.

12

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18.   SPECIAL PROVISIONS FOR COUNTERPARTY PAYMENTS.  THE PARTIES HEREBY AGREE
THAT, NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN OR IN THE AGREEMENT, IN
THE EVENT THAT AN EARLY TERMINATION DATE (WHETHER AS A RESULT OF AN EVENT OF
DEFAULT OR A TERMINATION EVENT) OCCURS OR IS DESIGNATED WITH RESPECT TO ANY
TRANSACTION AFTER COUNTERPARTY HAS PAID THE PREMIUM TO DEALER AND, AS A RESULT,
COUNTERPARTY OWES TO DEALER AN AMOUNT CALCULATED UNDER SECTION 6(E) OF THE
AGREEMENT (CALCULATED AS IF THE TRANSACTIONS BEING TERMINATED ON SUCH EARLY
TERMINATION DATE WERE THE SOLE TRANSACTIONS UNDER THE AGREEMENT), SUCH AMOUNT
SHALL BE DEEMED TO BE ZERO.

19.   UNWIND.  IN THE EVENT THE SALE OF THE $150,000,000 0.50% CONVERTIBLE
SENIOR NOTES DUE SEPTEMBER 30, 2011 AND THE $150,000,000 0.75% CONVERTIBLE
SENIOR NOTES DUE SEPTEMBER 30, 2013 ARE NOT CONSUMMATED WITH THE INITIAL
PURCHASERS PURSUANT TO THE PURCHASE AGREEMENT FOR ANY REASON BY THE CLOSE OF
BUSINESS IN NEW YORK ON SEPTEMBER 27, 2006 (OR SUCH LATER DATE AS AGREED UPON BY
THE PARTIES) (SUCH DATE OR SUCH LATER DATE AS AGREED UPON BEING THE “ACCELERATED
UNWIND DATE”), THIS TRANSACTION SHALL AUTOMATICALLY TERMINATE (THE “ACCELERATED
UNWIND”) ON THE ACCELERATED UNWIND DATE AND (I) THIS TRANSACTION AND ALL OF THE
RESPECTIVE RIGHTS AND OBLIGATIONS OF DEALER AND COUNTERPARTY UNDER THIS
TRANSACTION SHALL BE CANCELLED AND TERMINATED AND (II) EACH PARTY SHALL BE
RELEASED AND DISCHARGED BY THE OTHER PARTY FROM AND AGREES NOT TO MAKE ANY CLAIM
AGAINST THE OTHER PARTY WITH RESPECT TO ANY OBLIGATIONS OR LIABILITIES OF THE
OTHER PARTY ARISING OUT OF AND TO BE PERFORMED IN CONNECTION WITH THIS
TRANSACTION EITHER PRIOR TO OR AFTER THE ACCELERATED UNWIND DATE.  DEALER AND
COUNTERPARTY REPRESENT AND ACKNOWLEDGE TO THE OTHER THAT UPON AN ACCELERATED
UNWIND, ALL OBLIGATIONS WITH RESPECT TO THIS TRANSACTION SHALL BE DEEMED FULLY
AND FINALLY DISCHARGED.

20.   ADDITIONAL PROVISIONS.

Regulation:                                            MLI is regulated by The
Financial Services Authority.

21.  ARBITRATION.

(a)           All parties to this Confirmation are giving up the right to sue
each other in court, including the right to a trial by jury, except as provided
by the rules of the arbitration forum in which a claim is filed.

(b)           Arbitration awards are generally final and binding; a party’s
ability to have a court reverse or modify an arbitration award is very limited.

(c)           The ability of the parties to obtain documents, witness statements
and other discovery is generally more limited in arbitration than in court
proceedings.

(d)           The arbitrators do not have to explain the reason(s) for their
award.

(e)           The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry, unless
Counterparty is a member of the organization sponsoring the arbitration
facility, in which case all arbitrators may be affiliated with the securities
industry.

(f)            The rules of some arbitration forums may impose time limits for
bringing a claim in arbitration.  In some cases, a claim that is ineligible for
arbitration may be brought in court.

(g)           The rules of the arbitration forum in which the claim is filed,
and any amendments thereto, shall be incorporated into this Confirmation.

