Exhibit
10.82


 


Priceline Mortgage

Company, L.L.C.


 


Financial
Statements for the Years


Ended
December 31, 2003 and 2002


and
Independent Auditors’ Report


 

















 


PRICELINE
MORTGAGE COMPANY, L.L.C.


 


TABLE OF
CONTENTS


 


	
  INDEPENDENT AUDITORS’
  REPORT

  	
   

  
	
   

  	
   

  
	
  FINANCIAL
  STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002:

  	
   

  
	
   

  	
   

  
	
  Balance Sheets

  	
   

  
	
   

  	
   

  
	
  Statements
  of Income

  	
   

  
	
   

  	
   

  
	
  Statements of
  Changes in Members’ Equity

  	
   

  
	
   

  	
   

  
	
  Statements of Cash Flows

  	
   

  
	
   

  	
   

  
	
  Notes to Financial
  Statements

  	
   

  



 

















 


INDEPENDENT AUDITORS’ REPORT


 


To the Members 

Priceline Mortgage Company, L.L.C.

Jacksonville, Florida


 


We have audited the
accompanying balance sheets of Priceline Mortgage Company, L.L.C.
(the ”Company”) (formerly National Mortgage Center, L.L.C.) as of
December 31, 2003 and 2002 and the related statements of income, changes
in members’ equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.


 


We conducted our audits
in accordance with auditing standards generally accepted in the United States
of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.


 


In our opinion, such
financial statements present fairly, in all material respects, the financial
position of Priceline Mortgage Company, L.L.C. at December 31, 2003 and
2002 and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.


 


 


	
  /s/ Deloitte &
  Touche LLP

  	
   

  
	
  Jacksonville, Florida

  
	
   

  
	
  February 25, 2004

  
	
  (September 22,
  2004 as to Note 4)

  



 

















 


PRICELINE MORTGAGE COMPANY, L.L.C.


 


BALANCE SHEETS


DECEMBER 31, 2003 AND 2002


 


	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
  ASSETS

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASSETS:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  and cash equivalents

  	
   

  	
  $

  	
  4,038,766

  	
   

  	
  $

  	
  7,092,422

  	
   

  
	
  Loans
  held for sale

  	
   

  	
  13,500,167

  	
   

  	
  2,323,586

  	
   

  
	
  Due
  from affiliates, net

  	
   

  	
  —

  	
   

  	
  1,537,495

  	
   

  
	
  Prepaid
  expenses and other assets

  	
   

  	
  97,942

  	
   

  	
  60,799

  	
   

  
	
  Premises
  and equipment, net

  	
   

  	
  844,109

  	
   

  	
  1,210,885

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  ASSETS

  	
   

  	
  $

  	
  18,480,984

  	
   

  	
  $

  	
  12,225,187

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES AND MEMBERS’ EQUITY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  payable and accrued expenses

  	
   

  	
  $

  	
  1,407,293

  	
   

  	
  $

  	
  3,492,631

  	
   

  
	
  Due
  to affiliates, net

  	
   

  	
  78,722

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total
  liabilities

  	
   

  	
  1,486,015

  	
   

  	
  3,492,631

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COMMITMENTS
  AND CONTINGENCIES (see Note 4)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MEMBERS’
  EQUITY

  	
   

  	
  16,994,969

  	
   

  	
  8,732,556

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL
  LIABILITIES AND MEMBERS’ EQUITY

  	
   

  	
  $

  	
  18,480,984

  	
   

  	
  $

  	
  12,225,187

  	
   

  



 


See notes to financial
statements.


 


2

















 


PRICELINE MORTGAGE COMPANY, L.L.C.


 


STATEMENTS OF INCOME


YEARS ENDED DECEMBER 31, 2003 AND 2002


 


	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INTEREST INCOME:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interest income

  	
   

  	
  $

  	
  796,054

  	
   

  	
  $

  	
  482,635

  	
   

  
	
  Interest expense

  	
   

  	
  (2,783

  	
  )

  	
  (4,044

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net interest income

  	
   

  	
  793,271

  	
   

  	
  478,591

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NON-INTEREST INCOME:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gain on sale of loans, net of commitment fees

  	
   

  	
  13,523,357

  	
   

  	
  9,882,002

  	
   

  
	
  Loan production revenue, net

  	
   

  	
  10,301,923

  	
   

  	
  9,475,171

  	
   

