Download 1 AS FILED WITH THE SECURITIES AND EXCHANGE

1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
REGISTRATION NO. 333================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
7375
(Primary Standard Industrial
Classification Code Number)
91-1646860
(I.R.S. Employer
Identification No.)
1516 SECOND AVENUE, 4TH FLOOR
SEATTLE, WASHINGTON 98101
(206) 622-2335
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
--------------------JEFFREY P. BEZOS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMAZON.COM, INC.
1516 SECOND AVENUE, 4TH FLOOR
SEATTLE, WASHINGTON 98101
(206) 622-2335
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------COPIES TO:
CHARLES J. KATZ, JR., ESQ.
L. MICHELLE WILSON, ESQ.
DAVID F. MCSHEA, ESQ.
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888
MARK A. BERTELSEN, ESQ.
DAVID C. DRUMMOND, ESQ.
ROBERT M. TARKOFF, ESQ.
WILSON SONSINI GOODRICH & ROSATI, P.C.
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
--------------------Approximate date of commencement of proposed sale to the public:
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
AS SOON AS
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- -----------------------------------If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- -----------------------------------If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
--------------------CALCULATION OF REGISTRATION FEE
================================================================================================
PROPOSED
PROPOSED
TITLE OF EACH CLASS
AMOUNT
MAXIMUM
MAXIMUM
AMOUNT OF
OF SECURITIES TO BE
TO BE
OFFERING PRICE
AGGREGATE
REGISTRATION
REGISTERED
REGISTERED(1)
PER SHARE(2) OFFERING PRICE(2)
FEE
- -----------------------------------------------------------------------------------------------Common Stock, $0.01 par
value per share.......
2,875,000 shares
$13.00
$37,375,000
$11,326
================================================================================================
(1) Includes 375,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c).
--------------------THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 24, 1997
LOGO
- -------------------------------------------------------------------------------2,500,000 SHARES
COMMON STOCK
- -------------------------------------------------------------------------------All of the 2,500,000 shares of Common Stock, par value $0.01 per share ("Common
Stock"), are being sold by Amazon.com, Inc. ("Amazon.com" or the "Company").
Prior to this offering, there has been no public market for the Common Stock. It
is currently estimated that the initial public offering price will be between
$
and $
per share. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price. The Company
has applied to have the Common Stock approved for listing on the Nasdaq National
Market under the symbol "AMZN."
FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PRICE TO
PUBLIC
UNDERWRITING
DISCOUNT(1)
Per Share
Total(3)
PROCEEDS TO
COMPANY(2)
$
$
$
$
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting expenses estimated at $850,000, payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $
, $
and $
, respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to approval
of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. Delivery of the shares of Common Stock
offered hereby to the Underwriters is expected to be made in New York, New York
on or about
, 1997.
DEUTSCHE MORGAN GRENFELL
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST
The date of this Prospectus is
, 1997.
$
$
3
[SCREEN-SHOTS OF WEB PAGES]
The Company has applied for federal registration of the marks "AMAZON.COM"
and "AMAZON.COM BOOKS." All other trademarks or service marks appearing in this
Prospectus are trademarks or service marks of the respective companies that
utilize them.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
Except as otherwise noted, all information in this Prospectus, including
share and per share information, (i) assumes no exercise of the Underwriters'
over-allotment option, (ii) reflects the conversion of each outstanding share of
the Company's Preferred Stock into six shares of Common Stock upon the closing
of this offering, (iii) gives effect to a four-for-one stock split of the
Company's outstanding Common Stock effective November 23, 1996 and a
three-for-two split of the Company's outstanding Common Stock to be effected
prior to the closing of this offering, and (iv) reflects an increase in the
authorized number of shares of Common Stock from 25,000,000 to 100,000,000 and
an increase in the authorized number of shares of Preferred Stock from 5,000,000
to 10,000,000 to be effected prior to the closing of this offering.
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PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
Amazon.com is the leading online retailer of books. Since opening for
business as "Earth's Biggest Bookstore" in July 1995, the Amazon.com bookstore
has quickly become one of the most widely known, used and cited commerce sites
on the World Wide Web (the "Web"). Amazon.com strives to offer its customers
compelling value through innovative use of technology, broad selection,
high-quality content, a high level of customer service, competitive pricing and
personalized services. As an online bookseller, Amazon.com has virtually
unlimited online shelf space and can offer customers a vast selection through an
efficient search and retrieval interface. The Company offers more than 2.5
million titles, including most of the estimated 1.5 million English-language
books believed to be in print, more than one million out-of-print titles
believed likely to be in circulation and a smaller number of CDs, videotapes and
audiotapes. Beyond the benefits of selection, purchasing books from Amazon.com
is more convenient than shopping in a physical bookstore because online shopping
can be done 24 hours a day and does not require a trip to a store. Furthermore,
Amazon.com's high inventory turnover, lack of investment in expensive retail
real estate and reduced personnel requirements give it meaningful structural
economic advantages relative to traditional booksellers.
Through December 31, 1996, Amazon.com had sales of more than $16 million to
approximately 180,000 customer accounts in over 100 countries. Average daily
visits (not "hits") have grown from approximately 2,200 in December 1995 to
approximately 50,000 in December 1996, and repeat customers currently account
for over 40% of orders. Time magazine rated Amazon.com one of the 10 "Best
Websites of 1996."
THE OFFERING
Common Stock offered.......................................
Common Stock to be outstanding after this offering.........
Use of proceeds............................................
corporate purposes.
Proposed Nasdaq National Market symbol.....................
2,500,000 shares
22,954,534 shares(1)
For working capital and other general
AMZN
- --------------(1) Excludes 3,052,974 shares and 264,000 shares of Common Stock issuable upon
exercise of options outstanding at February 28, 1997 under the Company's
Amended and Restated 1994 Stock Option Plan (the "1994 Stock Option Plan")
and outside the 1994 Stock Option Plan, respectively, at a weighted average
exercise price of $1.23 per share. See "Management -- Employee Benefit
Plans" and Note 3 of Notes to Financial Statements.
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
FOR THE PERIOD
YEAR ENDED
QUARTER ENDED
FROM JULY 5, 1994 -------------------------- -----------------------------------------------(INCEPTION) TO
DECEMBER 31, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
DECEMBER 31, 1994
1995
1996
1996
1996
1996
1996
----------------- ------------ ------------ --------- -------- ------------- -----------STATEMENT OF OPERATIONS
DATA:
Net sales..............
Loss from operations...
Net loss...............
Net loss per share(1)...
Shares used in
computation of net
loss per share(1)....
$ -(52)
(52)
(0.00)
17,577
$ 511
(304)
(303)
(0.02)
18,780
$ 15,746
(5,979)
(5,777)
(0.26)
22,543
$ 875
(336)
(331)
(0.02)
22,098
$2,230
(776)
(767)
(0.04)
22,279
$ 4,173
(2,472)
(2,380)
(0.10)
22,897
$
22,899
AT DECEMBER 31, 1996
-------------------------ACTUAL
AS ADJUSTED(2)
---------------------BALANCE SHEET DATA:
Cash and cash equivalents.............................................................
Working capital.......................................................................
Total assets..........................................................................
Stockholders' equity..................................................................
$ 6,248
2,270
8,271
3,401
8,468
(2,395)
(2,299)
(0.10)
$ 35,623
31,645
37,646
32,776
- --------------(1) See Note 1 of Notes to Financial Statements for information concerning the
determination of net loss per share.
(2) Adjusted to give effect to the sale by the Company of the shares of Common
Stock offered hereby at an assumed initial public offering price of $13.00
per share and after deducting the estimated underwriting discount and
offering expenses, and the receipt of the net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
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THE COMPANY
Amazon.com is the leading online retailer of books. Since opening for
business as "Earth's Biggest Bookstore" in July 1995, the Amazon.com bookstore
has quickly become one of the most widely known, used and cited commerce sites
on the Web. By offering customers an authoritative selection of more than 2.5
million titles, as well as competitive pricing and outstanding customer service,
Amazon.com believes it has achieved a preeminent position among online
retailers.
Customers enter the Amazon.com bookstore through the Company's Web site
and, in addition to ordering books, can conduct targeted searches, browse from
among highlighted selections, bestsellers and other features, read and post
reviews, register for personalized services, participate in promotions and check
order status. Customers simply click on a button to add books to their virtual
shopping baskets. Customers can add and subtract books from their shopping
baskets as they browse, prior to making a final purchase decision, just as in a
physical store. To execute orders, customers click on the buy button and are
prompted to supply shipping and credit card details. Customers are offered a
variety of delivery services, including overnight and various international
shipping options, as well as giftwrapping.
The worldwide book industry is large, growing and relatively fragmented.
According to Euromonitor, U.S. book sales were estimated to be approximately $26
billion in 1996 and are expected to grow to approximately $30 billion in 2000,
while worldwide book sales were estimated at approximately $82 billion in 1996
and are expected to grow to approximately $90 billion in 2000.
Amazon.com was founded to capitalize on the opportunity for online book
retailing. The Company believes that the retail book industry is particularly
suited to online retailing for many compelling reasons. An online bookseller has
virtually unlimited online shelf space and can offer customers a vast selection
through an efficient search and retrieval interface. This is particularly
valuable in the book market because the extraordinary number of different items
precludes even the largest physical bookstore from economically stocking more
than a small minority of available titles. In addition, by serving a large and
global market through centralized distribution and operations, online
booksellers can realize significant structural cost advantages relative to
traditional booksellers. Furthermore, unlike with clothing or other personal
products, consumers can make educated book purchase decisions using online
information. Books can be selected and sampled effectively through online
synopses, excerpts and reviews and have consistent quality across different
retailers. In addition, the demographic overlap between frequent book buyers and
Internet users is high. Further, online bookselling has the potential to
eliminate or mitigate critical inefficiencies and problems faced by book
publishers.
Amazon.com intends to use technology to deliver an outstanding service
offering and to achieve the significant economies inherent in the online store
model. The Company's strategy is to build strong brand recognition, customer
loyalty and supplier relationships, while creating an economic model that is
superior to that of the capital and real estate intensive traditional book
retailing business.
The Company has grown rapidly since first opening its bookstore. Through
December 31, 1996, Amazon.com had sales of more than $16 million to
approximately 180,000 customer accounts in over 100 countries. Compounded
quarterly sales growth exceeded 100% from the first to the fourth quarter of
1996. Average daily visits (not "hits") have grown from approximately 2,200 in
December 1995 to approximately 50,000 in December 1996, and repeat customers
account for over 40% of orders. Time magazine rated Amazon.com one of the 10
"Best Websites of 1996." Growth rates experienced to date are not sustainable.
See "Risk Factors -- Limited Operating History; Accumulated Deficit; Anticipated
Losses."
The Company was incorporated in Washington in July 1994 and reincorporated
in Delaware in June 1996. The Company's headquarters are located at 1516 Second
Avenue, 4th Floor, Seattle, Washington 98101. Its telephone number at that
location is (206) 622-2335. Information contained on the Company's Web site will
not be deemed to be a part of this Prospectus. As used herein, "titles" offered
by the Company means the number of items offered in the Company's catalog and
includes primarily books but also a small number of CDs, videotapes and
audiotapes.
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RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should carefully consider the following risk factors before making an
investment decision concerning the Common Stock. All statements, trend analysis
and other information contained in this Prospectus relative to markets for the
Company's products and trends in net sales, gross margin and anticipated expense
levels, as well as other statements including words such as "anticipate,"
"believe," "plan," "estimate," "expect" and "intend" and other similar
expressions, constitute forward-looking statements. These forward-looking
statements are subject to business and economic risks, and the Company's actual
results of operations may differ materially from those contained in the
forward-looking statements.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES. The
Company was founded in July 1994 and began selling books on its Web site in July
1995. Accordingly, the Company has a limited operating history on which to base
an evaluation of its business and prospects. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving markets such as online commerce. Such
risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, maintain and increase its customer
base, implement and successfully execute its business and marketing strategy,
continue to develop and upgrade its technology and transaction-processing
systems, improve its Web site, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Since inception, the Company has incurred significant losses, and as of
December 31, 1996 had an accumulated deficit of $6.0 million. The Company
believes that its success will depend in large part on its ability to (i) extend
its brand position, (ii) provide its customers with outstanding value and a
superior shopping experience, and (iii) achieve sufficient sales volume to
realize economies of scale. Accordingly, the Company intends to invest heavily
in marketing and promotion, site development and technology and operating
infrastructure development. The Company also intends to offer attractive pricing
programs, which will reduce its gross margins. Because the Company has
relatively low product gross margins, achieving profitability given planned
investment levels depends upon the Company's ability to generate and sustain
substantially increased revenue levels. As a result, the Company believes that
it will incur substantial operating losses for the foreseeable future, and that
the rate at which such losses will be incurred will increase significantly from
current levels. Although the Company has experienced significant revenue growth
in recent periods, such growth rates are not sustainable and will decrease in
the future. In view of the rapidly evolving nature of the Company's business and
its limited operating history, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and should
not be relied upon as an indication of future performance. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company expects to use a portion of the net proceeds of this offering
to fund its operating losses. If such net proceeds, together with cash generated
by operations, are insufficient to fund future operating losses, the Company may
be required to raise additional funds. There can be no assurance that such
financing will be available in amounts or on terms acceptable to the Company, if
at all.
UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY. As a result of the Company's limited operating
history and the emerging nature of the markets in which it competes, the Company
is unable to accurately forecast its revenues. The Company's current and future
expense levels are based largely on its investment
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plans and estimates of future revenues and are to a large extent fixed. Sales
and operating results generally depend on the volume of, timing of and ability
to fulfill orders received, which are difficult to forecast. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues in
relation to the Company's planned expenditures would have an immediate adverse
effect on the Company's business, prospects, financial condition and results of
operations. Further, as a strategic response to changes in the competitive
environment, the Company may from time to time make certain pricing, service or
marketing decisions that could have a material adverse effect on its business,
prospects, financial condition and results of operations. See
"Business -- Competition."
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include (i) the Company's ability to retain existing
customers, attract new customers at a steady rate and maintain customer
satisfaction, (ii) the Company's ability to manage inventory and fulfillment
operations and maintain gross margins, (iii) the announcement or introduction of
new sites, services and products by the Company and its competitors, (iv) price
competition or higher wholesale prices in the industry, (v) the level of use of
the Internet and online services and increasing consumer acceptance of the
Internet and other online services for the purchase of consumer products such as
those offered by the Company, (vi) the Company's ability to upgrade and develop
its systems and infrastructure and attract new personnel in a timely and
effective manner, (vii) the level of traffic on the Company's Web site, (viii)
technical difficulties, system downtime or Internet brownouts, (ix) the amount
and timing of operating costs and capital expenditures relating to expansion of
the Company's business, operations and infrastructure, (x) the number of popular
books introduced during the period, (xi) the level of merchandise returns
experienced by the Company, (xii) governmental regulation, and (xiii) general
economic conditions and economic conditions specific to the Internet, online
commerce and the book industry.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail book industry are significantly higher in the fourth calendar
quarter of each year than in the preceding three quarters.
Due to the foregoing factors, in one or more future quarters the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would likely be
materially adversely affected.
RISK OF CAPACITY CONSTRAINTS; RELIANCE ON INTERNALLY DEVELOPED SYSTEMS;
SYSTEM DEVELOPMENT RISKS. A key element of the Company's strategy is to generate
a high volume of traffic on, and use of, its Web site. Accordingly, the
satisfactory performance, reliability and availability of the Company's Web
site, transaction-processing systems and network infrastructure are critical to
the Company's reputation and its ability to attract and retain customers and
maintain adequate customer service levels. The Company's revenues depend on the
number of visitors who shop on its Web site and the volume of orders it
fulfills. Any system interruptions that result in the unavailability of the
Company's Web site or reduced order fulfillment performance would reduce the
volume of goods sold and the attractiveness of the Company's product and service
offerings. The Company has experienced periodic system interruptions, which it
believes will continue to occur from time to time. Any substantial increase in
the volume of traffic on the Company's Web site or the number of orders placed
by customers will require the Company to expand and upgrade further its
technology, transaction-processing systems and network infrastructure. There can
be no assurance that the Company will be able to accurately project the rate or
timing of increases, if any, in the use of its Web site or timely expand and
upgrade its systems and infrastructure to accommodate such increases.
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The Company uses an internally developed system for its Web site, search
engine and substantially all aspects of transaction processing, including order
management, cash and credit card processing, purchasing, inventory management
and shipping. The system is not integrated with the remainder of the Company's
accounting and financial systems. To date, development efforts for the Company's
transaction-processing system have focused primarily on support for rapid growth
of order volume and customer service, and less on traditional accounting,
control and reporting aspects of system development. As a result, the Company's
current management information system, which produces frequent operational
reports, is inefficient with respect to traditional accounting-oriented
reporting and requires a significant amount of manual effort to prepare
information for financial and accounting reporting. This may make it difficult
for management to obtain accurate financial statements and reporting information
on a timely basis. The Company intends to upgrade and expand its
transaction-processing systems and to integrate newly developed and/or purchased
modules with its existing systems in order to improve its accounting, control
and reporting methods and support increased transaction volume. The Company's
inability to add additional software and hardware or to develop and upgrade
further its existing technology, transaction-processing systems or network
infrastructure to accommodate increased traffic on its Web site or increased
sales volume through its transaction-processing systems may cause unanticipated
system disruptions, slower response times, degradation in levels of customer
service, impaired quality and speed of order fulfillment, and delays in
reporting accurate financial information. In addition, although the Company
works to prevent unauthorized access to Company data, it is impossible to
completely eliminate this risk. There can be no assurance that the Company will
be able in a timely manner to effectively upgrade and expand its
transaction-processing system or to integrate smoothly any newly developed or
purchased modules with its existing systems. Any inability to do so would have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Business -- Technology."
RISK OF SYSTEM FAILURE; SINGLE SITE AND ORDER INTERFACE. The Company's
success, in particular its ability to successfully receive and fulfill orders
and provide high-quality customer service, largely depends on the efficient and
uninterrupted operation of its computer and communications hardware systems.
Substantially all of the Company's computer and communications hardware is
located at a single leased facility in Seattle, Washington. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. The Company does not presently have redundant systems or a formal
disaster recovery plan and does not carry sufficient business interruption
insurance to compensate it for losses that may occur. Despite the implementation
of network security measures by the Company, its servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
accept and fulfill customer orders. The occurrence of any of the foregoing risks
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. See "Business -- Facilities" and
"-- Technology."
MANAGEMENT OF POTENTIAL GROWTH; NEW MANAGEMENT TEAM; LIMITED SENIOR
MANAGEMENT RESOURCES. The Company has rapidly and significantly expanded its
operations, and anticipates that further significant expansion will be required
to address potential growth in its customer base and market opportunities. This
expansion has placed, and is expected to continue to place, a significant strain
on the Company's management, operational and financial resources. From January
1, 1996 to December 31, 1996, the Company expanded from 11 to 151 employees. The
majority of the Company's senior management joined the Company within the last
four months, and some officers have no prior senior management experience at
public companies. The Company's new employees include a number of key
managerial, technical and operations personnel who have not yet been fully
integrated into the Company, and the Company expects to add additional key
personnel in the near future. In particular, the Company intends to hire a Chief
Information Officer to manage the operation, development and enhancement of its
information
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system. To manage the expected growth of its operations and personnel, the
Company will be required to improve existing and implement new
transaction-processing, operational and financial systems, procedures and
controls, and to expand, train and manage its already growing employee base. The
Company also will be required to expand its finance, administrative and
operations staff. Further, the Company's management will be required to maintain
and expand its relationships with various distributors and publishers, freight
companies, other Web sites and other Web service providers, Internet and other
online service providers and other third parties necessary to the Company's
business. There can be no assurance that the Company's current and planned
personnel, systems, procedures and controls will be adequate to support the
Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that Company management will
be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results of operations will be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Employees."
DEPENDENCE ON CONTINUED GROWTH OF ONLINE COMMERCE. The Company's future
revenues and any future profits are substantially dependent upon the widespread
acceptance and use of the Internet and other online services as an effective
medium of commerce by consumers. Rapid growth in the use of and interest in the
Internet, the Web and online services is a recent phenomenon, and there can be
no assurance that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet and other online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty and there exist few proven services and
products. The Company relies on consumers who have historically used traditional
means of commerce to purchase merchandise. For the Company to be successful,
these consumers must accept and utilize novel ways of conducting business and
exchanging information.
In addition, the Internet and other online services may not be accepted as
a viable commercial marketplace for a number of reasons, including potentially
inadequate development of the necessary network infrastructure or delayed
development of enabling technologies and performance improvements. To the extent
that the Internet and other online services continue to experience significant
growth in the number of users, their frequency of use or an increase in their
bandwidth requirements, there can be no assurance that the infrastructure for
the Internet and online services will be able to support the demands placed upon
them. In addition, the Internet or other online services could lose their
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity, or due to
increased governmental regulation. Changes in or insufficient availability of
telecommunications services to support the Internet or other online services
also could result in slower response times and adversely affect usage of the
Internet and other online services generally and Amazon.com in particular. If
use of the Internet and other online services does not continue to grow or grows
more slowly than expected, if the infrastructure for the Internet and other
online services does not effectively support growth that may occur, or if the
Internet and other online services do not become a viable commercial
marketplace, the Company's business, prospects, financial condition and results
of operations would be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE. To remain competitive, the Company must
continue to enhance and improve the responsiveness, functionality and features
of the Amazon.com online store. The Internet and the online commerce industry
are characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing Web site and proprietary
technology and systems obsolete. The Company's success will depend, in part, on
its ability to license leading technologies useful in its business, enhance its
existing services, develop new services and
8
10
technology that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices on a cost-effective and timely basis. The
development of Web site and other proprietary technology entails significant
technical and business risks. There can be no assurance that the Company will
successfully use new technologies effectively or adapt its Web site, proprietary
technology and transaction-processing systems to customer requirements or
emerging industry standards. If the Company is unable, for technical, legal,
financial or other reasons, to adapt in a timely manner in response to changing
market conditions or customer requirements, its business, prospects, financial
condition and results of operations would be materially adversely affected. See
"Business -- Technology."
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL. The Company's
performance is substantially dependent on the continued services and on the
performance of its senior management and other key personnel, particularly
Jeffrey P. Bezos, its President, Chief Executive Officer and Chairman of the
Board. The Company's performance also depends on the Company's ability to retain
and motivate its other officers and key employees. The loss of the services of
any of its executive officers or other key employees could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. The Company does not have long-term employment agreements
with any of its key personnel and maintains no "key person" life insurance
policies. The Company's future success also depends on its ability to identify,
attract, hire, train, retain and motivate other highly skilled technical,
managerial, editorial, merchandising, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to successfully attract, assimilate or retain
sufficiently qualified personnel. In particular, the Company has encountered
difficulties in attracting a sufficient number of qualified software developers
for its Web site and transaction-processing systems, and there can be no
assurance that the Company will be able to retain and attract such developers.
The failure to retain and attract the necessary technical, managerial,
editorial, merchandising, marketing and customer service personnel could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Business -- Employees" and
"Management."
ONLINE COMMERCE SECURITY RISKS. A significant barrier to online commerce
and communications is the secure transmission of confidential information over
public networks. The Company relies on encryption and authentication technology
licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information, such as customer
credit card numbers. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments will not result in a compromise or breach of the algorithms used by
the Company to protect customer transaction data. If any such compromise of the
Company's security were to occur, it could have a material adverse effect on the
Company's reputation, business, prospects, financial condition and results of
operations. A party who is able to circumvent the Company's security measures
could misappropriate proprietary information or cause interruptions in the
Company's operations. The Company may be required to expend significant capital
and other resources to protect against such security breaches or to alleviate
problems caused by such breaches. Concerns over the security of the Internet and
other online transactions and the privacy of users may also inhibit the growth
of the Internet and other online services generally, and the Web in particular,
especially as a means of conducting commercial transactions. To the extent that
activities of the Company or third-party contractors involve the storage and
transmission of proprietary information, such as credit card numbers, security
breaches could damage the Company's reputation and expose the Company to a risk
of loss or litigation and possible liability. There can be no assurance that the
Company's security measures will prevent security breaches or that failure to
prevent such security breaches will not have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
See "Business -- Technology."
9
11
COMPETITION. The online commerce market, particularly over the Internet, is
new, rapidly evolving and intensely competitive, which competition the Company
expects to intensify in the future. Barriers to entry are minimal, and current
and new competitors can launch new sites at a relatively low cost. In addition,
the retail book industry is intensely competitive. The Company currently or
potentially competes with a variety of other companies. These competitors
include (i) various online booksellers and vendors of other information-based
products such as CDs and videotapes, including Book Stacks Unlimited, Inc., a
subsidiary of CUC International, Inc. ("CUC"), (ii) a number of indirect
competitors that specialize in online commerce or derive a substantial portion
of their revenues from online commerce, including America Online, Inc. ("AOL")
and Microsoft Corporation, through which other bookstores may offer products,
and (iii) retail vendors of books, music and videotapes, including large
specialty booksellers, with significant brand awareness, sales volume and
customer bases, such as Barnes & Noble, Inc. ("B&N") and Borders Group, Inc.
("Borders"). Both B&N and Borders have announced their intention to devote
substantial resources to online commerce in the near future and B&N,
specifically, has entered into a relationship with AOL through which, beginning
in March 1997, it offers a broad selection of titles at discounted prices.
The Company believes that the principal competitive factors in its market
are brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content and reliability and speed of fulfillment. Many of the
Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. In addition, online
retailers may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases. Certain of
the Company's competitors may be able to secure merchandise from vendors on more
favorable terms, devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing or inventory availability policies and
devote substantially more resources to Web site and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors, and competitive pressures faced by the Company may have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. Further, as a strategic response to changes in the
competitive environment, the Company may from time to time make certain pricing,
service or marketing decisions or acquisitions that could have a material
adverse effect on its business, prospects, financial condition and results of
operations. New technologies and the expansion of existing technologies may
increase the competitive pressures on the Company. For example, client-agent
applications that select specific titles from a variety of Web sites may channel
customers to online booksellers that compete with the Company. In addition,
companies that control access to transactions through network access or Web
browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion. See "Business -- Competition."
RELIANCE ON CERTAIN SUPPLIERS. The Company purchases a substantial majority
of its products from two major vendors, Ingram Book Group ("Ingram") and Baker &
Taylor, Inc. ("B&T"). Ingram is the single largest supplier and accounted for
59% of the Company's inventory purchases in 1996. The Company carries minimal
inventory and relies to a large extent on rapid fulfillment from these and other
vendors. The Company has no long-term contracts or arrangements with any of its
vendors that guarantee the availability of merchandise, the continuation of
particular payment terms or the extension of credit limits. There can be no
assurance that the Company's current vendors will continue to sell merchandise
to the Company on current terms or that the Company will be able to establish
new or extend current vendor relationships to ensure acquisition of merchandise
in a timely and efficient manner and on acceptable commercial terms. If the
Company were unable to develop and maintain relationships with vendors that
would allow it
10
12
to obtain sufficient quantities of merchandise on acceptable commercial terms,
its business, prospects, financial condition and results of operations would be
materially adversely affected. See "Business -- Warehousing and Fulfillment."
RISKS ASSOCIATED WITH ENTRY INTO NEW BUSINESS AREAS. The Company may choose
to expand its operations by developing new Web sites, promoting new or
complementary products or sales formats, expanding the breadth and depth of
products and services offered or expanding its market presence through
relationships with third parties. In addition, the Company may pursue the
acquisition of new or complementary businesses, products or technologies,
although it has no present understandings, commitments or agreements with
respect to any material acquisitions or investments. There can be no assurance
that the Company would be able to expand its efforts and operations in a
cost-effective or timely manner or that any such efforts would increase overall
market acceptance. Furthermore, any new business or Web site launched by the
Company that was not favorably received by consumers could damage the Company's
reputation or the Amazon.com brand. Expansion of the Company's operations in
this manner would also require significant additional expenses and development,
operations and editorial resources and would strain the Company's management,
financial and operational resources. The lack of market acceptance of such
efforts or the Company's inability to generate satisfactory revenues from such
expanded services or products to offset their cost could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
TRADEMARKS AND PROPRIETARY RIGHTS. The Company regards its copyrights,
service marks, trademarks, trade dress, trade secrets and similar intellectual
property as critical to its success, and relies on trademark and copyright law,
trade secret protection and confidentiality and/or license agreements with its
employees, customers, partners and others to protect its proprietary rights. The
Company pursues the registration of its trademarks and service marks in the U.S.
and internationally, and has applied for the registration of certain of its
trademarks and service marks. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which the
Company's products and services are made available online. The Company has
licensed in the past, and expects that it may license in the future, certain of
its proprietary rights, such as trademarks or copyrighted material, to third
parties. While the Company attempts to ensure that the quality of its brand is
maintained by such licensees, there can be no assurance that such licensees will
not take actions that might materially adversely affect the value of the
Company's proprietary rights or reputation, which could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate or that third parties will not
infringe or misappropriate the Company's copyrights, trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert infringement claims against the Company. The Company has
been subject to claims and expects to be subject to legal proceedings and claims
from time to time in the ordinary course of its business, including claims of
alleged infringement of the trademarks and other intellectual property rights of
third parties by the Company and its licensees. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources. The Company is not currently aware of any legal
proceedings pending against it. The Company has received notice from B&N of an
alleged claim. See "Business -- Intellectual Property."
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES. The Company is not
currently subject to direct regulation by any domestic or foreign governmental
agency, other than regulations applicable to businesses generally, and laws or
regulations directly applicable to access to online commerce. However, due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for the Company's products
11
13
and services and increase the Company's cost of doing business, or otherwise
have an adverse effect on the Company's business, prospects, financial condition
and results of operations. Moreover, the applicability to the Internet and other
online services of existing laws in various jurisdictions governing issues such
as property ownership, sales tax, libel and personal privacy is uncertain and
may take years to resolve. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to the Company's business, or the application of existing laws
and regulations to the Internet and other online services could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
SALES TAX COLLECTION. The Company does not currently collect sales or other
similar taxes in respect of shipments of goods into states other than
Washington. However, one or more states may seek to impose sales tax collection
obligations on out-of-state companies such as the Company which engage in online
commerce. In addition, any new operation in states outside Washington could
subject shipments into such states to state sales taxes. A successful assertion
by one or more states or any foreign country that the Company should collect
sales or other similar taxes on the sale of merchandise could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations.
CONTROL OF THE COMPANY. Immediately upon completion of this offering, the
outstanding Common Stock will be beneficially owned approximately 43% by Jeffrey
P. Bezos, the Company's President, Chief Executive Officer and Chairman of the
Board, and 10% by members of Mr. Bezos' family and trusts controlled by members
of Mr. Bezos' family (42% and 10%, respectively, if the over-allotment option is
exercised in full). The above persons and entities will hold an aggregate of
approximately 53% of the outstanding voting power of the Company immediately
upon completion of this offering. As a result, upon completion of this offering,
the Bezos family will be able to (i) elect, or defeat the election of, any of
the Company's directors, (ii) amend or prevent amendment of the Company's
Restated Certificate of Incorporation or Bylaws, or (iii) effect or prevent a
merger, sale of assets or other corporate transaction, and the Company's public
stockholders, for so long as they hold less than 50% of the outstanding voting
power of the Company, will not be able to control the outcome of such
transactions. The extent of ownership by the Bezos family may have the effect of
preventing a change in control of the Company or discouraging a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
the Company, which in turn could have an adverse effect on the market price of
the Common Stock. See "Management," "Certain Transactions" and "Principal
Stockholders."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. The trading
price of the Common Stock is likely to be highly volatile and could be subject
to wide fluctuations in response to factors such as actual or anticipated
variations in quarterly operating results, announcements of technological
innovations, new sales formats or new products or services by the Company or its
competitors, changes in financial estimates by securities analysts, conditions
or trends in the Internet and online commerce industries, changes in the market
valuations of other Internet, online service or retail companies, announcements
by the Company of significant acquisitions, strategic partnerships, joint
ventures or capital commitments, additions or departures of key personnel, sales
of Common Stock and other events or factors, many of which are beyond the
Company's control. In addition, the stock market in general, and the Nasdaq
National Market and the market for Internet-related and technology companies in
particular, has experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of such
companies. The trading prices of many technology companies' stocks are at or
near historical highs and reflect price earnings ratios substantially above
historical levels. There can be no assurance that these trading prices and price
earnings ratios will be sustained. These broad market and industry factors may
materially and adversely affect the market price of the Common Stock, regardless
of the Company's operating performance. In the past, following periods of
volatility in the market price of a company's securities, securities
class-action litigation has often been instituted against such company. Such
litigation, if instituted, could result in substantial costs and a diversion of
management's attention and resources, which would have a material adverse effect
on the Company's business, prospects, financial condition and results of
operations.
12
14
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the
Company's Common Stock in the public market after this offering could adversely
affect prevailing market prices for the Common Stock. The 2,500,000 shares of
Common Stock offered hereby will be freely tradeable without restriction in the
public market. Taking into account restrictions imposed by the Securities Act of
1933, as amended (the "Securities Act"), rules promulgated by the Securities and
Exchange Commission (the "Commission") thereunder and lock-up agreements between
certain stockholders and the Company or Deutsche Morgan Grenfell Inc., the
number of additional shares that will be available for sale in the public
market, subject in some cases to the volume and other restrictions of Rule 144
under the Securities Act, will be as follows: approximately 19,336,009
additional shares will be eligible for sale beginning 181 days after the date of
this Prospectus. Approximately 993,786 remaining shares will be eligible for
sale pursuant to Rule 144 upon the expiration of one-year holding periods, which
will expire between November 1997 and March 1998. Deutsche Morgan Grenfell Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the shares subject to such lock-up agreements. Upon the closing of
this offering, holders of 13,301,376 shares of Common Stock are entitled to
certain rights with respect to the registration of such shares under the
Securities Act. In addition, the Company intends to file a registration
statement on Form S-8 under the Securities Act approximately 180 days after the
date of this Prospectus to register approximately 9,534,648 shares of Common
Stock reserved for issuance under the 1994 Stock Option Plan and the Company's
1997 Stock Option Plan. See "Description of Capital Stock -- Registration
Rights" and "Shares Eligible for Future Sale."
ANTITAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. Upon the closing of this
offering, the Company's Board of Directors will have the authority to issue up
to 10,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely affect the voting and other rights
of the holders of Common Stock. The Company has no present plans to issue shares
of Preferred Stock. Further, certain provisions of the Company's Restated
Certificate of Incorporation and Bylaws and Delaware law could delay or make
more difficult a merger, tender offer or proxy contest involving the Company.
See "Description of Capital Stock."
NO SPECIFIC USE OF PROCEEDS. The Company has not designated any specific
use for the net proceeds from the sale by the Company of the Common Stock
offered hereby. The Company expects to use the net proceeds for general
corporate purposes, including working capital to fund anticipated operating
losses and capital expenditures. A portion of net proceeds may also be used to
acquire or invest in complementary businesses, products and technologies. From
time to time, in the ordinary course of business, the Company expects to
evaluate potential acquisitions of such businesses, products or technologies.
However, the Company has no present understandings, commitments or agreements
with respect to any material acquisition or investment. Accordingly, management
will have significant flexibility in applying the net proceeds of this offering.
The failure of management to apply such funds effectively could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. See "Use of Proceeds."
IMMEDIATE AND SUBSTANTIAL DILUTION. The initial public offering price is
substantially higher than the book value per outstanding share of Common Stock.
Accordingly, purchasers in this offering will suffer an immediate and
substantial dilution of $11.50 per share in the net tangible book value of the
Common Stock from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options granted by the Company. See
"Dilution."
13
15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby, assuming an initial public offering price of $13.00
per share, are estimated to be approximately $29.4 million (approximately $33.9
million if the Underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discount and offering expenses.
The principal purposes of this offering are to obtain additional capital,
to create a public market for the Common Stock, to facilitate future access by
the Company to public equity markets, and to provide increased visibility and
credibility in a marketplace where many of the Company's current and potential
competitors are or will be publicly held companies. The Company has no specific
plan for the net proceeds of the offering. The Company expects to use the net
proceeds for general corporate purposes, including working capital to fund
anticipated operating losses and capital expenditures. A portion of net proceeds
may also be used to acquire or invest in complementary businesses, products and
technologies. From time to time, in the ordinary course of business, the Company
expects to evaluate potential acquisitions of such businesses, products or
technologies. However, the Company has no present understandings, commitments or
agreements with respect to any material acquisitions or investments. Pending use
of the net proceeds for the above purposes, the Company intends to invest such
funds in short-term, interest-bearing, investment-grade securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings of its
business, and therefore does not anticipate paying any cash dividends in the
foreseeable future.
14
16
CAPITALIZATION
The following table sets forth at December 31, 1996 the (i) actual
capitalization of the Company, (ii) the pro forma capitalization of the Company,
giving effect to the conversion of the Preferred Stock outstanding as of
December 31, 1996 into Common Stock upon the closing of this offering, and (iii)
the pro forma capitalization as adjusted to reflect the receipt of the estimated
net proceeds from the sale of the 2,500,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $13.00 per share and after
deducting the estimated underwriting discount and offering expenses payable by
the Company. This table should be read in conjunction with the Company's
financial statements and the notes thereto included elsewhere in this
Prospectus.
DECEMBER 31, 1996
--------------------------------PRO FORMA
ACTUAL
PRO FORMA
AS ADJUSTED
------------------------(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
Long-term obligations, net of current maturities...........
Stockholders' equity:
Preferred Stock, $0.01 par value per share; 10,000,000
shares authorized: 569,396 shares issued and outstanding,
actual; no shares issued and outstanding, pro forma and
pro forma as adjusted(1).................................
Common Stock, $0.01 par value per share; 100,000,000 shares
authorized; 15,900,237 shares issued and outstanding,
actual; 19,316,613 shares issued and outstanding, pro
forma; 21,816,613 shares issued and outstanding, pro
forma as adjusted(2).....................................
Additional paid-in capital.................................
Deferred compensation......................................
Accumulated deficit........................................
------------------------Total stockholders' equity...............................
------------------------Total capitalization............................. $ 3,401
=======
=======
=========
$
--
--
$
--
6
--
--
159
9,873
(612)
(6,025)
193
9,845
(612)
(6,025)
218
39,195
(612)
(6,025)
3,401
$ 3,401
- --------------(1) Excludes 5,000 shares of Series A Preferred Stock issued in January and
February 1997.
(2) Excludes 3,016,851 and 312,000 shares of Common Stock issuable upon exercise
of options outstanding at December 31, 1996 under the 1994 Stock Option Plan
and outside the 1994 Stock Option Plan, respectively, at a weighted average
exercise price of $0.448 per share. See Note 3 of Notes to Financial
Statements.
15
$
3,401
$32,776
32,776
17
DILUTION
The pro forma net tangible book value of the Company at December 31, 1996
was $3.4 million, or $0.18 per share. Pro forma net tangible book value per
share represents the amount of total tangible assets of the Company reduced by
the Company's total liabilities, divided by the pro forma number of shares of
Common Stock outstanding, after giving effect to the automatic conversion of all
shares of Preferred Stock outstanding as of December 31, 1996 into an aggregate
of 3,416,376 shares of Common Stock upon the closing of this offering. After
giving effect to the sale by the Company of the 2,500,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $13.00 per share
(after deducting estimated underwriting discounts and offering expenses), the
adjusted pro forma net tangible book value of the Company at December 31, 1996
would have been $32.8 million, or $1.50 per share. This represents an immediate
increase in pro forma net tangible book value of $1.32 per share to existing
stockholders and an immediate dilution of $11.50 per share to new investors. The
following table illustrates this per share dilution:
Assumed initial public offering price per share..................
Pro forma net tangible book value per share at December 31,
1996........................................................ $0.18
Increase per share attributable to new investors...............
1.32
----Adjusted pro forma net tangible book value per share after this
offering.......................................................
-----Dilution per share to new investors..............................
======
$13.00
1.50
$11.50
The following table sets forth on a pro forma basis at December 31, 1996,
after giving effect to the automatic conversion of all shares of Preferred Stock
outstanding as of December 31, 1996 into an aggregate of 3,416,376 shares of
Common Stock upon the closing of this offering, the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company
and the average price paid per share by existing stockholders and by investors
purchasing Common Stock in this offering:
SHARES PURCHASED
-------------------NUMBER
PERCENT
----------------
TOTAL CONSIDERATION
--------------------AMOUNT
PERCENT
-----------------
AVERAGE
PRICE PER
SHARE
---------
Existing stockholders..... 19,316,613
88.5%
$ 9,563,333
New investors.............
2,500,000
11.5
32,500,000
-------------------------------Total........... 21,816,613
100.0%
$42,063,333
100.0%
==========
======
===========
======
22.7%
77.3
The foregoing tables assume no exercise of any outstanding stock options or
the Underwriters' over-allotment options. See "Underwriting" for information
concerning the Underwriters' over-allotment option. As of December 31, 1996,
there were outstanding options to purchase 3,016,851 and 312,000 shares of
Common Stock under the 1994 Stock Option Plan and outside the 1994 Stock Option
Plan, respectively, at a weighted average exercise price of $0.448 per share. To
the extent that the outstanding options, or any options granted in the future,
are exercised, there will be further dilution to new investors.
16
$
0.50
13.00
18
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein. The statement of operations data for the period from July 5, 1994
(inception) to December 31, 1994 and for the years ended December 31, 1995 and
1996 and the balance sheet data at December 31, 1995 and 1996 are derived from
the financial statements of the Company, which have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere in this Prospectus,
and are qualified by reference to such financial statements and the notes
thereto. The balance sheet data at December 31, 1994 are derived from the
financial statements of the Company which were also audited by Ernst & Young
LLP, which are not included herein. The statement of operations data for each of
the four quarters in the year ended December 31, 1996 are derived from unaudited
financial statements which have been prepared substantially on the same basis as
the audited financial statements and, in the opinion of management of the
Company, reflect all adjustments, consisting only of normal recurring
adjustments, that are necessary for a fair presentation of the results of
operations for these periods. The historical results are not necessarily
indicative of future results.
FOR THE PERIOD
FROM
JULY 5, 1994
YEAR ENDED DECEMBER
QUARTER ENDED
(INCEPTION) TO
31,
---------------------------------------------------DECEMBER 31,
--------------------MARCH 31,
JUNE 30,
SEPTEMBER 30,
DECEMBER 31,
1994
1995
1996
1996
1996
1996
1996
--------------------------------------------------------------------(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Net sales................
$
-$
511
$ 15,746
$
875
Cost of sales............
-409
12,287
695
---------------------------------------------------------Gross profit.............
-102
3,459
180
Operating expenses:
Marketing and sales....
-200
6,090
205
Product development....
38
171
2,313
263
General and
administrative.......
14
35
1,035
48
---------------------------------------------------------Total operating
expenses.......
52
406
9,438
516
1,253
---------------------------------------------------------Loss from operations.....
(52)
(304)
(5,979)
(336)
Interest income..........
-1
202
5
---------------------------------------------------------Net loss.................
$
(52)
$
(303) $ (5,777) $
(331)
============
=======
=======
=========
=======
============
Net loss per share(1)....
$
(0.00)
$
(0.02) $
(0.26) $ (0.02)
============
=======
=======
=========
=======
============
Shares used in
computation of
net loss per
share(1)...............
17,577
18,780
22,543
22,098
============
=======
=======
=========
=======
============
$
2,230
$
1,753
-----------477
696
394
163
------------
3,383
-----------(776)
9
-----------$
(767)
$
============
$ (0.04)
$
============
4,173
3,262
$
8,468
6,577
911
1,891
2,251
755
2,938
901
377
447
4,286
(2,472)
92
(2,395)
96
(2,380)
$
(2,299)
(0.10)
$
(0.10)
22,279
22,897
============
22,899
DECEMBER 31,
---------------------------------------1994
1995
1996
---------------------------(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.............................................
Working capital (deficiency)..........................................
Total assets..........................................................
Long-term obligations, net of current maturities......................
Stockholders' equity..................................................
$
52
(16)
76
-8
$
- --------------(1) See Note 1 of Notes to Financial Statements for information concerning the
determination of net loss per share.
17
996
920
1,084
-977
$
6,248
2,270
8,271
-3,401
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in this
Prospectus relative to markets for the Company's products and trends in net
sales, gross margin and anticipated expense levels, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect"
and "intend" and other similar expressions, constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks, and the Company's actual results of operations may differ
materially from those contained in the forward-looking statements. For a more
detailed discussion of these and other business risks, see "Risk Factors."
OVERVIEW
Amazon.com is the leading online retailer of books. The Company also sells
a smaller number of CDs, videotapes and audiotapes. All these products are sold
through the Company's Web site.
The Company was incorporated in July 1994 and commenced offering products
for sale on its Web site in July 1995. For the period from inception through
July 1995, the Company had no sales and its operating activities related
primarily to the development of the necessary computer infrastructure and
initial planning and development of the Amazon.com site and operations.
Operating expenses in 1994 were minimal. For the period beginning with the
opening of the Amazon.com bookstore in July 1995 through December 31, 1995, the
Company continued the foregoing activities and also focused on building sales
momentum, establishing vendor relationships, marketing the Amazon.com brand and
establishing fulfillment and customer service operations. The Company's cost of
sales and operating expenses have increased significantly since the Company's
inception. This trend reflects the costs associated with the formation of the
Company, as well as increased efforts to promote the Amazon.com brand, build
market awareness, attract new customers, recruit personnel, build operating
infrastructure, and develop the Company's Web site and associated
transaction-processing systems.
The Company has a limited operating history on which to base an evaluation
of its business and prospects. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new and
rapidly evolving markets such as online commerce. Such risks for the Company
include, but are not limited to, an evolving and unpredictable business model
and management of growth. To address these risks, the Company must, among other
things, maintain and increase its customer base, implement and successfully
execute its business and marketing strategy, continue to develop and upgrade its
technology and transaction-processing systems, improve its Web site, provide
superior customer service and order fulfillment, respond to competitive
developments, and attract, retain and motivate qualified personnel. There can be
no assurance that the Company will be successful in addressing such risks, and
the failure to do so could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
Since inception, the Company has incurred significant losses, and as of
December 31, 1996 had an accumulated deficit of $6.0 million. The Company
believes that its success will depend in large part on its ability to (i) extend
its brand position, (ii) provide its customers with outstanding value and a
superior shopping experience, and (iii) achieve sufficient sales volume to
realize economies of scale. Accordingly, the Company intends to invest heavily
in marketing and promotion, site development, and technology and operating
infrastructure development. The Company also intends to offer attractive pricing
programs, which will reduce its gross margins. Because the Company has
relatively low product gross margins, achieving profitability given planned
investment levels depends upon the Company's ability to generate and sustain
substantially increased revenue levels. As a result, the Company believes that
it will incur substantial operating losses for the foreseeable future, and that
the rate at which such losses will be incurred
18
20
will increase significantly from current levels. Although the Company has
experienced significant revenue growth in recent periods, such growth rates are
not sustainable and will decrease in the future. In view of the rapidly evolving
nature of the Company's business and its limited operating history, the Company
believes that period-to-period comparisons of its operating results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
RESULTS OF OPERATIONS -- YEARS ENDED DECEMBER 31, 1995 AND 1996
Net Sales. Net sales are comprised of the selling price of books and other
merchandise sold by the Company, net of returns, as well as outbound shipping
and handling charges. Net sales grew from $511,000 in 1995 to $15.7 million in
1996 as a result of the significant growth of the Company's customer base,
repeat purchases from the Company's existing customers and six additional months
of sales in 1996. International sales represented approximately 39% and 33% of
net sales in 1995 and 1996, respectively.