(h)           Counterparty agrees that any and all controversies that may arise
between Counterparty and Dealer, including, but not limited to, those arising
out of or relating to the Agreement or the Transaction hereunder, shall be
determined by arbitration conducted before The New York Stock Exchange, Inc.
(“NYSE”) or NASD Dispute Resolution (“NASD-DR”), or, if the NYSE and NASD-DR
decline to hear the matter, before the American Arbitration Association, in
accordance with their arbitration rules then in force.  The award of the
arbitrator shall be final, and judgment upon the award rendered may be entered
in any court, state or federal, having jurisdiction.

(i)            No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement against
any person who has initiated in court a putative class action or who is a

13

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member of a putative class who has not opted out of the class with respect to
any claims encompassed by the putative class action until: (i) the class
certification is denied; (ii) the class is decertified; or (iii) Counterparty is
excluded from the class by the court.

(j)            Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this Confirmation except to the extent
stated herein.

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Counterparty hereby agrees (a) to check this Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by Dealer) correctly sets forth the terms of the agreement between
Dealer and Counterparty with respect to this Transaction, by manually signing
this Confirmation or this page hereof as evidence of agreement to such terms and
providing the other information requested herein and immediately returning an
executed copy to us.

 

Yours faithfully,

 

 

 

 

Very truly yours,

 

 

 

 

MERRILL LYNCH INTERNATIONAL

 

 

 

 

By:

/s/ Angelina Lopes

 

 

Name:

Angelina Lopes

 

 

Title:

 

 

 

 

Agreed and Accepted By:

 

 

 

 

 

PRICELINE.COM INCORPORATED

 

 

 

 

 

 

 

By:

/s/ Robert J. Mylod, Jr.

 

 

Name:

Robert J. Mylod, Jr.

 

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

Acknowledged and agreed as to matters to the Agent:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
Solely in its capacity as Agent hereunder

 

 

 

 

 

 

By:

/s/ Rhonda Garguilo

 

 

Name:

Rhonda Garguilo

 

 

Title:

Authorized Signatory

 

 

 

15

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ANNEX A

 

Component

 

Number of Options

 

Expiration Date
(5-Year)

 

1

 

55,720

 

21-Sep-11

 

2

 

55,720

 

22-Sep-11

 

3

 

55,720

 

23-Sep-11

 

4

 

55,720

 

26-Sep-11

 

5

 

55,720

 

27-Sep-11

 

6

 

55,720

 

28-Sep-11

 

7

 

55,720

 

29-Sep-11

 

8

 

55,720

 

30-Sep-11

 

9

 

55,720

 

3-Oct-11

 

10

 

55,720

 

4-Oct-11

 

11

 

55,720

 

5-Oct-11

 

12

 

55,720

 

6-Oct-11

 

13

 

55,720

 

7-Oct-11

 

14

 

55,720

 

10-Oct-11

 

15

 

55,720

 

11-Oct-11

 

16

 

55,720

 

12-Oct-11

 

17

 

55,720

 

13-Oct-11

 

18

 

55,720

 

14-Oct-11

 

19

 

55,720

 

17-Oct-11

 

20

 

55,720

 

18-Oct-11

 

 

16

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ANNEX B

 

 

 

VWAP Price

 

 

 

<$25.0

 

$25.0

 

$30.0

 

$35.0

 

$40.0

 

$45.0

 

$50.0

 

$55.0

 

09/26/06

 

0.000000

 

-0.084164

 

-0.088701

 

-0.090470

 

-0.090441

 

0.013402

 

0.105025

 

0.098397

 

03/26/07

 

0.000000

 

-0.077763

 

-0.084349

 

-0.087836

 

-0.089175

 

0.013609

 

0.104428

 

0.097198

 

09/26/07

 

0.000000

 

-0.072343

 

-0.080028

 

-0.084549

 

-0.086783

 

0.011875

 

0.102372

 

0.094939

 

03/26/08

 

0.000000

 

-0.065048

 

-0.075116

 

-0.081793

 

-0.085813

 

0.014823

 

0.103972

 

0.095473

 

09/26/08

 

0.000000

 

-0.036479

 

-0.062365

 

-0.085777

 

-0.099254

 

0.009935

 

0.104318

 

0.095219

 

03/26/09

 

0.000000

 

-0.027818

 

-0.054062

 

-0.080465

 

-0.098489

 