  
	
  Other

  	
   

  	
  118,906

  	
   

  	
  249,794

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total non-interest income

  	
   

  	
  23,944,186

  	
   

  	
  19,606,967

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NON-INTEREST EXPENSES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salaries, commissions and other employee benefits

  	
   

  	
  10,326,230

  	
   

  	
  8,465,906

  	
   

  
	
  Occupancy and equipment

  	
   

  	
  1,174,278

  	
   

  	
  1,251,970

  	
   

  
	
  General and administrative

  	
   

  	
  4,974,536

  	
   

  	
  5,895,796

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total non-interest expenses

  	
   

  	
  16,475,044

  	
   

  	
  15,613,672

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET INCOME

  	
   

  	
  $

  	
  8,262,413

  	
   

  	
  $

  	
  4,471,886

  	
   

  



 


See
notes to financial statements.


 


3

















 


PRICELINE MORTGAGE COMPANY, L.L.C.


 


STATEMENTS OF CHANGES IN
MEMBERS’ EQUITY


YEARS ENDED DECEMBER 31, 2003 AND 2002


 


	
   

  	
   

  	
  Capital

  	
   

  	
  Accumulated

  Earnings

  (Deficit)

  	
   

  	
  Total

  Members’

  Equity

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2001

  	
   

  	
  $

  	
  7,934,472

  	
   

  	
  $

  	
  (3,673,802

  	
  )

  	
  $

  	
  4,260,670

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
   

  	
   

  	
  4,471,886

  	
   

  	
  4,471,886

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2002

  	
   

  	
  7,934,472

  	
   

  	
  798,084

  	
   

  	
  8,732,556

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
   

  	
   

  	
  8,262,413

  	
   

  	
  8,262,413

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BALANCE—December 31, 2003

  	
   

  	
  $

  	
  7,934,472

  	
   

  	
  $

  	
  9,060,497

  	
   

  	
  $

  	
  16,994,969

  	
   

  



 


See
notes to financial statements.


 


4

















 


PRICELINE MORTGAGE COMPANY, L.L.C.


 


STATEMENTS OF CASH FLOWS


YEARS ENDED DECEMBER 31, 2003 AND 2002


 


	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OPERATING ACTIVITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
  $

  	
  8,262,413

  	
   

  	
  $

  	
  4,471,886

  	
   

  
	
  Adjustments to reconcile net income to net cash
  (used in) provided by operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Depreciation expense

  	
   

  	
  408,935

  	
   

  	
  419,243

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  —

  	
   

  	
  920

  	
   

  
	
  Change in operating assets and liabilities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Increase) decrease in loans held for sale

  	
   

  	
  (11,176,581

  	
  )

  	
  93,921

  	
   

  
	
  Decrease (increase) in due to affiliates, net

  	
   

  	
  1,616,217

  	
   

  	
  (1,831,291

  	
  )

  
	
  (Increase) decrease in prepaid expenses and other
  assets

  	
   

  	
  (37,143

  	
  )

  	
  806,731

  	
   

  
	
  (Decrease) increase in accounts payable and
  accrued expenses

  	
   

  	
  (2,085,338

  	
  )

  	
  2,477,684

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash (used in) provided by operating
  activities

  	
   

  	
  (3,011,497

  	
  )

  	
  6,439,094

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INVESTING ACTIVITIES:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchase of premises and equipment

  	
   

  	
  (42,159

  	
  )

  	
  (839,373

  	
  )

  
	
  Net cash used in investing activities

  	
   

  	
  (42,159

  	
  )

  	
  (839,373

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS

  	
   

  	
  (3,053,656

  	
  )

  	
  5,599,721

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CASH AND CASH EQUIVALENTS:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beginning of year

  	
   

  	
  7,092,422

  	
   

  	
  1,492,701

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  End of year

  	
   

  	
  $

  	
  4,038,766

  	
   

  	
  $

  	
  7,092,422

  	
   

  



 


See
notes to financial statements.


 


5

















 


PRICELINE
MORTGAGE COMPANY, L.L.C.


 


NOTES TO FINANCIAL STATEMENTS


YEARS
ENDED DECEMBER 31, 2003 AND 2002


 


1.                                      ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


 


Organization—Priceline Mortgage
Company, L.L.C., formerly known as National Mortgage Center, L.L.C., (the
“Company”), engages in the origination of real estate mortgage loans using the
internet. The Company is 51% owned by EverBank (formerly First Alliance Bank,
FSB) and 49% owned by a wholly owned subsidiary of Priceline.com and is doing
business as pricelinemortgage.com.