Cost of Sales. Cost of sales consists primarily of the costs of
merchandise sold to customers and outbound and inbound shipping costs. Cost of
sales increased substantially in absolute dollars during 1996, reflecting the
Company's increased sales volume. The Company's gross profit margin was
approximately 20% of net sales in 1995 and approximately 22% of net sales in
1996.
The Company believes that offering its customers attractive prices is an
essential component of its business strategy. Accordingly, the Company offers
discounts on a broad selection of books. In March 1997, the Company began
discounting the Amazon.com 500 and other featured books by 40% from list price.
The Company may in the future expand or increase the discounts it offers to its
customers and may otherwise alter its pricing structures and policies. The
Company anticipates that its March 1997 pricing change and any further price
reductions will reduce gross margins below those experienced during 1995 and
1996.
Marketing and Sales Expenses. Marketing and sales expenses consist
primarily of advertising, public relations and promotional expenditures, as well
as payroll and related expenses for personnel engaged in marketing, selling and
fulfillment activities. Marketing and sales expenses increased from $200,000 in
1995 to $6.1 million in 1996. Marketing and sales expenses as a percentage of
net sales were 39% in each of 1995 and 1996. The increase in marketing and sales
expenses was primarily attributable to expansion of the Company's online and
print advertising, public relations and other promotional expenditures, as well
as to increased personnel and related expenses required to implement the
Company's marketing strategy and fulfill customer demand. The Company intends to
pursue an aggressive branding and marketing campaign and therefore expects
marketing and sales expenses to increase significantly in absolute dollars.
Product Development Expenses. Product development expenses consist
principally of payroll and related expenses for development, editorial, and
network operations personnel and consultants, systems and telecommunications
infrastructure and costs of acquired content. Product development expenses
increased from $171,000 in 1995 to $2.3 million in 1996. Product development
expenses as a percentage of net sales were 33% in 1995 and 15% in 1996. The
increase in product development expenses was primarily attributable to increased
staffing and associated costs related to enhancing the features, content and
functionality of the Company's Web site transaction-processing systems, as well
as increased investments in systems and telecommunications infrastructure. Such
expenses decreased significantly as a percentage of net sales in 1996 due to the
significant increase in 1996 net sales. To date, all product development costs
have been expensed as incurred. The Company believes that continued investment
in product development is critical to attaining its strategic objectives and, as
a result, expects product development expenses to increase significantly in
absolute dollars.
General and Administrative Expenses. General and administrative expenses
consist of payroll and related expenses for executive, accounting and
administrative personnel, recruiting, professional fees and other general
corporate expenses. General and administrative expenses increased
19
21
from $35,000 in 1995 to $1.0 million in 1996. General and administrative
expenses as a percentage of net sales were 7% in each of 1995 and 1996. The
increase in general and administrative expenses was primarily due to increased
salaries and related expenses associated with the hiring of additional
personnel, and increases in professional fees and travel. The Company expects
general and administrative expenses to increase in absolute dollars as the
Company expands its staff and incurs additional costs related to the growth of
its business and being a public company.
Interest
cash and
$202,000
cash and
Income. Interest income consists of earnings on the Company's
cash equivalents. Interest income increased from $1,000 in 1995 to
in 1996. The increase was attributable to earnings on higher average
cash equivalents balances during the year.
Income Taxes. The Company has had a net loss for each period since
inception. As of December 31, 1996, the Company had approximately $5.5 million
of net operating loss carryforwards for federal income tax purposes, which
expire in 2011. The Company has provided a full valuation allowance on the
deferred tax asset, consisting primarily of net operating loss carryforwards,
because of uncertainty regarding its realizability. See Note 4 of Notes to
Financial Statements.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statement of
operations data for each of the four quarters during the year ended December 31,
1996. In the opinion of management, this information has been prepared
substantially on the same basis as the audited financial statements appearing
elsewhere in this Prospectus, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results. The quarterly data should be
read in conjunction with the audited financial statements of the Company and the
notes thereto appearing elsewhere in this Prospectus. The operating results for
any quarter are not necessarily indicative of the operating results for any
future period.
QUARTER ENDED
---------------------------------------------------MARCH
JUNE
31,
30,
SEPTEMBER 30,
DECEMBER 31,
1996
1996
1996
1996
-----------------------------------(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales............................... $
875
$ 2,230
Cost of sales...........................
695
1,753
-----------------------------------Gross profit............................
180
477
Operating expenses:
Marketing and sales...................
205
696
Product development...................
263
394
General and administrative............
48
163
-----------------------------------Total operating expenses......
516
1,253
3,383
-----------------------------------Loss from operations....................
(336)
(776)
Interest income.........................
5
9
-----------------------------------Net loss................................ $ (331)
$ (767)
=======
=======
==========
==========
Net loss per share...................... $ (0.02)
$ (0.04)
=======
=======
==========
==========
Shares used in computation of net loss
per share.............................
22,098
22,279
=======
=======
==========
==========
20
$ 4,173
3,262
$
911
8,468
6,577
1,891
2,251
755
377
2,938
901
447
4,286
(2,472)
92
(2,395)
96
$(2,380)
$ (2,299)
$ (0.10)
$
22,897
(0.10)
22,899
22
AS A PERCENTAGE OF NET SALES
--------------------------------------------------------MARCH 31,
JUNE 30,
SEPTEMBER 30,
DECEMBER 31,
1996
1996
1996
1996
--------------------------------------Net sales..............................
Cost of sales..........................
---------------------------Gross profit...........................
Operating expenses:
Marketing and sales..................
Product development..................
General and administrative...........
---------------------------Total operating expenses.....
59.0
---------------------------Loss from operations...................
Interest income........................
---------------------------Net loss...............................
=======
======
==========
100.0%
100.0%
79.4
78.6
-----------20.6
21.4
23.4
31.2
30.1
17.7
5.5
7.3
-----------56.2
81.0
-----------(38.4)
(34.8)
0.6
0.4
-----------(37.8)%
(34.4)%
==========
100.0%
78.2
100.0%
77.7
21.8
22.3
53.9
18.1
9.0
50.6
(59.2)
2.2
(28.3)
1.1
(57.0)%
(27.2)%
The Company's net sales have increased significantly in all quarters
presented due to the expansion of the Company's customer base and repeat
purchases by existing customers. International sales have grown less rapidly
than domestic sales and have decreased as a percentage of net sales during each
of the four quarters in the year ended December 31, 1996. All operating expense
categories increased in absolute dollars in each quarter, reflecting increased
spending on developing, delivering, supporting and marketing the Company's
business and products, and building the Company's market presence. This trend
accelerated in the third quarter of 1996, particularly with respect to marketing
and sales expenses, following the Preferred Stock financing in June 1996.
As a result of the Company's limited operating history and the emerging
nature of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenues and are to a
large extent fixed. Sales and operating results generally depend on the volume
of, timing of and ability to fulfill orders received, which are difficult to
forecast. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects, financial
condition and results of operations. Further, as a strategic response to changes
in the competitive environment, the Company may from time to time make certain
pricing, service or marketing decisions that could have a material adverse
effect on its business, prospects, financial condition and results of
operations. See "Business -- Competition."
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include (i) the Company's ability to retain existing
customers, attract new customers at a steady rate and maintain customer
satisfaction, (ii) the Company's ability to manage inventory and fulfillment
operations and maintain gross margins, (iii) the announcement or introduction of
new sites, services and products by the Company and its competitors, (iv) price
competition or higher wholesale prices in the industry, (v) the level of use of
the Internet and online services and increasing consumer acceptance of the
Internet and other online services for the purchase of consumer products such as
those offered by the Company, (vi) the Company's ability to upgrade and develop
its systems and infrastructure and attract new personnel in a timely and
effective manner, (vii) the level of traffic on the Company's Web site, (viii)
technical difficulties, system downtime or Internet brownouts, (ix) the amount
and timing of operating costs and capital expenditures relating to expansion of
the Company's business, operations and infrastructure, (x) the number of popular
books introduced during the period, (xi) the level of merchandise returns
experienced by the
21
34.7
10.6
5.3
23
Company, (xii) governmental regulation, and (xiii) general economic conditions
and economic conditions specific to the Internet, online commerce and the book
industry.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail book industry are significantly higher in the fourth calendar
quarter of each year than in the preceding three quarters.
Due to the foregoing factors, in one or more future quarters the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would likely be
materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of Common Stock and Preferred Stock which, through December 31,
1996, totaled $1.6 million and $8.0 million, respectively.
Net cash used in operating activities was $232,000 in 1995 and $1.7 million
in 1996. Cash used in operating activities in 1995 was attributable to a net
loss of $303,000 and increases in inventories and prepaid expenses, partially
offset by an increase in accounts payable and accrued expenses, as well as
depreciation. For 1996, cash used in operating activities resulted from a net
loss of $5.8 million and increases of $554,000 in inventories, $307,000 in
prepaid expenses and $146,000 in deposits, largely offset by increases of $4.8
million in accounts payable and accrued expenses and $286,000 in depreciation.
Net cash used in investing activities of $52,000 and $1.2 million for 1995 and
1996, respectively, were primarily attributable to purchases of equipment.
Cash flows provided by financing activities of $1.2 million in 1995
consisted primarily of proceeds from the issuance of Common Stock and the
exercise of stock options. Cash flow of $8.2 million attributable to financing
activities in 1996 consisted of net proceeds of $8.0 million from the issuance
of Preferred Stock and $231,000 from the sale of Common Stock and the exercise
of Common Stock options.
As of December 31, 1996, the Company had $6.2 million of cash and cash
equivalents. As of that date, the Company's principal commitments consisted of
obligations outstanding under operating leases. Although the Company has no
material commitments for capital expenditures, it anticipates a substantial
increase in its capital expenditures and lease commitments consistent with
anticipated growth in operations, infrastructure and personnel. The Company may
establish additional warehouse locations, which will require it to commit to
additional lease obligations and stock inventories, and to purchase equipment
and install leasehold improvements. In the future, the Company may support a
larger merchandise inventory in order to provide better availability to
customers and achieve purchasing efficiencies.
The Company believes that the net proceeds from this offering, together
with its current cash and cash equivalents, will be sufficient to meet its
anticipated cash needs for working capital and capital expenditures for the next
12 months. If cash generated from operations is insufficient to satisfy the
Company's liquidity requirements, the Company may seek to sell additional equity
or debt securities or to obtain a credit facility. The sale of additional equity
or convertible debt securities could result in additional dilution to the
Company's stockholders. There can be no assurance that financing will be
available in amounts or on terms acceptable to the Company, if at all.
22
24
BUSINESS
Amazon.com is the leading online retailer of books. Since opening for
business as "Earth's Biggest Bookstore" in July 1995, the Amazon.com bookstore
has quickly become one of the most widely known, used and cited commerce sites
on the Web. Amazon.com strives to offer its customers compelling value through
innovative use of technology, broad selection, high-quality content, a high
level of customer service, competitive pricing and personalized services. As an
online bookseller, Amazon.com has virtually unlimited online shelf space and can
offer a vast selection through an efficient search and retrieval interface. The
Company offers more than 2.5 million titles, including most of the estimated 1.5
million English-language books believed to be in print, more than one million
out-of-print titles believed likely to be in circulation and a smaller number of
CDs, videotapes and audiotapes. Beyond the benefits of selection, purchasing
books from Amazon.com is more convenient than shopping in a physical bookstore
because online shopping can be done 24 hours a day and does not require a trip
to a store. Furthermore, Amazon.com's high inventory turnover, lack of
investment in expensive retail real estate and reduced personnel requirements
give it meaningful structural economic advantages relative to traditional
booksellers.
The Company has grown rapidly since first opening its bookstore. Through
December 31, 1996, Amazon.com had sales of more than $16 million to
approximately 180,000 customer accounts in over 100 countries. Compounded
quarterly sales growth exceeded 100% from the first to the fourth quarter of
1996. Average daily visits (not "hits") have grown from approximately 2,200 in
December 1995 to approximately 50,000 in December 1996, and repeat customers
account for over 40% of orders. Time magazine rated Amazon.com one of the 10
"Best Websites of 1996." Growth rates experienced to date are not sustainable.
See "Risk Factors -- Limited Operating History; Accumulated Deficit; Anticipated
Losses."
INDUSTRY BACKGROUND
Growth of the Internet and Online Commerce
The Internet is an increasingly significant global medium for
communications, content and online commerce. International Data Corporation
("IDC") estimates that the number of Web users grew to approximately 35 million
by the end of 1996 and will grow to approximately 163 million by 2000. Growth in
Internet usage has been fueled by a number of factors, including the large and
growing installed base of personal computers in the workplace and home, advances
in the performance and speed of personal computers and modems, improvements in
network infrastructure, easier and cheaper access to the Internet and increased
awareness of the Internet among businesses and consumers.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium. The
Internet and other online services are evolving into a unique sales and
marketing channel, just as retail stores, mail-order catalogs and television
shopping have done. Online retailers can interact directly with customers by
frequently adjusting their featured selections, editorial insights, shopping
interfaces, pricing and visual presentations. The minimal cost to publish on the
Web, the ability to reach and serve a large and global group of customers
electronically from a central location, and the potential for personalized
low-cost customer interaction provide additional economic benefits for online
retailers. Unlike traditional retail channels, online retailers do not have the
burdensome costs of managing and maintaining a significant retail store
infrastructure or the continuous printing and mailing costs of catalog
marketing. Because of these advantages over traditional retailers, online
retailers have the potential to build large, global customer bases quickly and
to achieve superior economic returns over the long term. An increasingly broad
base of products is being sold successfully online, including computers, travel
services, brokerage services, automobiles and music, as well as books. IDC
estimates that the total value of goods and services purchased over the Web grew
from $318 million in 1995, to an annualized run rate of $5.4 billion in December
1996, and will increase to $95 billion in 2000.
23
25
Traditional Book Industry
The worldwide book industry is large, growing and relatively fragmented.
According to Euromonitor, U.S. book sales were estimated to be approximately $26
billion in 1996 and are expected to grow to approximately $30 billion in 2000,
while worldwide book sales were estimated at approximately $82 billion in 1996
and are expected to grow to approximately $90 billion in 2000. Books In Print
lists approximately 50,000 publishers. Publishers sell books both directly to
retailers and to a network of distributors. Distributors serve as the primary
vendors for many retailers and carry up to 350,000 of the best-selling titles.
The two largest U.S. retailers, which together are estimated to account for less
than 25% of total U.S. book sales, have focused aggressively on superstore
growth and have closed many of their smaller mall stores. Based on publicly
available data, the Company estimates that such superstores carry an average of
approximately 130,000 titles, with the largest stores carrying up to 175,000
titles on site. There are thousands of independent bookstores in the U.S., which
typically carry a more limited selection of titles in a small selling space and
have recently come under intense competitive pressure from the superstore
format.
Several characteristics of the traditional book industry have created
inefficiencies for all participants. Physical store-based book retailers must
make significant investments in inventory, real estate and personnel for each
retail location. This capital and real estate intensive business model, among
other things, limits the amount of inventory that can be economically carried in
any location. The average superstore stocks less than 10% of the estimated 1.5
million English-language books believed to be in print, which limits customer
selection and available retail shelf space for the majority of published titles.
In addition, publishers typically offer generous rights of return to their
customers and, as a result, effectively bear the risk of their customers' demand
forecasting which encourages overordering. As a result, returns in the book
industry are high, creating substantial additional costs. Finally, publishers
and traditional book retailers cannot easily obtain demographic and behavioral
data about customers, limiting opportunities for direct marketing and
personalized services.
THE AMAZON.COM SOLUTION
Amazon.com was founded to capitalize on the opportunity for online book
retailing. The Company believes that the retail book industry is particularly
suited to online retailing for many compelling reasons. An online bookseller has
virtually unlimited online shelf space and can offer customers a vast selection
through an efficient search and retrieval interface. This is particularly
valuable in the book market because the extraordinary number of different items
precludes even the largest physical bookstore from economically stocking more
than a small minority of available titles. In addition, by serving a large and
global market through centralized distribution and operations, online
booksellers can realize significant structural cost advantages relative to
traditional booksellers. Furthermore, unlike with clothing or other personal
products, consumers can make educated book purchase decisions using online
information. Books can be selected and sampled effectively through online
synopses, excerpts and reviews and have consistent quality across different
retailers. In addition, the demographic overlap between frequent book buyers and
Internet users is high. Further, online bookselling promises significant
benefits for publishers because centralized distribution is believed to greatly
reduce product returns and because consumer preference information can be
efficiently captured and utilized.
Since opening for business as "Earth's Biggest Bookstore" in July 1995, the
Amazon.com bookstore has quickly become one of the most widely known, used and
cited commerce sites on the Web. By offering customers an authoritative
selection of more than 2.5 million titles, as well as competitive pricing and
outstanding customer service, Amazon.com believes it has achieved a preeminent
position among online retailers. Key components of the Amazon.com solution
include:
24
26
Authoritative Selection. Amazon.com offers a breadth of selection that
would be economically impractical to stock in a physical bookstore or to include
in a mail-order catalog. Amazon.com offers more than 2.5 million titles through
a consistent search and retrieval interface, including most of the estimated 1.5
million English-language books believed to be in print, more than one million
out-of-print titles believed likely to be in circulation and a smaller number of
CDs, videotapes and audiotapes. In contrast, the average retail superstore
stocks only 130,000 titles, fewer than 10% of titles in print.
Online Store Economics. As an online bookseller, Amazon.com enjoys
meaningful structural economic advantages relative to traditional retailers. As
a result of its online business model and centralized distribution, Amazon.com
offers significantly improved inventory turnover, eliminates investment in
expensive retail real estate and dramatically reduces personnel requirements.
Further, Amazon.com serves a global market through centralized operations,
allowing its investments in Web sites, content, marketing and technology to be
leveraged over a relatively large sales base.
Customer Convenience. Beyond the benefits of selection, purchasing books
from Amazon.com is more convenient than shopping in a physical bookstore because
the Amazon.com bookstore is open 24 hours per day and shopping does not require
a trip to a store. Books can be shipped directly to the customer's home or
office. The Company believes that customers may buy more books because they have
more hours to shop, can act immediately on a purchase impulse and can locate
books that are hard to find. Because the Amazon.com bookstore has a global
reach, it can deliver an extremely broad selection to customers in rural,
international or other locations that cannot support large-scale physical
bookstores.
Compelling Content. Amazon.com has attracted a high-quality editorial
staff and delivers relevant, informative and entertaining editorial and other
content, including synopses, reviews and excerpts. In addition, reviews by
authors, other users, publishers and third-party reviewers provide diverse and
often stimulating points of view to inform and entertain customers while
shopping.
Personalized Service. Amazon.com currently offers the Eyes and Editors
notification services and has announced the MatchMaker collaborative filtering
service for its customers. Over time, the Company can accumulate substantial
behavior and preference information that will allow it to provide increasingly
rich value-added services to its customers.
Benefits to Vendors. Amazon.com's methods of online bookselling offer
substantial benefits to publishers. Because Amazon.com centralizes distribution
and orders most products based on actual customer demand, it believes that its
returns of books to publishers and wholesalers are significantly below industry
norms. The Company believes its market approach may increase sales of many
second- and third-tier titles that are not typically stocked in physical
bookstores. In addition, the Company believes it will be able to help publishers
target customers for particular product offerings.
STRATEGY
Amazon.com's objective is to be the leading online retailer of
information-based products and services, with an initial focus on books. The
Company plans to attain this goal through the following key strategies:
Create Customer Loyalty by Delivering a Compelling Value Proposition. The
Company's goal is to be the authoritative source for books and information-based
products by delivering to its customers the benefits of online commerce and by
maintaining relentless customer focus. Amazon.com strives to offer its customers
compelling value through innovative use of technology, broad selection,
high-quality content, a high level of customer service, competitive pricing and
personalized services. In addition, the Company seeks to offer its customers a
high-quality shopping experience through informative and entertaining editorial
content, as well as simple and efficient navigation and search capabilities.
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Build Strong Brand Recognition. Amazon.com is a leading brand name in
online commerce and believes that it is benefiting from first mover advantages
and momentum. The Company's strategy is to promote, advertise and increase its
brand equity and visibility through excellent service and a variety of marketing
and promotional techniques, including advertising on leading Web sites and other
media, conducting an ongoing public relations campaign and developing business
alliances and partnerships.
Create a Superior Economic Model. Because it is not burdened by the costs
or legacy of a physical store network and related personnel, the Company
believes it has an inherent economic advantage relative to traditional
retailers. The Company's goal is to capitalize on this advantage by aggressively
driving revenue growth to achieve economies of scale and by incorporating
technological advances throughout its business.
Maintain Technology Focus and Expertise. A state-of-the-art interactive
commerce platform is necessary to enhance the Amazon.com service offering,
leverage the unique characteristics of online retailing, and enable a superior
economic model. Amazon.com's internal development group has expended and will
continue to expend substantial efforts developing, acquiring and implementing
technology-driven enhancements to its Web site and transaction-processing
systems. Among other technology objectives, the Company intends to provide
increasingly valuable personalized service programs, make the user interface as
intuitive, engaging and fast as possible and continuously improve the efficiency
of its fulfillment activities.
Build Strong Publisher and Distributor Relationships. The Company views
its publishers and distributors as customers and seeks to utilize the
substantial structural advantages inherent in its business model to build strong
relationships with them. Amazon.com's current inventory management practices
result in many fewer returns than are traditional in the industry. In addition,
the demographic and purchasing data accumulated by the Company will enable it to
help publishers target customers for particular product offerings. Through
targeted marketing and virtually unlimited online shelf space, the Company can
offer publishers enhanced promotional opportunities for new authors, new titles
and second- and third-tier titles.
Attract and Retain Exceptional Employees. The Company believes that
versatile and experienced employees, management and directors provide
significant advantages in the rapidly evolving market in which it competes.
Since inception, the Company has devoted and will continue to devote substantial
efforts to building a talented employee base and to attracting an experienced
management team with a track record in large and fast-growing organizations.
Pursue Incremental Revenue Opportunities. The Company intends to leverage
its brand, online commerce experience, operating infrastructure and customer
base to broaden its presence and develop additional revenue opportunities. For
example, the Company's Associates Program allows the Company to work
collaboratively with owners of other Web sites, and the Company believes that it
can further expand its reach through alliances with other Web sites, online
service providers and other relationships. In addition, the Company will
consider developing incremental revenue opportunities through affiliated or
related sites, related product areas, geographic expansion or acquisition of
complementary businesses, products or technologies. Finally, the Company's
customer demographic and substantial site traffic create a meaningful
opportunity for advertising sales.
THE AMAZON.COM BOOKSTORE
Customers enter the Amazon.com bookstore through the Company's Web site
and, in addition to ordering books, can conduct targeted searches, browse from
among highlighted selections, bestsellers and other features, read and post
reviews, register for personalized services, participate in promotions and check
order status.
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[PICTURES OF THE COMPANY'S WELCOME, SEARCH, REVIEW AND ORDERING WEB PAGES]
Browsing. The Amazon.com site offers visitors a variety of highlighted
subject areas and special features. Popular features include Editors' Favorites
organized by subject matter, as well as Amazon.com and national bestsellers
lists. The Amazon.com 500 features 500 current bestsellers and titles that
Amazon.com predicts will be future bestsellers at 40% discounts from list price,
including various focus lists such as the Computer 50 and the Science Fiction
50. In addition, the Spotlight section features different interesting titles
every day, selected by the Company's highly skilled in-house and contract
editors, based on criteria such as books in the news and upcoming releases. Book
of the Day focuses on a particular highlighted book chosen to provide readers a
mix of popular, unusual, entertaining and topical selections. A selection of
noteworthy titles is highlighted directly on the home page, as is Titles in the
News, which lists titles recently featured in sources such as The New York Times
Book Review, National Public Radio, The Atlantic Monthly, Entertainment Weekly,
Oprah, Wired and others. In addition, the Amazon.com home page presents a
variety of other features of topical or current-event interest, such as a
Women's History Month reading list and a guide to books written by participants
and speakers at notable industry conferences. The site also periodically offers
advance glimpses into new or upcoming releases, such as the recently featured
first two chapters of John Grisham's new novel, The Partner. Other features
include the Hot This Week section of best-selling new or prereleased titles and
Award Winners, a list of nominees and winners of over 20 different literary
prizes, including the Nobel Prize for Literature and the Pulitzer Prize. To
enhance the shopping experience and increase sales, the Company features various
books on a rotating basis throughout the store. As a customer proceeds through
the catalog, he or she encounters cover art of featured books. Clicking with the
mouse on any of these images pulls up more information about the featured book,
as well as a button which, if clicked on, adds the book to the customer's order.
These images of featured books appear, one or two at a time, in addition to
whatever material the customer specifically requested.
Searching. A primary feature of the Amazon.com bookstore is its
interactive, searchable catalog of more than 2.5 million titles. The Company
provides a selection of search tools to find books based on title, subject,
author, keyword, publication date or ISBN. Customers can also use more complex
and precise search tools such as Boolean search queries. The Company licenses
some of its catalog and other information from third parties.
Reviews and Content. The Amazon.com store offers numerous forms of content
to entertain and engage readers, enhance the customer's shopping experience and
encourage purchases. Numerous author interviews are presented, along with
reviews from professional sources and other consumers. Various types of content
are available for particular titles, including cover art, synopses, annotations,
interviews by authors or reviews by other readers. Customers are encouraged to
write and post their own reviews, and authors are invited to "self-administer"
interviews by answering pre-defined questions.
Online Community. By creating an online community, the Company hopes to
provide customers with an inviting and familiar experience that will encourage
them to return frequently to the site and to interact with other users, and that
will promote loyalty and repeat purchase. Amazon.com invites readers, authors
and publishers to post reviews, sponsors review competitions and provides a
forum for author interviews. Reviewers and authors are encouraged to provide
their e-mail addresses to facilitate interaction with other readers.
Personalized Services. Amazon.com currently offers two free e-mail
notification services. The Company's Eyes service allows customers to specify an
author, title or subject area and receive notice automatically when a new book
is published that matches their criteria. Typically, a few weeks prior to the
release date of a matching new book, the Company's Eyes book notification
service software sends the customer an e-mail message containing prerelease
information. The Company's Editors service draws on experts in more than 50
subjects and genres to send e-mail notices highlighting interesting information
on the chosen subject or genre. The editors study
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advance reviews and preview galleys to find titles of interest to subscribers.
Subscribers receive e-mail messages periodically in selected subject areas.
MatchMaker Collaborative Filtering. Amazon.com announced its MatchMaker
collaborative filtering service in March 1997. MatchMaker will function as an
expert reviewer that develops a relationship with customers, helping them to
find books they may like based on their preferences. MatchMaker will match the
preferences of people to one another, drawing from a pool of titles chosen by
other Amazon.com customers who share similar interests and tastes.
Ordering. To purchase books, customers simply click on a button to add
books to their virtual shopping baskets. Customers can add and subtract books
from their shopping baskets as they browse, prior to making a final purchase
decision, just as in a physical store. To execute orders, customers click on the
buy button and are prompted to supply shipping and credit card details, either
by e-mail or by telephone. This information is stored on the Company's secure
server and need not be provided again by repeat customers. The personal password
allows repeat customers to automatically access their previously provided
shipping and credit card information, as well as their book notification
profiles. The Company's system automatically confirms each order by e-mail to
the customer within minutes after the order is placed and advises customers by
e-mail shortly after orders are shipped.
Availability and Fulfillment. Some of the Company's titles are available
for immediate shipment, others are available for shipment within 48 to 72 hours
and the remainder of in-print titles are generally available within four to six
weeks, although some titles may not be available at all. Out-of-print titles
generally are available in two to six months, although some titles may not be
available at all. Customers select from a variety of delivery options, including
overnight and various international shipping options, as well as giftwrapping
services. The Company uses e-mail to notify customers of order status under
various conditions. If a hard-to-find book is discovered to have a price higher
than the estimate at the time the customer's order was placed, the Company
notifies the customer and seeks approval for sale at the higher price. The
Company seeks to provide rapid and reliable fulfillment of customer orders, and
intends to continue to improve its availability and fulfillment in the future.
Out-of-Print. Amazon.com began offering an out-of-print book service in
March 1997. Over one million out-of-print titles are listed in the Company's
catalog. Because of the difficulty of sourcing out-of-print titles, customers
are advised to expect two- to six-month delivery times and that the books may
not be available at all.
MARKETING AND PROMOTION
The Company's goal is to be the worldwide authoritative source for books.
Amazon.com's marketing strategy is designed to strengthen the Amazon.com brand
name, increase customer traffic to the Amazon.com bookstore, build strong
customer loyalty, maximize repeat purchases and develop incremental revenue
opportunities.
Amazon.com intends to build customer loyalty by creatively applying
technology to deliver personalized programs and service, as well as creative and
flexible merchandising. The Company will be able to provide increasingly
targeted and customized services by using the extensive customer preference and
behavioral data obtained as a result of its online experience and market share.
The Internet allows rapid and effective experimentation and analysis, instant
user feedback and efficient "redecorating of the store for each and every
customer," all of which the Company intends to incorporate in its merchandising.
In contrast to traditional direct-marketing efforts, the Company's personalized
notification services send customers highly customized notices at their request.
By offering customers a compelling and personalized value proposition, the
Company seeks to increase the number of visitors that make a purchase, to
encourage repeat visits and purchases and to extend customer retention. Loyal,
satisfied customers also generate word-of28
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mouth advertising and awareness, and are able to reach thousands of other
customers and potential customers because of the reach of online communication.
The Company employs a variety of media, program and product development,
business development and promotional activities to achieve these goals.
Online Service and Internet Advertising. The Company places advertisements
on various high-profile and high-traffic conduit Web sites, including CNET,
Yahoo!, Pointcast, Excite, Lycos, Quote.com and CNN. These advertisements
usually take the form of banners that encourage readers to click through
directly to the Amazon.com bookstore.
Advertising and Public Relations. The Company engages in a coordinated
program of print advertising in specialized and general circulation newspapers
and magazines, such as The New York Times Book Review and Wired Magazine. In the
future it may begin advertising in other media. As a result of its public
relations activities as well as unsolicited invitations, the Company has been
featured in a wide variety of television shows, articles and radio programs and
as part of the "What's New" and "What's Cool" sections of Netscape and Yahoo!,
respectively.
Associates Program. The Company extends its market presence through its
Associates Program, which included over 4,800 registered members as of December
31, 1996. The program enables Associate Web sites to offer books to their
audiences for fulfillment by Amazon.com. The Associate embeds a hyperlink to
Amazon.com's site, together with books recommended for that Associate's targeted
customer base. The customer is automatically connected to Amazon.com's site and
may place his or her order. The Associate is able to offer enhanced services and
recommendations, avoiding the expenses associated with ordering and fulfillment,
and receives a commission for certain orders. Prominent Associate sites include
Netscape Developer's Bookstore, The Village Voice and Upside.com.
Personalized Shopping Services. The Company offers personalized
notification and shopping services through its Eyes and Editors services and has
recently announced its MatchMaker collaborative filtering system.
Customer Gifts. The Company has in the past sent, and may in the future
send, gifts to its customer base. These activities are designed to increase
customer loyalty and provide customers with a continuing reminder of the
Amazon.com brand and Web site.
CUSTOMER SERVICE
The Company believes that its ability to establish and maintain long-term
relationships with its customers and encourage repeat visits and purchases
depends, in part, on the strength of its customer support and service operations
and staff. Furthermore, the Company values frequent communication with and
feedback from its customers in order to continually improve the store and its
services. Amazon.com offers nine e-mail addresses to enable customers to request
information and to encourage feedback and suggestions. The Company's team of
customer support and service personnel are responsible for handling general
customer inquiries, answering customer questions about the ordering process, and
investigating the status of orders, shipments and payments. Amazon.com also
offers a toll-free line for customers who are reluctant to enter their credit
card numbers through the Web site. The Company has automated certain of the
tools used by its customer support and service staff and intends to actively
pursue enhancements to and further automation of its customer support and
service systems and operations.
WAREHOUSING AND FULFILLMENT
The Company sources product from a network of book distributors and
publishers. The Company carries minimal inventory and relies to a large extent
on rapid fulfillment from major distributors and wholesalers which carry a broad
selection of titles. The Company purchases a substantial majority of its
products from Ingram and B&T. Ingram is the single largest supplier and
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accounted for 59% of the Company's inventory purchases in 1996. Of the more than
2.5 million titles offered by the Company, up to 400,000 are currently supplied
by book distributors and wholesalers, including Ingram and B&T.
The Company utilizes automated interfaces for sorting and organizing its
orders to enable it to achieve the most rapid and economic purchase and delivery
terms possible. The Company's proprietary software selects the orders that can
be filled quickly via electronic interfaces with vendors, and forwards remaining
orders to its special order group. Under the Company's arrangements with its
distributors, electronically ordered books often are shipped by the distributor
within hours of receipt of an order from Amazon.com. The Company has developed
customized information systems and dedicated ordering personnel that specialize
in sourcing hard-to-find books. The Company currently processes all sales
through its warehouse in Seattle.
TECHNOLOGY
The Company has implemented a broad array of site management, search,
customer interaction, transaction-processing and fulfillment services and
systems using a combination of its own proprietary technologies and commercially
available, licensed technologies. The Company's current strategy is to license
commercially available technology whenever possible rather than seek internally
developed solutions. Amazon.com focuses its development efforts on creating and
enhancing the specialized, proprietary software that is unique to its business.
The Company uses a set of applications for accepting and validating
customer orders, organizing, placing and managing orders with suppliers,
receiving product and assigning it to customer orders, and managing shipment of
books to customers based on various ordering criteria. The Company's
transaction-processing systems handle millions of items, six different
availability statuses, gift-wrapping requests and multiple shipment methods, and
allow the customer to choose whether to receive single or several shipments
based on availability. These applications also manage the process of accepting,
authorizing and charging customer credit cards. In addition, the Company's
systems allow it to maintain ongoing automated e-mail communications with
customers throughout the ordering process at a negligible incremental cost.
These systems automate many routine communications entirely, facilitate
management of customer e-mail inquiries and allow customers to, on a
self-service basis, check order status, change their e-mail address or password,
and check subscriptions to personal notification services. The Amazon.com
bookstore also incorporates a variety of search and database tools.
A group of systems administrators and network managers monitor and operate
the Company's Web site, network operations and transaction-processing systems.
The continued uninterrupted operation of the Company's Web site and
transaction-processing systems is essential to its business, and it is the job
of the site operations staff to ensure, to the greatest extent possible, the
reliability of the Company's Web site and transaction-processing systems. The
Company uses the services of two Internet service providers, UUNet Technologies,
Inc. and Interconnected Associates, Inc., to obtain connectivity to the Internet
over multiple dedicated T1 lines.
The Company's transaction-processing system is not integrated with the
remainder of the Company's accounting and financial systems. As a result, the
Company's current management information system, which produces frequent
operational reports, is inefficient with respect to traditional
accounting-oriented reporting and requires a significant amount of manual effort
to prepare information for financial and accounting reporting. See "Risk
Factors -- Risk of Capacity Constraints; Reliance on Internally Developed
Systems; System Development Risks," "-- Risk of System Failure; Single Site and
Order Interface" and "-- Online Commerce Security Risks."
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COMPETITION
The online commerce market, particularly over the Internet, is new, rapidly
evolving and intensely competitive, which competition the Company expects to
intensify in the future. Barriers to entry are minimal, and current and new
competitors can launch new sites at a relatively low cost. In addition, the
retail book industry is intensely competitive. The Company currently or
potentially competes with a variety of other companies. These competitors
include (i) various online booksellers and vendors of other information-based
products such as CDs and videotapes, including Book Stacks Unlimited, Inc., a
subsidiary of CUC, (ii) a number of indirect competitors that specialize in
online commerce or derive a substantial portion of their revenues from online
commerce, including AOL and Microsoft Corporation, through which other
bookstores may offer products, and (iii) retail vendors of books, music and
videotapes, including large specialty booksellers, with significant brand
awareness, sales volume and customer bases, such as B&N and Borders. Both B&N
and Borders have announced their intention to devote substantial resources to
online commerce in the near future and B&N, specifically, has entered into a
relationship with AOL through which, beginning in March 1997, it offers a broad
selection of titles at discounted prices.
The Company believes that the principal competitive factors in its market
are brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content and reliability and speed of fulfillment. Many of the
Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. In addition, online
retailers may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases. Certain of
the Company's competitors may be able to secure merchandise from vendors on more
favorable terms, devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing or inventory availability policies and
devote substantially more resources to Web site and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors, and competitive pressures faced by the Company may have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. Further, as a strategic response to changes in the
competitive environment, the Company may from time to time make certain pricing,
service or marketing decisions or acquisitions that could have a material
adverse effect on its business, prospects, financial condition and results of
operations. New technologies and the expansion of existing technologies may
increase the competitive pressures on the Company. For example, client-agent
applications that select specific titles from a variety of Web sites may channel
customers to online booksellers that compete with the Company. In addition,
companies that control access to transactions through network access or Web
browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion. See "Risk Factors -- Competition."
LEGAL PROCEEDINGS
The Company has been subject to claims and expects to be subject to legal
proceedings and claims from time to time in the ordinary course of its business,
including claims of alleged infringement by the Company of trademarks and other
intellectual property rights of third parties. The Company is not currently
aware of any material legal proceedings pending against it.
INTELLECTUAL PROPERTY
The Company regards its copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to its success, and
relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with its employees,
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customers, partners and others to protect its proprietary rights. The Company
pursues the registration of its trademarks and service marks in the U.S. and
internationally, and has applied for the registration of certain of its
trademarks and service marks. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which the
Company's products and services are made available online. The Company has
licensed in the past, and expects that it may license in the future, certain of
its proprietary rights, such as trademarks or copyrighted material, to third
parties. While the Company attempts to ensure that the quality of its brand is
maintained by such licensees, there can be no assurance that such licensees will
not take actions that might materially adversely affect the value of the
Company's proprietary rights or reputation, which could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. There can be no assurance that the steps taken by the Company to
protect its proprietary rights will be adequate or that third parties will not
infringe or misappropriate the Company's copyrights, trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert infringement claims against the Company. The Company has
been subject to claims and expects to be subject to legal proceedings and claims
from time to time in the ordinary course of its business, including claims of
alleged infringement of the trademarks and other intellectual property rights of
third parties by the Company and its licensees. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources. The Company is not currently aware of any legal
proceedings pending against it. The Company has received a letter from legal
counsel for B&N which claims in part that the Company has infringed B&N's
alleged common-law trademark rights. The Company believes that B&N's claims are
without merit. The Company does not believe that these claims will have,
individually or in the aggregate, a material adverse effect on its financial
position or results of operations.
EMPLOYEES
As of December 31, 1996, the Company employed 151 full-time employees. The
Company also employs independent contractors and other temporary employees in
its editorial, operations and finance and administration departments. None of
the Company's employees is represented by a labor union, and the Company
considers its employee relations to be good. Competition for qualified personnel
in the Company's industry is intense, particularly among software development
and other technical staff. The Company believes that its future success will
depend in part on its continued ability to attract, hire and retain qualified
personnel. See "Risk Factors -- Management of Potential Growth; New Management
Team; Limited Senior Management Resources" and "-- Dependence on Key Personnel;
Need for Additional Personnel."
FACILITIES
The Company's principal administrative, engineering, marketing and customer
service facilities total approximately 42,400 square feet and are located in
Seattle, Washington under a lease that expires on July 31, 1999. The Company's
warehousing and merchandising operations are housed in an approximately
50,000-square-foot facility in Seattle, Washington under a lease that expires on
October 31, 1999. The Company anticipates that it will require additional
administrative, customer service, warehouse and fulfillment space within the
next 12 months, but that suitable additional space will be available on
commercially reasonable terms, although there can be no assurance in this
regard. The Company does not own any real estate.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of March 17, 1997:
NAME
--------------------------------------
AGE
---
POSITION
--------------------------------------
Jeffrey P. Bezos......................
Chairman of the Board
Rick R. Ayre..........................
Mark L. Breier........................
Joy D. Covey..........................
President of Finance and
Administration, Treasurer and
Secretary
Oswaldo F. Duenas.....................
Mary E. Engstrom......................
Sheldon J. Kaphan.....................
Officer
Scott E. Lipsky.......................
John D. Risher........................
Joel R. Spiegel.......................
Tom A. Alberg(1)......................
Scott D. Cook.........................
L. John Doerr(2)......................
Patricia Q. Stonesifer(1)(2)..........
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President, Chief Executive Officer and
47
37
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Vice President and Executive Editor
Vice President of Marketing
Chief Financial Officer, Vice
50
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44
Vice President of Operations
Vice President of Publisher Affairs
Vice President and Chief Technology
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41
57
44
45
40
Vice President of Business Expansion
Vice President of Product Development
Vice President of Engineering
Director
Director
Director
Director
- --------------(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
JEFFREY P. BEZOS. Mr. Bezos has been President and Chairman of the Board
of the Company since founding it in 1994, and Chief Executive Officer since May
1996, and served as Treasurer and Secretary from May 1996 to March 1997. From
December 1990 to June 1994, Mr. Bezos was employed by D.E. Shaw & Co., a Wall
Street investment firm, becoming Senior Vice President in 1992. From April 1988
to December 1990, Mr. Bezos was employed by Bankers Trust Company, becoming Vice
President in February 1990. Mr. Bezos received his B.S. in Electrical
Engineering and Computer Science, Summa Cum Laude, from Princeton University.
RICK R. AYRE. Mr. Ayre joined the Company in September 1996 as Vice
President and Executive Editor. From September 1991 to September 1996, Mr. Ayre
served in a number of positions at PC Magazine, most recently as Executive
Editor for Technology. From September 1988 to September 1991, Mr. Ayre served as
Chief of Information Resources Management of Highland Drive VAMC, a hospital.
Mr. Ayre received his B.A. in Sociology from Drury College.
MARK L. BREIER. Mr. Breier joined the Company in January 1997 as Vice
President of Marketing. From March 1994 to September 1996, Mr. Breier served as
Vice President of Marketing of Cinnabon World Famous Cinnamon Rolls. Mr. Breier
was involved in product management and introduction at Dreyer's Grand Ice Cream
from October 1988 to March 1994, at Kraft Foods, Inc., a multinational consumer
products company, from April 1986 to October 1988 and at Parker Brothers, a
worldwide manufacturer of toys and games, from August 1985 to March 1986. Mr.
Breier received his B.A. in Economics from Stanford University and his M.B.A.
from the Stanford University Graduate School of Business.
JOY D. COVEY. Ms. Covey joined the Company in December 1996 as Chief
Financial Officer and Vice President of Finance and Administration, and became
Secretary and Treasurer in March 1997. From June 1995 to February 1996, Ms.
Covey served as Vice President, Operations of the
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Broadcast Division of Avid Technology, Inc. ("Avid"), a developer of digital
media systems, and from January 1995 to June 1995, Ms. Covey served as Vice
President of Business Development for Avid. From July 1991 to January 1995, Ms.
Covey served as Chief Financial Officer of Digidesign, Inc., a developer of
random access digital audio systems and software. Prior to that, she was an
associate at Wasserstein Perella & Co., and a certified public accountant at
Arthur Young & Company (now Ernst & Young LLP). Ms. Covey received her B.S. in
Business Administration, Summa Cum Laude, from California State University,
Fresno, her M.B.A., With High Distinction, from Harvard Business School and her
J.D., Magna Cum Laude, from Harvard Law School. She is a Certified Public
Accountant and a member of the California State Bar.
OSWALDO F. DUENAS. Mr. Duenas joined the Company in January 1997 as Vice
President of Operations. From February 1994 to December 1996, Mr. Duenas served
as Vice President of the Latin American division of International Service
System, Inc., Latin America's largest integrated service company, where he
oversaw sales, marketing, operations and customer relations for the division and
managed several thousand employees. From September 1993 to January 1994, Mr.
Duenas served as President and Director General of National Vision Associates, a
Mexican vision retail business. From 1973 to 1993, Mr. Duenas held various
management positions with Federal Express, a worldwide express transportation
company.
MARY E. ENGSTROM. Ms. Engstrom joined the Company in February 1997 as Vice
President of Publisher Affairs. From December 1996 to February 1997, Ms.
Engstrom served as Vice President of Marketing of Symantec Corporation
("Symantec"), a developer of information management and productivity enhancement
software, and from February 1996 to February 1997, Ms. Engstrom served as
General Manager of the Security Business Unit of Symantec. From July 1989 to
September 1994, Ms. Engstrom held several management positions at Microsoft
Corporation, including Group Product Manager for Microsoft Access, Group Product
Manager for Microsoft Project and Director of Marketing, Strategic Relations.
Ms. Engstrom received her B.A. in Economics from the University of California,
Berkeley, and her M.B.A. from the Anderson Graduate School of Management at the
University of California, Los Angeles.
SHELDON J. KAPHAN. Mr. Kaphan has served as the Company's Vice President
and Chief Technology Officer since March 1997. From October 1994 to March 1997,
Mr. Kaphan served as Vice President of Research and Development of the Company.
From October 1992 to July 1994, Mr. Kaphan served as senior engineer at Kaleida
Labs Inc., a multimedia joint venture between Apple Computer Inc. and
International Business Machines Corporation. Mr. Kaphan received his B.A. in
Mathematics from the University of California, Santa Cruz.
SCOTT E. LIPSKY. Mr. Lipsky joined the Company in July 1996 as Vice
President of Business Expansion. From March 1994 to July 1996, Mr. Lipsky served
as Chief Information Officer of the superstore division, and Chief Technology
Officer of the college division, of B&N, a national bookstore chain. From
September 1991 to January 1994, Mr. Lipsky served as founder and President of
Omni Information Group, a consulting, software development and systems
integration company serving the retail-chain market. From February 1987 to
September 1991, Mr. Lipsky was Vice President of Information Systems at
Babbage's, a consumer software retail chain.
JOHN D. RISHER. Mr. Risher joined the Company in February 1997 as Vice
President of Product Development. From July 1991 to February 1997, Mr. Risher
held a variety of marketing and project management positions at Microsoft
Corporation, including Team Manager for Microsoft Access and Founder and Product
Unit Manager for MS Investor, Microsoft's Web site for personal investment. Mr.
Risher received his B.A. in Comparative Literature, Magna Cum Laude, from
Princeton University and his M.B.A. from Harvard Business School.
JOEL R. SPIEGEL. Mr. Spiegel joined the Company in March 1997 as Vice
President of Engineering. From March 1995 to March 1997, Mr. Spiegel held
several positions with Microsoft Corporation, including Windows 95 Multimedia
Development Manager, Windows Multimedia Group Manager and Product Unit Manager,
Information Retrieval. From June 1986 to March 1995, he held a variety of
positions at Apple Computer Inc., most recently as Senior Manager responsible
for new product development in the Apple Business Systems Division. Prior to
that, Mr. Spiegel
34
36
held software product development positions at a number of companies, including
Hewlett-Packard and VisiCorp. Mr. Spiegel received his B.A. in Biology with
Honors from Grinnell College.