0.006144

 

0.098636

 

0.088630

 

09/26/09

 

0.000000

 

-0.018516

 

-0.043550

 

-0.072808

 

-0.096557

 

0.004191

 

0.095362

 

0.084707

 

03/26/10

 

0.000000

 

-0.009701

 

-0.030898

 

-0.061974

 

-0.092763

 

0.000351

 

0.087623

 

0.075012

 

09/26/10

 

0.000000

 

-0.002794

 

-0.016071

 

-0.045656

 

-0.085195

 

-0.001542

 

0.082491

 

0.068248

 

03/26/11

 

0.000000

 

-0.000102

 

-0.002997

 

-0.021420

 

-0.068526

 

-0.004492

 

0.064059

 

0.042987

 

09/21/11

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

 

 

 

VWAP Price

 

 

 

$60.0

 

$65.0

 

$70.0

 

$75.0

 

$80.0

 

$85.0

 

$90.0

 

$95.0

 

09/26/06

 

0.085663

 

0.075391

 

0.066993

 

0.060045

 

0.054234

 

0.049328

 

0.045148

 

0.041558

 

03/26/07

 

0.084019

 

0.073424

 

0.064797

 

0.057691

 

0.051778

 

0.046810

 

0.042601

 

0.039005

 

09/26/07

 

0.081645

 

0.070999

 

0.062365

 

0.055285

 

0.049419

 

0.044513

 

0.040375

 

0.036855

 

03/26/08

 

0.081349

 

0.070064

 

0.060947

 

0.053505

 

0.047374

 

0.042278

 

0.038007

 

0.034402

 

09/26/08

 

0.080640

 

0.069017

 

0.059654

 

0.052040

 

0.045792

 

0.040624

 

0.036314

 

0.032693

 

03/26/09

 

0.073519

 

0.061646

 

0.052238

 

0.044723

 

0.038670

 

0.033759

 

0.029743

 

0.026434

 

09/26/09

 

0.069224

 

0.057188

 

0.047767

 

0.040340

 

0.034443

 

0.029726

 

0.025925

 

0.022839

 

03/26/10

 

0.058480

 

0.046071

 

0.036745

 

0.029716

 

0.024393

 

0.020339

 

0.017230

 

0.014826

 

09/26/10

 

0.050951

 

0.038405

 

0.029349

 

0.022819

 

0.018102

 

0.014680

 

0.012180

 

0.010336

 

03/26/11

 

0.024473

 

0.014003

 

0.008373

 

0.005438

 

0.003921

 

0.003123

 

0.002681

 

0.002416

 

09/21/11

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VWAP Price

 

 

 

$100.0

 

$105.0

 

$110.0

 

$115.0

 

$120.0

 

$125.0

 

$130 or more

 

09/26/06

 

0.038451

 

0.035745

 

0.033371

 

0.031278

 

0.029420

 

0.027764

 

0.026281

 

03/26/07

 

0.035911

 

0.033229

 

0.030891

 

0.028839

 

0.027029

 

0.025422

 

0.023991

 

09/26/07

 

0.033839

 

0.031237

 

0.028976

 

0.027001

 

0.025264

 

0.023728

 

0.022364

 

03/26/08

 

0.031335

 

0.028709

 

0.026446

 

0.024483

 

0.022771

 

0.021269

 

0.019945

 

09/26/08

 

0.029630

 

0.027021

 

0.024784

 

0.022855

 

0.021181

 

0.019721

 

0.018439

 

03/26/09

 

0.023687

 

0.021392

 

0.019459

 

0.017821

 

0.016423

 

0.015222

 

0.014183

 

09/26/09

 

0.020315

 

0.018234

 

0.016505

 

0.015059

 

0.013838

 

0.012801

 

0.011913

 

03/26/10

 

0.012951

 

0.011474

 

0.010297

 

0.009350

 

0.008578

 

0.007942

 

0.007410

 

09/26/10

 

0.008959

 

0.007918

 

0.007118

 

0.006493

 

0.005995

 

0.005591

 

0.005257

 

03/26/11

 

0.002237

 

0.002105

 

0.001997

 

0.001905

 

0.001823

 

0.001749

 

0.001681

 

09/21/11

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

0.000000

 

 

17

--------------------------------------------------------------------------------