 


Basis of Presentation—The financial
statements are presented in accordance with accounting principles generally
accepted in the United States of America, which require management to make
estimates that affect the reported amounts and disclosures of contingencies in
the financial statements. Estimates, by their nature, are based on judgment and
available information. Therefore, actual results could differ from those
estimates and could have a material impact on the financial statements, and it
is possible that such change could occur in the near term.


 


Cash and Cash Equivalents—Cash
represents amounts held on deposit with various banks.


 


Loans Held for Sale—Loans held for
sale are residential mortgage loans originated by the Company which management
intends to sell at some point in the future. Loans held for sale are reported
at the lower of cost or estimated market value determined on an aggregate
basis.


 


Commitments to Originate Mortgage Loans—The
Company enters into commitments to originate loans whereby the interest rate on
the loan is determined prior to funding (rate lock commitments). Rate lock
commitments on loans that are intended to be sold are considered to be
derivatives and are therefore recorded at fair value with changes in fair value
recorded in earnings. The fair value of rate lock commitments at December 31,
2003 and 2002 recorded in loans held for sale was $43,114 and $207,065,
respectively. The change in fair value recorded in gain on sale for the years
ended December 31, 2003 and 2002 was $(163,951) and $(178,138),
respectively.  Rate lock commitments
expose the Company to interest rate risk.


 


Premises and Equipment—Premises and equipment consist
of leasehold improvements, furniture, and equipment. Premises and equipment are
recorded at cost, less accumulated depreciation. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets ranging
from 3 to 10 years. Leasehold improvements are amortized using the
straight-line method over the shorter of their estimated useful life or the
period the Company expects to occupy the related leased space.


 


Revenue Recognition—Loan production
income represents income earned from the origination of mortgage loans. Gains
and losses on the sale of loans are recorded upon the sale of these assets by
the Company.


 


6

















 


Interest income on
mortgage loans is accrued as earned and is computed using the effective
interest method. Loans are placed on non-accrual status when any portion of the
principal or interest is 90 days past due.


 


Income Taxes—For federal and state
income tax purposes the Company is considered a partnership with income taxable
to the ultimate owners of the Company. Thus, the Company does not provide for
federal and state income taxes.


 


Reclassification—Certain
reclassifications have been made to prior year amounts to conform to the
current year presentation.


 


2.                                      PREMISES
AND EQUIPMENT


 


Premises and equipment at
December 31 consist of the following:


 


	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leasehold improvements

  	
   

  	
  $

  	
  233,874

  	
   

  	
  $

  	
  233,874

  	
   

  
	
  Furniture

  	
   

  	
  543,623

  	
   

  	
  540,748

  	
   

  
	
  Equipment

  	
   

  	
  1,285,252

  	
   

  	
  1,245,968

  	
   

  
	
   

  	
   

  	
  2,062,749

  	
   

  	
  2,020,590

  	
   

  
	
  Less accumulated depreciation

  	
   

  	
  (1,218,640

  	
  )

  	
  (809,705

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  844,109

  	
   

  	
  $

  	
  1,210,885

  	
   

  



 


Depreciation expense for
the years ended December 31, 2003 and 2002 was $408,935 and $419,243,
respectively.


 


3.                                      EMPLOYEE
BENEFIT PLAN


 


The Company participates
in a defined contribution plan sponsored by EverHome Mortgage Company (formerly
Alliance Mortgage Company), an affiliated company, adopted under the Internal
Revenue Code Section 401(k) (the “Profit Sharing and Savings Plan”),
covering substantially all full-time employees meeting the eligibility
requirements. Employees may contribute between 1% and 18% of their pre-tax
compensation to the Profit Sharing and Savings Plan. Company contributions to
the Profit Sharing and Savings Plan are at the discretion of the Company. The
Company made discretionary contributions of $320,500 and $253,000 to the Plan
for the years ended December 31, 2003 and 2002, respectively. The Company
made employer matching contributions of approximately $198,000 and $115,000 in
2003 and 2002, respectively.