TOM A. ALBERG. Mr. Alberg has been a director of the Company since June
1996. Mr. Alberg has been a principal in the firm of Madrona Investment Group,
L.L.C., a private merchant banking firm, since January 1996. From April 1991 to
October 1995, he was the President and a director of LIN Broadcasting
Corporation, and from July 1990 to October 1995, he was Executive Vice President
of McCaw Cellular Communications, Inc.; both companies were providers of
cellular telephone services and are now part of AT&T Corp. Prior to 1990, Mr.
Alberg was a partner of the law firm Perkins Coie, where he also served as
Chairman of the firm's Executive Committee. Mr. Alberg is also a director of
Active Voice Corporation, Emeritus Corp., Mosaix, Inc., Teledesic Corporation
and Visio Corp. Mr. Alberg received his B.A. from Harvard University and his
J.D. from Columbia Law School.
SCOTT D. COOK. Mr. Cook has been a director of the Company since January
1997. Mr. Cook co-founded Intuit, Inc., a leading personal finance, tax and
accounting software company, in 1983, has served as President of Intuit since
that time and has served as its Chairman of the Board since April 1994. Prior to
co-founding Intuit, Mr. Cook was a consultant for Bain & Company, a strategy
consulting firm, and a brand manager for Procter & Gamble. Mr. Cook is also a
director of Broderbund Software, Inc. and Intuit, Inc. Mr. Cook received his
B.A. in Mathematics and Economics from the University of Southern California and
his M.B.A. from Harvard Business School.
L. JOHN DOERR. Mr. Doerr has been a director of the Company since June
1996. Mr. Doerr has been a general partner of Kleiner Perkins Caufield & Byers,
a venture capital firm, since September 1980. Prior to joining Kleiner Perkins
Caufield & Byers, Mr. Doerr was employed by Intel Corporation for five years.
Mr. Doerr is also a director of Netscape Communications Corporation, Intuit,
Inc., Macromedia, Inc., Platinum Software, Inc., Shiva Corporation and Sun
Microsystems, as well as several private companies. Mr. Doerr received his
M.E.E. and B.S.E.E. from Rice University and his M.B.A. from Harvard Business
School.
PATRICIA Q. STONESIFER. Ms. Stonesifer has been a director of the Company
since February 1997. Ms. Stonesifer is an independent management consultant
whose clients include DreamWorks SKG. Ms. Stonesifer served as Senior Vice
President of the Interactive Media Division of Microsoft Corporation from
February 1996 to December 1996, was head of Microsoft's Consumer Division from
August 1993 to February 1996 and held a range of positions at Microsoft from
1988 to 1993. While at Microsoft, Ms. Stonesifer managed its investments in new
online content and service products, including MSN, the Microsoft Network
(msn.com); MSNBC, Microsoft's joint venture with NBC; Slate (slate.com); and
Expedia (expedia.com), as well as other Internet-based products. Prior to
joining Microsoft, Ms. Stonesifer held a number of positions at Que Corporation.
Ms. Stonesifer is also a director of Kinko's, Inc. and a member of the Executive
Board of the Academy of Interactive Arts and Sciences. Ms. Stonesifer received
her B.A. in General Studies from Indiana University.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee consists of Mr. Alberg and Ms. Stonesifer. Among other
functions, the Audit Committee makes recommendations to the Board of Directors
regarding the selection of independent auditors, reviews the results and scope
of the audit and other services provided by the Company's independent auditors,
reviews the Company's balance sheet, statement of operations and cash flows and
reviews and evaluates the Company's internal control functions.
The Compensation Committee consists of Mr. Doerr and Ms. Stonesifer. The
Compensation Committee reviews and approves the compensation and benefits for
the Company's executive officers, administer the Company's stock option plans
and make recommendations to the Board of Directors regarding such matters.
35
37
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for their
services as directors or members of committees of the Board of Directors, but
are reimbursed for their reasonable expenses incurred in attending meetings of
the Board of Directors. In December 1995, the Company granted to Mr. Alberg a
nonqualified stock option to purchase 60,000 shares of Common Stock at an
exercise price of $0.3333 per share and a nonqualified stock option to purchase
60,000 shares of Common Stock at an exercise price of $0.6666 per share. In
January 1997, the Company granted Mr. Cook, a director of the Company, an option
to purchase 60,000 shares of Common Stock at an exercise price of $1.3333 per
share. In February 1997, the Company granted Ms. Stonesifer, a director of the
Company, an option to purchase 60,000 shares of Common Stock at an exercise
price of $2.6666 per share. The Company currently intends to make comparable
option grants to future outside directors. See "Certain Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Mr. Doerr and Ms.
Stonesifer. No member of the Board of Directors or of the Compensation Committee
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee. In February 1997, Ms.
Stonesifer, a member of the Compensation Committee, purchased 2,500 shares of
the Company's Series A Preferred Stock at $40.00 per share.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Restated Certificate of Incorporation limits the liability of
directors to the full extent permitted by Delaware law. Delaware law provides
that a corporation's certificate of incorporation may contain a provision
eliminating or limiting the personal liability of directors for monetary damages
for breach of their fiduciary duties as directors, except for liability (i) for
any breach of their duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases or redemptions as provided in Section 174 of the
Delaware General Corporation Law (the "DGCL"), or (iv) for any transaction from
which the director derived an improper personal benefit. The Company's Bylaws
provide that the Company shall indemnify its directors and officers and may
indemnify its employees and agents to the fullest extent permitted by law. The
Company believes that indemnification under its Bylaws covers at least
negligence and gross negligence on the part of indemnified parties.
The Company has entered into agreements to indemnify its directors and
executive officers. These agreements, among other things, indemnify the
Company's directors and officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by such persons in any
action or proceeding, including any action by or in the right of the Company,
arising out of such person's services as a director or officer of the Company,
any subsidiary of the Company or any other company or enterprise to which the
person provides services at the request of the Company. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered to the Company in all capacities during the year
ended December 31, 1996 by the Company's President and Chief Executive Officer.
No other executive officer of the Company who held office at December 31, 1996
met the definition of "highly compensated" within the meaning of the
Commission's executive compensation disclosure rules.
36
38
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------------------------NAME AND PRINCIPAL
OTHER ANNUAL
ALL OTHER
POSITION
SALARY($)
BONUS($)
COMPENSATION($)
COMPENSATION($)
- -------------------------------------- -------------------------------------------Jeffrey P. Bezos......................
President and Chief Executive
Officer
$ 64,333
$
-0-
$ -0-
Mr. Bezos does not currently hold options to purchase capital stock of the
Company.
EMPLOYEE BENEFIT PLANS
1994 Stock Option Plan. The Company's Board of Directors has adopted the
Company's 1994 Stock Option Plan and reserved an aggregate of 4,800,000 shares
of Common Stock for grants of stock options under the plan. The 1994 Stock
Option Plan provides for the grant of options for Common Stock to employees,
directors, officers, consultants, advisors and independent contractors of the
Company or an affiliate of the Company. The 1994 Stock Option Plan was approved
by the Board of Directors and the sole stockholder on September 15, 1994, and
amended by the Board of Directors on September 25, 1996. As of February 28,
1997, options to purchase 3,052,974 shares of Common Stock were outstanding
under the 1994 Stock Option Plan with exercise prices ranging from $0.1717 to
$4.00 per share, options to purchase 110,640 shares were available for grant and
options for 1,636,386 shares had been exercised.
The 1994 Stock Option Plan is administered by the Compensation Committee.
The Compensation Committee has the authority to select individuals who are to
receive options under the 1994 Stock Option Plan and to specify the terms and
conditions of each option so granted (incentive or nonqualified), the vesting
provisions, the option term and the exercise price. Options granted under the
1994 Stock Option Plan must be exercised within three months of the optionee's
termination of service (as defined in the 1994 Stock Option Plan) to or
employment by the Company (subject to extension to one year from the date of
termination if the optionee dies within such three-month exercise period), or
within one year after the optionee's termination by death or disability (subject
to extension to one year from the date of death if the optionee dies during the
one-year exercise period after termination by disability), but in no event later
than the expiration of the option term. Options granted under the 1994 Stock
Option Plan are not transferable by the optionee except by will or the laws of
descent and distribution and generally are exercisable during the lifetime of
the optionee only by such optionee.
In the event of a sale of all or substantially all of the Company's assets,
a merger or reorganization in which the Company is not the surviving
corporation, or the sale or other transfer of more than 50% of the outstanding
shares of Common Stock (each, a "Terminating Event"), the Compensation Committee
may determine whether provision will be made for assumption of or substitution
for the stock options granted under the 1994 Stock Option Plan by the successor
corporation. If the Compensation Committee determines that no such assumption or
substitution will be made, all options will become fully vested and each
optionee will have the right to exercise any unexercised and unexpired options
within 30 days from the date of notice of such determination. With respect to
options granted prior to December 20, 1996, Terminating Events also include the
sale of a material division of the Company, an acquisition by the Company
resulting in an extraordinary expansion of the Company and a material change in
the capital structure of the Company (excluding the issuance of securities of
the Company for adequate consideration and the conversion into Common Stock of
convertible securities of the Company).
1997 Stock Option Plan. The purpose of the 1997 Stock Option Plan is to
enhance the long-term stockholder value of the Company by offering opportunities
to employees, directors, officers, consultants, agents, advisors and independent
contractors of the Company to participate in the Company's growth and success,
and to encourage them to remain in the service of the Company and acquire and
maintain stock ownership in the Company.
37
$ -0-
39
As of February 28, 1997, an aggregate of 6,000,000 shares of Common Stock
were available for issuance under the 1997 Stock Option Plan, and no options
were outstanding. In addition, any shares of Common Stock available for issuance
under the 1994 Stock Option Plan that are not issued under that plan shall be
added to the aggregate number of shares available for issuance under the 1997
Stock Option Plan. Options for a maximum of 375,000 shares may be granted under
the 1997 Stock Option Plan to any individual in any one fiscal year, except that
the Company may make additional one-time grants of up to 1,500,000 shares to
newly hired individuals.
The 1997 Stock Option Plan is administered by the Compensation Committee,
which has the authority to select individuals who are to receive options under
the 1997 Stock Option Plan and to specify the terms and conditions of each
option so granted (incentive or nonqualified), the vesting provisions, the
option term and the exercise price. Unless otherwise provided by the Plan
Administrator, an option granted under the 1997 Stock Option Plan expires 10
years from the date of grant (five years in the case of an incentive stock
option granted to the holder of 10% or more of the Company's outstanding capital
stock) or, if earlier, three months after the optionee's termination of
employment or service other than termination for cause, one year after the
optionee's retirement, early retirement at the Company's request, death or
disability, or immediately upon notification to an optionee of termination for
cause. Options granted under the 1997 Stock Option Plan are not generally
transferable by the optionee except by will or the laws of descent and
distribution and generally are exercisable during the lifetime of the optionee
only by such optionee.
In the event of (i) the merger or consolidation of the Company in which it
is not the surviving corporation, or pursuant to which shares of Common Stock
are converted into cash, securities or other property (other than a merger in
which holders of Common Stock immediately before the merger have the same
proportionate ownership of the capital stock of the surviving corporation
immediately after the merger), (ii) the sale, lease, exchange or other transfer
of all or substantially all of the Company's assets (other than a transfer to a
majority-owned subsidiary), or (iii) the approval by the holders of Common Stock
of any plan or proposal for the Company's liquidation or dissolution (each, a
"Corporate Transaction"), the Compensation Committee will determine whether
provision will be made in connection with the Corporate Transactions for
assumption of the options under the 1997 Stock Option Plan or substitution of
appropriate new options covering the stock of the successor corporation, or an
affiliate of the successor corporation. If the Compensation Committee determines
that no such assumption or substitution will be made, each outstanding option
under the 1997 Stock Option Plan shall automatically accelerate so that it will
become 100% vested and exercisable immediately before the Corporate Transaction,
except that acceleration will not occur if, in the opinion of the Company's
accountants, it would render unavailable "pooling of interest" accounting for
the Corporate Transaction.
Repurchase Right Under Option Plans. With respect to each of the 1994
Stock Option Plan and the 1997 Stock Option Plan (collectively, the "Plans"),
the Compensation Committee has the discretion to authorize the issuance of
unvested shares of Common Stock pursuant to the exercise of a stock option under
the applicable Plan. If the optionee ceases to be employed by or provide
services to the Company, all shares of Common Stock issued on exercise of a
stock option which are unvested at the time of cessation shall be subject to
repurchase by the Company at the exercise price paid for such shares. The terms
and conditions upon which the repurchase rights are exercisable by the Company
are determined by the Compensation Committee and set forth in the agreement
evidencing such right. The Compensation Committee has discretionary authority to
cancel the Company's outstanding repurchase rights with respect to one or more
shares purchased or purchasable under an option granted pursuant to that Plan.
In the event of a Terminating Event or a Corporate Transaction under the 1994
Stock Option Plan or the 1997 Stock Option Plan, respectively, if vesting of the
options accelerates, the repurchase rights of the Company with respect to shares
previously acquired on exercise of options granted under the 1994 Stock Option
Plan or the 1997 Stock Option Plan, respectively, shall terminate.
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40
CERTAIN TRANSACTIONS
Since the inception of the Company in July 1994, the Company has issued
shares of Preferred Stock in private placement transactions as follows: 555,161
and 14,235 shares of Series A Preferred Stock at $14.05 per share to Kleiner
Perkins Caufield & Byers VIII and KPCB Information Sciences Zaibatsu Fund II,
respectively, and 2,500 and 2,500 shares of Series A Preferred Stock at $40.00
per share to Scott D. Cook and Patricia Q. Stonesifer, respectively. L. John
Doerr, a director of the Company, is a general partner of KPCB VIII Associates,
which is a general partner of Kleiner Perkins Caufield & Byers VIII and KPCB
Information Sciences Zaibatsu Fund II. Mr. Doerr disclaims beneficial ownership
of the shares of Series A Preferred Stock issued to such entities, except for
his proportional interest therein. Mr. Cook and Ms. Stonesifer are directors of
the Company. All outstanding shares of Series A Preferred Stock will convert
into an aggregate of 3,446,376 shares of Common Stock upon the closing of this
offering. The holders of certain of such shares of Series A Preferred Stock are
entitled to certain registration rights with respect to the Common Stock
issuable upon conversion thereof. See "Description of Capital
Stock--Registration Rights."
In July 1994, Jeffrey P. Bezos, the President, Chief Executive Officer and
Chairman of the Board of the Company, purchased 10,200,000 shares of Common
Stock for an aggregate price of $10,000. Mr. Bezos made interest-free loans to
the Company in the principal amounts of $15,000, $29,000 and $40,000 in July
1994, November 1994 and November 1995, respectively, which were fully repaid in
August 1995, April 1995 and November 1995, respectively. From November 1994 to
December 1996, Mr. Bezos personally guaranteed the obligations of the Company
under a merchant account with Seafirst Bank. Since July 1995, Mr. Bezos has
personally guaranteed the obligations of the Company under a bankcard merchant
account with Wells Fargo Bank. Since April 1995, Mr. Bezos has personally
guaranteed company credit cards. The Company intends to secure releases of all
of Mr. Bezos' guarantees as soon as possible following the closing of this
offering. The Company has granted to Mr. Bezos certain rights with respect to
the registration of 9,885,000 shares of Common Stock. See "Description of
Capital Stock -- Registration Rights."
In February 1995, the Company sold 582,528 shares of Common Stock to Miguel
A. Bezos at a price per share of $0.1717. In July 1995, the Company sold 847,716
shares of Common Stock to the Gise Family Trust at a price per share of $0.1717.
Jacklyn Gise Bezos is the trustee and beneficiary of the Gise Family Trust.
Miguel A. Bezos and Jacklyn Gise Bezos are the parents of Jeffrey P. Bezos. In
May 1996, the Company sold 30,000 shares of Common Stock to each of Mark S.
Bezos and Christina Bezos Poore, siblings of Jeffrey P. Bezos, at a price per
share of $0.3333.
In December 1995, the Company sold 150,000 shares of Common Stock to Tom A.
Alberg, a director of the Company, at a price per share of $0.3333.
In June 1996, in connection with the Company's Series A Preferred Stock
financing, Mr. Bezos granted the Company a right to repurchase 612,000 shares of
Common Stock held by him at $0.0010 per share if his employment terminates under
certain circumstances. The Company's right of repurchase lapses ratably over the
36-month period ending June 21, 1999.
The Company believes that all the transactions set forth above were made on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. Any future transactions, including loans, between
the Company and its officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested directors, and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties.
The Company has entered into indemnification agreements with each of its
executive officers and directors. See "Management -- Limitation of Liability and
Indemnification Matters."
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41
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of February 28, 1997 and
as adjusted to reflect the sale of the Common Stock offered hereby for (i) each
person or entity known by the Company to beneficially own more than 5% of the
Common Stock, (ii) each director of the Company, (iii) the Company's Chief
Executive Officer, and (iv) all of the Company's directors and executive
officers as a group. Except as otherwise indicated, the Company believes that
the beneficial owners of the Common Stock listed below, based on information
furnished by such owners, have sole voting and investment power with respect to
such shares.
PERCENTAGE OF
SHARES OUTSTANDING
------------------NUMBER OF SHARES
PRIOR TO
AFTER
NAME AND ADDRESS
BENEFICIALLY OWNED
OFFERING
OFFERING
- --------------------------------------------------------- -----------------Jeffrey P. Bezos.........................................
c/o Amazon.com, Inc.
1516 Second Avenue, 4th Floor
Seattle, WA 98101
L. John Doerr(1).........................................
Kleiner Perkins Caufield & Byers
4 Embarcadero Center, Suite 3520
San Francisco, CA 94111
Tom A. Alberg(2).........................................
Scott D. Cook(3).........................................
Patricia Q. Stonesifer(4)................................
All directors and executive officers as a group (13
persons)(5)............................................
48.3%
43.1%
3,416,376
16.7
14.9
195,000
75,000
75,000
*
*
*
*
*
*
15,560,226
Less than 1%
(1) Represents 3,330,966 shares and 85,410 shares of Common Stock issuable upon
conversion of Series A Preferred Stock held by Kleiner Perkins Caufield &
Byers VIII and KPCB Information Sciences Zaibatsu Fund II, respectively. Mr.
Doerr is a general partner of KPCB VIII Associates, which is a general
partner of Kleiner Perkins Caufield & Byers VIII and KPCB Information
Sciences Zaibatsu Fund II. Mr. Doerr disclaims beneficial ownership of such
shares, except for his proportional interest therein.
(2) Includes 48,000 shares subject to options exercisable within 60 days of
February 28, 1997.
(3) Represents 60,000 shares subject to options exercisable within 60 days of
February 28, 1997, certain of which shares may be subject to a right of
repurchase by the Company, and 15,000 shares of Common Stock issuable upon
conversion of Series A Preferred Stock.
(4) Represents 60,000 shares subject to options exercisable within 60 days of
February 28, 1997, certain of which shares may be subject to a right of
repurchase by the Company, and 15,000 shares of Common Stock issuable upon
conversion of Series A Preferred Stock.
(5) Includes 759,498 shares subject to options exercisable within 60 days of
February 28, 1997, certain of which may be subject to a right of repurchase.
40
--------
9,885,000
- --------------*
--------
73.4
65.6
42
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $0.01 par value per share, and 10,000,000 shares of Preferred
Stock, $0.01 par value per share. The following summary of certain provisions of
the Common Stock and Preferred Stock does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of the Company's
Restated Certificate of Incorporation, which is included as an exhibit to the
Registration Statement of which this Prospectus is a part, and by the provisions
of applicable law.
COMMON STOCK
As of February 28, 1997, there were 17,008,158 shares of Common Stock
outstanding held of record by 54 stockholders. There will be 22,954,534 shares
of Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option and no exercise of outstanding options) after giving
effect to the sale of Common Stock offered to the public hereby. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. See "Risk Factors -- Control of the
Company." Subject to preferences that may be applicable to any outstanding
shares of Preferred Stock, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available for the payment of dividends. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities and liquidation preferences of any outstanding
shares of Preferred Stock. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock will be converted into 3,446,376 shares of Common Stock. Thereafter,
pursuant to the Company's Restated Certificate of Incorporation, the Board of
Directors will have the authority, without further action by the stockholders,
to issue up to 10,000,000 shares of Preferred Stock in one or more series and to
fix the designations, powers, preferences, privileges and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights of the Common Stock. The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. Additionally, the issuance of Preferred
Stock may have the effect of decreasing the market price of the Common Stock,
and may adversely affect the voting and other rights of the holders of Common
Stock. The Company has no plans to issue any Preferred Stock.
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF RESTATED CERTIFICATE OF
INCORPORATION AND WASHINGTON LAW
As noted above, the Company's Board of Directors, without stockholder
approval, has the authority under the Company's Restated Certificate of
Incorporation to issue Preferred Stock with rights superior to the rights of the
holders of Common Stock. As a result, Preferred Stock could be issued quickly
and easily, could adversely affect the rights of holders of Common Stock and
could be issued with terms calculated to delay or prevent a change in control of
the Company or make removal of management more difficult.
The laws of the State of Washington, where the Company's principal
executive offices are located, impose restrictions on certain transactions
between certain foreign corporations and significant stockholders. Chapter
23B.19 of the Washington Business Corporation Act (the "WBCA") prohibits a
"Target Corporation," with certain exceptions, from engaging in certain
41
43
"Significant Business Transactions" with a person or group of persons which
beneficially owns 10% or more of the voting securities of the Target Corporation
(an "Acquiring Person") for a period of five years after such acquisition,
unless the transaction or acquisition of shares is approved by a majority of the
members of the Target Corporation's board of directors prior to the time of
acquisition. Such prohibited transactions include, among other things, a merger
or consolidation with, disposition of assets to, or issuance or redemption of
stock to or from, the Acquiring Person, termination of 5% or more of the
employees of the Target Corporation as a result of the Acquiring Person's
acquisition of 10% or more of the shares or allowing the Acquiring Person to
receive any disproportionate benefit as a stockholder. After the five-year
period, a Significant Business Transaction may take place as long as it complies
with certain fair price provisions of the statute. A Target Corporation includes
a foreign corporation if (i) the corporation has a class of voting stock
registered pursuant to Section 12 or 15 of the Securities Exchange Act of 1934,
as amended, (ii) the corporation's principal executive office is located in
Washington State, (iii) any of (a) more than 10% of the corporation's
stockholders of record are Washington residents, (b) more than 10% of its shares
of record are owned by Washington residents, or (c) 1,000 or more of its
stockholders of record are Washington residents, (iv) a majority of the
corporation's employees are Washington residents or more than 1,000 Washington
residents are employees of the corporation, and (v) a majority of the
corporation's tangible assets are located in Washington State or the corporation
has more than $50 million of tangible assets located in Washington State. A
corporation may not "opt out" of this statute. Depending upon whether the
Company meets the definition of a Target Corporation, Chapter 23B.19 of the WBCA
may have the effect of delaying, deferring or preventing a change in control of
the Company.
Although Section 203 of the DGCL generally prohibits Delaware corporations
from engaging in certain "Business Combinations" (as defined therein) with
certain "Interested Stockholders" (as defined therein) for a period of three
years unless certain criteria are met, the Company has expressly elected in its
Restated Certificate of Incorporation not to be governed by Section 203 of the
DGCL.
REGISTRATION RIGHTS
Pursuant to an agreement among the Company, Mr. Bezos, who is the holder of
9,885,000 shares of Common Stock (the "Common Holder"), and two holders of
569,396 shares of Series A Preferred Stock in the aggregate which are
convertible into 3,416,376 shares of Common Stock (the "Preferred Holders"), the
Common Holder and the Preferred Holders are entitled to certain rights with
respect to the registration of such shares under the Securities Act. If the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other security holders, the
Common Holder and the Preferred Holders are entitled to notice of such
registration and to include shares of Common Stock in such registration at the
Company's expense. Additionally, the Preferred Holders are entitled to certain
demand registration rights pursuant to which they may require the Company to
file a registration statement under the Securities Act at the Company's expense
with respect to their shares of Common Stock, and the Company is required to use
its commercially reasonable efforts to effect such registration (a "Requested
Registration"). Further, the Preferred Holders may require the Company to file
additional registration statements on Form S-3 at the expense of the Preferred
Holders. All of these registration rights are subject to certain conditions and
limitations, among them the right of the underwriters of an offering to limit
the number of shares included in such registration and the right of the Company
not to effect a Requested Registration before the earlier of (a) one year after
the offering made hereby and (b) June 21, 1999.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, Ridgefield Park, New Jersey.
NASDAQ NATIONAL MARKET LISTING
Application has been made to have the Common Stock listed for quotation on
the Nasdaq National Market under the symbol "AMZN."
42
44
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock and there can be no assurance that a significant public market for the
Common Stock will be developed or be sustained after this offering. Sales of
substantial amounts of Common Stock in the public market after this offering, or
the possibility of such sales occurring, could adversely affect prevailing
market prices for the Common Stock or the future ability of the Company to raise
capital through an offering of equity securities.
After this offering, the Company will have outstanding 22,954,534 shares of
Common Stock. Of these shares, the 2,500,000 shares offered hereby will be
freely tradeable in the public market without restriction under the Securities
Act, unless such shares are held by "affiliates" of the Company, as that term is
defined in Rule 144 under the Securities Act.
The remaining 20,454,534 shares of Common Stock outstanding upon completion
of this offering will be "restricted securities," as that term is defined in
Rule 144 ("Restricted Shares"). The Restricted Shares were issued and sold by
the Company in private transactions in reliance upon exemptions from
registration under the Securities Act. Restricted Shares may be sold in the
public market only if they are registered or if they qualify for an exemption
from registration under Rule 144 or 701 under the Securities Act, which are
summarized below.
Pursuant to certain "lock-up" agreements, all the executive officers,
directors and certain stockholders and employees of the Company, who
collectively hold an aggregate of approximately 20,329,794 shares, have agreed
not to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any such shares for a period of 180 days from the date of this
Prospectus. The Company has also entered into an agreement with Deutsche Morgan
Grenfell Inc. that it will not offer, sell or otherwise dispose of Common Stock
for a period of 180 days from the date of this Prospectus. As a result of the
expiration of such lock-up agreements, approximately 19,336,009 of the
Restricted Shares will be eligible for immediate sale beginning 181 days after
the date of this Prospectus (of which 17,260,470 shares will be subject to
certain volume, manner of sale and other limitations under Rule 144).
Approximately 993,786 remaining shares will be eligible for sale pursuant to
Rule 144 upon the expiration of one-year holding periods, which will expire
between November 1997 and March 1998.
Following the expiration of such lock-up periods, certain shares issued
upon exercise of options granted by the Company prior to the date of this
Prospectus will also be available for sale in the public market pursuant to Rule
701 under the Securities Act. Rule 701 permits resales of such shares in
reliance upon Rule 144 but without compliance with certain restrictions,
including the holding period requirement, imposed under Rule 144. In general,
under Rule 144 as in effect at the closing of this offering, beginning 90 days
after the date of this Prospectus, a person (or persons whose shares of the
Company are aggregated) who has beneficially owned Restricted Shares for at
least one year (including the holding period of any prior owner who is not an
affiliate of the Company) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of (i) one percent of
the then outstanding shares of Common Stock (approximately 229,545 shares
immediately after this offering) or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed to
have been an affiliate of the Company at any time during the 90 days preceding a
sale and who has beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner who is not an
affiliate of the Company) is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144.
The Company intends to file after the effective date of this offering a
Registration Statement on Form S-8 to register an aggregate of approximately
9,534,648 shares of Common Stock reserved for issuance under the 1994 Stock
Option Plan and the 1997 Stock Option Plan. Such Registration Statement will
become effective automatically upon filing. Shares issued under the foregoing
plans, after the filing of a Registration Statement on Form S-8, may be sold in
the open market, subject, in the case of certain holders, to the Rule 144
limitations applicable to affiliates, the above-referenced lock-up agreements
and vesting restrictions imposed by the Company.
In addition, following this offering, the holders of 13,301,376 shares of
outstanding Common Stock will, under certain circumstances, have rights to
require the Company to register their shares for future sale. See "Description
of Capital Stock -- Registration Rights."
43
45
UNDERWRITING
The Underwriters named below, for whom Deutsche Morgan Grenfell Inc., Alex.
Brown & Sons Incorporated, and Hambrecht & Quist LLC are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement (the form of which
will be filed as an exhibit to the Company's Registration Statement, of which
this Prospectus is a part), to purchase from the Company the respective number
of shares of Common Stock indicated below opposite their respective names. The
Underwriters are committed to purchase all of the shares, if they purchase any.
NUMBER OF
UNDERWRITERS
SHARES
- ------------------------------------------------------------------------------Deutsche Morgan Grenfell Inc...................................................
Alex. Brown & Sons Incorporated................................................
Hambrecht & Quist LLC..........................................................
--------Total................................................................
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers
(who may include the Underwriters) a concession of not more than $
per
share. The selected dealers may reallow a concession of not more than
$
to certain other dealers. After the initial public offering, the
price and concessions and re-allowances to dealers and other selling terms may
be changed by the Representatives. The Common Stock is offered subject to
receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part. The Underwriters do
not intend to sell any of the shares of Common Stock offered hereby to accounts
for which they exercise discretionary authority.
The Company has granted an option to the Underwriters to purchase up to a
maximum of 375,000 additional shares of Common Stock to cover over-allotments,
if any, at the public offering price, less the underwriting discount set forth
on the cover page of this Prospectus. Such option may be exercised at any time
until 30 days after the date of the Underwriting Agreement. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
In connection with this offering, the Company and the directors, executive
officers and certain stockholders have agreed not to offer or sell any Common
Stock until the expiration of 180 days following the date of the final
Prospectus without the prior written consent of Deutsche Morgan Grenfell Inc.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, as amended, or will contribute to payments the
Underwriters may be required to make in respect thereof.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Representatives. The principal factors to be
considered in determining the public offering price include the information set
forth in this Prospectus and otherwise available to the Representatives; the
history and the prospects for the industry in which the Company will compete;
the ability of the Company's management; the prospects for future earnings of
the Company; the present state of
44
2,500,000
---------
46
the Company's development and its current financial condition; the general
condition of the securities markets at the time of this offering; and the recent
market prices of, and the demand for, publicly traded common stock of generally
comparable companies. Each of the Representatives has informed the Company that
it currently intends to make a market in the shares subsequent to the
effectiveness of this offering, but there can be no assurance that the
Representatives will take any action to make a market in any securities of the
Company.
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
this offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with this
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq Stock Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters will be passed on for the Company by Perkins Coie,
Seattle, Washington. Certain legal matters will be passed on for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
EXPERTS
The financial statements of Amazon.com, Inc. at December 31, 1995 and 1996,
and for the period July 5, 1994 (date of inception) to December 31, 1994 and the
years ended December 31, 1995 and 1996, appearing in this Prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement, of
which this Prospectus constitutes a part, under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Stock offered hereby. Statements contained
herein concerning the provisions of any documents are not necessarily complete,
and in each instance reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including exhibits filed
therewith, may be inspected without charge at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as the Company, that file
electronically with the Commission. Information concerning the Company is also
available for inspection at the offices of the Nasdaq National Market, Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
45
47
AMAZON.COM, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors...................................
Balance Sheets......................................................................
Statements of Operations............................................................
Statements of Stockholders' Equity..................................................
Statements of Cash Flows............................................................
Notes to Financial Statements.......................................................
F-1
F-2
F-3
F-4
F-5
F-6
F-7
48
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Amazon.com, Inc.
We have audited the accompanying balance sheets of Amazon.com, Inc. as of
December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for the period from July 5, 1994 (date of
inception) to December 31, 1994 and the years ended December 31, 1995 and 1996.
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Amazon.com, Inc. at December
31, 1995 and 1996, and the results of its operations and its cash flows for the
period from July 5, 1994 (date of inception) to December 31, 1994 and the years
ended December 31, 1995 and 1996, in conformity with generally accepted
accounting principles.
Seattle, Washington
February 28, 1997, except for Note 6, as
to which the date is March
, 1997
- -------------------------------------------------------------------------------The foregoing report is in the form that will be signed upon the completion
of the three-for-two common stock split described in Note 6 to the Financial
Statements.
ERNST & YOUNG LLP
Seattle, Washington
March 24, 1997
F-2
49
AMAZON.COM, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31,
DECEMBER 31,
-----------------1996
1995
1996
(NOTE 6)
----------------------(UNAUDITED)
Current assets:
Cash and cash equivalents.............................
$ 996
$ 6,248
Inventories...........................................
17
571
Prepaid expenses and other............................
14
321
-----------Total current assets..........................
1,027
7,140
Equipment, net..........................................
57
985
Deposits................................................
-146
-----------Total assets..................................
$1,084
$ 8,271
======
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................
$
99
$ 2,852
Accrued advertising...................................
-598
Accrued product development...........................
-500
Other liabilities and accrued expenses................
8
920
-----------Total current liabilities.....................
107
4,870
Commitments
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares -- 10,000,000
Issued and outstanding shares -- 569,396 at
December 31, 1996 (none pro forma), aggregate
liquidation preference -- $8,000.................
-6
$
-Common stock, $0.01 par value:
Authorized shares -- 100,000,000
Issued and outstanding shares -- 14,555,244 and
15,900,237 at December 31, 1995 and 1996,
respectively (19,316,613 pro forma)..............
1,075
159
193
Advances received for common stock....................
150
--Additional paid-in capital............................
-9,873
9,845
Deferred compensation.................................
-(612)
(612)
Accumulated deficit...................................
(248)
(6,025)
(6,025)
----------------------Total stockholders' equity....................
977
3,401
$ 3,401
==========
-----------Total liabilities and stockholders' equity....
$1,084
$ 8,271
======
=======
See accompanying notes.
F-3
50
AMAZON.COM, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE PERIOD FROM
JULY 5, 1994 (DATE
OF INCEPTION)
YEAR ENDED DECEMBER 31,
TO DECEMBER 31,
------------------------1994
1995
1996
------------------------------------Net sales.................................
Cost of sales.............................
-------------Gross profit..............................
Operating expenses:
Marketing and sales.....................
Product development.....................
General and administrative..............
-------------Total operating expenses........
-------------Loss from operations......................
Interest income...........................
-------------Net loss..................................
====
=====
=======
Net loss per share........................
====
=====
=======
Shares used in computation of
net loss per share......................
====
=====
=======
See accompanying notes.
F-4
$
---
$
--38
14
52
511
409
$ 15,746
12,287
102
3,459
200
171
35
406
9,438
(52)
-$
6,090
2,313
1,035
(304)
1
(5,979)
202
$ (5,777)
(52)
$
(303)
$ (0.00)
$
(0.02)
17,577
18,780
$
(0.26)
22,543
51
AMAZON.COM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
PREFERRED STOCK
---------------SHARES
AMOUNT
------------
COMMON STOCK
------------------SHARES
AMOUNT
---------------
ADVANCES
RECEIVED FOR
COMMON STOCK
------------
Sale of common
stock to
founder......
-$ -10,200,000
$ 10
Advances
received for
common
stock........
----Net loss for
the period
ended
December 31,
1994.........
---------------------------------Balance at
December 31,
1994...........
--10,200,000
10
Sale of common
stock........
--4,235,244
1,172
Reclassification
of
accumulated
deficit due
to
termination
of S
Corporation
status.......
---(107)
Advances
received for
common
stock........
----Exercise of
common stock
options......
--120,000
-Net loss for
the year
ended
December 31,
1995.........
---------------------------------Balance at
December 31,
1995...........
--14,555,244
1,075
Reincorporation
in
Delaware.....
---(929)
Sale of
preferred
stock, net of
issuance
costs of
$30.......... 569,396
6
--Sale of common
stock........
--840,534
8
Exercise of
common stock
options......
--504,459
5
Unearned
compensation
related to
stock
options......
----Net loss for
the year
ended
December 31,
1996.........
---------------------------------Balance at
December 31,
1996........... 569,396
$
6
15,900,237
$ 159
=======
======
==========
======
=====
See accompanying notes.
F-5
ADDITIONAL
PAID-IN
CAPITAL
----------
$
--
DEFERRED
COMPENSATION
------------
$
--
ACCUMULATED
DEFICIT
-----------
$
--
50
--
--
--------
--------
--------
50
--
--
TOTAL
STOCKHOLDERS'
EQUITY
-------------
$
--
--
(52)
-------
$
10
50
(52)
(52)
8
(50)
--
--
--
1,122
--
--
--
107
--
150
--
--
--
150
--
--
--
--
--
--------
--------
--------
150
--
--
(303)
------(248)
(303)
977
--
929
--
--
--
--
7,964
--
--
7,970
178
--
--
36
--
190
--
--
195
--
612
--
--
--------
--------
--------
(5,777)
-------
$
-=======
$9,873
=======
$ (612)
=======
$(6,025)
=======
(150)
(612)
(5,777)
$ 3,401
52
AMAZON.COM, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE
PERIOD
FROM JULY 5,
1994 (DATE OF
INCEPTION) TO
DECEMBER 31,
1994
-------------
YEAR ENDED
DECEMBER 31,
-----------------1995
1996
------------
OPERATING ACTIVITIES
Net loss...............................................
$ (52)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.........................................
5
Changes in operating assets and liabilities:
Increase in inventories...........................
-Increase in prepaid expenses and other............
-Increase in deposits..............................
-Increase in accounts payable and accrued
expenses........................................
23
-----------------------Net cash used in operating activities...........
(24)
INVESTING ACTIVITIES
Purchases of equipment.................................
-----------------------Net cash used in investing activities...........
(28)
FINANCING ACTIVITIES
Proceeds from exercise of stock options, sale of stock,
and advances received for common stock...............
Proceeds from sale of preferred stock..................
Proceeds from (repayment of) notes payable.............
-----------------------Net cash provided by financing activities.......
104
-----------------------Net increase in cash...................................
Cash and cash equivalents at beginning of year.........
-----------------------Cash and cash equivalents at end of year...............
==========
======
=======
See accompanying notes.
F-6
$ (303)
19
286
(17)
(14)
--
(554)
(307)
(146)
83
4,763
(232)
(1,735)
(28)
(52)
(52)
60
1,272
-(44)
1,228
231
7,970
--
8,201
52
-52
(1,214)
(1,214)
-44
$
$(5,777)
$
944
52
5,252
996
996
$ 6,248
53
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Description of Business
Amazon.com, Inc. (the Company) was incorporated on July 5, 1994. The
Company is an online retailer of books and other information-based products on
the Company's Internet site, and offers more than 2.5 million titles.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents represent short-term investments consisting of
commercial paper and money market funds carried at cost, which approximates
market. The Company considers all short-term investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
Inventories
Inventories are valued at the lower of average cost or market.
The Company's largest vendor accounted for 59% of the Company's book
purchases in 1996. The vendor's inability to supply books in a timely manner or
on terms acceptable to the Company could severely affect the Company's ability
to meet customers' demands.
Equipment
Equipment is recorded at cost less accumulated depreciation. Depreciation
of equipment is provided using the straight-line method over the estimated
useful lives of two to four years.
Income Taxes
The Company was initially organized under the provisions of Subchapter S of
the Internal Revenue Code of 1986, as amended (the Code). In lieu of corporate
income taxes, the stockholders of a Subchapter S corporation are taxed on their
proportionate shares of the company's taxable income. Effective March 31, 1995,
the Company, with the consent of its stockholders, elected to be taxed under the
provisions of Subchapter C of the Code. Accordingly, cumulative net losses of
$107,000 incurred by the Company as of that date have been reclassified to
common stock.
Revenue Recognition
The Company recognizes revenue from product sales when the products are
shipped to customers. Outbound shipping and handling charges are included in net
sales. International sales were $198,000 and $5.1 million for the years ended
December 31, 1995 and 1996, respectively.
F-7
54
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Advertising Costs
The cost of advertising is expensed as incurred. For the years ended
December 31, 1995 and 1996, the Company incurred advertising expense of $30,000
and $3.4 million, respectively.
Product Development
Product development expenses consist principally of payroll and related
expenses for development, editorial, and network operations personnel and
consultants, systems and telecommunications infrastructure and costs of acquired
content. All product development costs have been expensed as incurred.
Stock Compensation
The Company has elected to apply the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, the Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. Compensation cost for stock options is measured as the excess,
if any, of the fair value of the Company's common stock at the date of grant
over the stock option exercise price.
Concentrations of Credit Risk
The Company is subject to concentrations of credit risk from its cash
investments. The Company's credit risk is managed by investing its excess cash
in high-quality money market instruments and securities of the U.S. government.
Net Loss Per Share
Net loss per share is computed based on the weighted average number of
common shares outstanding. In accordance with the Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
12-month period prior to the filing of the Company's initial public offering
have been included in the calculation as if they were outstanding for all
periods presented using the treasury stock method and the assumed initial public
offering price. Common equivalent shares consist of the common shares issuable
upon the conversion of the convertible preferred stock and shares issuable upon
the exercise of stock options.
Reclassifications
Certain prior-year balances have been reclassified to conform to the
current-year presentation.
F-8
55
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. EQUIPMENT
Equipment, at cost, consists of the following:
DECEMBER 31,
--------------1995
1996
--------(IN THOUSANDS)
Computers and equipment....................................
Purchased software.........................................
Leasehold improvements.....................................
-------81
1,295
Less accumulated depreciation..............................
-------$57
$ 985
===
======
$73
8
--
$1,031
134
130
24
310
3. STOCKHOLDERS' EQUITY
Reincorporation
On May 28,
authorized
25,000,000
statements
1996, the Company reincorporated in the state of Delaware with
capital of 5,000,000 shares of $0.01 par value preferred stock and
shares of $0.01 par value common stock. The accompanying financial
have been restated to reflect this reincorporation.
Preferred Stock
Preferred stock is convertible into common stock at the option of the
holder, at any time, at a rate of four shares of common stock for one share of
preferred stock. The conversion rate may be adjusted depending on future events.
(See Note 6). The preferred stock also has certain mandatory conversion
requirements, including in the event of an initial public offering of the
Company's common stock, subject to certain minimum requirements.
Each share of preferred stock has voting rights equivalent to the number of
common shares issuable, if converted. The preferred stock also has preferential
rights in the event of any distribution of assets upon liquidation of the
Company, which are determined as fixed amounts per share, plus any declared but
unpaid dividends. Noncumulative dividends accrue at $1 per share, per annum,
when and if declared.
In June 1996, the Company issued 569,396 shares of Series A convertible
preferred stock at a price of $14.05 per share.
In January and February 1997, the Company sold 2,500 shares of Series A
preferred stock at $40 per share to each of two new directors of the Company,
aggregating 5,000 shares, and increased the total number of designated Series A
preferred stock to 579,396 shares.
Common Stock
At December 31, 1994 and 1995, the Company received advances for common
stock. The common stock was subsequently issued at $0.172 and $0.333 per share,
respectively.
On November 23, 1996, the Company effected a 4-for-1 common stock split.
The accompanying financial statements have been restated to reflect this stock
split. (See Note 6).
In conjunction with the sale of Series A preferred stock in June 1996, the
Company's founder granted the Company a right to repurchase 612,000 shares of
common stock held by him at the original purchase price of $0.001 per share if
his employment terminates under certain circumF-9
56
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
stances. The Company's right of repurchase lapses ratably over the 36-month
period ending June 21, 1999. At December 31, 1996, 510,000 shares held by the
founder were subject to repurchase under this agreement.
STOCK OPTIONS
The Company adopted the 1994 Stock Option Plan (the 1994 Plan), which
provides for the issuance of incentive and nonqualified stock options to
employees and officers. There are 4,800,000 shares of common stock reserved
under the 1994 Plan. Generally, options are granted by the Company's Board of
Directors at an exercise price of not less than the fair market value of the
Company's common stock at the date of grant. Each outstanding option granted
prior to December 20, 1996 has a term of five years from the date of vesting.
Each outstanding option granted subsequent to December 20, 1996 has a term of
ten years from the date of grant. Generally, options granted under the 1994 Plan
become exercisable immediately and vest at the rate of 20% after year one, 20%
after year two, and 5% at the end of each quarter for years three through five.
Shares issued upon exercise of options that are unvested are subject to
repurchase by the Company upon termination of employment or services.
During 1995, the Company granted a total of 360,000 nonqualified stock
options outside of the 1994 Plan under separate agreements with three
individuals. Under the terms of these agreements, the option prices range from
$0.333 to $0.667 and vest at the rate of 40% on the date of grant, 30% after two
years, and 30% after four years. Unexercised options expire five years after the
date of grant. At December 31, 1996, options for 96,000 shares of common stock
were exercisable and options for 48,000 shares had been exercised.
The following table summarizes the Company's stock option activity:
WEIGHTED
AVERAGE
NUMBER OF
SHARES
---------
EXERCISE
PRICE
--------
Options granted in 1994........................... 1,176,816
--------Balance, December 31, 1994.......................... 1,176,816
Options granted...................................
742,464
Options canceled..................................
(30,000)
Options exercised.................................
(120,000)
--------Balance December 31, 1995........................... 1,769,280
Options granted:
At fair market value........................... 1,038,600
At less than fair market value................. 1,554,150
Options canceled..................................
(528,720)
Options exercised.................................
(504,459)
--------Balance December 31, 1996........................... 3,328,851
=========
$0.001
0.001
0.344
0.172
0.001
0.142
0.333
0.796
0.278
0.387
0.448
At December 31, 1996, 1,206,690 shares of common stock were available for
future issuance under the 1994 Plan.
F-10
57
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about options outstanding and
exercisable at December 31, 1996:
OPTIONS OUTSTANDING
-------------------------------------------WEIGHTEDOPTIONS EXERCISABLE
AVERAGE
----------------------------REMAINING
WEIGHTEDWEIGHTEDRANGE OF
OPTIONS
CONTRACTUAL
AVERAGE
OPTIONS
EXERCISE PRICES
OUTSTANDING
LIFE
EXERCISE PRICE
EXERCISABLE
------------------- -------------------------------------------$0.001 - $0.334....
0.335 - 1.00 ...
--------0.001 - 1.00 ...
1,770,450
1,558,401
6.5 years
8.1 years
3,328,851
7.3 years
$0.168
0.766
--------0.448
1,662,450
1,450,401
$0.158
0.773
3,112,851
0.445
At December 31, 1996, common stock reserved for future issuance was as
follows:
Preferred stock conversion....................
3,416,376
Stock options:
1994 Plan...................................
4,223,541
Outside 1994 Plan...........................
312,000
---------7,951,917
==========
The Company follows the intrinsic value method in accounting for its stock
options. Had compensation cost been recognized based on the fair value at the
date of grant for options awarded under the 1994 Plan, the pro forma amounts of
the Company's net loss and net loss per share for the years ended December 31,
1995 and 1996 would have been as follows:
DECEMBER 31,
----------------1995
1996
----------(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
Net
Net
Net
Net
loss
loss
loss
loss
-- as reported.................................
-- pro forma...................................
per common share -- as reported................
per common share -- pro forma..................
$
303
304
(0.02)
(0.02)
$5,777
5,808
(0.26)
(0.26)
The fair value of each option grant was estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions: risk-free
interest rates of 5.16% to 7.60%; expected option life of three years; and no
expected dividends. As the Company is privately held, expected volatility is not
applicable. The weighted-average fair value of options granted during the years
1995 and 1996 was $0.06 and $0.08, respectively, for options granted at fair
market value. The weighted-average fair value of options granted at less than
fair market value during 1996 was $0.53.
Deferred Compensation
The Company recorded aggregate deferred compensation of $612,000 during the
fourth quarter of 1996. The amount recorded represents the difference between
the grant price and the deemed fair value of the Company's common stock for
shares subject to options granted in 1996. The amortization of deferred
compensation will be charged to operations over the vesting period of the
options, which is typically five years. No amount was amortized in 1996.
F-11
AVERAGE
EXERCISE PRICE
--------------
58
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $5.5 million. Utilization of net operating loss carryforwards may
be subject to certain limitations under Section 382 of the Code. The
carryforwards expire in 2011.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
DECEMBER 31,
-----------------1995
1996
---------(IN THOUSANDS)
Deferred tax assets:
Net operating loss carryforwards.....................
$ 84
Book-over-tax depreciation...........................
2
---------86
1,855
Valuation allowance for deferred tax assets............
(86)
---------Net deferred tax assets................................
$ -====
=======
$ 1,855
-(1,855)
$
5. COMMITMENTS
The Company currently leases office and warehouse space and equipment under
noncancelable operating leases. Rental expense under operating lease agreements
for 1994, 1995, and 1996 was $2,000, $12,000, and $257,000, respectively.
In February 1997, the Company entered into several additional lease
commitments for equipment and facilities. Future minimum lease commitments under
noncancelable leases and service agreements as of December 31, 1996, including
the lease commitments entered into in February 1997, are as follows:
(IN THOUSANDS)
-------------1997.........................
1998.........................
1999.........................
2000.........................
2001.........................
-----$4,323
======
$1,540
1,534
1,133
107
9
6. SUBSEQUENT EVENTS
In February 1997, the Company adopted the 1997 Stock Option Plan (the 1997
Plan). Under the 1997 Plan, 6,000,000 shares of common stock have been reserved
for future issuance.
In March 1997, the Company's Board of Directors approved amendments to the
Company's Restated Certificate of Incorporation to increase authorized common
stock to 100,000,000 shares; increase authorized preferred stock to 10,000,000
shares; and effect a three-for-two common stock split. These amendments are
subject to stockholder approval. The accompanying financial statements have been
restated to reflect this stock split.
F-12
--
59
AMAZON.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In March 1997, the Company's Board of Directors authorized management to
file a registration statement with the Securities and Exchange Commission to
permit the Company to sell shares of its common stock to the public. Upon
completion of the Company's initial public offering, each outstanding share of
preferred stock will convert into six shares of common stock. Unaudited pro
forma stockholders' equity reflects the assumed conversion of the preferred
stock into common stock as of December 31, 1996.
F-13
60
[SCREEN-SHOTS OF WEB PAGES]
61
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
---Prospectus Summary....................
3
The Company...........................
4
Risk Factors..........................
5
Use of Proceeds.......................
14
Dividend Policy.......................
14
Capitalization........................
15
Dilution..............................
16
Selected Financial Data...............
17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................
18
Business..............................
23
Management............................
33
Certain Transactions..................
39
Principal Stockholders................
40
Description of Capital Stock..........
41
Shares Eligible for Future Sale.......
43
Underwriting..........................
44
Legal Matters.........................
45
Experts...............................
45
Additional Information................
45
Index to Financial Statements......... F-1
UNTIL
, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------LOGO
2,500,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
ALEX. BROWN & SONS
INCORPORATED
HAMBRECHT & QUIST
Prospectus
, 1997
62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the Common Stock being registered hereby. All amounts shown are estimates,
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
Securities and Exchange Commission registration fee.............................
NASD filing fee.................................................................
Nasdaq National Market listing fee..............................................
Blue Sky fees and expenses......................................................
Printing and engraving expenses.................................................
Legal fees and expenses.........................................................
Accounting fees and expenses....................................................
Directors and officers insurance................................................
Transfer Agent and Registrar fees...............................................
Miscellaneous expenses..........................................................
-------Total................................................................. $850,000
========
ITEM 14.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation -- a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise.
Section 10 of the registrant's Bylaws (Exhibit 3.2 hereto) requires
indemnification to the full extent permitted under Delaware law as it now exists
or may hereafter be amended. Subject to any restrictions imposed by Delaware
law, the Bylaws provide an unconditional right to indemnification for all
expense, liability and loss (including attorneys' fees, judgment, fines, ERISA
excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred or suffered by any person in connection with any actual or
threatened action, suit or proceeding, whether civil, criminal, administrative
or investigative (including, to the extent permitted by law, any derivative
action) by reason of the fact that such person is or was serving as a director
or officer of the registrant or that, being or having been a director or officer
of the registrant, such person is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan. The Bylaws also provide that the registrant
may, by action of its Board of Directors, provide indemnification to its
employees and agents with the same scope and effect as the foregoing
indemnification of directors and officers.
II-1
$ 11,326
4,525
50,000
5,000
150,000
275,000
150,000
150,000
10,000
44,149
63
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payments of unlawful dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit.
Article 10 of the registrant's Restated Certificate of Incorporation
(Exhibit 3.1 hereto) provides that to the full extent that the DGCL, as it now
exists or may hereafter be amended, permits the limitation or elimination of the
liability of directors, a director of the registrant shall not be liable to the
registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director. Any amendment to or repeal of such Article 10 shall not adversely
affect any right or protection of a director of the registrant for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
The registrant has entered into certain indemnification agreements with its
officers and directors, the form of which is attached as Exhibit 10.1 to this
Registration Statement and incorporated herein by reference. The indemnification
agreements provide the registrant's officers and directors with further
indemnification to the maximum extent permitted by the DGCL. Reference is made
to the Underwriting Agreement (Exhibit 1.1 hereto), in which the Underwriters
have agreed to indemnify the officers and directors of the registrant against
certain liabilities.
ITEM 15.
RECENT SALES OF UNREGISTERED SECURITIES
Since its inception in July 1994, the registrant has issued and sold
unregistered securities as follows (which information has been adjusted to give
effect to a four-for-one stock split of the registrant's outstanding Common
Stock effective November 23, 1996 and a three-for-two stock split of the
registrant's outstanding Common Stock to be effected prior to the closing of the
offering):
1. On July 5, 1994, the registrant issued an aggregate of 10,200,000 shares
of Common Stock to its founder for a consideration of approximately $.0010 per
share, or an aggregate of $10,000. The foregoing purchase and sale were exempt
from registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) thereof on the basis that the transaction did
not involve a public offering.
2. On February 9, 1995, July 24, 1995 and May 3, 1996, the registrant
issued an aggregate of 2,012,772 shares of Common Stock to three investors for a
consideration of approximately $.1717 per share, or an aggregate of $345,525.
The foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transactions did not involve a public offering.
3. On August 7, 1995, the registrant issued 42,000 shares of Common Stock
to one investor for a consideration of approximately $.1287 per share, or an
aggregate of $5,408. The foregoing purchase and sale were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof on the
basis that the transaction did not involve a public offering.
4. Between December 6, 1995 and May 16, 1996, the registrant issued an
aggregate of 3,021,000 shares of Common Stock to 23 investors for a
consideration of approximately $.3333 per share, or an aggregate of $1,007,000.
The foregoing purchases and sales were exempt from registration under the
Securities Act pursuant to Section 4(2) thereof on the basis that the
transactions did not involve a public offering.
5. On June 18, 1996, the registrant effected a reincorporation from the
state of Washington to the state of Delaware. The registrant, as a Washington
corporation, merged with and into a new corporation incorporated in Delaware,
with the new corporation surviving the merger (the "Surviving Entity"). As a
result, each share of Common Stock of the registrant, as a Washington
corporation, converted into one fully paid and nonassessable share of Common
Stock of the
II-2
64
Surviving Entity. Such issuances were exempt from registration under the
Securities Act under Section 2(3) thereof on the basis that the transaction did
not involve a sale of securities.
6. On June 21, 1996, the registrant issued 569,396 shares of Series A
Preferred Stock, which are convertible into 3,416,376 shares of Common Stock, to
two investors for a consideration of approximately $14.05 per share of Series A
Preferred Stock, or an aggregate of $8,000,014. The foregoing purchases and
sales were exempt from registration under the Securities Act pursuant to Section
4(2) thereof on the basis that the transactions did not involve a public
offering.
7. In January and February 1997, the registrant issued an aggregate of
5,000 shares of Series A Preferred Stock, which are convertible into 30,000
shares of Common Stock, to two investors for a consideration of $40.00 per share
of Series A Preferred Stock, or an aggregate of $200,000. The foregoing
purchases and sales were exempt from registration under the Securities Act
pursuant to Section 4(2) thereof on the basis that the transactions did not
involve a public offering.
8. From October 24, 1994 through February 28, 1997, the registrant granted
stock options to purchase 5,296,080 shares of the Common Stock at a weighted
average exercise price of $1.2927 per share to employees, consultants and
directors pursuant to its 1994 Stock Option Plan. Of these options, 606,720 have
been canceled without being exercised, 1,636,386 have been exercised and
3,052,974 remain outstanding. From December 6, 1995 through February 28, 1997,
the registrant also granted stock options outside of any plan to purchase
360,000 shares of the registrant's Common Stock at a weighted average exercise
price of $0.50 per share to consultants and directors. Of these options, none
have been canceled, 96,000 have been exercised and 264,000 remain outstanding.
The sales and issuances of these securities were exempt from registration
under the Securities Act pursuant to Rule 701 promulgated thereunder on the
basis that these options were offered and sold either pursuant to a written
compensatory benefit plan or pursuant to written contracts relating to
consideration, as provided by Rule 701, or pursuant to Section 4(2) thereof on
the basis that the transactions did not involve a public offering.
ITEM 16.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
NUMBER
- ------
DESCRIPTION
----------------------------------------------------------------------------------
1.1*
-- Form of Underwriting Agreement.
2.1
-- Agreement and Plan of Merger between the Registrant, a Washington corporation, and
Amazon.com, Inc., a Delaware corporation, dated May 28, 1996.
3.1
-- Restated Certificate of Incorporation and all amendments thereto of the
Registrant.
3.2
-- Bylaws of the Registrant.
4.1*
-- Specimen Common Stock Certificate.
5.1
-- Opinion of Perkins Coie as to the legality of the shares.
10.1*
-- Form of Indemnification Agreement between the Registrant and each of its Directors
and Executive Officers.
10.2
-- Series A Preferred Stock Purchase Agreement, dated June 21, 1996, by and among the
Registrant and Kleiner Perkins Caufield & Byers VIII and KPCB Information Sciences
Zaibatsu Fund II.
10.3
-- Co-Sale Agreement, dated June 21, 1996, by and among the Registrant and Kleiner
Perkins Caufield & Buyers VIII, KPCB Information Sciences Zaibatsu Fund II and
Jeffrey P. Bezos.
II-3
65
NUMBER
- ------
DESCRIPTION
----------------------------------------------------------------------------------
10.4
-- Right of First Refusal Agreement, dated June 21, 1996, by and between the
Registrant and Kleiner Perkins Caufield & Byers VIII, KPCB Information Sciences
Zaibatsu Fund II and Jeffrey P. Bezos.
10.5
-- Repurchase Agreement, dated June 21, 1996, by and between the Registrant and
Jeffrey P. Bezos.
10.6
-- Voting Agreement, dated June 21, 1996, by and among the Registrant and Kleiner
Perkins Caufield & Byers VIII, KPCB Information Sciences Zaibatsu Fund II and
Jeffrey P. Bezos.
10.7
-- Investor Rights Agreement, dated as of June 21, 1996, by and among the Registrant,
Kleiner Perkins Caufield & Byers VIII, KPCB Information Sciences Zaibatsu Fund II
and Jeffrey P. Bezos.
10.8
-- Investment Letter Agreement regarding Purchase of Series A Stock, dated January
31, 1997, between the Registrant and Scott D. Cook.
10.9
-- Right of First Refusal Agreement, dated January 31, 1997, between the Registrant
and Scott D. Cook.
10.10
-- Investment Letter Agreement regarding Purchase of Series A Stock, dated February
20, 1997, between the Registrant and Patricia Q. Stonesifer.
10.11
-- Right of First Refusal Agreement, dated February 20, 1997, between the Registrant
and Patricia Q. Stonesifer.
10.12
-- Subscription, dated July 5, 1994, by Jeffrey P. Bezos.
10.13
-- Shareholder's Agreement, dated February 9, 1995, by and between the Registrant and
Miguel A. Bezos.
10.14
-- Shareholder's Agreement, dated July 24, 1995, by and between the Registrant and
the Gise Family Trust.
10.15
-- Shareholder's Agreement, dated August 8, 1995, by and between the Registrant and
Sheldon J. Kaphan.
10.16
-- Shareholder's Agreement, dated November 26, 1995, by and between the Registrant
and Tom A. Alberg.
10.17
-- [Reserved]
10.18
-- Shareholder's Agreement, dated July 10, 1996, by and between the Registrant and
Scott E. Lipsky.
10.19
-- Shareholder's Agreement, dated December 31, 1996, by and between the Registrant
and Joy D. Covey.
10.20
-- Amended and Restated 1994 Stock Option Plan (version as of December 20, 1996 for
Amended and Restated Grants and version as of December 20, 1996 for New Grants).
10.21
-- 1997 Stock Option Plan.
10.22
-- Amended and Restated Incentive Stock Option Letter Agreement, effective October
24, 1994, from the Registrant to Sheldon J. Kaphan.
10.23
-- Non-Qualified Stock Option Letter Agreement, effective December 6, 1995, from the
Registrant to Tom A. Alberg.
10.24
-- Non-Qualified Stock Option Letter Agreement, effective December 6, 1995, from the
Registrant to Tom A. Alberg.
10.25
-- Non-Qualified Stock Option Letter Agreement, effective December 20, 1996, from the
Registrant to Joy D. Covey.
II-4
66
NUMBER
- ------
DESCRIPTION
----------------------------------------------------------------------------------
10.26
-- Incentive Stock Option Letter Agreement, effective December 20, 1996, from the
Registrant to Joy D. Covey.
10.27
-- Subrogation Agreement, dated June 19, 1996, by and between the Registrant and
Jeffrey P. Bezos.
10.28
-- Lease Agreement, dated July 1, 1996, as amended on December 21, 1996, January 9,
1997 and February 27, 1997, by and between the Registrant and Trident Investments,
Inc.
10.29
-- Lease Agreement, dated September 30, 1996, by and between the Registrant and
Pacific Northwest Group A.
10.30
-- Sublease Agreement, dated February 19, 1997, by and between C.C. Filson Company
and the Registrant.
10.31
-- Sublease Agreement, dated January 19, 1996, by and between the Registrant and
Coast Wide Supply Co.
10.32
-- Master Lease Agreement No. 6672336, dated February 12, 1997, between the
Registrant and Digital Financial Services, a division of General Electric Capital
Corporation.
11.1
-- Statement regarding computation of net loss per share.
23.1
-- Consent of Ernst & Young LLP.
23.2
-- Consent of Perkins Coie (contained in the opinion filed as Exhibit 5.1 hereto).
24.1
-- Power of Attorney (contained on signature page).
27.1
-- Financial Data Schedule.
- --------------* To be filed by amendment.
(b) Financial Statement Schedules
All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the registrant or related
notes thereto.
ITEM 17.
UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
II-5
67
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
68
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on the 24th day of March, 1997.
AMAZON.COM, INC.
By:
/s/ JEFFREY P. BEZOS
----------------------------------Jeffrey P. Bezos, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Jeffrey P. Bezos and Joy D. Covey, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments, and any registration statement relating to the same offerings as
this Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or either of them, or their or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 24th day of March, 1997.
/s/ JEFFREY P. BEZOS
President, Chief Executive Officer and
- --------------------------------------------Chairman of the Board (Principal Executive
Jeffrey P. Bezos
Officer)
/s/ JOY D. COVEY
Chief Financial Officer, Vice President of
- --------------------------------------------Finance and Administration (Principal
Joy D. Covey
Financial and Accounting Officer)
/s/ TOM A. ALBERG
Director
- --------------------------------------------Tom A. Alberg
/s/ SCOTT D. COOK
Director
- --------------------------------------------Scott D. Cook
/s/ L. JOHN DOERR
Director
- --------------------------------------------L. John Doerr
/s/ PATRICIA Q. STONESIFER
Director
- --------------------------------------------Patricia Q. Stonesifer
II-7
69
INDEX TO EXHIBITS
EXHIBIT
NUMBER
- ------
EXHIBITS
--------------------------------------------------------------------------
1.1*
-- Form of Underwriting Agreement.
2.1
-- Agreement and Plan of Merger between the Registrant, a Washington
corporation, and Amazon.com, Inc., a Delaware corporation, dated May 28,
1996.
3.1
-- Restated Certificate of Incorporation and all amendments thereto of the
Registrant.
3.2
-- Bylaws of the Registrant.
4.1*
-- Specimen Common Stock Certificate.
5.1
-- Opinion of Perkins Coie as to the legality of the shares.
10.1*
-- Form of Indemnification Agreement between the Registrant and each of its
Directors and Executive Officers.
10.2
-- Series A Preferred Stock Purchase Agreement, dated June 21, 1996, by and
among the Registrant and Kleiner Perkins Caufield & Byers VIII and KPCB
Information Sciences Zaibatsu Fund II.
10.3
-- Co-Sale Agreement, dated June 21, 1996, by and among the Registrant and
Kleiner Perkins Caufield & Buyers VIII, KPCB Information Sciences Zaibatsu
Fund II and Jeffrey P. Bezos.
10.4
-- Right of First Refusal Agreement, dated June 21, 1996, by and between the
Registrant and Kleiner Perkins Caufield & Byers VIII, KPCB Information
Sciences Zaibatsu Fund II and Jeffrey P. Bezos.
10.5
-- Repurchase Agreement, dated June 21, 1996, by and between the Registrant
and Jeffrey P. Bezos.
10.6
-- Voting Agreement, dated June 21, 1996, by and among the Registrant and
Kleiner Perkins Caufield & Byers VIII, KPCB Information Sciences Zaibatsu
Fund II and Jeffrey P. Bezos.
10.7
-- Investor Rights Agreement, dated as of June 21, 1996, by and among the
Registrant, Kleiner Perkins Caufield & Byers VIII, KPCB Information
Sciences Zaibatsu Fund II and Jeffrey P. Bezos.
10.8
-- Investment Letter Agreement regarding Purchase of Series A Stock, dated
January 31, 1997, between the Registrant and Scott D. Cook.
10.9
-- Right of First Refusal Agreement, dated January 31, 1997, between the
Registrant and Scott D. Cook.
10.10
-- Investment Letter Agreement regarding Purchase of Series A Stock, dated
February 20, 1997, between the Registrant and Patricia Q. Stonesifer.
10.11
-- Right of First Refusal Agreement, dated February 20, 1997, between the
Registrant and Patricia Q. Stonesifer.
10.12
-- Subscription, dated July 5, 1994, by Jeffrey P. Bezos.
10.13
-- Shareholder's Agreement, dated February 9, 1995, by and between the
Registrant and Miguel A. Bezos.
10.14
-- Shareholder's Agreement, dated July 24, 1995, by and between the
Registrant and the Gise Family Trust.
10.15
-- Shareholder's Agreement, dated August 8, 1995, by and between the
Registrant and Sheldon J. Kaphan.
70
EXHIBIT
NUMBER
- ------
EXHIBITS
--------------------------------------------------------------------------
10.16
-- Shareholder's Agreement, dated November 26, 1995, by and between the
Registrant and Tom A. Alberg.
10.17
-- [Reserved]
10.18
-- Shareholder's Agreement, dated July 10, 1996, by and between the
Registrant and Scott E. Lipsky.
10.19
-- Shareholder's Agreement, dated December 31, 1996, by and between the
Registrant and Joy D. Covey.
10.20
-- Amended and Restated 1994 Stock Option Plan (version as of December 20,
1996 for Amended and Restated Grants and version as of December 20, 1996
for New Grants).
10.21
-- 1997 Stock Option Plan.
10.22
-- Amended and Restated Incentive Stock Option Letter Agreement, effective
October 24, 1994, from the Registrant to Sheldon J. Kaphan.
10.23
-- Non-Qualified Stock Option Letter Agreement, effective December 6, 1995,
from the Registrant to Tom A. Alberg.
10.24
-- Non-Qualified Stock Option Letter Agreement, effective December 6, 1995,
from the Registrant to Tom A. Alberg.
10.25
-- Non-Qualified Stock Option Letter Agreement, effective December 20, 1996,
from the Registrant to Joy D. Covey.
10.26
-- Incentive Stock Option Letter Agreement, effective December 20, 1996, from
the Registrant to Joy D. Covey.
10.27
-- Subrogation Agreement, dated June 19, 1996, by and between the Registrant
and Jeffrey P. Bezos.
10.28
-- Lease Agreement, dated July 1, 1996, as amended on December 21, 1996,
January 9, 1997 and February 27, 1997, by and between the Registrant and
Trident Investments, Inc.
10.29
-- Lease Agreement, dated September 30, 1996, by and between the Registrant
and Pacific Northwest Group A.
10.30
-- Sublease Agreement, dated February 19, 1997, by and between C.C. Filson
Company and the Registrant.
10.31
-- Sublease Agreement, dated January 19, 1996, by and between the Registrant
and Coast Wide Supply Co.
10.32
-- Master Lease Agreement No. 6672336, dated February 12, 1997, between the
Registrant and Digital Financial Services, a division of General Electric
Capital Corporation.
11.1
-- Statement regarding computation of net loss per share.
23.1
-- Consent of Ernst & Young LLP.
23.2
-- Consent of Perkins Coie (contained in the opinion filed as Exhibit 5.1
hereto).
24.1
-- Power of Attorney (contained on signature page).
27.1
-- Financial Data Schedule.
- -----------------------* To be filed by amendment.
1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BETWEEN
AMAZON.COM, INC.
(A WASHINGTON CORPORATION)
AND
AMAZON.COM, INC.
(A DELAWARE CORPORATION)
DATED AS OF
MAY 28, 1996
2
CONTENTS
1.
THE MERGER ....................................................
1.1
The Merger ..............................................
2
1.2
Effective Date ..........................................
2
1.3
Certificate of Incorporation ............................
2
1.4
Bylaws ..................................................
2
1.5
Directors and Officers ..................................
2
2.
CONVERSION OF SHARES ..........................................
2.1
Amazon Washington Common Stock ..........................
3
2.2
Amazon Delaware Common Stock ............................
3
2.3
Options .................................................
3
2.4
Exchange of Certificates ................................
3
3.
EFFECT OF THE MERGER ..........................................
3.1
Rights, Privileges, Etc. ................................
3
3.2
Further Assurances ......................................
4
4.
GENERAL .......................................................
4.1
Abandonment .............................................
4
4.2
Amendment ...............................................
4
4.3
Governing Law ...........................................
5
4.4
Counterparts ............................................
5
2
3
3
4
- -------------------------------------------------------------------------------Page 1
3
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("this Agreement") is made and entered
into as of May 28, 1996, between Amazon.com, Inc., a Washington corporation
("Amazon Washington"), and Amazon.com, Inc., a Delaware corporation ("Amazon
Delaware"). Amazon Washington and Amazon Delaware are from time to time herein
referred to as the "Constituent Corporations."
RECITALS
A. Amazon Washington is a corporation duly organized
the laws of the State of Washington and, on the date
issue 5,000,000 shares of common stock, no par value
Washington Common Stock"), of which 2,589,711 shares
as of May 28, 1996.
and existing under
hereof, has authority to
per share ("Amazon
are issued and outstanding
B. Amazon Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and, on the date hereof, has authority to issue
25,000,000 shares of common stock, par value $.01 per share ("Amazon Delaware
Common Stock"), of which one share is issued and outstanding and owned by Amazon
Washington, and 5,000,000 shares of preferred stock, par value $.01 per share,
of which no shares are issued and outstanding.
C. The Boards of Directors of the Constituent Corporations deem it
advisable and to the advantage of the Constituent Corporations and their
respective shareholders that Amazon Washington be merged with and into Amazon
Delaware for the purpose of changing the jurisdiction of incorporation of Amazon
Washington from the State of Washington to the State of Delaware.
D.
Each of the Constituent Corporations has, subject to approval
by its shareholders, adopted the Plan of Merger embodied in this Agreement.
AGREEMENT
In consideration of the terms hereof, the Constituent Corporations do
hereby agree to merge on the terms and conditions herein provided, as follows:
- -------------------------------------------------------------------------------Page 1
4
1.
THE MERGER
1.1
THE MERGER
Upon the terms and subject to the conditions hereof, on the Effective Date
(as hereinafter defined), Amazon Washington shall be merged with and into Amazon
Delaware in accordance with the applicable laws of the States of Washington and
Delaware (the "Merger"). The separate existence of Amazon Washington shall
cease, and Amazon Delaware shall be the surviving corporation (the "Surviving
Corporation") and shall be governed by the laws of the State of Delaware.
1.2
EFFECTIVE DATE
The Merger shall become effective on the date and at the time of filing of
Articles of Merger, in substantially the form annexed hereto as Appendix A-1,
with the Secretary of State of the State of Washington, and a Certificate of
Merger in substantially the same form with the Secretary of State of the State
of Delaware, whichever later occurs (the "Effective Date"), all after
satisfaction of the requirements of the applicable laws of such States
prerequisite to such filings, including without limitation the approval of the
shareholders of the Constituent Corporations.
1.3
CERTIFICATE OF INCORPORATION
On the Effective Date, the Certificate of Incorporation of Amazon
Delaware, as in effect immediately prior to the Effective Date, shall continue
in full force and effect as the Certificate of Incorporation of the Surviving
Corporation.
1.4
BYLAWS
On the Effective Date, the Bylaws of Amazon Delaware, as in effect
immediately prior to the Effective Date, shall continue in full force and effect
as the bylaws of the Surviving Corporation.
1.5
DIRECTORS AND OFFICERS
The directors and officers of Amazon Delaware immediately prior to the
Effective Date shall be the directors and officers of the Surviving Corporation,
until their successors shall have been duly elected and qualified or until
otherwise provided by law, the Certificate of Incorporation of the Surviving
Corporation or the Bylaws of the Surviving Corporation.
- -------------------------------------------------------------------------------Page 2
5
2.
CONVERSION OF SHARES
2.1
AMAZON WASHINGTON COMMON STOCK
Upon the Effective Date, by virtue of the Merger and without any action on
the part of any holder thereof, each share of Amazon Washington Common Stock
outstanding immediately prior thereto shall be changed and converted into one
fully paid and nonassessable share of the common stock of the Surviving
Corporation, par value of $.01 per share ("Survivor Stock").
2.2
AMAZON DELAWARE COMMON STOCK
Upon the Effective Date, by virtue of the Merger and without any action on
the part of the holder thereof, each share of Amazon Delaware Common Stock
outstanding immediately prior thereto shall be cancelled and returned to the
status of authorized but unissued shares.
2.3
OPTIONS
Upon the Effective Date, the Surviving Corporation shall assume and
continue the rights and obligations of Amazon Washington under each then
outstanding option to purchase Amazon Washington Common Stock, and the
outstanding and unexercised portions of all options and rights to buy Amazon
Washington Common Stock shall become options or rights for the same number of
shares of Survivor Stock with no other changes in the terms and conditions of
such options or rights, including exercise prices, and upon the Effective Date,
the Surviving Corporation hereby assumes the outstanding and unexercised
portions of such options and rights and the obligations of Amazon Washington
with respect thereto.
2.4
EXCHANGE OF CERTIFICATES
Each person who becomes entitled to receive Survivor Stock by virtue of
the Merger shall be entitled to receive from the Surviving Corporation, as
promptly as practicable after the Effective Time, a certificate or certificates
representing the number of shares of Survivor Stock to which such person is
entitled as provided herein.
3.
EFFECT OF THE MERGER
3.1
RIGHTS, PRIVILEGES, ETC.
On the Effective Date of the Merger, the Surviving Corporation, without
further act, deed or other transfer, shall retain or succeed to, as the case may
be, and possess and be vested with all the rights, privileges, immunities,
powers, franchises
- -------------------------------------------------------------------------------Page 3
6
and authority, of a public as well as of a private nature, of Amazon Washington
and Amazon Delaware; all property of every description and every interest
therein, and all debts and other obligations of or belonging to or due to each
of Amazon Washington and Amazon Delaware on whatever account shall thereafter be
taken and deemed to be held by or transferred to, as the case may be, or
invested in the Surviving Corporation without further act or deed; title to any
real estate, or any interest therein vested in Amazon Washington or Amazon
Delaware, shall not revert or in any way be impaired by reason of this merger;
and all of the rights of creditors of Amazon Washington and Amazon Delaware
shall be preserved unimpaired, and all liens upon the property of Amazon
Washington or Amazon Delaware shall be preserved unimpaired, and all debts,
liabilities, obligations and duties of the respective corporations shall
thenceforth remain with or be attached to, as the case may be, the Surviving
Corporation and may be enforced against it to the same extent as if all of said
debts, liabilities, obligations and duties had been incurred or contracted by
it.
3.2
FURTHER ASSURANCES
From time to time, as and when required by the Surviving Corporation or by
its successors and assigns, there shall be executed and delivered on behalf of
Amazon Washington such deeds and other instruments, and there shall be taken or
caused to be taken by it such further and other action, as shall be appropriate
or necessary in order to vest or perfect in or to conform of record or otherwise
in the Surviving Corporation the title to and possession of all the property,
interest, assets, rights, privileges, immunities, powers, franchises and
authority of Amazon Washington and otherwise to carry out the purposes of this
Agreement, and the officers and directors of the Surviving Corporation are fully
authorized in the name and on behalf of Amazon Washington or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
4.
GENERAL
4.1
ABANDONMENT
At any time before the Effective Date, this Agreement may be terminated
and the Merger may be abandoned for any reason whatsoever by the Board of
Directors of either Amazon Washington or Amazon Delaware or both,
notwithstanding the approval of this Agreement by the shareholders of Amazon
Washington and Amazon Delaware.
4.2
AMENDMENT
At any time prior to the Effective Date, this Agreement may be amended or
modified in writing by the Board of Directors of either Amazon Washington or
- -------------------------------------------------------------------------------Page 4
7
Amazon Delaware or both; provided, however, that an amendment made subsequent to
the adoption of this Agreement by the shareholders of either Constituent
Corporation shall not alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the rights of the
shareholders of such Constituent Corporation.
4.3
GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware and, so far as applicable, the
merger provisions of the Washington Business Corporation Act.
4.4
COUNTERPARTS
In order to facilitate the filing and recording of this Agreement, the
same may be executed in any number of counterparts, each of which shall be
deemed to be an original.
(This space intentionally left blank.)
- -------------------------------------------------------------------------------Page 5
8
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first written.
AMAZON.COM, INC. (a Washington corporation)
By
//s// Jeffrey P. Bezos
---------------------------------------Name: Jeffrey P. Bezos
Title: President, Secretary and
Treasurer
AMAZON.COM, INC. (a Delaware corporation)
By //s// Jeffrey P. Bezos
---------------------------------------Name: Jeffrey P. Bezos
Title: CEO, Secretary and Treasurer
- -------------------------------------------------------------------------------Page 6
9
APPENDIX A-1
CERTIFICATE OF MERGER
OF
AMAZON.COM, INC.
(a Delaware corporation)
AND
AMAZON.COM, INC.
(a Washington corporation)
In accordance with Section 252 of the Delaware General Corporation Law,
the undersigned, Jeffrey P. Bezos, being the Chief Executive Officer of
Amazon.com, Inc., a Delaware corporation, DOES HEREBY CERTIFY as follows:
(1) The name and state of incorporation of each of the constituent
corporations are Amazon.com, Inc., a Delaware corporation, and Amazon.com, Inc.,
a Washington corporation;
(2) An agreement of merger has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with
Section 252 of the Delaware General Corporation Law;
(3)
The name of the surviving corporation is Amazon.com, Inc.;
(4) The surviving corporation, Amazon.com, Inc., will be a Delaware
corporation and its Certificate of Incorporation as currently filed with the
Secretary of State of the State of Delaware shall be the Certificate of
Incorporation of the surviving corporation;
(5) The executed agreement of merger is on file at the principal place of
business of the surviving corporation, 2250 First Avenue South, Seattle,
Washington 98134;
(6) A copy of the agreement of merger will be furnished by the surviving
corporation, on request and without cost, to any current stockholder of either
constituent corporation;
- -------------------------------------------------------------------------------Page 7
10
(7) The authorized capital stock of Amazon.com, Inc., a Washington
corporation, consists of 5,000,000 shares of Common Stock, no par value per
share; and
(8)
This certificate shall become effective at 5:00 p.m. PST on
the date it is filed.
IN WITNESS WHEREOF, the undersigned has signed his name and affirmed that
this instrument is the act and deed of the corporation and that the statements
herein are true, under penalties of perjury, this ___ day of June, 1996.
AMAZON.COM, INC. (a Delaware corporation)
By
---------------------------------Jeffrey P. Bezos
CEO, Secretary and Treasurer
- -------------------------------------------------------------------------------Page 8
11
APPENDIX A-1
ARTICLES OF MERGER
AMAZON.COM, INC.
(A WASHINGTON CORPORATION)
AND
AMAZON.COM, INC.
(A DELAWARE CORPORATION)
Pursuant to the provisions of the Washington Business Corporation Act,
Title 23B of the Revised Code of Washington and the Delaware General Corporation
Law, the following Articles of Merger are executed for the purpose of merging
Amazon.com, Inc., a Washington corporation (the "Disappearing Corporation"),
into Amazon.com, Inc., a Delaware corporation (the "Surviving Corporation").
1. The Agreement and Plan of Merger approved by the shareholders of the
Disappearing Corporation and by the sole stockholder of the Surviving
Corporation is attached hereto as Exhibit A.
2.
The Agreement and Plan of Merger was duly approved by the sole
stockholder of the Surviving Corporation pursuant to the Delaware General
Corporation Law and by the shareholders of the Disappearing Corporation
pursuant to RCW 23B.11.030.Dated: June ___, 1996
AMAZON.COM, INC.
By
---------------------------------Jeffrey P. Bezos, President
- -------------------------------------------------------------------------------Page 9
1
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
AMAZON.COM, INC.
Amazon.com, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, does hereby certify:
1.
The original Certificate of Incorporation was filed with the
Secretary of State on May 28, 1996.
2.
The following Restated Certificate of Incorporation was duly
adopted by the corporation's Board of Directors in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware and only restates and integrates and does not further amend the
provisions of the corporation's Certificate of Incorporation as heretofore
amended and supplemented, and there is no discrepancy between those provisions
and the following:
ARTICLE 1.
NAME
The name of this corporation is Amazon.com, Inc.
ARTICLE 2.
REGISTERED OFFICE AND AGENT
The address of the initial registered office of this corporation is
1013 Centre Road, Wilmington, County of New Castle, State of Delaware 19805,
and the name of its initial registered agent at such address is Corporation
Service Company.
ARTICLE 3.
PURPOSES
The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE 4.
SHARES
The total authorized stock of this corporation shall consist of
25,000,000 shares of common stock having a par value of $.01 per share and
5,000,000 shares of preferred stock having a par value of $.01 per share.
Authority is hereby expressly granted to the Board of Directors to fix by
resolution or resolutions any of the designations and the powers, preferences
and rights, and the qualifications, limitations or restrictions which are
permitted by Delaware General Corporation Law in respect of any class or
classes of stock or any series of any class of stock of the corporation. This
corporation shall from time to time in accordance with the laws of the State of
Delaware increase the authorized amount of its Common Stock if at any time the
2
number of shares of Common Stock remaining unissued and available for issuance
shall not be sufficient to permit the conversion of the Preferred Stock.
The Preferred Stock shall be divided into series, and 569,396 shares
of Preferred Stock are designated Series A Preferred Stock ("Series A Preferred
Stock"). The Series A Preferred Stock shall have the rights, preferences and
other terms as are set forth in this Article 4.
4.1.
Dividends.
(a)
The holders of the Series A Preferred Stock shall be
entitled to receive dividends, prior and in preference to any dividend on
Common Stock, at the rate of $1.00 per share of Series A Preferred Stock, per
annum (as adjusted for any stock dividends, combinations or splits with respect
to such shares), whenever funds are legally available and when and if declared
by the Board of Directors. The dividends shall be non-cumulative and
non-accruing.
(b)
No dividends (other than those payable solely in
Common Stock) shall be paid on any Common Stock of the Corporation during any
fiscal year of the Corporation until dividends in the total amount set forth
above per share of Series A Preferred Stock per annum (as adjusted for any
stock dividends, combinations or splits with respect to such shares) shall have
been paid or declared and set apart during that fiscal year on the Series A
Preferred Stock, and no dividends shall be paid on any share of Common Stock
unless a dividend (including, for this purpose the amount of any dividends paid
pursuant to the provisions of Subsection 4.1(a)) is paid with respect to all
outstanding shares of Series A Preferred Stock in an amount for each such share
of Series A Preferred Stock equal to or greater than the aggregate amount of
such dividends for all shares of Common Stock into which each such share of
Series A Preferred Stock could then be converted.
4.2.
Liquidation Preference.
(a)
In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock by reason of their ownership
thereof, the amount of $14.05 per share then held by them (as adjusted for any
stock dividends, combinations or splits with respect to such shares) plus all
declared but unpaid dividends on each such share. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
holders and the holders of any other class or series of preferred stock ranking
on a parity with or senior to the Series A Preferred Stock of the full
preferential amounts
3
due to such holders, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock and the holders of any other such class
or series of preferred stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
(b)
After payment has been made to the holders of the
Series A Preferred Stock and the holders of any other class or series of
preferred stock of the full amounts to which they shall be entitled as provided
in Section 4.2(a), the entire remaining assets and funds of the Corporation
legally available for distribution, if any, shall be distributed among the
holders of Common Stock in proportion to the shares of Common Stock then held
by each.
(c)
A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all or substantially
all of the assets of the Corporation, shall not be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4.2, but shall be
subject to the provisions of Section 4.5 hereof.
4.3.
Voting Rights.
Except with respect to the election of directors of the
Corporation, the holder of each share of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such share of Series A Preferred Stock could be converted and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law), voting together as a single class, and shall be entitled to notice of any
stockholders' meeting in accordance with the By-laws of the Corporation.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares into
which shares of Series A Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
4.4.
Conversion Rights. The holders of the Series A Preferred Stock
shall have the conversion rights as follows:
(a)
Right to Convert: Each share of the Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for such shares, into one fully paid and
nonassessable share of Common Stock (the "Series A Conversion Rate"), subject
to adjustment as hereinafter provided.
4
(b)
Automatic Conversion.
1.
Initial Public Offering. Each share of
Series A Preferred Stock shall automatically be converted into shares of Common
Stock at the then-effective Series A Conversion Rate immediately upon the
closing of the sale of the Corporation's Common Stock in a firm commitment,
underwritten public offering registered under the Securities Act of 1933, as
amended (other than a registration relating solely to a transaction under Rule
145 under such Act (or any successor thereto) or to an employee benefit plan of
the Corporation), (i) at a public offering price (prior to underwriter
commissions and expenses) equal to or exceeding $20.00 per share of Common
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), and (ii) the aggregate proceeds to the Corporation (before
deduction for underwriter commissions and expenses relating to the issuance,
including without limitation fees of the Corporation's counsel) of which equal
or exceed $7,500,000.
2.
Stockholder Vote. Each share of Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
the then-effective Series A Conversion Rate upon the affirmative vote or
written consent of holders of not less than two-thirds of the shares of Series
A Preferred Stock outstanding at such time.
(c)
Mechanics of Conversion. Before any holder of Series
A Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for
such stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series A Preferred Stock to
be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(d)
Adjustments to Conversion Prices for Combinations or
Subdivisions of Common Stock. In the event that this Corporation at any time
or from time to time after the date of filing of this Restated Certificate of
Incorporation shall declare or pay any dividend on the Common Stock payable in
Common Stock or in any right to acquire Common Stock, or shall effect a
subdivision of the outstanding
5
shares of Common Stock into a greater number of shares of Common Stock (by
stock split, reclassification or otherwise than by payment of a dividend in
Common Stock or in any right to acquire Common Stock), or in the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Series A Conversion Rate in effect immediately prior to such event
shall, concurrently with the effectiveness of such event, be proportionately
and equitably decreased or increased, as appropriate.
(e)
No Impairment. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation.
(f)
Certificates as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Series A Conversion Rate pursuant to
this Section 4.4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock, as the case may be, a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the applicable
Series A Conversion Rate at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such Series A Preferred Stock.
(g)
Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to this
Restated Certificate of Incorporation.
(h)
Fractional Shares. No fractional shares shall be
issued upon the conversion of any share or shares of Series A Preferred Stock.
All shares of Common
6
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series A Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share. If, after the aforementioned aggregation, the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market
value of such fraction on the date of conversion (as determined in good faith
by the Board of Directors of the Corporation).
(i)
Adjustments. Except under the circumstances set
forth in Section 4.5 below (in which case this subsection (i) shall not apply),
in case of any reorganization or any reclassification of the capital stock of
the Corporation, any consolidation or merger of the Corporation with or into
another corporation or corporations, or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Series A Preferred Stock shall thereafter be convertible into the number of
shares of stock or other securities or property (including cash) to which a
holder of the number of shares of Common Stock deliverable upon conversion of
such share of Series A Preferred Stock would have been entitled upon the record
date of (or date of, if no record date is fixed) such reorganization,
reclassification, consolidation, merger or conveyance, and, in any case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holders of the Series A Preferred Stock,
to the end that the provisions set forth herein shall thereafter be applicable,
as nearly as equivalent as is practicable, in relation to any shares of stock
or the securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Series A Preferred Stock.
4.5.
(a)
Merger, Consolidation.
At any time, in the event of:
1.
a consolidation or merger of the Corporation
with or into any other corporation, or any other entity or person in which the
stockholders of the Corporation hold in the aggregate less than one-half of the
outstanding voting securities of the surviving entity after the merger,
2.
any corporate reorganization in which the
stockholders of the Corporation hold in the aggregate less than one-half of the
outstanding voting securities of the surviving entity after the merger,
3.
a sale of all or substantially all of the
assets of the Corporation, or
7
4.
a reorganization of the Corporation as
defined in Section 368(a)(1)(B) of the Internal Revenue Code of 1986 or in
which more than fifty percent (50%) of the outstanding stock of the Corporation
is exchanged (calculated on an as-converted to Common Stock basis), the holders
of the Series A Preferred Stock, the holders of any other class or series of
preferred stock hereafter created and issued and the holders of Common Stock
shall be paid in cash or in securities received from the acquiring corporation
or in a combination thereof, at the closing of any such transaction, amounts
per share equal to the amounts per share which would be payable to such holders
pursuant to Section 4.2 if all consideration received by the Corporation and
its stockholders in connection with such event were being available distributed
in a liquidation of the Corporation; provided, however, that if upon the
occurrence of such event, the assets and funds thus available for distribution
among the holders of the Series A Preferred Stock and the holders of any other
class or series of preferred stock ranking on a parity with or senior to the
Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full preferential amounts due to them pursuant to Section 4.2
above, then the entire assets and funds of the Corporation legally available
for distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and the holders of any other such class or series of preferred
stock in proportion to the preferential amount each such holder is otherwise
entitled to receive.
(b)
Any securities to be delivered to stockholders
pursuant to Section 4.5(a) above shall be valued as follows:
(i)
Securities not subject to investment letter
or other similar restrictions on free marketability:
1.
If traded on a securities exchange,
the value shall be deemed to be the average of the security's closing prices on
such exchange over the 30-day period ending three (3) days prior to the
closing;
2.
If actively traded over-the-counter,
the value shall be deemed to be the average of the midpoints of the closing bid
and ask prices over the 30-day period ending three (3) days prior to the
closing, and
3.
If there is no active public market,
the value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
Series A Preferred Stock; and
(ii)
The method of valuation of securities subject
to investment letter or other restrictions on free marketability shall be to
make an appropriate discount from the market value determined as above in
(i)(1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the
8
Corporation and the holders of not less than a majority of the outstanding
Series A Preferred Stock.
(iii)
In the event of any dispute between the
Corporation and the holders of Series A Preferred Stock regarding valuation
issues as provided in this Section 4.5(b), such dispute shall be submitted to
binding arbitration in accordance with the currently prevailing commercial
arbitration rules of the American Arbitration Association. The decisions and
awards rendered in such proceedings shall be final and conclusive and may be
entered in any court having jurisdiction thereof.
(c)
The Corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending transaction not later
than fifteen (15) days prior to the stockholders' meeting called to approve
such transaction or twenty fifteen (15) days prior to the closing of such
transaction, whichever is earlier, and shall also notify such holders in
writing of the final approval of such transaction. The first of said notices
shall describe the material terms and conditions of the contemplated
transaction as well as the terms and conditions of this Section 4.5, and the
Corporation shall thereafter give such holders prompt notice of any material
changes.
4.6.
Amendment. Any term relating to the Series A Preferred Stock
may be amended and the observance of any term relating to the Series A
Preferred Stock may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the vote or written consent of
holders of at least a majority of the shares of the Series A Preferred Stock
then outstanding and the Corporation. Any amendment or waiver so effected
shall be binding upon the Corporation and any holder of shares of the Series A
Preferred Stock.
4.7.
Restrictions and Limitations. As long as any shares of Series
A Preferred Stock shall be issued and outstanding, the Corporation shall not,
without first obtaining the approval (by vote or consent as provided by law) of
the holders of not less than a majority of the total number of shares of the
Series A Preferred Stock then outstanding:
(a)
amend or repeal any provision of, or add any
provision to, the Company's Restated Certificate of Incorporation or Bylaws if
such action would alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the Series A Preferred
Stock;
(b)
authorize, create or issue shares of any class or
series of stock having any preference or priority superior to any such
preference or priority of the Series A Preferred Stock;
9
(c)
enter into any transaction or series of related
transactions, as a result of which majority voting control of the Company shall
have passed to another person or entity (or group of related persons or
entities);
(d)
increase or decrease (other than for decreases
resulting from conversion of the Series A Preferred Stock) the number of
authorized shares of Series A Preferred Stock; or
(e)
amend this Subsection 4.7.
4.8.
No Reissuance of Preferred Stock. No share or shares of
Series A Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
ARTICLE 5.
DIRECTORS
The number of Directors of this corporation shall be determined in the
manner provided by the Bylaws and may be increased or decreased from time to
time in the manner provided therein. Written ballots are not required in the
election of Directors.
ARTICLE 6.
BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws of this corporation; provided, however, the Board of Directors may
not repeal or amend any bylaw that the stockholders have expressly provided may
not be amended or repealed by the Board of Directors. The stockholders shall
also have the power to adopt, amend or repeal the Bylaws of this corporation.
ARTICLE 7.
PREEMPTIVE RIGHTS
Preemptive rights shall not exist with respect to shares of stock or
securities convertible into shares of stock of this corporation.
ARTICLE 8.
CUMULATIVE VOTING
The right to cumulate votes in the election of Directors shall not
exist with respect to shares of stock of this corporation.