 


7

















 


4.                                      COMMITMENTS
AND CONTINGENCIES


 


Operating Leases – The Company has
entered into various operating leases for the office space in which it
operates. Rent expense associated with these leases was approximately $284,000
and $347,000 for the years ended December 31, 2003 and 2002, respectively.
The future minimum lease payments for the leases are as follows:


 


	
  2004

  	
   

  	
  $

  	
  465,589

  	
   

  
	
  2005

  	
   

  	
  474,900

  	
   

  
	
  2006

  	
   

  	
  484,398

  	
   

  
	
  2007

  	
   

  	
  494,086

  	
   

  
	
  2008

  	
   

  	
  506,874

  	
   

  
	
  Thereafter

  	
   

  	
  1,286,634

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  3,712,481

  	
   

  



 


Legal Action - On August 24,
2004, the Company was served with a complaint for patent infringement captioned
IMX, Inc. v., LendingTree, Inc.,
priceline.com Inc. and Priceline Mortgage Company LLC. The
August 24, 2004 complaint added the Company as a new defendant to a
previously filed complaint served upon priceline.com, Inc. dated
November 24, 2003. The complaint alleges, among other things, that the
Company has infringed, induced others to infringe and/or committed acts of
contributory infringement of U.S. Patent number 5,995,947 entitled “Interactive
Mortgage and Loan Information and Real-Time Trading Systems.”  The complaint seeks injunctive relief;
unspecified money damages; an order directing defendants to pay IMX’s costs and
attorneys’ fees; and an award of pre-and post-judgment interest.  The Company intends to defend vigorously
against this action.  The Company is
unable at this time to predict the outcome of this suit or reasonably estimate
a range of possible loss, if any.


 


5.                                      RELATED
PARTY TRANSACTIONS


 


At December 31 due
from (to) affiliates includes the following amounts:


 


	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Due from EverHome Mortgage Company, net

  	
   

  	
  $

  	
  40,658

  	
   

  	
  $

  	
  815,408

  	
   

  
	
  Due from BNY Mortgage Company L.L.C.

  	
   

  	
  69

  	
   

  	
  54

  	
   

  
	
  Due (to) from EverBank

  	
   

  	
  (119,449

  	
  )

  	
  722,033

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  (78,722

  	
  )

  	
  $

  	
  1,537,495

  	
   

  



 


Administrative expenses
allocated to the Company from affiliates were $420,000 and $210,000 for the
years ended December 31, 2003 and 2002, respectively. Advertising expenses
paid to an affiliate were $533,935 and $1,752,637 for the years ended
December 31, 2003 and 2002, respectively.


 


The Company participates
in an overall insurance program administered by EverBank Financial, L.P.
(formerly Alliance Capital Partners, L.P.), parent of EverBank. Insurance
expense allocated to the Company totaled $76,176 and $43,813 for the years
ended December 31, 2003 and 2002, respectively.


 


8

















 


The Company generally
sells all its originated mortgage loans to affiliates on a right of first
refusal basis. In 2003 and 2002, the Company recognized gains of $13,591,438
and $10,060,156, respectively, on loans sold to affiliates.


 


6.                                      FINANCIAL
INSTRUMENTS


 


Derivative Instruments—In the ordinary course of business,
the Company enters into commitments to originate loans. Inherent in these
transactions is the interest rate risk associated with the movement of interest
rates in the mortgage market. The Company mitigates this risk by obtaining
commitments from investors for the purchase of loans generally at or prior to
the loan origination date. At December 31, 2003 and 2002, the Company had
commitments to originate loans of approximately $96 million and $669 million,
respectively.


 


9

















 


As a mortgage banking
entity, the Company underwrites loans and the extension of credit to borrowers
in accordance with the standards prescribed by loan investors. The Company does
not invest in mortgage loans for its own account and, therefore, does not
assume the long-term credit risk associated with mortgage lending. The
Company’s credit risk is generally transferred to the investor upon the sale of
the loans. The Company does not have credit risk concentration, as defined,
with any one financial institution, government agency, government-sponsored
enterprise, or individual investor.


 


Fair Value
Financial Instruments—The following methods and assumptions
were used by the Company to estimate the fair value of each class of financial
instruments:


 


Loans Held for Sale—Fair
value is estimated using the quoted market prices for similar loans, adjusted
for differences in loan characteristics. The estimated fair value of these
financial instruments at December 31, 2003 and 2002 was $13.6 million and
$5.3 million, respectively.


 


******


 


10