ARTICLE 9.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
This corporation reserves the right to amend or repeal, by the
affirmative vote of the holders of a majority of the outstanding shares
entitled to vote, any of the
10
provisions contained in this Certificate of Incorporation. The rights of the
stockholders of this corporation are granted subject to this reservation.
ARTICLE 10.
LIMITATION OF DIRECTOR LIABILITY
To the full extent that the Delaware General Corporation Law, as it
exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of directors, a director of this corporation
shall not be liable to this corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any amendment to or repeal
of this Article 11 shall not adversely affect any right or protection of a
director of this corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
ARTICLE 11.
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Only action properly brought before the stockholders by or at the
direction of the Board of Directors may be taken without a meeting, without
prior notice and without a vote, if a written consent setting forth the action
so taken is signed by the holders of outstanding shares of capital stock
entitled to be voted with respect to the subject matter thereof having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
ARTICLE 12.
SPECIAL MEETINGS OF STOCKHOLDERS
The Chairman of the Board of Directors, the Chief Executive Officer,
the President or the Board of Directors may call special meetings of the
stockholders for any purpose. A special meeting of the stockholders shall be
held if the holders of not less than thirty percent (30%) of all the votes
entitled to be cast on any issue proposed to be considered at such special
meeting have dated, signed and delivered to the Secretary one or more written
demands for such meeting, describing the purpose or purposes for which it is to
be held.
ARTICLE 13.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
This corporation expressly elects not to be governed by section 203(a)
of Title 8 of the Delaware General Corporation Law.
11
IN WITNESS WHEREOF, this corporation has caused this Restated
Certificate of Incorporation to be signed by its duly authorized officer this
9th day of July, 1996.
AMAZON.COM, INC.
By //s// Jeffrey P. Bezos
---------------------------------Jeffrey P. Bezos, Chief Executive
Officer
12
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
AMAZON.COM, INC.
Amazon.com., Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), does hereby
certify as follows:
1.
A resolution setting forth the following amendment to the
Company's Restated Certificate of Incorporation and declaring the advisability
of such amendment was duly adopted by the Company's Board of Directors by
unanimous written consent of its members and filed with the minutes of the
Board in accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware:
The second paragraph of Article 4 of the Company's Restated
Certificate of Incorporation is amended to read in its entirety as follows:
"The Preferred Stock shall be divided into series, and 571,896
shares of Preferred Stock are designated Series A Preferred Stock
("Series A Preferred Stock"). The Series A Preferred Stock shall have
the rights, preferences and other terms as are set forth in this
Article 4."
2.
In lieu of a meeting of the stockholders, written consent has
been given for the adoption of said amendment in accordance with the applicable
provisions of Section 228 and Section 242 of the General Corporation Law of the
State of Delaware, and written notice of the taking of such corporate action
has been given as provided in said Section 228.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by its duly authorized officer on this 24th day of January, 1997.
AMAZON.COM, INC.
By: //s// Jeffrey P. Bezos
------------------------------Name: Jeffrey P. Bezos
----------------------------Title:
President
----------------------------
13
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
AMAZON.COM, INC.
Amazon.com., Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), does hereby
certify as follows:
1.
A resolution setting forth the following amendment to the
Company's Restated Certificate of Incorporation and declaring the advisability
of such amendment was duly adopted by the Company's Board of Directors by
unanimous written consent of its members and filed with the minutes of the
Board in accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware:
The second paragraph of Article 4 of the Company's Restated
Certificate of Incorporation is amended to read in its entirety as follows:
"The Preferred Stock shall be divided into series, and 579,396
shares of Preferred Stock are designated Series A Preferred Stock
("Series A Preferred Stock"). The Series A Preferred Stock shall have
the rights, preferences and other terms as are set forth in this
Article 4."
2.
In lieu of a meeting of the stockholders, written consent has
been given for the adoption of said amendment in accordance with the applicable
provisions of Section 228 and Section 242 of the General Corporation Law of the
State of Delaware, and written notice of the taking of such corporate action
has been given as provided in said Section 228.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by its duly authorized officer on this 19th day of February, 1997.
AMAZON.COM, INC.
By: //s// Jeffrey P. Bezos
------------------------------Name: Jeffrey P. Bezos
----------------------------Title:
President
----------------------------
1
EXHIBIT 3.2
BYLAWS
OF
AMAZON.COM, INC.
ORIGINALLY ADOPTED ON MAY 28, 1996
AMENDMENTS ARE LISTED ON P. I
2
AMAZON.COM, INC.
AMENDMENTS
Date of
Section
----------
i
Effect of Amendment
-------------------------------------------
Amendment
--------------
3
CONTENTS
SECTION
SECTION
2.1
2.2
2.3
2.4
2.5
2.5.1
2.5.2
2.5.3
2.6
2.6.1
2.6.2
2.7
2.7.1
2.7.2
2.7.3
2.8
2.9
2.10
2.11
2.11.1
2.11.2
2.12
2.13
2.14
2.15
2.15.1
2.15.2
SECTION
3.1
3.2
3.3
3.3.1
3.3.2
3.4
3.5
3.6
1.
OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
STOCKHOLDERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual Meeting
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Special Meetings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Place of Meeting
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
Notice of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
Business for Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . .
2
Business at Annual Meetings
. . . . . . . . . . . . . . . .
2
Business at Special Meetings . . . . . . . . . . . . . . . .
3
Notice to Corporation
. . . . . . . . . . . . . . . . . . .
3
Waiver of Notice
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
Waiver in Writing
. . . . . . . . . . . . . . . . . . . . .
3
Waiver by Attendance . . . . . . . . . . . . . . . . . . . .
3
Fixing of Record Date for Determining Stockholders
. . . . . . . . . . . . .
4
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Consent to Corporate Action Without a Meeting
. . . . . . .
4
Dividends, Distributions and Other Rights
. . . . . . . . .
4
Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Quorum
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Manner of Acting
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Appointment
. . . . . . . . . . . . . . . . . . . . . . . .
6
Delivery to Corporation; Duration
. . . . . . . . . . . . .
6
Voting of Shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Voting for Directors
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Action by Stockholders Without a Meeting
. . . . . . . . . . . . . . . . . .
7
Inspectors of Election
. . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Appointment
. . . . . . . . . . . . . . . . . . . . . . . .
7
Duties . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
3.
BOARD OF DIRECTORS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General Powers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Number and Tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
Nomination and Election.
. . . . . . . . . . . . . . . . . . . . . . . . . .
9
Nomination . . . . . . . . . . . . . . . . . . . . . . . . .
9
Election . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Annual and Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . .
10
Special Meetings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
Meetings by Telephone
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
3.7
Notice of Special Meetings
. . . . . . . . . . . . . . . . . . . . . . . . .
-i-
10
1
1
8
4
3.7.1
3.7.2
3.7.3
3.7.4
3.7.5
3.7.6
3.8
3.8.1
3.8.2
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.16.1
3.16.2
3.16.3
3.16.4
3.16.5
3.16.6
3.16.7
3.16.8
3.17
SECTION
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
SECTION
5.1
5.2
5.3
-ii-
Personal Delivery
. . . . . . . . . . . . . . . . . . . . .
10
Delivery by Mail . . . . . . . . . . . . . . . . . . . . . .
11
Delivery by Private Carrier
. . . . . . . . . . . . . . . .
11
Facsimile Notice . . . . . . . . . . . . . . . . . . . . . .
11
Delivery by Telegraph
. . . . . . . . . . . . . . . . . . .
11
Oral Notice
. . . . . . . . . . . . . . . . . . . . . . . .
11
Waiver of Notice
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
In Writing . . . . . . . . . . . . . . . . . . . . . . . . .
11
By Attendance
. . . . . . . . . . . . . . . . . . . . . . .
12
Quorum
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Manner of Acting
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Action by Board or Committees Without a Meeting . . . . . . . . . . . . . . .
12
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Committees
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13
Creation and Authority of Committees . . . . . . . . . . . .
13
Audit Committee
. . . . . . . . . . . . . . . . . . . . . .
14
Compensation Committee . . . . . . . . . . . . . . . . . . .
14
Nominating and Organization Committee
. . . . . . . . . . .
14
Minutes of Meetings
. . . . . . . . . . . . . . . . . . . .
15
Quorum and Manner of Acting
. . . . . . . . . . . . . . . .
15
Resignation
. . . . . . . . . . . . . . . . . . . . . . . .
15
Removal
. . . . . . . . . . . . . . . . . . . . . . . . . .
15
Compensation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
4.
OFFICERS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Election and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . .
16
Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Vice President
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17
Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Salaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
5.
CONTRACTS, LOANS, CHECKS AND DEPOSITS . . . . . . . . . . . . . . . . . . . .
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
Loans to the Corporation
. . . . . . . . . . . . . . . . . . . . . . . . . .
18
Checks, Drafts, Etc.
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
18
16
18
5
5.4
SECTION
6.1
6.2
6.3
6.4
6.5
6.6
6.7
SECTION
SECTION
SECTION
SECTION
10.1
10.2
10.3
10.4
10.5
10.6
10.7
SECTION
-iii-
Deposits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
. . . . . . . . . . . . .
Issuance of Shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restriction on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of Shares
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lost or Destroyed Certificates
. . . . . . . . . . . . . . . . . . . . . . .
Shares of Another Corporation . . . . . . . . . . . . . . . . . . . . . . . .
7.
BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
ACCOUNTING YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.
SEAL
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right to Indemnification
. . . . . . . . . . . . . . . . . . . . . . . . . .
Right of Indemnitee to Bring Suit . . . . . . . . . . . . . . . . . . . . . .
Nonexclusivity of Rights
. . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance, Contracts and Funding
. . . . . . . . . . . . . . . . . . . . . .
Indemnification of Employees and Agents of the Corporation
. . . . . . . . .
Persons Serving Other Entities
. . . . . . . . . . . . . . . . . . . . . . .
Procedures for the Submission of Claims . . . . . . . . . . . . . . . . . . .
11.
AMENDMENTS OR REPEAL
. . . . . . . . . . . . . . . . . . . . . . . .
19
. . .
19
19
19
20
20
20
20
. . .
. . .
. . .
. . .
21
22
22
23
23
23
23
. . .
.
19
.
.
.
.
21
21
21
21
.
23
6
BYLAWS
OF
AMAZON.COM, INC.
SECTION 1.
OFFICES
The principal office of the corporation shall be located at its
principal place of business or such other place as the Board of Directors (the
"Board") may designate. The corporation may have such other offices, either
within or without the state of Delaware, as the Board may designate or as the
business of the corporation may require from time to time.
SECTION 2.
STOCKHOLDERS
2.1
ANNUAL MEETING
The annual meeting of the stockholders shall be held the second
Thursday of May in each year at the principal office of the corporation or such
other place designated by the Board for the purpose of electing Directors and
transacting such other business as may properly come before the meeting. If
the day fixed for the annual meeting is a legal holiday at the place of the
meeting, the meeting shall be held on the next succeeding business day. If the
annual meeting is not held on the date designated therefor, the Board shall
cause the meeting to be held as soon thereafter as may be convenient. At any
time prior to the commencement of the annual meeting, the Board may postpone
the annual meeting for a period of up to 120 days from the date fixed for such
meeting in accordance with this subsection 2.1.
2.2
SPECIAL MEETINGS
The Chairman of the Board, the President, the Board or the holders of
not less than 30 percent of all the outstanding shares of the corporation
entitled to vote on any issue proposed to be considered at the meeting may call
special meetings of the stockholders for any purpose.
2.3
PLACE OF MEETING
All meetings shall be held at the principal office of the corporation
or at such other place within or without the State of Delaware designated by
the Board, by any persons entitled to call a meeting hereunder or in a waiver
of notice signed by all of the stockholders entitled to notice of the meeting.
7
2.4
NOTICE OF MEETING
The Chairman of the Board, the President, the Secretary, the Board, or
stockholders calling an annual or special meeting of stockholders as provided
for herein, shall cause to be delivered to each stockholder entitled to notice
of or to vote at the meeting either personally or by mail, not less than 10 nor
more than 60 days before the meeting, written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Upon written request by the holders
of not less than the number of outstanding shares of the corporation specified
in subsection 2.2 hereof and entitled to vote at the meeting, it shall be the
duty of the Secretary to give notice of a special meeting of stockholders to be
held on such date and at such place and hour as the Secretary may fix, not less
than 10 nor more than 60 days after receipt of said request, and if the
Secretary shall neglect or refuse to issue such notice, the person making the
request may do so and may fix the date for such meeting. If such notice is
mailed, it shall be deemed delivered when deposited in the official government
mail properly addressed to the stockholder at such stockholder's address as it
appears on the stock transfer books of the corporation with postage prepaid.
If the notice is telegraphed, it shall be deemed delivered when the content of
the telegram is delivered to the telegraph company. Notice given in any other
manner shall be deemed delivered when dispatched to the stockholder's address,
telephone number or other number appearing on the stock transfer records of the
corporation.
2.5
2.5.1
BUSINESS FOR STOCKHOLDERS' MEETINGS
BUSINESS AT ANNUAL MEETINGS
In addition to the election of directors, other proper business may be
transacted at an annual meeting of stockholders, provided that such business
must be properly brought before such meeting. To be properly brought before an
annual meeting, business must be (a) brought by or at the direction of the
Board or (b) brought before the meeting by a stockholder pursuant to written
notice thereof, in accordance with subsection 2.5.3 hereof, and received by the
Secretary not fewer than 60 nor more than 90 days prior to the date specified
in subsection 2.1 hereof for such annual meeting (or if less than 60 days'
notice or prior public disclosure of the date of the annual meeting is given or
made to the stockholders, not later than the tenth day following the day on
which the notice of the date of the annual meeting was mailed or such public
disclosure was made). No business shall be conducted at any annual meeting of
stockholders except in accordance with this subsection 2.5.1, unless the
application of this subsection 2.5.1 to a particular matter is waived in
writing by the Board of Directors. If the facts warrant, the Board, or the
chairman of an annual meeting of stockholders, may determine and declare that
(a) a proposal does not constitute proper business to be transacted at the
meeting or (b) business was not properly brought before the meeting in
accordance with the provisions of this subsection 2.5.1 and, if, it is so
determined in either case, any such business shall not be transacted. The
procedures set forth in this subsection 2.5.1 for business to be properly
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8
brought before an annual meeting by a stockholder are in addition to, and not
in lieu of, the requirements set forth in Rule 14a-8 under Section 14 of the
Securities Exchange Act of 1934, as amended, or any successor provision.
2.5.2
BUSINESS AT SPECIAL MEETINGS
At any special meeting of the stockholders, only such business as is
specified in the notice of such special meeting given by or at the direction of
the person or persons calling such meeting, in accordance with subsection 2.4
hereof, shall come before such meeting.
2.5.3
NOTICE TO CORPORATION
Any written notice required to be delivered by a stockholder to the
corporation pursuant to subsection 2.2, subsection 2.4, subsection 2.5.1 or
subsection 2.5.2 hereof must be given, either by personal delivery or by
registered or certified mail, postage prepaid, to the Secretary at the
corporation's executive offices. Any such stockholder notice shall set forth
(i) the name and address of the stockholder proposing such business; (ii) a
representation that the stockholder is entitled to vote at such meeting and a
statement of the number of shares of the corporation that are beneficially
owned by the stockholder; (iii) a representation that the stockholder intends
to appear in person or by proxy at the meeting to propose such business; and
(iv) as to each matter the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, the language of the
proposal (if appropriate), and any material interest of the stockholder in such
business.
2.6
2.6.1
WAIVER OF NOTICE
WAIVER IN WRITING
Whenever any notice is required to be given to any stockholder under
the provisions of these Bylaws, the Certificate of Incorporation or the General
Corporation Law of the State of Delaware, as now or hereafter amended (the
"DGCL"), a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice.
2.6.2
WAIVER BY ATTENDANCE
The attendance of a stockholder at a meeting shall constitute a waiver
of notice of such meeting, except when a stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
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9
2.7
2.7.1
FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS
MEETINGS
For the purpose of determining stockholders entitled to notice of and
to vote at any meeting of stockholders or any adjournment thereof, the Board
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board, and which record
date shall not be more than 60 (or the maximum number permitted by applicable
law) nor less than 10 days before the date of such meeting. If no record date
is fixed by the Board, the record date for determining stockholders entitled to
notice of and to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of and to vote at the meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
2.7.2
CONSENT TO CORPORATE ACTION WITHOUT A MEETING
For the purpose of determining stockholders entitled to consent to
corporate action in writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which date shall not be more than
10 (or the maximum number permitted by applicable law) days after the date upon
which the resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by Chapter 1 of the
DGCL, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required by Chapter 1 of the DGCL,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
day on which the Board adopts the resolution taking such prior action.
2.7.3
DIVIDENDS, DISTRIBUTIONS AND OTHER RIGHTS
For the purpose of determining stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than 60 (or the maximum number permitted by
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10
applicable law) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the resolution relating
thereto.
2.8
VOTING LIST
At least 10 days before each meeting of stockholders, a complete list
of the stockholders entitled to vote at such meeting, or any adjournment
thereof, shall be made, arranged in alphabetical order, with the address of and
number of shares held by each stockholder. This list shall be open to
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of 10 days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. This list shall also be produced and
kept at such meeting for inspection by any stockholder who is present.
2.9
QUORUM
A majority of the outstanding shares of the corporation entitled to
vote, present in person or represented by proxy at the meeting, shall
constitute a quorum at a meeting of the stockholders; provided, that where a
separate vote by a class or classes is required, a majority of the outstanding
shares of such class or classes, present in person or represented by proxy at
the meeting, shall constitute a quorum entitled to take action with respect to
that vote on that matter. If less than a majority of the outstanding shares
entitled to vote are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
If a quorum is present or represented at a reconvened meeting following such an
adjournment, any business may be transacted that might have been transacted at
the meeting as originally called. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum.
2.10
MANNER OF ACTING
In all matters other than the election of Directors, if a quorum is
present, the affirmative vote of the majority of the outstanding shares present
in person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the vote of a
greater number is required by these Bylaws, the Certificate of Incorporation or
the DGCL. Where a separate vote by a class or classes is required, if a quorum
of such class or classes is present, the affirmative vote of the majority of
outstanding shares of such class or classes present in person or represented by
proxy at the meeting shall be the act of such class or classes, unless the vote
of a greater number is required by these Bylaws, the Certificate of
Incorporation or the DGCL. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of Directors.
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11
2.11
2.11.1
PROXIES
APPOINTMENT
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy. Such
authorization may be accomplished by (a) the stockholder or such stockholder's
authorized officer, director, employee or agent executing a writing or causing
his or her signature to be affixed to such writing by any reasonable means,
including facsimile signature or (b) by transmitting or authorizing the
transmission of a telegram, cablegram or other means of electronic transmission
to the intended holder of the proxy or to a proxy solicitation firm, proxy
support service or similar agent duly authorized by the intended proxy holder
to receive such transmission; provided, that any such telegram, cablegram or
other electronic transmission must either set forth or be accompanied by
information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission by which a stockholder has authorized another person to act as
proxy for such stockholder may be substituted or used in lieu of the original
writing or transmission for any and all purposes for which the original writing
or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
2.11.2
DELIVERY TO CORPORATION; DURATION
A proxy shall be filed with the Secretary before or at the time of the
meeting or the delivery to the corporation of the consent to corporate action
in writing. A proxy shall become invalid three years after the date of its
execution unless otherwise provided in the proxy. A proxy with respect to a
specified meeting shall entitle the holder thereof to vote at any reconvened
meeting following adjournment of such meeting but shall not be valid after the
final adjournment thereof.
2.12
VOTING OF SHARES
Each outstanding share entitled to vote with respect to the subject
matter of an issue submitted to a meeting of stockholders shall be entitled to
one vote upon each such issue.
2.13
VOTING FOR DIRECTORS
Each stockholder entitled to
vote, in person or by proxy,
as many persons as there are
such stockholder has a right
voting shall be permitted in
-6-
vote at an election of Directors may
the number of shares owned by such stockholder for
Directors to be elected and for whose election
to vote; provided, however, that no cumulative
the election of Directors.
12
2.14
ACTION BY STOCKHOLDERS WITHOUT A MEETING
Subject to the following paragraph, any action that is properly
brought before the stockholders by or at the direction of the Board of
Directors and that could be taken at an annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall (a) be signed by the holders of outstanding shares of capital stock
entitled to be voted with respect to the subject matter thereof having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted (as determined in accordance with subsection 2.6.2 hereof)
and (b) be delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the records of proceedings of meetings of
stockholders. Delivery made to the corporation's registered office shall be by
hand or by certified mail or registered mail, return receipt requested. Every
written consent shall bear the date of signature of each stockholder who signs
the consent, and no written consent shall be effective to take the corporate
action referred to therein unless written consents signed by the requisite
number of stockholders entitled to vote with respect to the subject matter
thereof are delivered to the corporation, in the manner required by this
Section 2, within 60 (or the maximum number permitted by applicable law) days
of the earliest dated consent delivered to the corporation in the manner
required by this Section 2. The validity of any consent executed by a proxy
for a stockholder pursuant to a telegram, cablegram or other means of
electronic transmission transmitted to such proxy holder by or upon the
authorization of the stockholder shall be determined by or at the direction of
the Secretary. A written record of the information upon which the person
making such determination relied shall be made and kept in the records of the
proceedings of the stockholders. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing. Any such consent
shall be inserted in the minute book as if it were the minutes of a meeting of
the stockholders.
2.15
2.15.1
INSPECTORS OF ELECTION
APPOINTMENT
In advance of any meeting of stockholders after this corporation has
become a Public Company (as defined below), the Board shall appoint one or more
persons to act as inspectors of election at such meeting and to make a written
report thereof. The Board may designate one or more persons to serve as
alternate inspectors to serve in place of any inspector who is unable or fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the chairman of such meeting shall appoint one or more persons to
act as inspector of elections at such meeting. This corporation shall be a
"Public Company" upon the earliest of (a) a vote by the Board of Directors of
the corporation designating the corporation a Public Company, (b) when a
registration statement filed by the
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corporation under the Securities Act of 1933, as amended, in connection with an
offering of the corporation's securities to the public first becomes effective
or (c) upon the effective date of the registration of the corporation's
securities pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
2.15.2
DUTIES
The inspectors of election shall:
(a)
ascertain the number of shares of the corporation
outstanding and the voting power of each such share;
(b)
determine the shares represented at the meeting and
the validity of proxies and ballots;
(c)
count all votes and ballots;
(d)
determine and retain for a reasonable period of time
a record of the disposition of any challenges made to any determination by
them; and
(e)
certify their determination of the number of shares
represented at the meeting and their count of the votes and ballots.
The validity of any proxy or ballot shall be determined by the
inspectors of election in accordance with the applicable provisions of these
Bylaws and the DGCL as then in effect. In determining the validity of any
proxy transmitted by telegram, cablegram or other electronic transmission, the
inspectors shall record in writing the information upon which they relied in
making such determination. Each inspector of elections shall, before entering
upon the discharge of his or her duties, take and sign an oath to faithfully
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors of election may appoint or retain
other persons or entities to assist them in the performance of their duties.
SECTION 3.
BOARD OF DIRECTORS
3.1
GENERAL POWERS
The business and affairs of the corporation shall be managed by the
Board.
3.2
NUMBER AND TENURE
The Board shall be composed of not less than one nor more than nine
Directors, the specific number to be set by resolution of the Board. No
decrease in the number of Directors shall have the effect of shortening the
term of any incumbent Director. Each Director shall serve for the term he or
she was elected, or until his or her successor shall have been elected and
qualified, or until his or her death, resignation or removal from
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14
office. Directors need not be stockholders of the corporation or residents of
the State of Delaware.
3.3
3.3.1
NOMINATION AND ELECTION.
NOMINATION
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations for the
election of Directors may be made (a) by or at the direction of the Board or
(b) by any stockholder of record entitled to vote for the election of Directors
at such meeting; provided, however, that a stockholder may nominate persons for
election as Directors only if written notice (in accordance with subsection
2.5.3 hereof) of such stockholder's intention to make such nominations is
received by the Secretary not later than (i) with respect to an election to be
held at an annual meeting of stockholders, not fewer than 60 nor more than 90
days prior to the date specified in subsection 2.1 hereof for such annual
meeting (or if less than 60 days' notice or prior public disclosure of the date
of the annual meeting is given or made to the stockholders, not later than the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made) and (ii) with respect to
an election to be held at a special meeting of stockholders for the election of
Directors, the close of business on the seventh business day following the date
on which notice of such meeting is first given to stockholders. Any such
stockholder's notice shall set forth (a) the name and address of the
stockholder who intends to make a nomination; (b) a representation that the
stockholder is entitled to vote at such meeting and a statement of the number
of shares of the corporation that are beneficially owned by the stockholder;
(c) a representation that the stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(d) as to each person the stockholder proposes to nominate for election or
re-election as a Director, the name and address of such person and, if the
corporation is then a Public Company, such other information regarding such
nominee as would be required in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had such nominee been nominated
by the Board, and a description of any arrangements or understandings, between
the stockholder and such nominee and any other persons (including their names),
pursuant to which the nomination is to be made; and (e) the consent of each
such nominee to serve as a Director if elected. If the facts warrant, the
Board, or the chairman of a stockholders' meeting at which Directors are to be
elected, may determine and declare that a nomination was not made in accordance
with the foregoing procedure and, if it is so determined, the defective
nomination shall be disregarded. The procedures set forth in this subsection
3.3 for nomination for the election of Directors by stockholders are in
addition to, and not in limitation of, any procedures now in effect or
hereafter adopted by or at the direction of the Board or any committee thereof.
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15
3.3.2
ELECTION
At each election of Directors, the persons receiving the greatest
number of votes shall be the Directors.
3.4
ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after
and at the same place as the annual meeting of stockholders. By resolution,
the Board or any committee designated by the Board may specify the time and
place either within or without the State of Delaware for holding regular
meetings thereof without other notice than such resolution.
3.5
SPECIAL MEETINGS
Special meetings of the Board or any committee appointed by the Board
may be called by or at the request of the Chairman of the Board, the Chief
Executive Officer, the President, the Secretary or, in the case of special
Board meetings, any Director, and, in the case of any special meeting of any
committee appointed by the Board, by the Chairman thereof. The person or
persons authorized to call special meetings may fix any place either within or
without the State of Delaware as the place for holding any special meeting
called by them.
3.6
MEETINGS BY TELEPHONE
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall constitute presence in person at a meeting.
3.7
NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day
and hour of the meeting shall be given to a Director in writing or orally by
telephone or in person. Neither the business to be transacted at, nor the
purpose of, any special meeting need be specified in the notice of such
meeting.
3.7.1
PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be effective
if delivered to a Director at least two days before the meeting.
-10-
16
3.7.2
DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deemed effective
if deposited in the official government mail properly addressed to a Director
at his or her address shown on the records of the corporation with postage
prepaid at least five days before the meeting.
3.7.3
DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be deemed
effective when dispatched to a Director at his or her address shown on the
records of the corporation at least three days before the meeting.
3.7.4
FACSIMILE NOTICE
If notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be deemed effective when dispatched
at least two days before the meeting to a Director at his or her telephone
number or other number appearing on the records of the corporation.
3.7.5
DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be deemed
effective if the content thereof is delivered to the telegraph company at least
two days before the meeting for delivery to a Director at his or her address
shown on the records of the corporation.
3.7.6
ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice
shall be deemed effective if personally given to the Director at least two days
before the meeting.
3.8
3.8.1
WAIVER OF NOTICE
IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Certificate of Incorporation or the DGCL, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board or any
committee appointed by the Board need be specified in the waiver of notice of
such meeting.
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17
3.8.2
BY ATTENDANCE
The attendance of a Director at a Board or committee meeting shall
constitute a waiver of notice of such meeting, except when a Director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
3.9
QUORUM
A majority of the total number of Directors fixed by or in the manner
provided in these Bylaws or, if vacancies exist on the Board, a majority of the
total number of Directors then serving on the Board, provided, however, that
such number may be not less than one-third of the total number of Directors
fixed by or in the manner provided in these Bylaws, shall constitute a quorum
for the transaction of business at any Board meeting. If less than a majority
are present at a meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
3.10
MANNER OF ACTING
The act of the majority of the Directors present at a Board or
committee meeting at which there is a quorum shall be the act of the Board or
committee, unless the vote of a greater number is required by these Bylaws, the
Certificate of Incorporation or the DGCL.
3.11
PRESUMPTION OF ASSENT
A Director of the corporation present at a Board or committee meeting
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his or her dissent is entered in the
minutes of the meeting, or unless such Director files a written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof, or forwards such dissent by registered mail to the
Secretary of the corporation immediately after the adjournment of the meeting.
A Director who voted in favor of such action may not dissent.
3.12
ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action that could be taken at a meeting of the Board or of any
committee appointed by the Board may be taken without a meeting if a written
consent setting forth the action so taken is signed by each of the Directors or
by each committee member. Any such written consent shall be inserted in the
minute book as if it were the minutes of a Board or a committee meeting.
3.13
RESIGNATION
Any Director may resign at any time by delivering written notice to
the Chairman of the Board, the Chief Executive Officer, the President, the
Secretary or the Board, or to
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the registered office of the corporation. Any such resignation shall take
effect at the time specified therein, or if the time is not specified, upon
delivery thereof and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
3.14
REMOVAL
At a meeting of stockholders called expressly for that purpose, or
without a meeting pursuant to Section 2.14 of these Bylaws, one or more members
of the Board (including the entire Board) may be removed, with or without
cause, by the holders of not less than a majority of the shares entitled to
elect the Director or Directors whose removal is sought in the manner provided
by these Bylaws.
3.15
VACANCIES
Any vacancy occurring on the Board may be filled only by the
affirmative vote of a majority of the remaining Directors, whether or not they
constitute a quorum of the Board. A Director elected to fill a vacancy shall
be elected for the unexpired term of his or her predecessor in office, if any.
Any directorship to be filled by reason of an increase in the number of
Directors may be filled by the Board for a term of office continuing only until
the next election of Directors, and until his or her successor shall be elected
and qualify.
3.16
3.16.1
COMMITTEES
CREATION AND AUTHORITY OF COMMITTEES
The Board may, by resolution passed by a majority of the number of
Directors fixed by or in the manner provided in these Bylaws, appoint standing
or temporary committees, each committee to consist of one or more Directors of
the corporation. The Board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board establishing
such committee or as otherwise provided in these Bylaws, shall have and may
exercise all the powers and authority of the Board in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers that require it; but no such committee
shall have the power or authority in reference to (a) amending the Certificate
of Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board as provided in Section 151(a) of the DGCL, fix the designations,
preferences or rights of such shares to the extent permitted under Section 141
of the DGCL), (b) adopting an agreement of merger or consolidation under
Sections 251 or 252
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of the DGCL, (c) recommending to the stockholders the sale, lease or exchange
or other disposition of all or substantially all of the property and assets of
the corporation, (d) recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (e) amending these Bylaws;
and, unless expressly provided by resolution of the Board, no such committee
shall have the power or authority to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the DGCL.
3.16.2
AUDIT COMMITTEE
In addition to any committees appointed pursuant to this subsection
3.16, no later than such time as this corporation may become a Public Company
there shall be an Audit Committee, appointed annually by the Board, consisting
of at least two Directors who are not members of management. It shall be the
responsibility of the Audit Committee, if and when appointed, to review the
scope and results of the annual independent audit of books and records of the
corporation, to review compliance with all corporate policies which have been
approved by the Board and to discharge such other responsibilities as may from
time to time be assigned to it by the Board. The Audit Committee shall meet at
such times and places as the members deem advisable, and shall make such
recommendations to the Board as they consider appropriate.
3.16.3
COMPENSATION COMMITTEE
The Board may, in its discretion, designate a Compensation Committee
consisting of one or more Directors as it may from time to time determine. The
duties of the Compensation Committee shall consist of the following: (a) to
establish and review periodically, but not less than annually, the compensation
of the officers of the corporation and to make recommendations concerning such
compensation to the Board; (b) to consider incentive compensation plans for the
employees of the corporation; (c) to carry out the duties assigned to the
Compensation Committee under any stock option plan or other plan approved by
the corporation; (d) to consult with the Chief Executive Officer or the
President concerning any compensation matters deemed appropriate by the Chief
Executive Officer or the President or the Compensation Committee; and (e) to
perform such other duties as shall be assigned to the Compensation Committee by
the Board.
3.16.4
NOMINATING AND ORGANIZATION COMMITTEE
The Board may, in its discretion, designate a Nominating and
Organization Committee consisting of one or more Directors as it may from time
to time determine. The duties of the Nominating and Organization Committee
shall consist of the following: (a) to report and make recommendations to
the Board on the size and composition of the Board and nominees for Directors;
(b) to evaluate the performance of the officers of the corporation and together
with management, select and recommend to the Board appropriate individuals for
election, appointment and promotion as officers of the corporation and ensure
the continuity of capable management; (c) to report and make recommendations to
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the Board on the organization of the corporation; and (d) to perform such other
duties as shall be assigned to the Nominating and Organization Committee by the
Board.
3.16.5
MINUTES OF MEETINGS
All committees so appointed shall keep regular minutes of their
meetings and shall cause them to be recorded in books kept for that purpose.
3.16.6
QUORUM AND MANNER OF ACTING
A majority of the number of Directors composing any committee of the
Board, as established and fixed by resolution of the Board, shall constitute a
quorum for the transaction of business at any meeting of such committee but, if
less than a majority are present at a meeting, a majority of such Directors
present may adjourn the meeting from time to time without further notice. The
act of a majority of the members of a committee present at a meeting at which a
quorum is present shall be the act of such committee.
3.16.7
RESIGNATION
Any member of any committee may resign at any time by delivering
written notice to the Chairman of the Board, the Chief Executive Officer, the
President, the Secretary, the Board or the Chairman of such committee. Any
such resignation shall take effect at the time specified therein or, if the
time is not specified, upon delivery thereof and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
3.16.8
REMOVAL
The Board may remove from office any member of any committee elected
or appointed by it, but only by the affirmative vote of not less than a
majority of the number of Directors fixed by or in the manner provided in these
Bylaws.
3.17
COMPENSATION
By Board resolution, Directors and committee members may be paid their
expenses, if any, of attendance at each Board or committee meeting, a fixed sum
for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee member from serving the
corporation in any other capacity and receiving compensation therefor.
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SECTION 4.
OFFICERS
4.1
NUMBER
The officers of the corporation shall be a Chief Executive Officer, a
President, a Secretary and a Treasurer, each of whom shall be elected by the
Board. One or more Vice Presidents and such other officers and assistant
officers, including a Chairman of the Board, may be elected or appointed by the
Board, such officers and assistant officers to hold office for such period,
have such authority and perform such duties as are provided in these Bylaws or
as may be provided by resolution of the Board. Any officer may be assigned by
the Board any additional title that the Board deems appropriate. The Board may
delegate to any officer or agent the power to appoint any such subordinate
officers or agents and to prescribe their respective terms of office, authority
and duties. Any two or more offices may be held by the same person.
4.2
ELECTION AND TERM OF OFFICE
The officers of the corporation shall be elected annually by the Board
at the Board meeting held after the annual meeting of the stockholders. If the
election of officers is not held at such meeting, such election shall be held
as soon thereafter as a Board meeting conveniently may be held. Unless an
officer dies, resigns or is removed from office, he or she shall hold office
until the next annual meeting of the Board or until his or her successor is
elected.
4.3
RESIGNATION
Any officer may resign at any time by delivering written notice to the
Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Secretary or the Board. Any such resignation shall take effect
at the time specified therein or, if the time is not specified, upon delivery
thereof and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.4
REMOVAL
Any officer or agent elected or appointed
by the Board whenever in its judgment the
would be served thereby, but such removal
contract rights, if any, of the person so
4.5
by the Board may be removed
best interests of the corporation
shall be without prejudice to the
removed.
VACANCIES
A vacancy in any office because of death, resignation, removal,
disqualification, creation of a new office or any other cause may be filled by
the Board for the unexpired portion of the term, or for a new term established
by the Board.
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4.6
CHAIRMAN OF THE BOARD
If elected, the Chairman of the Board shall perform such duties as
shall be assigned to him or her by the Board from time to time and shall
preside over meetings of the Board and stockholders unless another officer is
appointed or designated by the Board as chairman of such meeting.
4.7
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be the chief executive officer of
the corporation, shall preside over meetings of the Board and stockholders in
the absence of a Chairman of the Board and, subject to the Board's control,
shall supervise and control all of the assets, business and affairs of the
corporation. The Chief Executive Officer may sign certificates for shares of
the corporation, deeds, mortgages, bonds, contracts or other instruments,
except when the signing and execution thereof have been expressly delegated by
the Board or by these Bylaws to some other officer or agent of the corporation
or are required by law to be otherwise signed or executed by some other officer
or in some other manner. In general, the Chief Executive Officer shall perform
all duties incident to the office of Chief Executive Officer and such other
duties as are prescribed by the Board from time to time.
4.8
PRESIDENT
In the event of the death of the Chief Executive Officer or his
inability to act, the President shall perform the duties of the Chief Executive
Officer, except as may be limited by resolution of the Board, with all the
powers of and subject to all the restrictions upon the Chief Executive Officer.
The President may sign with the Secretary or any Assistant Secretary
certificates for shares of the corporation. The President shall have, to the
extent authorized by the Chief Executive Officer or the Board, the same powers
as the Chief Executive Officer to sign deeds, mortgages, bonds, contracts or
other instruments. The President shall perform such other duties as from time
to time may be assigned to him or her by the Chief Executive Officer or the
Board.
4.9
VICE PRESIDENT
In the event of the death of the President or his or her inability to
act, the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President, or
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Any Vice President may sign with the
Secretary or any Assistant Secretary certificates for shares of the
corporation. Vice Presidents shall have, to the extent authorized by the
President or the Board, the same powers as the President to sign deeds,
mortgages, bonds, contracts or other instruments. Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
President or the Board.
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4.10
SECRETARY
The Secretary shall be responsible for preparation of minutes of
meetings of the Board and stockholders, maintenance of the corporation's
records and stock registers, and authentication of the corporation's records
and shall in general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him or her by the
President or the Board. In the absence of the Secretary, an Assistant
Secretary may perform the duties of the Secretary.
4.11
TREASURER
The Treasurer shall have charge and custody of and be responsible for
all funds and securities of the corporation; receive and give receipts for
moneys due and payable to the corporation from any source whatsoever, and
deposit all such moneys in the name of the corporation in banks, trust
companies or other depositories selected in accordance with the provisions of
these Bylaws; sign certificates for shares of the corporation; and in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him or her by the President or
by the Board. In the absence of the Treasurer, an Assistant Treasurer may
perform the duties of the Treasurer.
4.12
SALARIES
The salaries of the officers shall be fixed from time to time by the
Board or by any person or persons to whom the Board has delegated such
authority. No officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a Director of the corporation.
SECTION 5.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1
CONTRACTS
The Board may authorize any officer or officers, or agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation. Such authority may be general or confined to
specific instances.
5.2
LOANS TO THE CORPORATION
No loans for borrowed money shall be contracted on behalf of the
corporation and no evidences of indebtedness for borrowed money shall be issued
in its name unless authorized by a resolution of the Board. Such authority may
be general or confined to specific instances.
5.3
CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such
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officer or officers, or agent or agents, of the corporation and in such manner
as is from time to time determined by resolution of the Board.
5.4
DEPOSITS
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board may select.
SECTION 6.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1
ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the
Board, which authorization shall include the maximum number of shares to be
issued and the consideration to be received for each share.
6.2
CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed by
the Chief Executive Officer or the President, or a Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
any of whose signatures may be a facsimile. The Board may in its discretion
appoint responsible banks, trust companies or other professionals from time to
time to act as transfer agents and registrars of the stock of the corporation;
and, when such appointments shall have been made, no stock certificate shall be
valid until countersigned by one of such transfer agents and registered by one
of such registrars. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person was such officer, transfer agent or registrar at the date of
issue. All certificates shall include on their face written notice of any
restrictions that may be imposed on the transferability of such shares and
shall be consecutively numbered or otherwise identified.
6.3
STOCK RECORDS
The stock transfer books shall be kept at the registered office or
principal place of business of the corporation or at the office of the
corporation's transfer agent or registrar. The name and address of each person
to whom certificates for shares are issued, together with the class and number
of shares represented by each such certificate and the date of issue thereof,
shall be entered on the stock transfer books of the corporation. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
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6.4
RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
shares of the corporation shall bear a legend on the face of the certificate,
or on the reverse of the certificate if a reference to the legend is contained
on the face, that reads substantially as follows:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 or any applicable state law, and no
interest therein may be sold, distributed, assigned, offered, pledged
or otherwise transferred unless (a) there is an effective registration
statement under such Act and applicable state securities laws covering
any such transaction involving said securities or (b) this corporation
receives an opinion of legal counsel for the holder of these
securities (concurred in by legal counsel for this corporation)
stating that such transaction is exempt from registration or this
corporation otherwise satisfies itself that such transaction is exempt
from registration. Neither the offering of the securities nor any
offering materials have been reviewed by any administrator under the
Securities Act of 1933 or any applicable state law."
6.5
TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the
stock transfer books of the corporation pursuant to authorization or document
of transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed
and filed with the Secretary of the corporation. All certificates surrendered
to the corporation for transfer shall be canceled and no new certificate shall
be issued until the former certificates for a like number of shares shall have
been surrendered and canceled.
6.6
LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or mutilated certificate, a new
certificate may be issued therefor upon such terms and indemnity to the
corporation as the Board may prescribe.
6.7
SHARES OF ANOTHER CORPORATION
Shares owned by the corporation in another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Board may
determine or, in the absence of such determination, by the Chief Executive
Officer, the President or any Vice President of the corporation.
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SECTION 7.
BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its stockholders
and Board and such other records as may be necessary or advisable.
SECTION 8.
ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year,
provided that if a different accounting year is at any time selected for
purposes of federal income taxes, the accounting year shall be the year so
selected.
SECTION 9.
SEAL
The seal of the corporation, if any, shall consist of the name of the
corporation, the state of its incorporation and the year of its incorporation.
SECTION 10.
10.1
INDEMNIFICATION
RIGHT TO INDEMNIFICATION
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a Director or officer of the
corporation or that, being or having been such a Director or officer of the
corporation, he or she is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as such a
Director or officer or in any other capacity while serving as such a Director
or officer, shall be indemnified and held harmless by the corporation to the
full extent permitted by the General Corporation Law of the State of Delaware,
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than permitted prior thereto), or by
other applicable law as then in effect, against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) actually and reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a Director or officer and shall inure
to the benefit of the indemnitee's heirs, executors and administrators;
provided, however, that except as provided in subsection 10.2 hereof with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in
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this subsection 10.1 shall be a contract right and shall include the right to
be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that if the DGCL requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this subsection 10.1 or
otherwise.
10.2
RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 10.1 hereof is not paid in full by the
corporation within 60 days after a written claim has been received by the
corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. The indemnitee shall be
presumed to be entitled to indemnification under this Section 10 upon
submission of a written claim (and, in an action brought to enforce a claim for
an advancement of expenses, where the required undertaking, if any is required,
has been tendered to the corporation), and thereafter the corporation shall
have the burden of proof to overcome the presumption that the indemnitee is not
so entitled. Neither the failure of the corporation (including its Board,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances nor an actual determination by the corporation
(including its Board, independent legal counsel or its stockholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit or
create a presumption that the indemnitee is not so entitled.
10.3
NONEXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses
conferred in this Section 10 shall not be exclusive of any other right that any
person may have or hereafter acquire under any statute, agreement, vote of
stockholders or disinterested Directors, provisions of the Certificate of
Incorporation or Bylaws of the corporation or otherwise. Notwithstanding any
amendment to or repeal of this Section 10, any indemnitee shall be entitled to
indemnification in accordance with the provisions hereof with respect to any
acts or omissions of such indemnitee occurring prior to such amendment or
repeal.
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10.4
INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect
itself and any Director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or loss
under the DGCL. The corporation, without further stockholder approval, may
enter into contracts with any Director, officer, employee or agent in
furtherance of the provisions of this Section 10 and may create a trust fund,
grant a security interest or use other means (including, without limitation, a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect indemnification as provided in this Section 10.
10.5
INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The corporation may, by action of the Board, grant rights to
indemnification and advancement of expenses to employees or agents or groups of
employees or agents of the corporation with the same scope and effect as the
provisions of this Section 10 with respect to the indemnification and
advancement of expenses of Directors and officers of the corporation; provided,
however, that an undertaking shall be made by an employee or agent only if
required by the Board.
10.6
PERSONS SERVING OTHER ENTITIES
Any person who is or was a Director or officer of the corporation who
is or was serving (a) as a Director or officer of another corporation of which
a majority of the shares entitled to vote in the election of its Directors is
held by the corporation or (b) in an executive or management capacity in a
partnership, joint venture, trust or other enterprise of which the corporation
or a wholly owned subsidiary of the corporation is a general partner or has a
majority ownership shall be deemed to be so serving at the request of the
corporation and entitled to indemnification and advancement of expenses under
subsection 10.1 hereof.
10.7
PROCEDURES FOR THE SUBMISSION OF CLAIMS
The Board may establish reasonable procedures for the submission of
claims for indemnification pursuant to this Section 10, determination of the
entitlement of any person thereto and review of any such determination. Such
procedures shall be set forth in an appendix to these Bylaws and shall be
deemed for all purposes to be a part hereof.
SECTION 11.
The
the
not
not
AMENDMENTS OR REPEAL
Board of Directors shall have the power to adopt, amend or repeal
Bylaws of this corporation; provided, however, the Board of Directors may
repeal or amend any bylaw that the stockholders have expressly provided may
be amended or repealed
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by the Board of Directors. The stockholders shall also have the power to
adopt, amend or repeal the Bylaws of this corporation.
Notwithstanding any amendment to Section 10 hereof or repeal of these
Bylaws, or of any amendment or repeal of any of the procedures that may be
established by the Board pursuant to Section 10 hereof, any indemnitee shall be
entitled to indemnification in accordance with the provisions hereof and
thereof with respect to any acts or omissions of such indemnitee occurring
prior to such amendment or repeal.
The foregoing Bylaws were adopted by the Board of Directors on May 28,
1996.
//s// Jeffrey P. Bezos
-----------------------------Jeffrey P. Bezos, Secretary
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EXHIBIT 5.1
[PERKINS COIE LETTERHEAD]
March 24, 1997
Amazon.com, Inc.
1516 Second Avenue, 4th Floor
Seattle, WA 98101
Ladies and Gentlemen:
We have acted as counsel to you in connection with the proceedings for
the authorization and issuance by Amazon.com, Inc. (the "Company") of up to
2,500,000 shares (the "Company Shares") of the Company's common stock, $.01 par
value per share (the "Common Stock"), together with an additional 375,000 shares
of Common Stock if and to the extent the underwriters exercise an over-allotment
option granted by the Company (the "Over-Allotment Shares"), and the preparation
and filing of a registration statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
which you are filing with the Securities and Exchange Commission with respect to
the Company Shares and the Over-Allotment Shares (collectively, the "Shares").
We have examined the Registration Statement and such documents and
records of the Company and other documents as we have deemed necessary for the
purpose of this opinion. Based upon the foregoing, we are of the opinion that
upon the happening of the following events:
(a)
the filing and effectiveness of the Registration Statement and any
amendments thereto,
(b)
due execution by the Company and registration by its registrar of
the Shares,
(c)
the offering and sale of the Shares as contemplated by the
Registration Statement, and
(d)
receipt by the Company of the consideration required for the Shares
contemplated by the Registration Statement,
the Shares will be duly authorized, validly issued, fully paid and
nonassessable.
2
Amazon.com, Inc.
March 24, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments and any registration statement relating to the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act, and to the reference to our firm in the Prospectus of the
Registration Statement under the heading "Legal Matters." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ PERKINS COIE
1
EXHIBIT 10.2
AMAZON.COM, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
JUNE 21, 1996
2
TABLE OF CONTENTS
PAGE
1.
1.1
1.2
Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale and Issuance of Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1-
-1-
2.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
2.16
2.17
2.18
2.19
2.20
2.21
Representations and Warranties of the Company
Organization, Good Standing and Qualification
Capitalization
. . . . . . . . . . . . . . .
Subsidiaries
. . . . . . . . . . . . . . . .
Authorization . . . . . . . . . . . . . . . .
Valid Issuance of Preferred and Common Stock
Governmental Consents . . . . . . . . . . . .
Litigation
. . . . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . .
Patents and Trademarks
. . . . . . . . . . .
Compliance with Other Instruments . . . . . .
Permits . . . . . . . . . . . . . . . . . . .
Environmental and Safety Laws . . . . . . . .
Disclosure
. . . . . . . . . . . . . . . . .
Registration Rights . . . . . . . . . . . . .
Title to Property and Assets
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Financial Statements
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Agreements; Action
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Tax Returns and Audits
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Shareholder Agreements
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Brokers or Finders
. . . . . . . . . . . . .
Qualified Small Business
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-1-
3.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
Representations and
Experience
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Investment
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Rule 144
. . . . .
No Public Market
.
Access to Data
. .
Authorization . . .
Accredited Investor
4.
4.1
4.2
4.3
Conditions of Investor's Obligations at
Representations and Warranties
. . . .
Performance . . . . . . . . . . . . . .
Compliance Certificate
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Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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3
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.4
4.5
4.6
4.7
4.8
Board of Directors
. . .
Blue Sky
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Opinion of Company Counsel
Investor Rights Agreement
Co-Sale Agreement . . . .
5.
5.1
5.2
5.3
5.4
5.5
5.6
Conditions of the Company's Obligations
Representations and Warranties
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Payment of Purchase Price . . . . . . .
Blue Sky
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Investor Rights Agreement . . . . . . .
Co-Sale Agreement . . . . . . . . . . .
Proceedings and Documents . . . . . . .
6.
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11Survival
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11Successors and Assigns
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11Notices, Etc
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12California Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12Expenses
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12Finder's Fee
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-12Counterparts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12Severability
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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at Closing
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-10.
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4
TABLE OF CONTENTS
(CONTINUED)
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
-iii-
Schedule of Investors
Amended and Restated Certificate of Incorporation
Schedule of Exceptions
Investor Rights Agreement
Co-Sale Agreement
Right of First Refusal Agreement
Voting Agreement
5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 21st day of June,
1996, by and among AMAZON.COM, INC., a Delaware corporation (the "Company"),
with its principal office at 2250 First Avenue South, Seattle, Washington 98134
and the investors listed on Exhibit A hereto, each of which is herein referred
to as an "Investor."
1.
1.1
Purchase and Sale of Stock.
Sale and Issuance of Series A Preferred Stock.
(a)
The Company shall adopt and file with the
Secretary of State of Delaware on or before the Closing (as defined below) the
Designation of Rights and Preferences of Series A Preferred Stock in the form
attached hereto as Exhibit B (the "Designation").
(b)
Subject to the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing that number of
shares of the Company's Series A Preferred Stock (the "Series A Preferred") set
forth opposite each Investor's name on Exhibit A hereto for the purchase price
per share of $14.05 as set forth thereon. The shares of Series A Preferred to
be sold pursuant to this Agreement are collectively referred to herein as the
"Shares."
1.2
Closing. The purchase and sale of the Shares shall
take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, at 9:30 a.m., on June 21, 1996, or at such other
time and place as the Company and Investors acquiring in the aggregate more
than half the Shares sold pursuant hereto mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing
the Company shall deliver to each Investor a certificate or certificates
representing the Series A Preferred that such Investor is purchasing against
payment of the purchase price therefor by check, wire transfer or any
combination thereof.
2.
Representations and Warranties of the Company. Except as set
forth in the Schedule of Exceptions attached hereto as Exhibit C, the Company
hereby represents and warrants as follows:
2.1
Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to carry on its business as currently conducted. The Company is
duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties. True and accurate copies of the
Company's Certificate of
6
Incorporation and Bylaws, each as amended and in effect at the Closing, have
been delivered to the special counsel to the Investors.
2.2
Capitalization. The authorized capital stock of the
Company consists of Twenty Five Million (25,000,000) shares of Common Stock
("Common Stock"), of which Two Million Five Hundred Eighty Nine Thousand Seven
Hundred Eleven (2,589,711) shares are issued and outstanding on the date of
this Agreement and Five Million (5,000,000) shares of Preferred Stock
("Preferred Stock"), of which Five Hundred Sixty Nine Thousand, Three Hundred
and Ninety Six (569,396) are designated as Series A Preferred Stock, and none
of which is issued and outstanding. All such issued and outstanding shares
have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has reserved Five Hundred Sixty Nine Thousand,
Three Hundred Ninety Six (569,396) shares of Common Stock for issuance upon
conversion of the Series A Preferred. The Company has reserved Four Hundred
Fourteen Thousand Six Hundred Thirty-Six (414,636) shares of Common Stock for
issuance upon exercise of options granted and outstanding as of the date of
this Agreement. The Company has reserved Three Hundred Forty-One Thousand Six
Hundred Fifteen (341,615) shares of Common Stock for issuance after the date of
this Agreement to future employees, consultants and directors of the Company.
Other than the shares reserved for issuance described in this paragraph, there
are no outstanding rights, options, warrants, preemptive rights, rights of
first refusal or similar rights for the purchase or acquisition from the
Company of any securities of the Company. All outstanding shares have been
issued in compliance with state and federal securities laws.
2.3
Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.4
Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Investor Rights
Agreement in the form attached hereto as Exhibit D (the "Investor Rights
Agreement"), the Co-Sale Agreement in the form attached hereto as Exhibit E
(the "Co-Sale Agreement"), the Right of First Refusal Agreement in the form
attached hereto as Exhibit F (the "Right of First Refusal Agreement") and the
Voting Agreement in the form attached hereto as Exhibit G (the "Voting
Agreement), the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance), sale
and delivery of the Shares being sold hereunder and the Common Stock issuable
upon conversion of the Shares has been taken or will be taken prior to the
Closing, and this Agreement, the Investor Rights Agreement and the Co- Sale
Agreement constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, subject to: (i)
judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies; (ii) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors' rights; and (iii) limitations on
the enforceability of the indemnification provisions of the Investor Rights
Agreement.
-2-
7
2.5
Valid Issuance of Preferred and Common Stock. The
shares of Series A Preferred that are being purchased by the Investors
hereunder, when issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer directly or indirectly created by the Company other than restrictions
on transfer under this Agreement, the Investor Rights Agreement, the Right of
First Refusal Agreement and the Co-Sale Agreement and under applicable state
and federal securities laws. The Common Stock issuable upon conversion of the
Series A Preferred purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Designation, will be duly and validly issued, fully paid, and nonassessable and
will be free of restrictions on transfer directly or indirectly created by the
Company other than restrictions on transfer under this Agreement, the Investor
Rights Agreement, the Right of First Refusal Agreement and the Co-Sale
Agreement and under applicable state and federal securities laws.
2.6
Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the offer, sale or issuance of
the Shares (and the Common Stock issuable upon conversion of the Shares) or the
consummation of any other transaction contemplated hereby, except for the
following: (i) the filing of the Restated Certificate in the office of the
Secretary of State of the State of Delaware, which shall be filed by the
Company on or prior to the Closing Date; (ii) the filing of such notices as may
be required under the Securities Act of 1933, as amended (the "Securities
Act"); (iii) the filing of a notice of exemption pursuant to Section 25102(f)
of the California Corporate Securities Law of 1968, as amended (the "California
Securities Law"), which shall be filed by the Company promptly following the
Closing; and (iv) the compliance with Washington and any other applicable state
securities laws, which compliance will have occurred within the appropriate
time periods therefor. Based in part on the representations of the Investors
set forth in Section 3 below, the offer, sale and issuance of the Shares in
conformity with the terms of this Agreement are exempt from the registration
requirements of Section 5 of the Securities Act, from the qualification
requirements of Section 25110 of the California Securities Law and from any
similar requirement under Washington securities law.
2.7
Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened before any court, administrative agency or other governmental body
against the Company which questions the validity of this Agreement, the
Investor Rights Agreement or the Co-Sale Agreement or the right of the Company
to enter into any of them, or to consummate the transactions contemplated
hereby or thereby, or which would be reasonably likely to result, either
individually or in the aggregate, in any material adverse change in the
condition (financial or otherwise), business, property, assets or liabilities
of the Company. The foregoing includes, without limitation, actions, suits,
proceedings or investigations pending or, to the best knowledge of the Company,
threatened (or any basis therefor known to the Company)
-3-
8
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or
subject to, and none of its assets is bound by, the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which would be reasonably likely to have a material adverse
effect on the Company.
2.8
Employees. Each employee of the Company has executed
a proprietary information agreement, in substantially the form delivered to
special counsel to the Investors. To the best knowledge of the Company, no
officer or key employee is in violation of any prior employee contract or
proprietary information agreement. Each holder of Common Stock of the Company
has entered into a Shareholders Agreement in the form provided to special
counsel to the Investors. The Company is not a party to or bound by any
currently effective employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation agreement or arrangement with any collective bargaining
agent. No employees of the Company are represented by any labor union or
covered by any collective bargaining agreement. There is no pending or, to the
best of the Company's knowledge, threatened labor dispute involving the Company
and any group of its employees.
2.9
Patents and Trademarks. The Company has sufficient
title to and ownership of all trade secrets, and, to its knowledge, copyrights,
information, proprietary rights and processes, patents, trademarks, service
marks and trade names necessary for its business as now conducted without any
material conflict with or infringement of the rights of others. There are no
material outstanding options, licenses, or agreements of any kind relating to
the foregoing, nor is the Company bound by or a party to any material options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company
has not received any written, or to its knowledge, oral communications alleging
that the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. To
the Company's knowledge, none of the Company's employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. To the Company's knowledge,
neither the execution nor delivery of this Agreement or the Investor Rights
Agreement, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as proposed, will
conflict with or
-4-
9
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company covenants that it will not, at any
time, knowingly conduct its business in such a way as to conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
2.10
Compliance with Other lnstruments. The Company is
not in violation or default of any provision of its Certificate of
Incorporation or Bylaws, each as amended and in effect on and as of the
Closing. The Company is not in violation or default of any material provision
of any instrument, mortgage, deed of trust, loan, contract, commitment,
judgment, decree, order or obligation to which it is a party or by which it or
any of its properties or assets are bound which would materially adversely
affect the condition (financial or otherwise), business, property, assets or
liabilities of the Company or, to the best of its knowledge, of any provision
of any federal, state or local statute, rule or governmental regulation which
would materially adversely affect the condition (financial or otherwise),
business, property, assets or liabilities of the Company. The execution,
delivery and performance of and compliance with this Agreement, the Investor
Rights Agreement and the Co-Sale Agreement, and the issuance and sale of the
Shares, will not result in any such violation, be in conflict with or
constitute, with or without the passage of time or giving of notice, a default
under any such provision, require any consent or waiver under any such
provision (other than any consents or waivers that have been obtained), or
result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company pursuant to any such
provision.
2.11
Permits. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business
as now being conducted by it, the lack of which could reasonably be expected to
materially and adversely affect the business, properties, prospects, or
financial condition of the Company, and the Company believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. The Company is not in default in any
material respect under any of such franchises, permits, licenses, or other
similar authority.
2.12
Environmental and Safety Laws. To the best of its
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
to the best of its knowledge, no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation,
2.13
Disclosure. No representation, warranty or statement
by the Company in this Agreement, or in any written statement or certificate
furnished to the Investors pursuant to this Agreement, contains any untrue
statement of a material fact or, when taken together, omits to state a material
fact necessary to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. However, as to any
projections furnished to the Investors, such projections were prepared in good
faith
-5-
10
by the Company, but the Company makes no representation or warranty that it
will be able to achieve such projections.
2.14
Registration Rights. Except as provided in the
Investor Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.15
Title to Property and Assets. The Company has good
and marketable title to all of its properties and assets free and clear of all
mortgages, liens and encumbrances, except liens for current taxes and
assessments not yet due and possible minor liens and encumbrances which do not,
in any case, in the aggregate, materially detract from the value of the
property subject thereto or materially impair the operations of the Company.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of its knowledge, holds a valid leasehold
interest free of all liens, claims or encumbrances. The Company's properties
and assets are in good condition and repair in all material respects.
2.16
Financial Statements. The Company has delivered to
the Investors (a) a balance sheet and income statement of the Company as of and
for the fiscal year ended December 31, 1995, and (b) a balance sheet and income
statement of the Company as of and for the three-month period ended March 31,
1996. The foregoing financial statements, all of which are unaudited, are
herein referred to as the "Financial Statements." The balance sheet of the
Company as of March 31, 1996 is herein referred to as the "Company Balance
Sheet." The Financial Statements fairly present, in all material respects, the
financial position and results of operations of the Company as of the dates and
for the periods indicated. The Company has no material liabilities or
obligations which are not reflected or reserved against in the Company Balance
Sheet, except liabilities or obligations incurred since the date of the Company
Balance Sheet in the ordinary course of business.
2.17
Agreements; Action.
(a)
Except for agreements described herein and in
the Investor Rights Agreement, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof
(b)
There are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound that may
involve (i) obligations (contingent or otherwise) of, or payments by the
Company in excess of, $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company, or (iii)
provisions restricting or adversely affecting the development, manufacture or
distribution of the Company's products or services or (iv) indemnification by
the Company with respect to infringements of proprietary rights.
(c)
The Company has not (i) declared or paid any
dividends or authorized or made any distribution upon or with respect to any
class or series of its capital
-6-
11
stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $75,000 or, in the case of indebtedness
and/or liabilities individually less than $75,000, in excess of $150,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d)
For the purposes of subsections (b) and (c)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
(e)
The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its Certificate of Incorporation or its Bylaws that adversely affects its
business as now conducted or as proposed to be conducted, its properties or its
financial condition.
2.18
Tax Returns and Audits. The Company has accurately
prepared all United States income tax returns and all state and municipal tax
returns required to be filed by it, if any, has paid all taxes, assessments,
fees and charges when and as due under such returns and has made adequate
provision for the payment of all other taxes, assessments, fees and charges
shown on such returns or on assessments received by the Company, where, if not
paid or filed or prepared correctly, would not have a material adverse effect
on the Company. To the best of the Company's knowledge, no deficiency
assessment or proposed adjustment of the Company's United States income tax or
state or municipal taxes is pending.
2.19
Shareholder Agreements. Except for agreements
contemplated hereby of even date herewith, there are no agreements, other than
agreements, true and complete copies of which the Company has provided to
special counsel to the Investors, between the Company and any of the Company's
shareholders, or to the best knowledge of the Company, among any of the
Company's shareholders, which in any way affect any shareholder's ability or
right freely to alienate or vote such shares (except restrictions designed to
provide compliance with securities laws).
2.20
Brokers or Finders. The Company has not agreed to
incur, directly or indirectly, any liability for brokerage or finders' fees,
agents' commissions or other similar charges in connection with this Agreement
or any of the transactions contemplated hereby.
2.21
Qualified Small Business. As of the Closing (without
reference to any time after the Closing), the Company is a "qualified small
business," as such term is defined in Section 1202 of the Internal Revenue Code
of 1986, as amended.
3.
Representations and Warranties of the Investors.
Investor hereby represents and warrants that:
-7-
Each
12
3.1
Experience. Such Investor is experienced in
evaluating start-up companies such as the Company, is able to fend for itself
in transactions such as the one contemplated by this Agreement, has such
knowledge and experience in financial and business matters that such Investor
is capable of evaluating the merits and risks of such Investor's prospective
investment in the Company, and has the ability to bear the economic risks of
the investment.
3.2
Investment. Such Investor is acquiring the Shares
(and the Common Stock issuable upon conversion of the Shares) for investment
for such Investor's own account and not with the view to, or for resale in
connection with, any distribution thereof. Such Investor understands that the
Shares (and the Common Stock issuable upon conversion of the Shares) have not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent as expressed
herein. Such Investor further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to any third person with respect to any of the Shares (or
any Common Stock acquired upon conversion thereof). Such Investor understands
and acknowledges that the offering of the Shares pursuant to this Agreement
will not, and any issuance of Common Stock on conversion may not, be registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from the
registration requirements of the Securities Act.
3.3
Rule 144. Such Investor acknowledges that the Shares
(and the Common Stock issuable upon conversion of the Shares) must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Such Investor is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions. Such Investor covenants that, in the
absence of an effective registration statement covering the stock in question,
such Investor will sell, transfer, or otherwise dispose of the Shares (and any
Common Stock issued on conversion thereof) only in a manner consistent with
such Investor's representations and covenants set forth in this Section 3. In
connection therewith, such Investor acknowledges that the Company will make a
notation on its stock books regarding the restrictions on transfers set forth
in this Section 3 and will transfer securities on the books of the Company only
to the extent not inconsistent therewith.
3.4
No Public Market. Such Investor understands that no
public market now exists for any of the securities issued by the Company, and
that it is unlikely that a public market will ever exist for the Shares (or the
Common Stock issuable upon conversion of the Shares).
3.5
Access to Data. Such Investor has received and
reviewed information about the Company and has had an opportunity to discuss
the Company's business, management and financial affairs with its management
and to review the Company's facilities.
-8-
13
Such Investor understands that such discussions, as well as any written
information issued by the Company, were intended to describe the aspects of the
Company's business and prospects which the Company believes to be material, but
were not necessarily a thorough or exhaustive description. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.
3.6
Authorization. This Agreement when executed and
delivered by such Investor will constitute a valid and legally binding
obligation of the Investor, enforceable in accordance with its terms, subject
to: (i) judicial principles respecting election of remedies or limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights; and (iii) limitations on the enforceability of the
indemnification provisions of the Investor Rights Agreement.
3.7
Accredited Investor. Such Investor acknowledges that
it is an "accredited investor" as defined in Rule 501 of Regulation D as
promulgated by the Securities and Exchange Commission under the Securities Act
and shall submit to the Company such further assurances of such status as may
be reasonably requested by the Company. For state securities law purposes, the
principal address of the Investor is that set forth on Exhibit A.
4.
Conditions of Investor's Obligations at Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent in writing thereto:
4.1
Representations and Warranties. The representations
and warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of such Closing.
4.2
Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
4.3
Compliance Certificate. The President of the Company
shall deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of this Agreement.
4.4
Board of Directors. Effective upon the Closing, the
directors of the Company shall be Messrs. Jeffrey P. Bezos, Tom A. Alberg, and
L. John Doerr.
-9-
14
4.5
Blue Sky. The Company shall have obtained all
necessary permits and qualifications, if any, or secured an exemption
therefrom, required by any state or country prior to the offer and sale of the
Shares.
4.6
Opinion of Company Counsel. Each Investor shall have
received from Perkins, Coie, counsel for the Company, an opinion, dated as of
the Closing, reasonably satisfactory to the Investors and their counsel.
4.7
Investor Rights Agreement. The Company and each
Investor and Jeffrey P. Bezos shall have entered into the Investor Rights
Agreement.
4.8
Co-Sale Agreement. The Company and each Investor and
Jeffrey P. Bezos shall have entered into the Co-Sale Agreement.
5.
Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
5.1
Representations and Warranties. The representations
and warranties of the Investor contained in Section 3 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2
Payment of Purchase Price. The Investor shall have
delivered the purchase price specified in Section 1.2 against delivery of the
Shares set forth in the Schedule of Investors attached hereto as Exhibit A by
the Company to such Investor.
5.3
Blue Sky. The Company shall have obtained all
necessary permits and qualifications, if any, or secured an exemption
therefrom, required by any state or country for the offer and sale of the
Shares.
5.4
Investor Rights Agreement. Each of the Investors and
Jeffrey P. Bezos shall have executed the Investor Rights Agreement on or prior
to the date of the Closing.
5.5
Co-Sale Agreement. Each of the Investors and Jeffrey
P. Bezos shall have executed the Co-Sale Agreement on or prior to the date of
the Closing.
5.6
Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby, and all documents and instruments incident to these transactions, shall
be reasonably satisfactory in substance to the Company and its counsel.
-10-
15
6.
Miscellaneous.
6.1
Governing Law. This Agreement shall be governed in
all respects by the laws of the State of Washington, without regard to any
provisions thereof relating to conflicts of laws among different jurisdictions.
6.2
Survival. The representations, warranties, covenants
and agreements made herein shall survive any investigation made by any Investor
and the closing of the transactions contemplated hereby for a period of three
(3) years, whereupon they shall cease and be of no further force and effect.
All statements as to factual matters contained in any certificate or exhibit
delivered by or on behalf of the Company pursuant hereto shall be deemed to be
the representations and warranties of the Company hereunder as of such date of
such certificate or exhibit.
6.3
Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that the rights of an Investor to purchase
Shares shall not be assignable without the consent of the Company.
6.4
Entire Agreement; Amendment. This Agreement and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects
hereof and thereof. Neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver, discharge or
termination is sought; provided, however, that holders of a majority of the
outstanding Shares (whether or not converted) may waive or amend, on behalf of
all Investors and other holders of Shares, any provisions hereof benefitting
the Investors so long as the effect thereof will be that all such Investors and
other holders of Shares will be treated equally.
6.5
Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, return receipt requested, or
otherwise delivered by hand or by messenger, addressed (a) if to an Investor,
at such Investor's address set forth on Exhibit A, or at such other address as
such Investor shall have furnished to the Company in writing, or (b) if to any
other holder of any Shares, at such address as such holder shall have furnished
the Company in writing, or, until any such holder so furnishes an address to
the Company, then to and at the address of the last holder of such Shares who
has so furnished an address to the Company, or (c) if to the Company, at its
address set forth on the first page of this Agreement addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Investors. If notice is provided by mail, notice
shall be deemed to be given three (3) business days after proper deposit in the
U. S. Mail.
-11-
16
6.6
Delays or Omissions. No delay or omission to
exercise any right, power or remedy accruing to any holder of any Shares upon
any breach or default of the Company under this Agreement shall impair any such
right, power or remedy of such holder, nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of any holder of any breach or default
under this Agreement, or any waiver on the part of any holder of any provisions
or conditions of this Agreement, must be in writing and shall be effective only
to the extent specifically set forth in such writing or as provided in this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
6.7
California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
6.8
Expenses. The Company and each Investor shall bear
their own expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby; provided, however, that the
Company shall pay, promptly after the Closing, the reasonable, itemized legal
fees and expenses of Wilson Sonsini Goodrich & Rosati ("WSGR"), special counsel
to the Investors, up to an aggregate maximum of $15,000.
6.9
Finder's Fee. The Company and the Investors shall
each indemnify and hold the other harmless from any liability for any
commission or compensation in the nature of a finder's fee (including the
costs, expenses and legal fees of defending against such liability) for which
the Company or the Investors, or any of their respective partners, employees,
or representatives, as the case may be, is responsible.
6.10
Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be executed by less than all
Investors, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
6.11
Severability. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to
be illegal, unenforceable or
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17
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
(This space intentionally left blank.)
-13-
18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AMAZON.COM, INC.
By: Jeff P. Bezos
---------------------------------Jeffrey P. Bezos, President and
Chief Executive Officer
[SIGNATURE PAGE FOR SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
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19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INVESTORS:
KLEINER, PERKINS, CAUFIELD &
BYERS VIII
By: L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
[SIGNATURE PAGE FOR SERIES A PREFERRED STOCK PURCHASE AGREEMENT]
-15-
20
EXHIBIT A
SCHEDULE OF INVESTORS
NO. OF
SHARES OF
AGGREGATE PURCHASE
SERIES A
PRICE OF SERIES A
INVESTOR
PURCHASED
- ----------------------------------------
PURCHASED
---------
------------------
Kleiner, Perkins, Caufield & Byers, VIII
2750 Sand Hill Road
Menlo Park, CA 94025
555,161
-------
$7,800,012.05
-------------
KPCB Information Sciences Zaibatsu Fund II
2750 Sand Hill Road
Menlo Park, CA 94025
TOTAL:
569,396
-------------------
14,235
-------
$ 200,001.75
-------------
-16-
$8,000,013.80
1
EXHIBIT 10.3
CO-SALE AGREEMENT
This Co-Sale Agreement (the "Co-Sale Agreement") is made as of June
21, 1996, by and among Amazon.com, Inc., a Delaware corporation (the
"Company"), the purchasers of the Company's Series A Preferred Stock
(individually an "Investor," collectively the "Investors"), and Jeffrey P.
Bezos (the "Founder").
Whereas, the Company and the Investors are entering into a Series A
Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"); and
Whereas, in order to induce the Company and the Investors to enter
into the Purchase Agreement, the Company, the Investors and the Founder desire
to enter into this Co-Sale Agreement, which pertains to sales of certain
securities by the Founder;
Now, therefore, in consideration of the mutual promises and covenants
hereinafter set forth, the Company, the Investors, and the Founder hereby agree
as follows:
SECTION 1
RIGHT OF CO-SALE
1.1
Sales by Founder. In the event that the Founder proposes to
sell, assign, transfer or otherwise convey shares of Common Stock or securities
convertible into, exchangeable for or exercisable for Common Stock ("Co-Sale
Securities"), then the Founder shall offer in writing to each Investor the
right to participate in such sale on the same terms and conditions available to
such Founder.
Upon written notice to the Founder within fifteen (15) days of
receipt by each Investor of notification from the Founder of the proposed sale,
an Investor may sell that number of shares of Co-Sale Securities equal to the
total number of shares to be sold in the transaction, multiplied by a fraction,
the numerator of which is the number of shares of Co-Sale Securities held by
such Investor and the denominator of which is the number of shares of Co-Sale
Securities held by all selling Investors plus the Founder. To the extent any
Investor exercises such right of participation, the number of shares of Co-Sale
Securities that the Founder may sell in the transaction shall be
correspondingly reduced.
1.2
Limitations on Right of Co-Sale. Section 1.1 of this
Agreement shall not apply where the sale, assignment, transfer or other
conveyance of Co-Sale Securities by a Founder is:
(a)
to that Founder's spouse, parents, or children or
other members of the Founder's family (including relatives by marriage), or to
a custodian, trustee or other fiduciary for the account of the Founder or
members of his family or to a family limited partnership,
2
limited liability company or other entity or person in connection with a bona
fide estate planning transaction;
(b)
by way of bequest or inheritance upon death;
(c)
to the Company;
(d)
by way of a bona fide gift;
(e)
when the number of Co-Sale Securities to be
transferred, combined with all prior sales and transfers of Co-Sale Securities
by Founder after the date hereof other than transfers pursuant to subparagraphs
(a), (b), (c), (d) and (f) hereof, is equal to or less than fifteen percent
(15%) of the Co-Sale Securities held by the Founder as of the date hereof; or
(f)
by way of any pledge of Co-Sale Securities made by
Founder pursuant to a bona fide loan transaction with an established financial
institution that creates a mere security interest; provided, however, that any
transferees pursuant to this Section 1.2 shall receive and hold such shares
subject in all respects to the provisions of this Agreement, and that there
shall be no further transfer of such shares except in accordance herewith.
1.3
Termination of Co-Sale Right. The Co-Sale Right set forth in
this Agreement shall terminate and be of no further force and effect
immediately upon the earliest of:
(a)
the closing of an initial firm commitment
underwritten public offering of the Company's Common Stock pursuant to an
effective registration statement on Form S-1 under the Securities Act of 1933
covering the offer and sale of Common Stock by the Company to the public at an
aggregate offering price of at least $7,500,000 and a per share offering price
to the public at least equal to twenty dollars ($20.00) (appropriately adjusted
to reflect any stock split, stock dividend or recapitalization of the Company);
(b)
the acquisition of all or substantially all the
assets or stock of the Company or the merger of the Company with or into any
other entity in which a change of control of the Company occurs; or
(c)
five years after the date of this Agreement.
SECTION 2
PROHIBITED TRANSFERS
2.1
Treatment of Prohibited Transfers. In the event a Founder
sells any Co-Sale Securities of the Company in contravention of the
participation rights of the Investors under
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3
this Agreement
other remedies
the put option
the applicable
(a "Prohibited Transfer"), the Investors, in addition to such
as may be available at law, in equity or hereunder, shall have
provided in Section 2.2 below, and the Founder shall be bound by
provisions of such put option.
2.2
Put Option. In the event of a Prohibited Transfer, each
Investor shall have the right to sell to the Founder who effected the
Prohibited Transfer, and, if such right is exercised, the Founder shall have
the obligation to purchase from each Investor, a number of shares of Common
Stock of the Company (either directly or through delivery of convertible Series
A Preferred Stock) equal to the number of shares each Investor would have been
entitled to transfer to the purchaser in the Prohibited Transfer pursuant to
the terms hereof. Such sale shall be made on the following term and
conditions:
(a)
The price per share at which the shares are to be
sold to the Founder shall be equal to the price per share paid by the purchaser
to the Founder in the Prohibited Transfer. The Founder shall also reimburse
each Investor for any and all fees and expenses, including legal fees and
expenses, promptly following demand therefor, incurred pursuant to the exercise
or the attempted exercise of the Investor's rights under this Section 2.
(b)
In order to exercise the put option created under
this Section 2, an Investor must, within 20 days after the later of the date on
which the Investor (i) received notice from the Founder of the Prohibited
Transfer or (ii) otherwise become aware of the Prohibited Transfer, deliver to
the Founder the certificate or certificates representing shares to be sold,
each certificate to be properly endorsed for transfer.
(c)
The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to Section
2.2(b), immediately pay the aggregate purchase price therefor and the amount of
reimbursable fees and expense, as specified in Section 2.2(a), by certified
check or bank draft made payable to the order of such Investor.
(d)
NOTWITHSTANDING THE FOREGOING, ANY ATTEMPT TO
TRANSFER SHARES OF THE COMPANY IN VIOLATION OF ARTICLE I HEREOF SHALL BE VOID
AND THE COMPANY AGREES IT WILL NOT EFFECT SUCH A TRANSFER NOR WILL IT TREAT ANY
ALLEGED TRANSFEREE AS THE HOLDER OF SUCH SHARES WITHOUT THE WRITTEN CONSENT OF
THE INVESTORS. THE COMPANY AND THE FOUNDER AGREE THAT ANY AND ALL CERTIFICATES
REPRESENTING ANY SHARES OR OTHER SECURITIES OF THE COMPANY HELD FROM TIME TO
TIME DURING THE TERM OF THIS CO-SALE AGREEMENT SHALL BEAR A LEGEND REFERRING TO
THE RESTRICTIONS IMPOSED BY THIS AGREEMENT.
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4
SECTION 3
MISCELLANEOUS
3.1
Governing Law. This Agreement shall be governed in all
respects by and construed in all respects in accordance with the laws of the
State of Washington.
3.2
Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, transferees, executors and
administrators of the parties hereto. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3
Entire Agreement This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to Co-Sale
rights.
3.4
Amendment and Waiver. This Agreement, or any provision
hereof, may be amended or waived only in writing signed by the Company, the
Founder and the holders of a majority of the Series A Preferred Stock
(including any Common Stock then held by the Investors issued upon conversion
of such Series A Preferred Stock), and any amendment or waiver so approved
shall be binding upon all the Investors (including any transferee of an
Investor).
3.5
Notices, etc. All notices and other communications required
or permitted under this Agreement shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger addressed (a) if to an Investor, at such Investor's address set
forth on the Purchase Agreement, or (b) if to a Founder or to the Company, at
the address of the Company's principal executive offices.
3.6
Severability. In the event that any provision of this
Agreement are held to be unenforceable under applicable law, this Agreement
shall continue in full force and effect without said provision and shall be
enforceable in accordance with its terms.
3.7
Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.8
Counterparts. This Agreement may be executed in any number of
Counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written. AMAZON.COM, INC.
By:
Jeffrey P. Bezos
-------------------------------------Jeffrey P. Bezos, President and
Chief Executive Officer
FOUNDER
Jeffrey P. Bezos
- ----------------------------------------Jeffrey P. Bezos
[SIGNATURE PAGE FOR CO-SALE AGREEMENT]
6
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first above written. INVESTORS: KLEINER, PERKINS, CAUFIELD & BYERS VIII
By:
L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By:
L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
[SIGNATURE PAGE FOR CO-SALE AGREEMENT]
1
EXHIBIT 10.4
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
THIS AGREEMENT is made as of June 21, 1996, among Amazon.com, Inc., a
Delaware corporation (the "Company"), and the undersigned holders of Series A
Preferred Stock of the Company (the "Stockholders").
WHEREAS, in connection with the Company's Series A Preferred Stock
financing, the Company has sold shares of its Series A Preferred Stock to the
Stockholders; and
WHEREAS, the Stockholders have agreed to grant the Company a Right of
First Refusal with respect to all shares of the Company's Preferred Stock or
Common Stock owned by them or issued to them in the future with respect to such
shares in any stock dividend, stock split, reclassification or similar event
(the "Shares").
THEREFORE, the undersigned agree as follows:
1.
Shares. Upon closing of the Series A Preferred Stock
financing with the Company pursuant to which the Stockholders purchase shares
of the Company's Series A Preferred Stock, each Stockholder hereby severally
represents that it owns that number of shares of Preferred Stock set forth
opposite its name on Exhibit A to the Series A Preferred Stock Purchase
Agreement of even date herewith.
2.
Company's Right of First Refusal. Before any Shares held by a
Stockholder (a "Selling Stockholder") or any transferee (either being sometimes
referred to herein as the "Holder") may be sold or otherwise transferred
(including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section (the "Right of First Refusal").
(a)
Notice of Proposed Transfer. The Selling Stockholder
shall (a) deliver to the Company a written notice (the "Notice") stating: (i)
the Selling Stockholder's bona fide intention to sell or otherwise transfer
such Shares; (ii) the name of each proposed purchaser or other transferee
("Proposed Transferee"); (iii) the number of Shares to be transferred to each
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Selling Stockholder proposes to transfer the Shares (the "Offered
Price"); and (v) the material terms and conditions of the proposed transfer
(the "Offer Terms") and (b) offer the Shares at the Offered Price and on the
Offer Terms to the Company or its assignee(s).
(b)
Exercise of Right of First Refusal. At any time
within 30 days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Selling Stockholder, elect to purchase
all, but not less than all, of the Shares proposed to be transferred to any one
or more of the Proposed Transferees, at the purchase price and on the terms
determined in accordance with subsection (c) below.
2
(c)
Purchase Price. The purchase price ("Purchase
Price") for the Shares purchased by the Company or its assignee(s) under this
Section shall be the Offered Price, and the terms and conditions of the
transfer shall be identical in all material respects to the Offer Terms (the
"Terms"). If the Offered Price includes consideration other than cash the cash
equivalent value of the non-cash consideration SW be determined by the Board of
Directors of the Company in good faith.
(d)
Purchase Price. Payment of the Purchase Price shall
be made, at the option of the Company or its assignee(s), in cash (by check),
by cancellation of all or a portion of any outstanding indebtedness of the
Selling Stockholder to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof, in any case in
accordance with the Terms, within thirty (30) days after delivery of the
written notice by the Company as set forth in Section 2(b).
(e)
Selling Stockholder's Right to Transfer. If all of
the Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company and/or its assignee(s) as provided
in this Section, then the Selling Stockholder may sell or otherwise transfer
such Shares to that Proposed Transferred at the Offered Price or at a higher
price and on the Offer Terms, provided that such sale or other transfer is
consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is affected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Selling
Stockholder may be sold or otherwise transferred.
(f)
Exception for Affiliate Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares to an affiliate of the Stockholder (including limited partners of
the Stockholder) shall be exempt from the provisions of this Section. In such
case, the transferee or other recipient shall receive and hold the Shares so
transferred subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Agreement.
(g)
Termination of Right of First Refusal. The Right of
First Refusal shall terminate as to any Shares immediately after the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act, as amended.
(h)
Assignment of Right of First Refusal. The Right of
First Refusal shall be freely assignable by the Company at any time.
-2-
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3.
General Provisions.
(a)
This Agreement shall be governed by the laws of the
State of Washington as they apply to contacts entered into and wholly to be
performed in such state. This Agreement represents the entire agreement
between the parties with respect to the Company's Right of First Refusal and
may only be modified or amended in writing signed by both parties.
(b)
Any notice, demand or request required or permitted
to be given by either the Company or the Purchase pursuant to the terms of this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally, (ii) five days after it is deposited in the U.S. mail, First Class
with postage prepaid, or (iii) one day after deposit (prepaid) with a
nationally recognized overnight courier, and addressed to the parties at the
addresses of the parties set forth in the Series A Preferred Stock Purchase
Agreement or such other address as a party may request by notifying the other
in writing.
(c)
Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(d)
The parties acknowledge that money damages may not be
an adequate remedy for violations of this Agreement and that any party may, in
its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper to enforce this Agreement or to prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief in appropriate circumstances.
(e)
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f)
Each party to this Agreement represents that such
party has duly authorized, executed and delivered this Agreement and that this
Agreement is a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
(g)
All certificates representing any Shares subject to
the provisions of this Agreement shall have endorsed thereon an appropriate
legend referencing the restrictions imposed by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY
AMAZON.COM, INC.
By: /s/ Jeff P. Bezos
----------------------------------Jeffrey P. Bezos, President and
Chief Executive Officer
[SIGNATURE PAGE FOR RIGHT OF FIRST OFFER AGREEMENT]
5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SERIES A PREFERRED STOCKHOLDERS:
KLEINER, PERKINS, CAUFIELD &
BYERS VIII
By: /s/ L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caulfield & Byers VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: /s/ L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caulfield & Byers VIII
[SIGNATURE PAGE FOR RIGHT OF FIRST OFFER AGREEMENT]
1
EXHIBIT 10.5
AMAZON.COM, INC.
REPURCHASE AGREEMENT
This Agreement is entered into as of June 21, 1996 by and between
Amazon.com, Inc., a Delaware corporation (the "Company"), and Jeffrey P. Bezos
("Investor").
RECITALS
A.
Prior to the date of this Agreement, the Company sold to
Investor and Investor purchased from the Company 1,700,000 shares of common
stock, $.01 par value per share, of the Company (the "Stock") at a price of
$.006 per share ("Purchase Price").
B.
The Company and each of Kleiner, Perkins, Caufield & Byers,
VIII and KPCB Information Sciences Zaibatsu Fund II (the "Series A Investors")
are entering into a Series A Preferred Stock Purchase Agreement of even date
herewith (the "Series A Agreement") pursuant to which the Series A Investors
are purchasing from the Company an aggregate of 569,396 shares of Series A
Preferred Stock, $.01 par value per share, of the Company for an aggregate
purchase price of $8,000,000;
C.
In order to induce the Company to enter into the Series A
Agreement, and to induce the Series A Investors to invest funds in the Company
pursuant to the Series A Agreement, Investor has agreed that a percentage of
the Stock originally purchased by such Investor from the Company be subject to
a purchase option in favor of the Company, and certain other matters set forth
herein.
AGREEMENTS
In consideration of the foregoing and the other provisions set forth
herein, the parties hereby agree as follows:
1.
PURCHASE OPTION
Six percent (6%) of the Stock (such 102,000 shares, subject to
increase or decrease pursuant to any forward or reverse stock split, stock
dividend or similar non-economic adjustment being referred to herein as the
"Option Shares") shall be subject to the following option (the "Purchase
Option"):
(a)
In the event that, prior to the termination of this
Agreement, Investor ceases to be continuously employed by the Company, or a
parent or
2
subsidiary or successor or affiliate of the Company, due either to his
voluntary resignation (other than due to disability) or to termination by the
Company for Cause (as defined below), the Company may exercise the Purchase
Option. For the purpose of this paragraph 1, Investor's "continuous
employment" shall cease when Investor ceases to be actively employed by the
Company or a parent or subsidiary or successor or affiliate of the Company, as
determined in the reasonable discretion of the Board of Directors of the
Company after at least 30 days' prior written notice is provided to Investor
that such a determination is under consideration. Vacations and absences due
to illness, disability or family crisis shall not be considered in determining
whether a cessation of Investor's active employment has occurred. The date
when continuous employment ceases is hereinafter referred to as the Termination
Date. The term "Cause" shall mean: (i) Investor's conviction of (or plea of
guilty or nolo contendere to) a felony which had or will have a material
detrimental effect on the Company's business, (ii) a grossly negligent or
willful act by Investor which constitutes gross misconduct and is injurious to
the Company, and (iii) continued violations by Investor of his material duties
which are demonstrably willful and deliberate or grossly negligent on
Investor's part after there has been delivered to Investor a written demand for
performance from the Company which describes the basis for the Company's belief
that Investor has not substantially performed his duties.
The Company shall have the right at any time within forty-five
(45) days after the Termination Date, provided that such date is prior to the
termination of this Agreement, to purchase from the Investor, at a price per
share equal to the Purchase Price (appropriately adjusted for any subsequent
stock split, dividend, combination, or other recapitalization) (the "Repurchase
Price"), up to but not exceeding a number of Option Shares equal to one hundred
percent (100%) of the Option Shares less 2,833 Option Shares (appropriately
adjusted for any subsequent stock split, dividend, combination, or other
recapitalization) for each completed month of employment with the Company
between the date of this Agreement (the "Commencement Date") and the
Termination Date.
(b)
The Purchase Option, if exercised by the Company,
shall be exercised by written notice signed by an officer or director of the
Company after approval by the Board of Directors and delivered to Investor on
or prior to the expiration of the 30 day period referred to in paragraph (a)
above. The Company may pay for the Option Shares it has elected to repurchase
(i) by delivery to the Investor of a check in the amount of the aggregate
Repurchase Price for the number of shares of Stock being repurchased, (ii) by
cancellation by the Company of an amount of Investor's indebtedness to the
Company or (iii) by a combination of (i) and (ii), so that the combined payment
to the Investor and cancellation of indebtedness of the Investor equals such
aggregate Repurchase Price. Payment of the Repurchase Price shall be
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completed within five business days after notice of exercise of the Purchase
Option is delivered to Investor.
(c)
Immediately prior to the consummation or occurrence
of any of the following:
(i)
any merger, sale of assets, consolidation,
reorganization or other sale of the Company as a result of which securities
representing a majority of the voting power of the Company are held by persons
or entities that held less than a majority voting interest in the Company prior
to such transaction;
(ii)
the liquidation, dissolution or indefinite
cessation of the business operations of the Company;
(iii)
the execution by the Company of a general
assignment for the benefit of creditors, the appointment of a receiver or
trustee to take possession of the property and assets of the Company, or the
filing of a petition under applicable bankruptcy laws with respect to the
Company;
(iv)
consummation of an initial registered public
offering of the Company's Common Stock under the Securities Act of 1933, as
amended;
(v)
the death or disability of Investor; or
(vi)
the cessation of Investor's employment with
the Company (or a parent or subsidiary or successor or affiliate of the
Company) due to any reason other than voluntary resignation (other than due to
disability) or termination by the Company for Cause;
the Purchase Option shall automatically lapse in its entirety and this
Agreement shall thereupon terminate.
2.
LEGENDS
All certificates representing any Option Shares subject to the
provisions of this Agreement shall have endorsed thereon an appropriate legend
referencing the restrictions imposed by this Agreement.
3.
RIGHTS OF INVESTOR AS SHAREHOLDER
Subject to the terms hereof, Investor shall have all the rights of a
shareholder with respect to the Option Shares during the term of this
Agreement, including
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without limitation the right to vote and receive any dividends or other
distributions declared thereon.
4.
ADJUSTMENTS FOR STOCK SPLITS AND OTHER NON-ECONOMIC EVENTS
If, at any time or from time to time, there is any stock dividend,
stock split, recapitalization, or other similar change or adjustment made with
respect to the outstanding securities of the Company, any and all new,
substituted or additional securities to which Investor is entitled by reason of
his or her ownership of the Option Shares then subject to the Purchase Option
shall be included in the definition of "Option Shares" for purposes of this
Agreement and shall be subject to the Purchase Option pursuant to Section 1
with the same force and effect as the Option Shares currently subject to this
Agreement and the Purchase Option. While the total Repurchase Price shall
remain the same after each such event, the Repurchase Price per share of Stock
upon exercise of the Purchase Option shall be appropriately adjusted as
reasonably determined by the Board of Directors of the Company.
5.
TERMINATION
This Agreement shall terminate in its entirety upon the lapse of the
Purchase Option in its entirety pursuant to Section 1(c) or otherwise, or upon
the completion of a repurchase transaction pursuant to an exercise of the
Purchase Option, in either case in accordance with the terms of this Agreement.
6.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.
AMENDMENT
This Agreement shall not be subject to modification or amendment in
any respect, except by an instrument in writing signed by Investor and on
behalf of the Company and approved by its Board of Directors.
8.
GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Washington, without regard to
principles of conflict of laws.
-4-
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9.
ARBITRATION
Any controversies or claims arising out of or relating to this
Agreement shall be fully and finally settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules"), conducted by one arbitrator either mutually agreed upon by the
parties or chosen in accordance with the AAA Rules, except that the parties
thereto shall have any right to discovery as would be permitted by the Federal
Rules of Civil Procedure for a period of 90 days following the commencement of
such arbitration, and the arbitrator thereof shall resolve any dispute which
arises in connection with such discovery. Arbitration proceedings shall be
conducted in Seattle, Washington.
10.
NOTICES
All notices, demands or other communications desired or required to be
given by any party to any other party hereto shall be in writing and shall be
deemed effectively given upon (a) personal delivery to the party to be
notified, (b) upon confirmation of receipt of telecopy or other electronic
facsimile transmission, (c) one business day after deposit with a reputable
overnight courier, prepaid for priority overnight delivery and addressed as set
forth in (d), or (d) five days after deposit with the United States Post
Office, postage prepaid, and addressed as follows: (i) if to Investor, to
Jeffrey P. Bezos, c/o Amazon.com, Inc., at the address and facsimile number of
the Company''s then current executive offices; (ii) if to the Company, at the
address and facsimile number of the Company''s then current executive offices;
or (iii) to such other addresses and to the attention of such other individuals
as any party shall have designated to the other parties by notice given in the
foregoing manner.
11.
SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provisions were so excluded and shall be enforceable in accordance with its
terms.
12.
ENTIRE AGREEMENT
This Agreement constitutes the full and entire understanding and
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
AMAZON.COM, INC.
By Jeff P. Bezos
-----------------------------Jeffrey P. Bezos, CEO
INVESTOR:
Jeff P. Bezos
---------------------------------Jeffrey P. Bezos
-6-
1
EXHIBIT 10.6
AMAZON.COM, INC.
VOTING AGREEMENT
This Shareholders Agreement (this "Agreement") is made as of June 21,
1996 by and among Amazon.com, Inc., a Delaware corporation (the "Company"),
Jeffrey P. Bezos (the "Founder") and the Investors listed on the signature
pages of this Agreement (the "Investors"). The Founder and the Investors are
collectively referred to herein as the "Shareholders."
RECITALS
A.
The Founder is the holder of 1,700,000 shares of common stock,
$.01 par value per share, of the Company (excluding any such common stock which
may be issued upon conversion of Series A Stock (as defined below), "Common
Stock").
B.
Simultaneously herewith, the Company and the Investors are
entering into a Series A Preferred Stock Purchase Agreement (the "Series A
Agreement") pursuant to which the Company is issuing and the Investors are
purchasing, in the amounts set forth in Exhibit A to the Series A Agreement, an
aggregate of 569,396 shares of the Company's Series A Preferred Stock, $.01 par
value per share (including the shares of Common Stock issuable upon conversion
thereof, the "Series A Stock").
C.
It is a condition to the obligations of the Investors under
the Series A Agreement that this Agreement be executed by the parties hereto,
and the parties are willing to execute, and to be bound by the provisions of,
this Agreement.
AGREEMENT
In consideration of the foregoing and the agreements set forth below,
the parties hereby agree as follows:
1.
1.1
ELECTION OF DIRECTORS
VOTING OF SHARES
In elections of directors of the Company and during the term of this
Agreement, the Shareholders shall vote all shares of the capital stock of the
Company owned by them, or as to which they have voting power, for the
candidates designated pursuant to the provisions of this Agreement.
1
2
1.2
NUMBER OF DIRECTORS
The Board of Directors shall consist of such number of directors,
which shall not be less than five, as may be determined in accordance with the
Bylaws of the Company. The parties agree that the Board of Directors shall
consist of five directors until such time as the number of directors may be
increased above such number in accordance with such Bylaws. The parties shall
use their best efforts to permit no amendment of the Bylaws of the Company that
would reduce the number of directors constituting the Board of Directors below
five or that otherwise would conflict with the terms of this Agreement.
1.3
DESIGNATED DIRECTORS
In elections of Directors of the Company, the Shareholders shall vote
for the candidates designated pursuant to this Section 1.3:
(a)
One candidate for the Board of Directors shall be designated
by the holders of Series A Stock (the "Series A Director").
(b)
Two candidates for the Board of Directors shall be designated
by the holders of Common Stock ("Common Stock Directors").
(c)
Two candidates for the Board of Directors shall be designated
by the holders of Series A Stock and Common Stock voting together as a single
class.
The holders of Series A Stock initially designate L. John Doerr as the
Series A Director, and the Founder, as the holder of a majority of the
outstanding shares of Common Stock and on behalf of all holders of Common
Stock, initially designates Jeffrey P. Bezos and Tom A. Alberg as the Common
Stock Directors.
In the event that the number of directors constituting the Board of
Directors is increased above five, the provisions of this Agreement shall
continue with respect to five of the total number of directors, with the
remaining directors being elected in such manner as may be provided by law or
in the Certificate of Incorporation or Bylaws of the Company or pursuant to any
agreement entered into in connection with such increase.
1.4
VOTING AMONG SHAREHOLDERS
Whenever the holders of Series A Stock or the
shall be entitled to designate a candidate or
Directors, the designating group shall choose
majority vote among the members of that group
outstanding voting securities held
2
holders of Common Stock
candidates to the Board of
such candidate or candidates by a
based on the number of
3
by the members of that group; provided, however, that if shares are held and
voted by members of a group in such proportion that no majority vote is
obtained, then the candidates with the greatest number of votes shall be deemed
chosen (up to the number of candidates to be selected by such group). The
candidate(s) so chosen shall be the designated candidate(s) for that group and
the Shareholders agree to vote for such individuals. No director shall be
removed except by the affirmative vote of the group entitled to elect such
director, and no director may be so removed if the votes cast against such
director's removal would be sufficient (assuming that each of such group's
designated directors were being chosen) to designate such director for the
group. The manner of obtaining such vote shall be determined by the holders of
securities of such group, and the Company shall be entitled to rely on a
certificate from any holder of such group as to the validity of the action of
such group.
1.5
REMOVAL OF DIRECTORS AND VACANCIES
Directors may be removed at any time with or without cause, provided
that no Shareholder shall vote for the removal of a director nominated and
elected pursuant to this Agreement, and no such vote shall be effective, unless
the parties who nominated such director, voting among themselves in accordance
with Section 1.4, shall so specify. If such parties do so specify the removal
of a director, the Shareholders agree to vote all shares of capital stock of
the Company owned by them, or as to which they have voting power, for the
removal of such director. If a vacancy occurs on the Board of Directors, the
remaining directors shall immediately elect the nominee of the group that
nominated the departing director. If the remaining directors fail for any
reason to elect such nominee, the Company or the Shareholders shall cause a
shareholders' meeting to be held at the earliest practicable date, at which
meeting the Shareholders shall vote, pursuant to this Agreement, all shares of
capital stock of the Company owned by them, or as to which they have voting
power, for such nominee.
2.
ADDITIONAL SHARES OF STOCK
In the event additional shares of voting capital stock of the Company
are, at any time during the term of this Agreement, issued to a Shareholder,
such additional shares of voting capital stock shall automatically become
subject to the terms and provisions of this Agreement and shall be voted in
accordance herewith.
3.
TERMINATION
This Agreement shall terminate in its entirety upon the earliest to
occur of (a) immediately prior to the closing of an initial public offering of
the Company's common stock registered under the Securities Act of 1933, as
amended, (b) any merger, sale of assets, consolidation, reorganization or other
sale of the Company as a result of which securities representing a majority of
the voting power of the Company
3
4
are held by persons or entities that held less than a majority voting interest
in the Company prior to such transaction, (c) the liquidation, dissolution or
indefinite cessation of the business operations of the Company, (d) the
execution by the Company of a general assignment for the benefit of creditors,
the appointment of a receiver or trustee to take possession of the property and
assets of the Company, or the filing of a petition under applicable bankruptcy
laws with respect to the Company, and (e) the seventh anniversary of the date
of this Agreement.
4.
AUTHORIZATION
Each party hereto represents that this Agreement has been duly
authorized, executed and delivered by such party and constitutes a valid and
binding obligation of such party, enforceable against such party in accordance
with its terms.
5.
SUCCESSORS
The provisions of this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of the parties hereto.
6.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.
AMENDMENT
This Agreement shall not be subject to modification or amendment in
any respect, except by an instrument in writing signed by the Company and each
of the Shareholders.
8.
GOVERNING LAW
This Agreement is entered into pursuant to and in accordance with the
provisions of Section 218 of the Delaware General Corporation Law. All
disputes hereunder shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware, without regard to
principles of conflict of laws.
9.
SPECIFIC PERFORMANCE
The parties acknowledge that money damages may not be an adequate
remedy for violations of this Agreement and that any party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper to
enforce this Agreement or to prevent
4
5
any violation hereof and, to the extent permitted by applicable law, each party
waives any objection to the imposition of such relief in appropriate
circumstances.
10.
NOTICES
All notices, demands or other communications desired or required to be
given by any party to any other party hereto shall be in writing and shall be
deemed effectively given upon (a) personal delivery to the party to be
notified, (b) upon confirmation of receipt of telecopy or other electronic
facsimile transmission, (c) one business day after deposit with a reputable
overnight courier, prepaid for priority overnight delivery and addressed as set
forth in (d), or (d) five days after deposit with the United States Post
Office, postage prepaid, and addressed as follows: (i) if to the Founder, to
Jeffrey P. Bezos, c/o Amazon.com, Inc., at the address and facsimile number of
the Company''s then current executive offices; (ii) if to the Investors, c/o
Kleiner, Perkins Caufield and Byers, 2750 Sand Hill Road, Menlo Park, CA 94025,
facsimile number (415) __________; or (iii) to such other addresses and to the
attention of such other individuals as any party shall have designated to the
other parties by notice given in the foregoing manner.
11.
SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provisions were so excluded and shall be enforceable in accordance with its
terms.
12.
ENTIRE AGREEMENT
This Agreement constitutes the full and entire understanding and
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect to the subject matter hereof.
5
6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AMAZON.COM, INC.
By: Jeff P. Bezos
--------------------------------Title: President and Chief Executive Officer
------------------------------------FOUNDER:
Jeff P. Bezos
-------------------------------------------Jeffrey P. Bezos
INVESTORS:
KLEINER, PERKINS, CAUFIELD & BYERS,
VIII
By
-----------------------------------------Title
--------------------------------------KPCB INFORMATION SCIENCES FUND, II
By
-----------------------------------------Title
---------------------------------------
6
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INVESTORS:
KLEINER, PERKINS, CAUFIELD &
BYERS, VIII
By L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND, II
By L. John Doerr
------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
7
1
EXHIBIT 10.7
AMAZON.COM, INC.
INVESTOR RIGHTS AGREEMENT
JUNE 21, 1996
2
TABLE OF CONTENTS
Page
SECTION 1.
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
Certain Definitions . . . . . .
Restrictions . . . . . . . . . .
Restrictive Legend . . . . . . .
Notice of Proposed Transfers . .
Requested Registration . . . . .
Company Registration . . . . . .
Registration on Form S-3 . . . .
Expenses of Registration . . . .
Registration Procedures . . . .
Indemnification . . . . . . . .
Information by Holder . . . . .
Rule 144 Reporting . . . . . . .
Transfer of Registration Rights
Standoff Agreement . . . . . . .
Termination of Rights . . . . .
SECTION 2.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
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Affirmative Covenants of the Company
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Waiver
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Schedule of Investors
Restrictive
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1
1
2
2
3
3
5
6
7
7
9
10
10
11
11
11
11
11
12
12
12
12
12
13
13
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assignment . . . . . .
Third Parties . . . .
Governing Law . . . .
Counterparts . . . . .
Notices . . . . . . .
Severability . . . . .
Amendment and Waiver .
Effect of Amendment or
Rights of Holders . .
Delays or Omissions .
EXHIBIT A
EXHIBIT B
Legend
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Financial Information . . . . . . . . . . . .
Operating Plan and Budget . . . . . . . . . .
Inspection . . . . . . . . . . . . . . . . . .
Assignment of Rights to Financial Information
Proprietary Information Agreement . . . . . .
Termination of Covenants . . . . . . . . . . .
Right of First Offer . . . . . . . . . . . . .
Initial Public Offering . . . . . . . . . . .
SECTION 3.
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
Restrictions on Transferability, Registration Rights
14
14
14
14
14
14
14
14
15
15
14
3
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 21st day of June, 1996, by and among Amazon.com, Inc., a Delaware
corporation (the "Company"), the persons set forth on the Schedule of Investors
attached hereto as Exhibit A (the "Investors") and, with respect to Section
1.6, Section 2.6 and Section 2.8, Jeffrey P. Bezos.
RECITALS
The Company and the Investors are entering into a Series A Preferred
Stock Purchase Agreement (the "Series A Agreement) of even date herewith,
pursuant to which the Company shall sell, and the Investors shall acquire,
shares of the Company's Series A Preferred Stock (the "Series A Preferred").
The shares of Series A Preferred are referred to collectively herein as the
"Shares."
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1.
RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS
1.1
Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable
upon conversion of the Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean any Investor holding Registrable
Securities and any person holding Registrable Securities to whom the rights
under this Agreement have been transferred in accordance with Section 1.13
hereof. Jeffrey P. Bezos shall be deemed to be a Holder, but only with respect
to a registration effected pursuant to Section 1.6 below.
"Initiating Holders" shall mean any Investors or transferees
of Investors under Section 1.13 hereof who in the aggregate are Holders of not
less than fifty percent (50%) of the Registrable Securities.
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
4
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 1.5, 1.6 and 1.7 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, and the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
"Registrable Securities" means any Common Stock of the Company
issued or issuable in respect of the Shares or Conversion Shares or other
securities issued or issuable with respect to the Shares or Conversion Shares
upon any stock split, stock dividend, recapitalization, or similar event, or
any Common Stock otherwise issued or issuable with respect to the Shares or
Conversion Shares; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in
a public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale. The Common Stock held by Bezos shall be deemed
Registrable Securities, but only with respect to a registration effected
pursuant to Section 1.6 below, and subject to all limitations therein.
"Restricted Securities" shall mean the securities of the
Company required to bear the legend set forth in Section 1.3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean an underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (as limited by Section 1.8).
1.2
Restrictions. The Shares and the Conversion Shares shall not
be sold, assigned, transferred or pledged except upon the conditions specified
in this Agreement, which conditions are intended to ensure compliance with the
provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee or pledgee of the Shares and the Conversion
Shares to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Agreement.
1.3
Restrictive Legend. Each certificate representing (i) the
Shares, (ii) the Conversion Shares, and (iii) any other securities issued in
respect of the securities referenced in clauses (i) and (ii) upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4
below) be stamped or otherwise imprinted with a legend in the form of Exhibit B
attached hereto (in addition to any legend required under applicable state
securities laws).
-2-
5
Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4
Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed
sale, assignment, transfer or pledge of any Restricted Securities, unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) a written opinion of legal
counsel who shall, and whose legal opinion shall be, reasonably satisfactory to
the Company, addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, or (iii) any other evidence reasonably satisfactory to counsel to the
Company, whereupon the holder of such Restricted Securities shall be entitled
to transfer such Restricted Securities in accordance with the terms of the
notice delivered by the holder to the Company. The Company will not require
such a legal opinion or "no action" letter (a) in any transaction in compliance
with Rule 144 or (b) in any transaction in which an Investor which is a
partnership distributes Restricted Securities solely to partners thereof for no
additional consideration. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.
1.5
Requested Registration.
(a)
Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the Company will:
(i)
promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii)
as soon as practicable, use its commercially
reasonable efforts to effect such registration, qualification or compliance
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within thirty
(30) days after receipt of such written notice from the Company; provided,
however, that
-3-
6
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1.5;
(1)
In any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(2)
Prior to the earlier of (a) one year
following the effective date of the first public offering of the Common Stock
of the Company to the general public which is effected pursuant to a
registration statement filed with and declared effective by, the Commission
under the Securities Act (the "Initial Public Offering") or (b) the third
anniversary of the date of this Agreement;
(3)
Unless not less than one half of the
Registrable Securities then outstanding are included in the request for
registration pursuant to Section 1.5(a) above;
(4)
After (i) the Company has effected
two (2) such registrations pursuant to this subparagraph 1.5(a) and each such
registration has been declared or ordered effective and remained effective for
the period specified in Section 1.9(a) of this Agreement or (ii) after seven
(7) years after the date hereof or five years after the closing of the
Company's Initial Public Offering, whichever is earlier; or
(5)
If the Company shall furnish to such
Holders a Certificate, signed by the President of the Company, stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed in the near future, then the Company's obligation to use its
commercially reasonable efforts to register, qualify or comply under this
Section 1.5 shall be deferred for a period not to exceed one hundred and twenty
(120) days from the date of receipt of written request from the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Initiating Holders.
(b)
Underwriting. In the event that a registration
pursuant to Section 1.5 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to Section 1.5(a)(i). The right of any Holder to registration
pursuant to Section 1.5 shall be conditioned upon such Holder's participation
in the underwriting arrangements required by this Section 1.5 and the inclusion
of such Holder's Registrable Securities in the underwriting to the extent
requested, to the went provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company (which managing underwriter shall be reasonably
acceptable to a majority in interest of the Initiating Holders).
Notwithstanding any other provision of this Section 1.5, if the managing
underwriter determines that marketing factors require a
-4-
7
limitation of the number of shares to be underwritten, then the Company shall
so advise all Holders of Registrable Securities in writing and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders at the time of filing the registration statement, provided,
however, that the number of shares of Registrable Securities to be included in
such underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred and eighty (180) days
after the effective date of such registration.
1.6
Company Registration.
(a)
Notice of Registration. If at any time or from time
to time prior to the seventh anniversary of the date of this Agreement or the
fifth anniversary of the Company's Initial Public Offering, whichever is
earlier, the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders other than
(i) a registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, the Company
will (but not more than five (5) times pursuant to this Section 1.6(a)):
(i)
promptly give to each Holder written notice
thereof; and include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests made
within fifteen (15) days after receipt of such written notice from the Company
by any Holder, but only to the extent that such inclusion will not diminish the
number of securities included by holders of the Company's securities who have
demanded such registration pursuant to Section 1.5 hereof.
(b)
Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 1.6(a)(i). In such event, the right of any
Holder to registration pursuant to Section 1.6 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting, to the extent requested, to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section 1.6, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of Registrable Securities to be included in
the registration and underwriting (up to the exclusion of all Registrable
Securities in the event of the Company's initial public offering), on a pro
rata basis based on the total number of securities (including, without
limitation, Registrable Securities) entitled to registration
-5-
8
pursuant to registration rights granted to the participating Holders by the
Company; provided, however, that if such offering is not the initial offering
of shares to the public, no such reduction may reduce the number of securities
being sold by the Holders to less than fifteen percent (15%) of the shares
being sold in such offering. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder or other holder to the nearest 100
shares. If any Holder or other holder disapproves of the terms of any such
underwriting, he or she may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to one hundred twenty (120) days
after the effective date of the registration statement relating thereto.
(c)
Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 1.6 prior to the effectiveness of such registration, whether or
not any Holder has elected to include securities in such registration.
1.7
Registration on Form S-3.
(a)
Notwithstanding the restrictions of Section 1.6
above, if any Holder or Holders of not less than twenty percent (20%) of the
Registrable Securities requests that the Company file a registration statement
on Form S-3 (or any successor form to Form S-3) for a public offering of shares
of the Registrable Securities, the reasonably anticipated aggregate price to
the public of which, net of underwriting discounts and commissions, would
exceed $1,000,000, and the Company is a registrant entitled to use Form S-3 to
register the Registrable Securities for such an offering, the Company shall use
its commercially reasonable efforts to cause such Registrable Securities to be
registered for the offering on such form. The Company will (i) promptly give
written notice of the proposed registration to all other Holders, and (ii) as
soon as practicable, use its commercially reasonable efforts to effect such
registration (including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate, the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within fifteen (15) days after receipt of such written notice from the Company.
The substantive provisions of Section 1.5(b) shall be applicable to each
registration initiated under this Section 1.7.
(b)
Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this Section 1.7: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act; (ii)
during the period starting with the date sixty (60) days prior to the Company's
estimated date of filing of and ending on the date six (6) months immediately
following the effective date of, a registration statement (other than with
respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; (iii) after the Company has
effected three (3) such registrations pursuant to this Section 1.7 and each
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such registration has been declared or ordered effective and has remained
effective for the period specified in Section 1.9(a) of this Agreement; (iv)
after seven (7) years after the date of this Agreement or five (5) years after
the closing of the Company's Initial Public Offering, whichever is earlier; or
(v) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors, it would be seriously detrimental to the Company or its
shareholders for registration statements to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed one hundred twenty (120)
days from the receipt of the request to file such registration by such Holder
or Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
1.8
Expenses of Registration. All Registration Expenses incurred
in connection with any registration pursuant to Sections 1.5 and 1.6 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company. All
Registration Expenses incurred in connection with any registration pursuant to
Section 1.7 of this Agreement and the cost of any counsel for the Holders in
any such registration shall be borne by the Holders pro rata according to the
number of Registrable Securities included by them in such registration. If a
registration proceeding is begun upon the request of Initiating Holders
pursuant to Section 1.5, but such request is subsequently withdrawn, then the
Holders of Registrable Securities to have been registered may either: (i) bear
all Registration Expenses of such proceeding, pro rata on the basis of the
number of shares to have been registered, in which case the Company shall be
deemed not to have effected a registration pursuant to subparagraph 1.5(a) of
this Agreement; or (ii) require the Company to bear all Registration Expenses
of such proceeding, in which case the Company shall be deemed to have effected
a registration pursuant to subparagraph 1.5(a) of this Agreement.
Notwithstanding the foregoing however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of said Registration
Expenses. In such case, the Company shall be deemed not to have effected a
registration pursuant to subparagraph 1.5(a) of this Agreement. Unless
otherwise stated, all other Selling Expenses relating to securities registered
on behalf of the Holders shall be borne by the Holders of the registered
securities included in such registration pro rata on the basis of the number of
shares so registered.
1.9
Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. The Company will:
(a)
Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective until the
distribution described in the registration statement has been completed, but in
no event longer than sixty (60) days; and
(b)
Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
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(c)
Furnish to the Holders participating in such
registration and to the underwriters, if any, of the securities being
registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
underwriters may reasonably request in order to facilitate the public offering
of such securities.
(d)
Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
(e)
In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f)
Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g)
Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange or other trading
market on which similar securities issued by the Company are then listed.
(h)
Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.
(i)
Use its best efforts to furnish, at the request of
any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, if such securities are being sold through underwriters, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
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1.10
Indemnification.
(a)
The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act, against all
actual out-of-pocket expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, preliminary prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation or any
alleged violation by the Company of any rule or regulation promulgated under
the Securities Act or the Exchange Act or any state securities law applicable
to the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse each such Holder, each of its
officers and directors, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal
and any other actual out-of-pocket expenses reasonably incurred in connection
with investigating, preparing or defending any such claim, loss, damage,
liability or action, as such expenses are incurred, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by such Holder,
controlling person or underwriter specifically for use therein.
(b)
Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all actual out-of-pocket expenses, claims, losses,
damages and liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any such registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein, in light of the circumstances in which they were made, or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, persons, underwriters or
control persons for any legal and any other actual out-of-pocket expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, as such expenses are incurred, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Holder specifically for use therein.
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(c)
Each party entitled to indemnification under this
Section 1.10 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, however, that an Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the reasonable fees and expenses of such counsel to be paid by the
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other
party represented by such counsel in such proceeding. The failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.10 unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party (not to be unreasonably withheld), consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.11
Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.12
Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a)
Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of the Exchange Act.
(b)
File with the Commission in a timely manner all
reports and other documents required of the Company under the Exchange Act (at
any time after it has become subject to such reporting requirements); and
(c)
So long as an Investor owns any Restricted
Securities, to furnish to the Investor forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements
of Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the
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Company as an Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investor to sell any such securities
without registration.
1.13
Transfer of Registration Rights. The rights to cause the
Company to register securities granted Investors under Sections 1.5, 1.6 and
1.7 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with transfer or assignment of Registrable Securities by
an Investor (together with any affiliate); provided that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company, and (c) such transferee or assignee
(i) is a wholly-owned subsidiary or constituent partner (including limited
partners, retired partners, spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) of such Investor, or (ii) acquires from
such Investor at least 25% of the Shares (as appropriately adjusted for stock
splits and the like) originally purchased by such Investor (or Common Stock
issued upon conversion thereof).
1.14
Standoff Agreement. Each Holder agrees in connection with any
registration of the Company's securities (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, not to sell, make any short
sale of, loan, pledge (or otherwise encumber or hypothecate), grant any option
for the purchase of, or otherwise directly or indirectly dispose of any
Registrable Securities (other than those included in the registration) without
the prior written consent of the Company and such managing underwriters for
such period of time as the Board of Directors establishes pursuant to its good
faith negotiations with such managing underwriters; provided, however, that the
Investors shall not be subject to such lockup unless the officers and directors
of the Company who own stock of the Company shall also be bound by such
restrictions.
1.15
Termination of Rights. The rights of any particular Holder to
cause the Company to register securities under Sections 1.5, 1.6 and 1.7 shall
terminate with respect to such Holder on the earlier of (a) the fifth
anniversary of the effective date of the Company's Initial Public Offering or
(b) the seventh anniversary of the date of this Agreement.
SECTION 2.
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
2.1
Financial Information. So long as an Investor holds at least
25% of the Shares originally purchased by such Investor and/or shares of Common
Stock issued upon the conversion thereof (as adjusted for any stock splits,
consolidations and the like), the Company will furnish to such Investor the
following reports:
(a)
As soon as practicable after the end of each fiscal
year, and in any event within ninety (90) days thereafter, audited consolidated
balance sheets and statements of shareholders' equity of the Company and its
subsidiaries, if any, as of the end of such fiscal year, and consolidated
statements of income and cash flows of the Company and its subsidiaries, if
any, for such year,
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prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of national standing selected by the Company. and
(b)
As soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, unaudited balance sheets of the Company and
its subsidiaries, if any, as of the end of each such quarter, and consolidated
statements of income and cash flows of the Company and its subsidiaries, if
any, for each such quarter, all prepared in accordance with generally accepted
accounting principles.
(c)
As soon as practicable after the end of each calendar
month, and in any event within 30 days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of each calendar
month, and consolidated statements of income and cash flows for such period and
for the current fiscal year to date, together with a comparison of such
statements to the Company's operating plan then in effect.
2.2
Operating Plan and Budget. So long as an Investor holds at
least 25% of the Shares originally purchased by such Investor and/or shares of
Common Stock issued upon conversion thereof (as adjusted for any stock splits,
consolidations and the like) the Company will furnish such Investor with the
Company's budget and operating plan (including projected balance sheets and
profit and loss and cash flow statements) for each fiscal year, as soon as
practicable after approval or adoption thereof by the Company's Board of
Directors.
2.3
Inspection. The Company shall permit each Investor, upon
reasonable notice to the Company at such Investor's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times during normal business hours as may be requested
by the Investor; provided, however, that the Company shall not be obligated
pursuant to this Section 2.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
2.4
Assignment of Rights to Financial Information. The rights
granted pursuant to Sections 2.1 and 2.2 may be assigned by an Investor to a
third party who acquires at least 50% of the Shares originally purchased by
such Investor and/or shares of Common Stock issued upon conversion thereof (as
adjusted for any stock splits, consolidations, and the like) and who is not a
competitor, or affiliated in any manner with a competitor, of the Company,
provided that the Company receives notice twenty (20) days prior to such
assignment.
2.5
Proprietary Information Agreement. The Company shall require
each person employed by, or who consults for, the Company to execute a
proprietary information confidentiality and nondisclosure agreement in
substantially the form provided to special counsel to the Investors.
2.6
Termination of Covenants. The covenants set forth in Sections
2.1 through 2.5 shall terminate on, and be of no further force or effect after,
the closing of the Company's initial public offering of Common Stock.
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2.7
Right of First Offer. Subject to the term and conditions
specified in this Section 2.7, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its
Securities (as hereinafter defined).
Each time the Company proposes to offer subsequent to the offering
under the Series A Agreement any shares of, or securities convertible into or
exercisable for any shares of, any class of its capital stock ("Securities"),
the Company shall first make an offering of such Securities to each Investor in
accordance with the following provisions:
(a)
The Company shall deliver a notice (Notice") to each
Investor stating (i) its bona fide intention to offer such Securities, (ii) the
number of such Securities to be offered, (iii) the price, if any, for which it
proposes to offer such Securities, and (iv) the terms of such offer.
(b)
Within fifteen (15) calendar days after receipt of
the Notice, the Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to an amount of such Securities equal to
that portion of such Securities which equals the proportion that the number of
shares of Common Stock then issued or issuable to the Investor upon conversion
of the shares of Series A Preferred held by the Investor bears to the sum of
the number of shares of Common Stock then issued plus the number of shares of
Common Stock issuable upon (i) conversion of all convertible securities of the
Company then outstanding and (ii) exercise of all vested options and warrants
then outstanding. An Investor shall be entitled to apportion the right of
first offer hereby granted among itself and its partners and affiliates in such
proportions as it deems appropriate.
(c)
If all Securities which the Investors are entitled to
purchase pursuant to this Section 2.7 are not elected to be obtained as
provided in subsection 2.7(b) hereof, the Company may, during the sixty (60)
day period following the expiration of the period provided in subsection 2.7(b)
hereof, offer such unsubscribed Securities to any person or persons at a price
not less than, and upon terms not materially more favorable to the offeree
than, those specified in the Notice. If the Company does not enter into an
agreement for the sale of the Securities within such period, or if such
agreement is not consummated within thirty (30) days of the execution thereof,
the right provided hereunder shall be deemed to be revived.
(d)
The right of first offer in this Section 2.7 shall
not be applicable (i) to the issuance or sale of shares of capital stock (or
options therefor) to employees, officers, directors or consultants for the
primary purpose of soliciting or retaining their services, (ii) to the issuance
or sale of the Company's securities to leasing entities or financial
institutions in connection with commercial leasing or borrowing transactions,
(iii) to or after consummation of the Company's Initial Public Offering, (iv)
to conversions of convertible securities or exercises of exercisable
securities, (v) to any issuances of any of the shares of Series A Preferred
authorized as of the date of this Agreement or (vi) to any issuance of
securities in connection with any acquisition, business combination,
reorganization, merger or similar event.
2.9
Initial Public Offering. The Investors agree not to take any
action or omit to take any action reasonably requested by the Company which
would prevent, block or impede the consummation of an Initial Public Offering.
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SECTION 3.
MISCELLANEOUS
3.1
Assignment. Except as otherwise provided herein, the terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties hereto.
3.2
Third Parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
3.3
Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Washington in the United States of
America.
3.4
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.5
Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, addressed to the other party at the address shown
below or at such other address for which such party gives notice hereunder.
Such notice shall be deemed to have been given three (3) days after deposit in
the mail.
3.6
Severability. If one or more provisions of this Agreement am
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7
Amendment and Waiver. Any provision of this Agreement may be
amended with the written consent of the Company and the Holders (other than Mr.
Bezos) of at least fifty percent (50%) of the outstanding shares of the
Registrable Securities; provided, however, that no amendment may impose
additional obligations upon Mr. Bezos that are not also imposed on the Holders
without Mr. Bezos' prior written consent. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event
that an underwriting agreement is entered into between the Company and any
Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
3.8
Effect of Amendment or Waiver. The Investors and their
successors and assigns acknowledge that by the operation of Section 3.7 hereof
the holders of fifty percent (50%) of the outstanding Registrable Securities
(other than Mr. Bezos), acting in conjunction with the Company, will have the
right and power to diminish or eliminate any or all rights or increase any or
all obligations pursuant to this Agreement.
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3.9
Rights of Holders. Each holder of Registrable Securities
shall have the absolute right to exercise or refrain from exercising any right
or rights that such holder may have by reason of this Agreement, including,
without limitation, the right to consent to the waiver or modification of any
obligation under this Agreement, and such holder shall not incur any liability
to any other holder of any securities of the Company as a result of exercising
or refraining from exercising any such right or rights.
3.10
Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
AMAZON.COM, INC.
By: Jeff P. Bezos
---------------------------------Jeffery P. Bezos, President and
Chief Executive Officer
FOUNDER
Jeff P. Bezos
- --------------------------------------Jeffery P. Bezos
[SIGNATURE PAGE FOR INVESTOR RIGHTS AGREEMENT]
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INVESTORS:
KLEINER, PERKINS, CAUFIELD &
BYERS VIII
By: L. John Doerr
--------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
KPCB INFORMATION SCIENCES
ZAIBATSU FUND II
By: L. John Doerr
--------------------------------------General Partner of KPCB VIII
Associates, the General Partner of
Kleiner, Perkins, Caufield & Byers VIII
[SIGNATURE PAGE FOR INVESTOR RIGHTS AGREEMENT]
20
EXHIBIT A
SCHEDULE OF INVESTORS
Kleiner Perkins Caufield & Byers VII
2750 Sand Hill Road
Menlo Park, CA 94025
KPCB Information Sciences Zaibitsu Fund II
2750 Sand Hill Road
Menlo Park, CA 94025
21
EXHIBIT B
RESTRICTIVE LEGEND
1
Exhibit 10.8
January 31, 1997
Amazon.com, Inc.
1516 Second Avenue, 4th Floor
Seattle, Washington 98101
Attn.: Jeffrey P. Bezos
RE:
INVESTMENT LETTER
Ladies and Gentlemen:
I hereby irrevocably agree to purchase 2,500 shares of the Series A
Preferred Stock, par value $.01 per share (the "Securities"), of Amazon.com,
Inc., a Delaware corporation (the "Company"), for a purchase price of $40.00 per
share. A check made payable to the order of the Company in the amount of
$100,000, representing the aggregate purchase price for the Securities, is
delivered herewith.
I am aware that the Securities have not been registered under the
federal Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws, pursuant to exemptions from registration. I understand that the
reliance by the Company on such exemptions is predicated in part upon the truth
and accuracy of the statements by me in this letter.
I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Securities; (2) I have had the opportunity to ask questions and
receive answers concerning the information received about the Securities and the
Company; (3) I have been given the opportunity to obtain any additional
information I deem necessary to verify the accuracy of any information obtained
concerning the Securities and the Company; and (4) I am an "accredited investor"
as defined by Rule 501 promulgated by the Securities and Exchange Commission
(the "SEC") under Regulation D of the 1933 Act.
I hereby represent and warrant that I am purchasing the Securities for
my own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities. No one other than myself has
any beneficial interest in the Securities.
I understand that because the Securities have not been registered under
the 1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Securities cannot be sold unless the Securities are
subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of
the Securities unless (1) there is an effective registration statement under the
1933 Act and applicable state
2
Amazon.com, Inc.
January ___, 1997
Page 2
securities laws covering any such transaction involving the Securities or (2)
the Company receives an opinion of my legal counsel (concurred in by legal
counsel for the Company) stating that such transaction is exempt from
registration, or the Company otherwise satisfies itself that such transaction is
exempt from registration.
I consent to the placing of a legend on my certificate for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the SEC may not be
relied on for the resale or distribution of the Securities by me. I understand
that the Company has no obligation to me to register the Securities with the SEC
and has not represented to me that it will register the Securities.
Very truly yours,
Scott D. Cook
Scott D. Cook
Address:
Intuit
P.O. Box 7850 M/S 2475
Mountain View, CA 94039-7850
Taxpayer ID No.:
Accepted:
January
549-72-0996
31 , 1997
AMAZON.COM, INC.
By
Its
Jeff P. Bezos
President
1
EXHIBIT 10.9
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT (this "Agreement") is made as of
January 31, 1997, between Amazon.com, Inc., a Delaware corporation (the
"Company"), and Scott Cook (the "Investor") .
WHEREAS, the Investor is acquiring concurrently with the execution and
delivery of this Agreement 2,500 shares of the Company's Series A Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), at a purchase
price of $40.00 per share; and
WHEREAS, as a condition to the issuance to the Investor of such shares
of the Series A Preferred Stock, the Investor has agreed to grant the Company a
right of first refusal with respect to such shares of the Series A Preferred
Stock and all shares of the common stock, preferred stock, and all other
securities of the Company which may be issued to the Investor in exchange for or
in respect of such shares of the Series A Preferred Stock in any stock dividend,
stock split, reclassification or similar event (together, the "Shares").
THEREFORE, the undersigned agree as follows:
1.
COMPANY'S RIGHT OF FIRST REFUSAL
Before any Shares held by the Investor or any transferee of the
Investor (either being sometimes referred to herein as the "Selling
Stockholder") may be sold or otherwise transferred (including transfer by gift
or operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Selling Stockholder shall
(a) deliver to the Company a written notice (the "Notice") stating: (i) the
Selling Stockholder's bona fide intention to sell or otherwise transfer such
Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; (iv) the bona fide cash price or other consideration for which the
Selling Stockholder proposes to transfer the Shares (the "Offered Price"); and
(v) the material terms and conditions of the proposed transfer (the "Offer
Terms") and (b) offer the Shares at the Offered Price and on the Offer Terms to
the Company or its assignee(s).
2
(b) Exercise of Right of First Refusal. At any time within 30
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Selling Stockholder, elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more of
the Proposed Transferees, at the purchase price and on the terms determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price (the "Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price, and the terms and conditions of the transferee shall
be identical in all material respects to the Offer Terms (the "Terms"). If the
Offered Price includes consideration other than cash, the cash equivalent value
of the non-cash consideration shall be determined by the Board of Directors of
the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Selling
Stockholder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof, in any case in accordance with the
Terms, within thirty (30) days after delivery of the written notice by the
Company as set forth in Section 2(b).
(e) Selling Stockholder's Right to Transfer. If all of the
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this
Section , then the Selling Stockholder may sell or otherwise transfer
such Shares to that Proposed Transferee at the Offered Price or at a higher
price and on the Offer Terms, provided that such sale or other transfer is
consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Selling
Stockholder may be sold or otherwise transferred.
(f) Exception for Certain Transfers. Anything to the contrary
contained in this Section notwithstanding, (i) the transfer of any or all of the
Shares for no consideration by way of a gift to the spouse of the Selling
Stockholder or to his or her lineal descendants, or to trusts for the benefit of
his or her spouse or lineal descendants and (ii) the transfer of any or all of
the Shares to the Company shall be exempt from the provisions of this Section
if, in such case, the transferee, and the
-2-
3
transferee's spouse, if any, shall receive and hold any and all Shares so
transferred subject to the provisions of this Agreement and subject to the
obligations of the Investor hereunder, and shall, upon request by the Company
execute, prior to the transfer to such transferee, an Endorsement in the form
attached hereto as Exhibit A.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares immediately after the first sale of the
common stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
(h) Assignment of Right of First Refusal. The Right of First
Refusal shall be freely assignable by the Company at any time.
2.
GENERAL PROVISIONS
(a) This Agreement shall be governed by the laws of the State
of Washington as they apply to contracts entered into and wholly to be performed
in such state. This Agreement represents the entire agreement between the
parties with respect to the Company's Right of First Refusal and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Selling Stockholder pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally, (ii) five days after it is deposited in the U.S. mail, certified
with return receipt requested and with postage prepaid, or (iii) one day after
deposit (prepaid) with a nationally recognized overnight courier, and addressed
to the party being notified at his or its address specified on the applicable
signature page hereto or such other address which the addressee may subsequently
notify the other party in writing.
(c) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(d) The parties acknowledge that money damages may not be an
adequate remedy for violations of this Agreement and that any party may, in its
sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper to enforce this
-3-
4
Agreement or to prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection to the imposition of such relief
in appropriate circumstances.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Each party to this Agreement represents that such party
has duly authorized, executed and delivered this Agreement and that this
Agreement is a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
(g) All certificates representing any Shares subject to the
provisions of this Agreement shall have endorsed thereon an appropriate legend
referencing the restrictions imposed by this Agreement.
-4-
5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date above written.
COMPANY:
AMAZON.COM, INC.
By:
Jeff P. Bezos
-------------------------Jeffrey P. Bezos, President and
Chief Executive Officer
Address:
1516 Second Avenue, 4th Floor
Seattle, Washington 90101
INVESTOR:
Scott D. Cook
-------------------------Scott Cook
Address:
Intuit
P.O. Box 7850, M/S 2475
Mountain View CA 94039-7850
-5-
6
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
CONSENT OF SPOUSE
I Helen Signe Ostby , the spouse of Scott Cook, have read and approve
the foregoing Right of First Refusal Agreement (the "Agreement"). In
consideration of the terms and conditions as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact with respect to the exercise of
any rights and obligations under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights or obligations in
the Agreement or any shares issued pursuant thereto under the community property
laws of the state of California, similar laws relating to marital property in
effect in the state of our residence as of the date of the Agreement or
otherwise.
Date:
January 31, 1997
------------------------------Scott D. Cook
H. S. Ostby
------------------------------(Signature)
H. S. Ostby
------------------------------(Printed Name)
-6-
7
EXHIBIT A
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
ENDORSEMENT
The undersigned, a stockholder of Amazon.com, Inc., a Delaware
corporation (the "Company"), and his or her spouse hereby agree to the terms and
conditions of the Right of First Refusal Agreement dated as of January ___, 1997
(the "Agreement") originally entered into by and between the Company and Scott
Cook and acknowledge receipt of a copy of the Agreement and agree to be bound by
the obligations applicable to the Investor under the Agreement to the same
extent as if the undersigned were the Investor thereunder.
Dated:
-------------------------- -------------------------(Signature of Stockholder)
-------------------------(Signature of Spouse)
- -------------------------(Printed Name)
-------------------------(Printed Name)
Address:
- -------------------------- -------------------------- --------------------------7-
1
EXHIBIT 10.10
February 20, 1997
Amazon.com, Inc.
1516 Second Avenue, 4th Floor
Seattle, Washington 98101
Attn.: Jeffrey P. Bezos
RE:
INVESTMENT LETTER
Ladies and Gentlemen:
I hereby irrevocably agree to purchase 2,500 shares of Series A
Preferred Stock, par value $.01 per share (the "Securities"), of Amazon.com,
Inc., a Delaware corporation (the "Company"), for a purchase price of $40.00 per
share. A check made payable to the order of the Company in the amount of
$100,000, representing the aggregate purchase price for the Securities, is
delivered herewith.
I am aware that the Securities have not been registered under the
federal Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws, pursuant to exemptions from registration. I understand that the
reliance by the Company on such exemptions is predicated in part upon the truth
and accuracy of the statements by me in this letter.
I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Securities; (2) I have had the opportunity to ask questions and
receive answers concerning the information received about the Securities and the
Company; (3) I have been given the opportunity to obtain any additional
information I deem necessary to verify the accuracy of any information obtained
concerning the Securities and the Company; and (4) I am an "accredited investor"
as defined by Rule 501 promulgated by the Securities and Exchange Commission
(the "SEC") under Regulation D of the 1933 Act.
I hereby represent and warrant that I am purchasing the Securities for
my own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities. No one other than myself has
any beneficial interest in the Securities.
I understand that because the Securities have not been registered under
the 1933 Act, I must continue to bear the economic risk of the investment for an
indefinite time and the Securities cannot be sold unless the Securities are
subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of
the Securities unless (1) there is an effective registration statement under the
1933 Act and applicable state
2
Amazon.com, Inc.
February ___, 1997
Page 2
securities laws covering any such transaction involving the Securities or (2)
the Company receives an opinion of my legal counsel (concurred in by legal
counsel for the Company) stating that such transaction is exempt from
registration, or the Company otherwise satisfies itself that such transaction is
exempt from registration.
I consent to the placing of a legend on my certificate for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the SEC may not be
relied on for the resale or distribution of the Securities by me. I understand
that the Company has no obligation to me to register the Securities with the SEC
and has not represented to me that it will register the Securities.
Very truly yours,
Patty Stonesifer
Patty Stonesifer
Address:
P.O. 876
-----------------------------Redmond, WA 98073
----------------------------------------------------------Taxpayer ID No.:
313-66-8349
-----------------------------Accepted:
February
20 , 1997
AMAZON.COM, INC.
By Jeff P. Bezos
- -----------------------------Its
President
- ------------------------------
1
EXHIBIT 10.11
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT (this "Agreement") is made as of
February 20, 1997, between Amazon.com, Inc., a Delaware corporation (the
"Company"), and Patty Stonesifer (the "Investor") .
WHEREAS, the Investor is acquiring concurrently with the execution and
delivery of this Agreement 2,500 shares of the Company's Series A Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), at a purchase
price of $40.00 per share; and
WHEREAS, as a condition to the issuance to the Investor of such shares
of the Series A Preferred Stock, the Investor has agreed to grant the Company a
right of first refusal with respect to such shares of the Series A Preferred
Stock and all shares of the common stock, preferred stock, and all other
securities of the Company which may be issued to the Investor in exchange for
such shares of the Series A Preferred Stock or in respect of such shares of the
Series A Preferred Stock in any stock dividend, stock split, reclassification or
similar event (together, the "Shares").
THEREFORE, the undersigned agree as follows:
1.
COMPANY'S RIGHT OF FIRST REFUSAL
Before any Shares held by the Investor or any transferee of the
Investor (either being sometimes referred to herein as the "Selling
Stockholder") may be sold or otherwise transferred (including transfer by gift
or operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Selling Stockholder shall
(a) deliver to the Company a written notice (the "Notice") stating: (i) the
Selling Stockholder's bona fide intention to sell or otherwise transfer such
Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; (iv) the bona fide cash price or other consideration for which the
Selling Stockholder proposes to transfer the Shares (the "Offered Price"); and
(v) the material terms and conditions of the proposed transfer (the "Offer
Terms") and (b) offer the Shares at the Offered Price and on the Offer Terms to
the Company or its assignee(s).
2
(b) Exercise of Right of First Refusal. At any time within 30
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Selling Stockholder, elect to purchase all, but not
less than all, of the Shares proposed to be transferred to any one or more of
the Proposed Transferees, at the purchase price and on the terms determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price (the "Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price, and the terms and conditions of the transfer shall
be identical in all material respects to the Offer Terms (the "Terms"). If the
Offered Price includes consideration other than cash, the cash equivalent value
of the non-cash consideration shall be determined by the Board of Directors of
the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Selling
Stockholder to the Company (or, in the case of repurchase by an assignee, to the
assignee), or by any combination thereof, in any case in accordance with the
Terms, within thirty (30) days after delivery of the written notice by the
Company as set forth in Section 2(b).
(e) Selling Stockholder's Right to Transfer. If all of the
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this
Section ,then the Selling Stockholder may sell or otherwise transfer such Shares
to that Proposed Transferee at the Offered Price or at a higher price and on the
Offer Terms, provided that such sale or other transfer is consummated within
sixty (60) days after the date of the Notice and provided further that any such
sale or other transfer is effected in accordance with any applicable securities
laws and the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Selling Stockholder may be sold
or otherwise transferred.
(f) Exception for Certain Transfers. Anything to the contrary
contained in this Section notwithstanding, (i) the transfer of any or all of the
Shares for no consideration by way of a gift to the spouse of the Selling
Stockholder or to his or her lineal descendants, or to trusts for the benefit of
his or her spouse or lineal descendants and (ii) the transfer of any or all of
the Shares to the Company shall be exempt from the provisions of this Section
if, in such case, the transferee, and the
-2-
3
transferee's spouse, if any, shall receive and hold any and all Shares so
transferred subject to the provisions of this Agreement and subject to the
obligations of the Investor hereunder, and shall, upon request by the Company
execute, prior to the transfer to such transferee, an Endorsement in the form
attached hereto as Exhibit A.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares immediately after the first sale of the
common stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
(h) Assignment of Right of First Refusal. The Right of First
Refusal shall be freely assignable by the Company at any time.
2.
GENERAL PROVISIONS
(a) This Agreement shall be governed by the laws of the State
of Washington as they apply to contracts entered into and wholly to be performed
in such state. This Agreement represents the entire agreement between the
parties with respect to the Company's Right of First Refusal and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Selling Stockholder pursuant to the terms of
this Agreement shall be in writing and shall be deemed given (i) when delivered
personally, (ii) five days after it is deposited in the U.S. mail, certified
with return receipt requested and with postage prepaid, or (iii) one day after
deposit (prepaid) with a nationally recognized overnight courier, and addressed
to the party being notified at his or her address specified on the applicable
signature page hereto or such other address which the addressee may subsequently
notify the other party in writing.
(c) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(d) The parties acknowledge that money damages may not be an
adequate remedy for violations of this Agreement and that any party may, in its
sole discretion, apply to a court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper to enforce this
-3-
4
Agreement or to prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection to the imposition of such relief
in appropriate circumstances.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) Each party to this Agreement represents that such party
has duly authorized, executed and delivered this Agreement and that this
Agreement is a valid and binding obligation of such party, enforceable against
such party in accordance with its terms.
(g) All certificates representing any Shares subject to the
provisions of this Agreement shall have endorsed thereon an appropriate legend
referencing the restrictions imposed by this Agreement.
-4-
5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date above written.
COMPANY:
AMAZON.COM, INC.
By: Jeff P. Bezos
-----------------------------Jeffrey P. Bezos, President and
Chief Executive Officer
Address:
1516 Second Avenue, 4th Floor
Seattle, Washington 98101
INVESTOR:
Patty Stonesifer
-----------------------------Patty Stonesifer
Address:
P.O. Box 876
-----------------------------Redmond, WA 98073
-----------------------------------------------------------5-
6
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
CONSENT OF SPOUSE
I Robert Stonesifer , the spouse of Patty Stonesifer, have read and
approve the foregoing Right of First Refusal Agreement (the "Agreement"). In
consideration of the terms and conditions as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact with respect to the exercise of
any rights and obligations under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights or obligations in
the Agreement or any shares issued pursuant thereto under the community property
laws of the state of Washington, similar laws relating to marital property in
effect in the state of our residence as of the date of the Agreement or
otherwise.
Date:
February 20, 1997
---------------------Robert Stonesifer
-----------------------------(Signature)
Robert Stonesifer
-----------------------------(Printed Name)
-6-
7
EXHIBIT A
AMAZON.COM, INC.
RIGHT OF FIRST REFUSAL AGREEMENT
ENDORSEMENT
The undersigned, a stockholder of Amazon.com, Inc., a Delaware
corporation (the "Company"), and his or her spouse hereby agree to the terms and
conditions of the Right of First Refusal Agreement dated as of February 20 ,
1997 (the "Agreement") originally entered into by and between the Company and
Patty Stonesifer and acknowledge receipt of a copy of the Agreement and agree to
be bound by the obligations applicable to the Investor under the Agreement to
the same extent as if the undersigned were the Investor thereunder.
Dated:
February 20, 1997
-----------------------------Patty Stonesifer
- -----------------------------(Signature of Stockholder)
Robert Stonesifer
------------------------------(Signature of Spouse)
Patty Stonesifer
- -----------------------------(Printed Name)
Robert Stonesifer
------------------------------(Printed Name)
Address:
P. O. Box 876
- ---------------------------Redmond, WA 98073
- ---------------------------- ----------------------------7-
1
EXHIBIT 10.12
SUBSCRIPTION
The undersigned, a resident of the State of Washington, hereby
subscribes for 1,700,000 shares of the common stock of Cadabra, Inc., a
Washington corporation, and agrees to pay therefor the sum of $10,000.
These shares are being acquired for the undersigned's own account, for
investment and not with a view to resale or distribution. The undersigned
consents to the placing of a restrictive legend on the stock certificate stating
that the stock has not been registered under the Securities Act of 1933 or any
applicable state law and may not be sold, distributed, assigned, offered,
pledged or otherwise transferred without complying with federal and state
securities laws and to the placing of a stop transfer order on the books of the
corporation and with any transfer agents against the stock until the stock may
be legally resold or distributed.
Dated:
July 5, 1994
Jeff P. Bezos
----------------------------------Jeffrey P. Bezos
1
EXHIBIT 10.13
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 9th day of February 1995 by and between Amazon.com, Inc. (the "Company"), a
Delaware corporation, and M. A. Bezos (the "Shareholder").
SELECT only one of the following:
______ For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials:________
x
For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials: MAB
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
Page 1
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ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
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(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2 Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the purchase
or redemption price (or more at the purchaser's option) with the balance to be
paid in sixty (60) equal monthly installments of principal and interest
including interest on the declining principal balance calculated so that the
entire principal balances of the note shall be paid in full on the fifth
anniversary of the note.
Page 3
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5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
February 9th 1995 a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
If to M.A.Bezos
(shareholder)
Florham Park, NJ 07932
Jeffrey P. Bezos
200 Park Ave. (#224)
10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
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10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Jurisdiction over and venue
of any suit arising out of or related to this Agreement shall be exclusively in
the state and federal courts of King County, Washington.
10.7 New Shareholders. Nothing in this agreement shall restrict the Company from
selling shares of its Stock to third persons on such terms and conditions as the
Company's Board of Directors deems appropriate.
10.8 Severability. If for any reason any portion of this Agreement shall be held
to be invalid or unenforceable, the holding of invalidity or unenforceability of
that portion shall not affect any other portion of this Agreement and the
remaining portions of this Agreement shall remain in full force and effect.
10.9 Counsel. The Shareholder acknowledges that he or she is aware of his or her
right to have independent counsel review this Agreement concerning his or her
rights and obligations under this Agreement prior to his or her execution of it.
The Shareholder represents: (i) that he or she has consulted independent
counsel, or by executing this Agreement, waives his or her right to consult with
an attorney concerning this Agreement; and (ii) that the Shareholder understands
the terms of this Agreement and will be bound by this Agreement.
10.10 Investment and Other Warranties. Each Shareholder, by his or her execution
of this Agreement, acknowledges and understands that, in connection with the
Stock now or hereafter owned by him or her:
(a) the Shareholder has been fully informed as to the circumstances
under which he or she is required to hold the Stock pursuant to the requirements
of the Securities Act of 1933, as amended (the "Act");
(b) the Company has informed the Shareholder that such Stock is not
registered under the Act and may not be transferred or otherwise disposed of
unless such Stock is subsequently registered under the Act or unless an
exemption from such registration is available; and
(c) the Shareholder has been informed that the Stock is subject to this
Agreement and that a restrictive legend, referring to the restrictions set forth
herein, has or will be placed upon the certificate(s) evidencing such Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
AMAZON.COM, INC.
By:
Jeff P. Bezos
Name:
Jeffrey P. Bezos
Title:
President
Date:
2/9/95
SHAREHOLDER
Signature:
M.A. Bezos
Name:
M.A. Bezos
Title:
---------------------------------Date:
2/9/95
SPOUSAL CONSENT
By execution of this Agreement, Jacklyn G. Bezos hereby agrees and consents to
all the terms and conditions of this Agreement and agrees to be bound by such
terms and conditions, and does hereby appoint his or her spouse as
attorney-in-fact in all respects with regard to the Company, its affairs, and
interest in the Company's Stock. Jacklyn G. Bezos has been informed of his or
her right to obtain independent legal counsel concerning this Shareholder's
Agreement and the rights and obligations provided for in this Agreement, and by
execution of this Agreement, acknowledges having either obtained such
independent counsel or having waived the same.
By: Jacklyn G. Bezos
, Individual
-----------------Page 8
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EXHIBIT 10.14
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 24th day of July 1995 by and between Amazon.com, Inc. (the "Company"), a
Delaware corporation, and Lawrence P. Gise (the "Shareholder"). (Shares to be
registered for and held under Gise Family Trust under agreement dated 4/21/93.)
SELECT only one of the following:
______ For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials:________
x
For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials: LPG
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
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ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
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(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2 Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the purchase
or redemption price (or more at the purchaser's option) with the balance to be
paid in sixty (60) equal monthly installments of principal and interest
including interest on the declining principal balance calculated so that the
entire principal balances of the note shall be paid in full on the fifth
anniversary of the note.
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5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
July 24 1995, a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
Page 5
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Jeffrey P. Bezos
If to Lawrence P. Gise
600 Leona St.
Cotulla, TX 78014
Lawrence P. Gise
10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
Page 6
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EXHIBIT 10.15
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 8th day of August 1995 by and between Amazon.com, Inc. (the "Company"), a
Delaware corporation, and Sheldon J. Kaphan (the "Shareholder").
SELECT only one of the following:
x
For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials: SJK
______ For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials:________
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
Page 1
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ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
Page 2
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(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2
Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the
purchase or redemption price (or more at the purchaser's option) with the
balance to be paid in sixty (60) equal monthly installments of principal and
interest including interest on the declining principal balance calculated so
that the entire principal balances of the note shall be paid in full on the
fifth anniversary of the note.
Page 3
4
5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
_______________, 19___, a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
Page 5
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Jeffrey P. Bezos
If to Sheldon J. Kaphan
7748 32nd Ave. NE
Seattle, WA 98115
Sheldon J. Kaphan
10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
Page 6
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10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Jurisdiction over and venue
of any suit arising out of or related to this Agreement shall be exclusively in
the state and federal courts of King County, Washington.
10.7 New Shareholders. Nothing in this agreement shall restrict the Company from
selling shares of its Stock to third persons on such terms and conditions as the
Company's Board of Directors deems appropriate.
10.8 Severability. If for any reason any portion of this Agreement shall be held
to be invalid or unenforceable, the holding of invalidity or unenforceability of
that portion shall not affect any other portion of this Agreement and the
remaining portions of this Agreement shall remain in full force and effect.
10.9 Counsel. The Shareholder acknowledges that he or she is aware of his or her
right to have independent counsel review this Agreement concerning his or her
rights and obligations under this Agreement prior to his or her execution of it.
The Shareholder represents: (i) that he or she has consulted independent
counsel, or by executing this Agreement, waives his or her right to consult with
an attorney concerning this Agreement; and (ii) that the Shareholder understands
the terms of this Agreement and will be bound by this Agreement.
10.10 Investment and Other Warranties. Each Shareholder, by his or her execution
of this Agreement, acknowledges and understands that, in connection with the
Stock now or hereafter owned by him or her:
(a) the Shareholder has been fully informed as to the circumstances
under which he or she is required to hold the Stock pursuant to the requirements
of the Securities Act of 1933, as amended (the "Act");
(b) the Company has informed the Shareholder that such Stock is not
registered under the Act and may not be transferred or otherwise disposed of
unless such Stock is subsequently registered under the Act or unless an
exemption from such registration is available; and
(c) the Shareholder has been informed that the Stock is subject to this
Agreement and that a restrictive legend, referring to the restrictions set forth
herein, has or will be placed upon the certificate(s) evidencing such Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
AMAZON.COM, INC.
By:
Jeff P. Bezos
Name:
Jeffrey P. Bezos
Title:
President
Date:
August 8, 1995
SHAREHOLDER
Signature:
Sheldon J. Kaphan
Name:
Sheldon J. Kaphan
Title:
____________________________________
Date:
9 August 1995
SPOUSAL CONSENT
By execution of this Agreement, _______________________ hereby agrees and
consents to all the terms and conditions of this Agreement and agrees to be
bound by such terms and conditions, and does hereby appoint his or her spouse as
attorney-in-fact in all respects with regard to the Company, its affairs, and
interest in the Company's Stock. _______________________ has been informed of
his or her right to obtain independent legal counsel concerning this
Shareholder's Agreement and the rights and obligations provided for in this
Agreement, and by execution of this Agreement, acknowledges having either
obtained such independent counsel or having waived the same.
By: _______________________
___________________, Individual
Page 8
1
EXHIBIT 10.16
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 26th day of November, 1995, by and between Amazon.com, Inc. (the
"Company"), a Delaware corporation, and Tom A. Alberg (the "Shareholder").
SELECT only one of the following:
______ For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials:________
x
For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials: TAA
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
Page 1
2
ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
Page 2
3
(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2 Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the
purchase or redemption price (or more at the purchaser's option) with the
balance to be paid in sixty (60) equal monthly installments of principal and
interest including interest on the declining principal balance calculated so
that the entire principal balances of the note shall be paid in full on the
fifth anniversary of the note.
Page 3
4
5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
11/26 1995, a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
Page 5
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Jeffrey P. Bezos
If to Tom A. Alberg
3404 E. Ward
Seattle, WA 98112
Tom A. Alberg
10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
Page 6
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10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Jurisdiction over and venue
of any suit arising out of or related to this Agreement shall be exclusively in
the state and federal courts of King County, Washington.
10.7 New Shareholders. Nothing in this agreement shall restrict the Company from
selling shares of its Stock to third persons on such terms and conditions as the
Company's Board of Directors deems appropriate.
10.8 Severability. If for any reason any portion of this Agreement shall be held
to be invalid or unenforceable, the holding of invalidity or unenforceability of
that portion shall not affect any other portion of this Agreement and the
remaining portions of this Agreement shall remain in full force and effect.
10.9 Counsel. The Shareholder acknowledges that he or she is aware of his or her
right to have independent counsel review this Agreement concerning his or her
rights and obligations under this Agreement prior to his or her execution of it.
The Shareholder represents: (i) that he or she has consulted independent
counsel, or by executing this Agreement, waives his or her right to consult with
an attorney concerning this Agreement; and (ii) that the Shareholder understands
the terms of this Agreement and will be bound by this Agreement.
10.10 Investment and Other Warranties. Each Shareholder, by his or her execution
of this Agreement, acknowledges and understands that, in connection with the
Stock now or hereafter owned by him or her:
(a) the Shareholder has been fully informed as to the circumstances
under which he or she is required to hold the Stock pursuant to the requirements
of the Securities Act of 1933, as amended (the "Act");
(b) the Company has informed the Shareholder that such Stock is not
registered under the Act and may not be transferred or otherwise disposed of
unless such Stock is subsequently registered under the Act or unless an
exemption from such registration is available; and
(c) the Shareholder has been informed that the Stock is subject to this
Agreement and that a restrictive legend, referring to the restrictions set forth
herein, has or will be placed upon the certificate(s) evidencing such Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
AMAZON.COM, INC.
By:
Jeff P. Bezos
Name:
Jeffrey P. Bezos
Title:
President
Date:
12/6/95
SHAREHOLDER
Signature:
Tom A. Alberg
Name:
Tom A. Alberg
Title:
____________________________________
Date:
11/27/95
SPOUSAL CONSENT
By execution of this Agreement, Judith Beck hereby agrees and consents to all
the terms and conditions of this Agreement and agrees to be bound by such terms
and conditions, and does hereby appoint his or her spouse as attorney-in-fact in
all respects with regard to the Company, its affairs, and interest in the
Company's Stock. Judith Beck has been informed of his or her right to obtain
independent legal counsel concerning this Shareholder's Agreement and the rights
and obligations provided for in this Agreement, and by execution of this
Agreement, acknowledges having either obtained such independent counsel or
having waived the same.
By: Judith Beck
Judith Beck, Individual
Page 8
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EXHIBIT 10.18
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 10th day of July 1996 by and between Amazon.com, Inc. (the "Company"), a
Delaware corporation, and Scott Lipsky (the "Shareholder").
SELECT only one of the following:
x
For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials: SL
______ For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials:________
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
Page 1
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ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
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(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2 Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the
purchase or redemption price (or more at the purchaser's option) with the
balance to be paid in sixty (60) equal monthly installments of principal and
interest including interest on the declining principal balance calculated so
that the entire principal balances of the note shall be paid in full on the
fifth anniversary of the note.
Page 3
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5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
_______________, 19___, a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
If to
-------------------:
Jeffrey P. Bezos
-------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
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10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Jurisdiction over and venue
of any suit arising out of or related to this Agreement shall be exclusively in
the state and federal courts of King County, Washington.
10.7 New Shareholders. Nothing in this agreement shall restrict the Company from
selling shares of its Stock to third persons on such terms and conditions as the
Company's Board of Directors deems appropriate.
10.8 Severability. If for any reason any portion of this Agreement shall be held
to be invalid or unenforceable, the holding of invalidity or unenforceability of
that portion shall not affect any other portion of this Agreement and the
remaining portions of this Agreement shall remain in full force and effect.
10.9 Counsel. The Shareholder acknowledges that he or she is aware of his or her
right to have independent counsel review this Agreement concerning his or her
rights and obligations under this Agreement prior to his or her execution of it.
The Shareholder represents: (i) that he or she has consulted independent
counsel, or by executing this Agreement, waives his or her right to consult with
an attorney concerning this Agreement; and (ii) that the Shareholder understands
the terms of this Agreement and will be bound by this Agreement.
10.10 Investment and Other Warranties. Each Shareholder, by his or her execution
of this Agreement, acknowledges and understands that, in connection with the
Stock now or hereafter owned by him or her:
(a) the Shareholder has been fully informed as to the circumstances
under which he or she is required to hold the Stock pursuant to the requirements
of the Securities Act of 1933, as amended (the "Act");
(b) the Company has informed the Shareholder that such Stock is not
registered under the Act and may not be transferred or otherwise disposed of
unless such Stock is subsequently registered under the Act or unless an
exemption from such registration is available; and
(c) the Shareholder has been informed that the Stock is subject to this
Agreement and that a restrictive legend, referring to the restrictions set forth
herein, has or will be placed upon the certificate(s) evidencing such Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
AMAZON.COM, INC.
By:
____________________________________
Name:
____________________________________
Title:
____________________________________
Date:
____________________________________
SHAREHOLDER
Signature:
Scott Lipsky
Name:
Scott Lipsky
Title:
____________________________________
Date:
7/10/96
SPOUSAL CONSENT
By execution of this Agreement, _______________________ hereby agrees and
consents to all the terms and conditions of this Agreement and agrees to be
bound by such terms and conditions, and does hereby appoint his or her spouse as
attorney-in-fact in all respects with regard to the Company, its affairs, and
interest in the Company's Stock. _______________________ has been informed of
his or her right to obtain independent legal counsel concerning this
Shareholder's Agreement and the rights and obligations provided for in this
Agreement, and by execution of this Agreement, acknowledges having either
obtained such independent counsel or having waived the same.
By: _______________________
___________________, Individual
Page 8
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EXHIBIT 10.19
SHAREHOLDER'S AGREEMENT
OF
AMAZON.COM, INC.
THIS SHAREHOLDER'S AGREEMENT (this "Agreement"), is made and entered into as of
this 31 day of December 1996 by and between Amazon.com, Inc. (the "Company"), a
Delaware corporation, and Joy Covey (the "Shareholder").
SELECT only one of the following:
x
For purposes of this Agreement, the Shareholder is an employee
shareholder (an "Employee Shareholder") and is bound to all the provisions of
this agreement including Article 9. Shareholder's Initials: JC
______ For purposes of this Agreement, the Shareholder is not an Employee
Shareholder and is not bound to the provisions of Article 9 of this Agreement.
Shareholder's Initials:________
WHEREAS, the parties hereto deem it in their best interest to provide for
ultimate ownership of the shares of the Company (the "Stock"), or rights
thereto, including the right to transfer such Stock and the right to purchase
such Stock upon the occurrence of certain events;
NOW, THEREFORE, in consideration of the foregoing and in consideration of the
mutual promises set forth herein, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
RESTRICTION ON DISPOSITION
1.1 Disposition Prohibited. The Shareholder shall not dispose of any of his or
her Stock except as permitted by this Agreement, and any such attempted
disposition shall be void and shall not be recognized or registered upon the
books of the Company.
1.2 Definition of "Dispose". The term "dispose" includes, but is not limited to,
the acts of selling, assigning, transferring, pledging, encumbering, giving
away, devising, and any other form of conveying, including conveyances caused by
marital separation, divorce, receivership, or bankruptcy, whether voluntary or
involuntary or by operation of law.
1.3 Notice of Involuntary Disposition. The Shareholder, or his or her personal
representative, shall notify the Company immediately upon the occurrence of an
involuntary disposal of his or her Stock. The Company shall notify the other
shareholders of any such involuntary transfer.
1.4 Role of Offeror or Transferor. If the Company is entitled to elect to
purchase or redeem any Stock owned by the Shareholder hereunder, the Shareholder
shall not participate in or interfere with, and shall abstain from any vote upon
(but shall be present for the purpose of meeting any quorum requirement), any
action to be taken by the Company in effecting such an election. The
Shareholder, or the legal representative of the Shareholder, shall cooperate in
effecting all company action and execute and deliver all papers as may be
necessary to consummate any purchase by the Company of such Stock. Unless
otherwise set forth herein, the option of the Company to purchase or redeem
Stock owned by the Shareholder shall be exercised only upon a majority vote of
the Board of Directors.
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ARTICLE 2
DISPOSITIONS DURING LIFE
2.1 Voluntary Disposition.
(a) Disposition of Stock prior to and on December 31, 1999. This
Agreement prohibits the Shareholder from disposing of any Stock until after
December 31, 1999, unless prior written consent is received from the Company,
which consent can be given only upon a majority vote of the Board of Directors.
(b) Disposition of Stock after December 31, 1999. In the event that the
Shareholder ("the Offering Shareholder") receives a bona fide offer (the
"Offer") after December 31, 1999, to purchase all or any portion of his or her
Stock (the "Shares") and the Offering Shareholder desires to sell his or her
Shares pursuant to the terms of the Offer, then the Offering Shareholder shall
forthwith deliver to the Company written notice of such offer. Such written
notice shall contain the name and address of the bona fide offeror, and the bona
fide purchase price offered for the Shares and all other terms of such offer.
The Company shall convey such notice to each other shareholder who is at that
time a current shareholder of the Company ("the Remaining Shareholders"). Within
sixty (60) days after receipt by the Company of the written notice of the Offer
(the "Option Period"), the Company shall have the right to purchase or redeem
all of the Shares included in such Offer either upon the price and terms set
forth in the Offer or, at the election of the Company, upon the price and terms
described in Article 5. A vote by the majority of the members of the Board of
Directors shall be required to exercise or waive the option, except that a
Director who is the proposed transferor may not participate in the voting, and
shall not be included in the number of Directors when computing whether a
majority vote of the member of the Board was obtained. If the Company does not
exercise such right within the Option Period, or exercises such right only as to
a portion of such shares, the Remaining Shareholders shall have the right for a
period of thirty (30) days following the end of the Option Period ("the Second
Option Period") to purchase all of the Shares included in the Offer that are not
purchased by the Company, upon the same terms as are available to the Company as
follows:
(1) Each Remaining Shareholder shall, during the Second Option
Period, advise the Secretary of the Company whether such Remaining Shareholder
wishes to exercise his or her right to purchase Shares and the maximum number of
Shares that he or she wishes to purchase.
(2) If the aggregate of the maximum number of Shares covered by
the Offer to be purchased by all Remaining Shareholders exceeds the number of
Shares available for purchase by them, the number of Shares offered shall be
apportioned pro rata among the Remaining Shareholders electing to purchase based
upon a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders electing to purchase. Fractions resulting in any such computation
shall be rounded to the next whole number. If such computation results in a
purchase of less than all Shares offered by the Offering Shareholder, then the
difference between the number of Shares agreed to be purchased and the number of
Shares offered shall be allocated to those Remaining Shareholders who have
offered to purchase a number of Shares greater than the number allocated to such
Remaining Shareholders in the first allocation. Such allocation shall be based
on a fraction, the numerator of which is the number of Shares outstanding held
by each such Remaining Shareholder and the denominator of which is the number
which is the aggregate number of Shares outstanding held by all Remaining
Shareholders who have offered to purchase a number of Shares greater than the
number allocated to them. For the purpose of accomplishing the allocations set
forth herein, the Secretary of the Company shall make the allocations and his or
her determination as to the allocations shall be conclusive.
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(3) If the maximum number of Shares to be purchased by the
Remaining Shareholders is less than the Shares offered by the Offering
Shareholder available for purchase by the Remaining Shareholders, or after
successive allocations each Remaining Shareholder has been allocated the maximum
number of Shares agreed to be purchased by him or her, and all Shares offered by
the Offering Shareholder are still not allocated to a Remaining Shareholder,
then the Company shall have the option to purchase the unallocated portion
within the Second Option Period upon the same terms as were available to the
Company in the Option Period.
(4) If neither the Company nor the Remaining Shareholders
exercises the right to purchase the entirety of the Shares within the time
provided for such exercise, the Offering Shareholder shall be free to sell any
remaining Shares so offered pursuant to the Offer, and only pursuant to the
Offer, for a period of sixty (60) days following the end of the Second Option
Period, provided, however, that the transferee of those Shares must first agree
in writing to be bound by the terms and conditions of this Agreement that apply
to the Shareholder. If no such sale is made by the Offering Shareholder within
such 60-day period, then the restrictions set forth in this Agreement shall
thereafter continue to apply to the Shares and no Stock, nor any interest
therein, shall thereafter be disposed, whether pursuant to an Offer or
otherwise, without again first complying with all of the provisions of this
Agreement.
2.2 This section remains only so as to preserve the numbering in this Agreement.
2.3 Closing. The closing of any purchase and sale under this Article 2 shall
take place at the principal office of the Company at the date designated by the
Company, which shall not be more than ninety (90) days after the written consent
of the Company pursuant to Section 2.1(a) or ninety (90) days after the end of
the Second Option Period pursuant to Section 2.1(b).
ARTICLE 3
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 4
This article remains only so as to preserve the numbering in this Agreement.
ARTICLE 5
VALUATION AND PAYMENT OF TERMS
5.1 Agreed Valuation and Terms. For purposes of Article 2, the value per share
of the Stock and the terms of the purchase or redemption shall be determined
annually by a majority vote of the Company's Board of Directors at the Company's
annual Directors' meeting, which is scheduled for December 31 of each year, or
at any other time prior to the closing of the proposed purchase or redemption.
If the necessary vote cannot be obtained or if the Offering Shareholder objects
to the value established by the Company's Board of Directors, then the value per
share shall be established pursuant to Section 5.4, and the terms of purchase or
redemption shall be those most recently adopted by the Directors pursuant to
this Section 5.1, or if no such terms have been so adopted or if the Offering
Shareholder objects to such terms, then those terms described in Section 5.2
below.
5.2 Initial Valuation and Terms.
a) The initial value per share of the Company's Stock is the book value.
b) The terms for payment are a down payment of ten percent (10%) of the
purchase or redemption price (or more at the purchaser's option) with the
balance to be paid in sixty (60) equal monthly installments of principal and
interest including interest on the declining principal balance calculated so
that the entire principal balances of the note shall be paid in full on the
fifth anniversary of the note.
Page 3
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5.3 Book Value. If the "book value" shall be used as the measurement of value,
per share, the following definition of "book value" shall apply:
Capital Stock plus retained earnings plus additional paid-in capital as of the
last day of the month preceding the date of purchase ("Valuation Date"), as
determined by the accountant regularly employed by the Company or, if no
accountant is regularly employed by the Company, then by an accountant selected
by mutual agreement of the parties.
5.4 Alternative Appraisal Value. If a valuation as provided for in Section 5.1
is not recorded for a particular year, the last previous valuation shall be
used; except that if no valuation is recorded within eighteen (18) months
preceding the proposed disposition, then in the event that the parties cannot
agree to use the last previous recorded valuation, the value per share shall be
determined by three appraisers. Within fifteen (15) days of the date that use of
the last previous recorded valuation was rejected, the rejecting party shall
select an appraiser and notify the other of the appraiser's name and address.
Within fifteen (15) days after receipt of that notice, the remaining party shall
select an appraiser and notify the first party of the name and address of such
appraiser. If any party is unable to or unwilling to agree upon an appraiser
within fifteen (15) days of the time designated for such selection, then the
appraiser shall be selected by the presiding judge of the King County Superior
Court. The two appraisers selected by the parties shall promptly appoint a third
appraiser as soon as practical. The three appraisers shall evaluate and agree
upon the value per share of the Stock as soon as practical after their
selection; the vote of two such appraisers shall be sufficient to establish the
value per share. The appraisers need not be licensed appraisers but should be
experienced in business matters and shall be independent of all parties. Each
party shall pay the fee charged for that party's appraiser; the fee charged by
the third appraiser and any costs related to the appraisal shall be borne
equally by each party.
5.5 Note for Unpaid Balance. Unless otherwise expressly provided herein, any
unpaid balance owing under this Agreement shall be evidenced by an installment
promissory note executed by the purchaser to the order of the seller providing
for an interest rate equal to the prime rate of Bank of America on the business
day prior to the closing date. The note shall give the purchaser the option of
prepaying the principal in full or in part at any time without penalty.
5.6 Setoff. In the event the Company purchases any Stock pursuant to this
Agreement, the Company shall set off against the purchase price for the Stock
any indebtedness owed to the Company by such Shareholder or his or her estate,
whether or not such indebtedness is then due. If any shareholder or other third
party purchases any Stock pursuant to this Agreement, as a condition of the
purchase, the purchaser agrees, prior to making any payment to the transferring
Shareholder, that the purchaser shall pay to the Company that part of the
purchase price equal to any indebtedness owed by the seller or his or her estate
to the Company, whether or not such indebtedness is then due, and such payments
shall be deemed payments on account of said purchase price or the promissory
note issued by such shareholder with respect thereto.
ARTICLE 6
ENDORSEMENT OF CERTIFICATE
6.1 The Secretary of the Company shall endorse all certificates representing
Stock owned by the Shareholder and all certificates representing Stock issued or
transferred after this Agreement is entered into with the following legend:
The transfer of the shares represented by this certificate is restricted by the
terms of a Shareholder's Agreement between the Shareholder and the Company dated
_______________, 19___, a copy of which is on file in the office of the Company.
Page 4
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ARTICLE 7
TERMINATION OF THIS AGREEMENT
7.1 Termination. This Agreement shall terminate at such time as the Common Stock
of the Company is listed on a recognized United States national securities
exchange or is traded in an over-the-counter market.
ARTICLE 8
AGREEMENT BINDING UPON TRANSFEREES
8.1 Except as otherwise provided for in this Agreement, in the event that any
Stock is at any time disposed of or transferred to any party pursuant to the
provisions hereof, the transferee shall take such Stock pursuant to all the
terms, provisions, conditions, and covenants of this Agreement, and the
transferee shall, as a condition precedent to the valid transfer of such Stock
to such transferee, be bound, and agree (for and on behalf of himself or
herself, his or her legal and personal representatives, his or her assigns, and
his or her transferees, direct or indirect) in writing to be bound, by all
provisions of this Agreement, including Article 9 in the case of a disposal or
transfer from an Employee Shareholder.
ARTICLE 9
GRANT OF IRREVOCABLE PROXY
9.1 Definition of Total Disability. As used in this Agreement, the term "Total
Disability" refers to a condition resulting from injury or illness to the
Employee Shareholder which prevents the Employee Shareholder from performing the
duties he or she has previously performed, and could be reasonably expected to
perform on behalf of the Company, for a period of 365 consecutive days (the
"Disability Period"), and Total Disability shall be deemed to occur on the first
day following the initial 365 day period (the "Total Disability Date"). In the
event that the disabled Employee Shareholder returns to the Company within the
Disability Period, but can fully perform the required services for less than
thirty (30) days, and then relapses to his or her disability, the Disability
Period shall not be considered to have been interrupted. In the event the
Company has disability insurance protection on the Employee Shareholder, or the
Employee Shareholder has an individual policy, the receipt of such disability
insurance payments shall be deemed proof that the Employee Shareholder is
disabled, and the waiting period and periods during which such Employee receives
disability payments from such insurance, shall be deemed proof of the extent of
time the Employee Shareholder has been disabled. Any dispute as to whether or
not an Employee Shareholder is "Totally Disabled" and for how long he or she has
been disabled as defined in this Agreement, shall be settled by mediation and/or
arbitration in accordance with the provisions of this Agreement.
9.2 Grant of Irrevocable Proxy. The Employee Shareholder hereby grants to the
Company an irrevocable proxy to vote all of the Stock held by the Employee
Shareholder upon or subsequent to his or her death, Total Disability as defined
above, or termination of employment with the Company, without regard to when or
for what reason, if any, such employment shall terminate. Such proxy is coupled
with an interest arising out of the terms of the Agreement, and such continues
so long as this Agreement remains in full force and effect.
The irrevocable proxies described in this Article 9 shall remain in effect until
the Company has issued and has outstanding shares of Common Stock held of record
by 300 stockholders or more and the Common Stock of the Company is quoted on a
recognized United States national securities exchange or the over-the-counter
market.
This irrevocable proxy is coupled with an interest arising out of the terms of
this Agreement, and continues as long as this Agreement remains in full force
and effect.
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ARTICLE 10
GENERAL PROVISIONS
10.1 Mediation and Arbitration. All controversies, claims, disputes and matters
in question arising out of or relating to this Agreement or the breach thereof,
shall be decided by mediation and/or arbitration in accordance with this Article
10.1. The party who seeks resolution of a controversy, claim, dispute or other
matter in question shall notify the other party in writing of the existence and
subject matter hereof, and shall designate in such notices the names of three
prospective mediators, each of whom shall be registered with the Seattle,
Washington office of the American Arbitration Association. The recipient party
shall select from such list one individual to act as a mediator in the dispute
set forth by the notifying party. The parties agree to meet with said mediator
in the City of Seattle within two weeks after the recipient party has received
notice of the dispute and agree to utilize their best efforts and all expediency
to resolve the matters in dispute. The mediation shall not continue longer than
one (1) hearing day without the written approval of both parties. Neither party
shall be bound by any recommendation of the mediator; however, any agreement
reached during mediation shall be final and conclusive.
If the dispute is not resolved by such mediation, it shall be decided by
mandatory arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Either party may apply to the American
Arbitration Association for a determination of the dispute set forth in the
notification thereof by the originating party. The parties agree that the
arbitration shall take place in the City of Seattle, and shall be governed by
the laws of the State of Washington. The award entered or decision made by the
arbitrator(s) shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof. Expense of
mediation and/or arbitration shall be shared equally by both parties.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties, their spouses, heirs, legal representatives,
successors, transferees and assigns.
10.3 Specific Performance. It is agreed that the remedy at law for any breach of
this Agreement would be inadequate, and that the aggrieved party shall be
entitled to injunctive relief as well as damages for such breach.
10.4 Notices. All notices, offers, acceptance, waivers and other acts under this
Agreement shall be in writing and shall be sufficiently given if delivered to
the addresses in person or if mailed, postage prepaid, return receipt requested,
to the addresses as follows or at any address that such party may designate by
written notice to the other:
If to the Company:
c/o Chuck Katz
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Jeffrey P. Bezos
If to Joy Covey
Seattle, WA 98112
2432 E. Calhoun
10.5 Prior Agreements. This Agreement contains the entire agreement between the
parties and supersedes all prior agreements entered into by the parties relative
to the subject matter of this Agreement.
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10.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. Jurisdiction over and venue
of any suit arising out of or related to this Agreement shall be exclusively in
the state and federal courts of King County, Washington.
10.7 New Shareholders. Nothing in this agreement shall restrict the Company from
selling shares of its Stock to third persons on such terms and conditions as the
Company's Board of Directors deems appropriate.
10.8 Severability. If for any reason any portion of this Agreement shall be held
to be invalid or unenforceable, the holding of invalidity or unenforceability of
that portion shall not affect any other portion of this Agreement and the
remaining portions of this Agreement shall remain in full force and effect.
10.9 Counsel. The Shareholder acknowledges that he or she is aware of his or her
right to have independent counsel review this Agreement concerning his or her
rights and obligations under this Agreement prior to his or her execution of it.
The Shareholder represents: (i) that he or she has consulted independent
counsel, or by executing this Agreement, waives his or her right to consult with
an attorney concerning this Agreement; and (ii) that the Shareholder understands
the terms of this Agreement and will be bound by this Agreement.
10.10 Investment and Other Warranties. Each Shareholder, by his or her execution
of this Agreement, acknowledges and understands that, in connection with the
Stock now or hereafter owned by him or her:
(a) the Shareholder has been fully informed as to the circumstances
under which he or she is required to hold the Stock pursuant to the requirements
of the Securities Act of 1933, as amended (the "Act");
(b) the Company has informed the Shareholder that such Stock is not
registered under the Act and may not be transferred or otherwise disposed of
unless such Stock is subsequently registered under the Act or unless an
exemption from such registration is available; and
(c) the Shareholder has been informed that the Stock is subject to this
Agreement and that a restrictive legend, referring to the restrictions set forth
herein, has or will be placed upon the certificate(s) evidencing such Stock.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
written above.
AMAZON.COM, INC.
By:
Jeff P. Bezos
Name:
____________________________________
Title:
____________________________________
Date:
____________________________________
SHAREHOLDER
Signature:
Joy Covey
Name:
Joy Covey
Title:
CFO
Date:
Jan. 2, 1997
SPOUSAL CONSENT
By execution of this Agreement, _______________________ hereby agrees and
consents to all the terms and conditions of this Agreement and agrees to be
bound by such terms and conditions, and does hereby appoint his or her spouse as
attorney-in-fact in all respects with regard to the Company, its affairs, and
interest in the Company's Stock. _______________________ has been informed of
his or her right to obtain independent legal counsel concerning this
Shareholder's Agreement and the rights and obligations provided for in this
Agreement, and by execution of this Agreement, acknowledges having either
obtained such independent counsel or having waived the same.
By: _______________________
___________________, Individual
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Exhibit 10.20
AMAZON.COM, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
(AS OF DECEMBER 20, 1996 FOR AMENDED AND RESTATED GRANTS)
AMAZON.COM, INC., a Delaware corporation (the "Company"), hereby
establishes and sets forth the terms of the AMAZON.COM, INC. AMENDED AND
RESTATED 1994 STOCK OPTION PLAN (the "Plan"), which for reference purposes shall
be dated September 15, 1994.
1. PURPOSE OF PLAN
The purpose of the Plan is to enhance the long-term stockholder value
of the Company by offering opportunities to employees, directors, officers,
consultants, advisors and independent contractors of the Company and any
Affiliate of the Company (as defined below) to participate in the success and
growth of the Company and to encourage them to remain in the service of the
Company. This Plan will seek to accomplish this purpose by providing for the
grant to such persons of options to acquire shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"). Options granted hereunder
may be issued as "incentive stock options" as such term is defined in Section
422 of the Internal Revenue Code of 1986, as the same may be amended from time
to time (the "Code"). The Plan and each such "incentive stock option" are
intended to comply with all of the requirements of said Section 422, and of all
other provisions of the Code applicable to "incentive stock options" and to
plans issuing the same (hereinafter referred to as "Incentive Stock Options").
Options granted hereunder also may be issued as nonqualified stock options not
intended to qualify as Incentive Stock Options (hereinafter referred to as
"Nonqualified Stock Options").
2. ADMINISTRATION OF THE PLAN
2.1. The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless a committee of the Board is appointed in accordance
with Section 2.2 or 2.4 below (the Board, or such committee, if appointed, will
be referred to in this Plan as the "Administrative Committee").
2.2. The Board may at any time appoint a committee, consisting of not
less than two of its members, to administer this Plan on behalf of the Board in
accordance with such terms and conditions not inconsistent with this Plan as the
Board may prescribe. Once appointed, the committee shall continue to serve until
otherwise directed by the Board. From time to time the Board may increase the
size of the
2
committee and appoint additional members, remove members (with or without cause)
and appoint new members in their place, fill vacancies however caused, and/or
remove all members of the committee and thereafter directly administer this
Plan.
2.3. A majority of the members of the Administrative Committee shall
constitute a quorum, and, subject to the limitations in this Section 2, all
actions of the Administrative Committee shall require the affirmative vote of
members who constitute a majority of such quorum. Members of the Administrative
Committee may vote on any matters affecting the administration of this Plan or
the grant of stock options pursuant to this Plan, except that no such member
shall act upon the granting of a stock option to himself or herself (but any
such member may be counted in determining the existence of a quorum at any
meeting of the Administrative Committee during which action is taken with
respect to the granting of a stock option to him or her).
2.4. Notwithstanding the foregoing provisions of this Section 2, if and
so long as the Company has registered any class of any equity security pursuant
to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall consider in selecting the Administrative Committee and the
membership of any committee acting as Administrative Committee, with respect to
any persons subject or likely to become subject to Section 16 of the Exchange
Act, the provisions regarding (a) "outside directors" as contemplated by Section
162(m) of the Code and (b) "nonemployee directors" as contemplated by Rule 16b-3
under the Exchange Act. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons to
different committees consisting of one or more members of the Board, subject to
such limitations as the Board deems appropriate.
2.5. The following provisions shall apply to the Administrative
Committee:
2.5.1 The Administrative Committee shall have the authority (a) to
administer this Plan in accordance with its express terms; (b) to determine all
questions arising in connection with the administration, interpretation, and
application of this Plan, including all questions relating to the value of the
Common Stock; (c) to correct any defect, supply any information and reconcile
any inconsistency in such manner and to such extent as shall be deemed necessary
or advisable to carry out the purpose of this Plan; (d) to prescribe, amend and
rescind rules and regulations relating to the administration of this Plan; (e)
to determine the duration and purposes of leaves of absence which may be granted
to participants without constituting a termination of employment for purposes of
this Plan; and (f) to make all other determinations necessary or advisable for
administration of this Plan.
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2.5.2 Exercise of the foregoing authority by the Administrative
Committee shall be consistent with the intent that the Incentive Stock Options
issued under this Plan be qualified under the terms of Section 422 of the Code
(including any amendments thereto and any similar successor provision).
2.5.3 All determinations made by the Administrative Committee in good
faith on matters referred to in this Section 2.5 shall be final, conclusive, and
binding upon all persons. The Administrative Committee shall have all powers
necessary or appropriate to accomplish its duties under this Plan.
3. ELIGIBILITY
3.1. An individual shall be eligible to participate in this Plan
provided that such individual is (a) an employee, director, officer, consultant,
agent, advisor or independent contractor of the Company or an Affiliate and (b)
selected by the Administrative Committee to receive one or more stock options
under this Plan. Each person so selected by the Administrative Committee shall
sometimes hereinafter be referred to as an "Optionee." No person shall be
eligible to be granted an Incentive Stock Option hereunder unless such person is
then a bona fide employee of the Company or an Affiliate.
3.2. As used in this Plan, an "Affiliate" of a corporation shall refer
to a "parent corporation" of such corporation as described in Section 424(e) of
the Code or a "subsidiary corporation" of such corporation as described in
Section 424(f) of the Code.
3.3. No stock option shall be granted hereunder to any person who is
not a resident of the State of Washington unless the Administrative Committee
shall have determined, based on the advice of counsel, that the grant of such
Incentive Stock Option (and the exercise thereof by the Optionee) will not
violate the securities laws of the state where the Optionee resides.
4. AUTHORIZED SHARES
The aggregate number of shares of Common Stock reserved for issuance
upon exercise of stock options granted under this Plan shall be Three Million
Two Hundred Thousand (3,200,000). This number shall be subject to any adjustment
required or permitted pursuant to the provisions of Section 10 below. If any
stock option granted under the terms of this Plan shall expire or terminate for
any reason without having been exercised in full and/or shares of Common Stock
subject to repurchase are repurchased by the Company, the unpurchased shares of
Common Stock formerly
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subject to such stock option, or such repurchased shares, shall again be
available for purposes of this Plan.
5. OPTION TERMS
5.1. With respect to each stock option to be granted to an Optionee
selected by the Administrative Committee in accordance with Section 3 above, the
Administrative Committee shall appropriately designate such options as Incentive
Stock Options or as Nonqualified Stock Options and shall specify the following
terms:
5.1.1 The number of shares of Common Stock subject to such
stock option.
5.1.2 The date on which the grant of such stock option shall
be effective (the "Date of Grant").
5.1.3 The period of time during which such stock option shall
be exercisable, which, in the case of an Incentive Stock Option, shall in no
event be more than ten (10) years following its Date of Grant; provided,
however, if such Incentive Stock Option is granted to an Optionee who on the
Date of Grant owns, either directly or indirectly within the meaning of Section
424(d) of the Code, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an Affiliate of the Company, the
period of time during which such Incentive Stock Option shall be exercisable
shall in no event be more than five (5) years following its Date of Grant.
5.1.4 The price or prices at which such stock option shall be
exercisable by the Optionee (the "Option Price"); provided, however, that, in
the case of an Incentive Stock Option, the Option Price shall in no event be
less than the fair market value, on the Date of Grant, of the shares of Common
Stock subject thereto; and provided, further, that, if, in the case of an
Incentive Stock Option, such Incentive Stock Option is granted to an Optionee
who on the Date of Grant owns, either directly or indirectly within the meaning
of Section 424(d) of the Code, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or an Affiliate of the
Company, then the Option Price shall be at least one hundred ten percent (110%)
of the fair market value, on the Date of Grant, of the Common Stock subject
thereto.
5.1.5 The Administrative Committee shall have complete
discretion with respect to the terms of any vesting schedule pursuant to which
the right of the Optionee to exercise such stock option shall be contingent,
including, without limitation, discretion (a) to allow full and immediate
vesting following the Date of
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Grant of a stock option, (b) to permit partial vesting in stated percentage
amounts based on the length of the holding period of the stock option, or (c) to
permit full vesting after a stated holding period has passed. Following
termination of an Optionee's employment or services with the Company, a stock
option that is subject to vesting under this Section 5.1.5 shall not vest
further on account of the holding period thereof subsequent to such date of
termination unless the Administrative Committee determines otherwise.
5.1.6 Whether shares of Common Stock acquired upon exercise of
such stock option will be subject to repurchase in accordance with Section 11
below.
5.1.7 Such other terms and conditions as the Administrative
Committee deems advisable and as are consistent with the terms and conditions of
this Plan, including, without limitation, any alternate repurchase provisions to
those set forth in Section 11 below.
5.2. Notwithstanding any provision of this Section 5 to the contrary,
no Incentive Stock Option shall be granted hereunder after the date immediately
preceding the tenth (10th) anniversary of the date this Plan is adopted by the
Board. Except as expressly provided herein, nothing contained in this Plan shall
require that the terms and conditions of stock options granted hereunder be
uniform.
5.3. Each stock option shall require that, unless the Common Stock
shall at such time be publicly traded, as a condition to exercise by the
Optionee of the stock option, the Optionee shall execute and deliver to the
Company the Shareholders Agreement in substantially the form attached hereto as
Exhibit A, as the same may have been amended through the date of exercise of
such stock option, or a counterpart thereof (the "Shareholders Agreement"),
together with, unless the Optionee is unmarried, a spousal consent in the form
attached hereto, unless the Optionee has previously executed and delivered such
documents and they are in effect at the time the Optionee exercises the option.
6. LIMITATION ON EXERCISE OF OPTIONS
To the extent the aggregate fair market value of the Common Stock with
respect to which, during any calendar year, one or more Incentive Stock Options
under this Plan (and/or one or more options under any other plan maintained by
the Company or any of its Affiliates for the granting of options intended to
qualify under Section 422 of the Code) are exercisable for the first time by an
Optionee exceeds One Hundred Thousand Dollars and 00/100 ($100,000.00) (said
value to be determined as of the respective Dates of Grant of such options),
such portion in excess of One Hundred Thousand Dollars and 00/100 ($100,000.00)
shall be subject to delayed
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exercisability or treated as a Nonqualified Stock Option, as set forth by the
Administrative Committee in the agreement(s) evidencing the stock option.
7. EXERCISE OF OPTION
Subject to Section 6 above and any terms of a stock option specified
pursuant to Section 5 above, an Optionee or the Qualified Successor of an
Optionee pursuant to Sections 8.2 and 8.3 below may exercise a stock option or
any part thereof (unless partial exercise is specifically prohibited by the
terms of the stock option), by giving written notice thereof to the Company at
its principal place of business. Such notice shall include a written
representation that the shares to be acquired will be acquired and held for
investment, and not for resale or distribution, and shall be accompanied by any
documents required by Section 5.3 above. Such notice shall also include full
payment of the Option Price to the extent the stock option is so exercised and
any withholding tax obligation that may arise in connection with such exercise.
Such payment shall be in lawful money of the United States and shall be payable
in cash or by certified or cashier's check; provided, however, that in the
discretion of the Administrative Committee, such payment may be made, in whole
or in part, in shares of Common Stock or in any other form approved by the
Administrative Committee. Following the exercise of a stock option, the
Administrative Committee shall cause the information statement required by
Section 6039 of the Code to be furnished to the Optionee within the time and in
the manner prescribed by law.
The Company or any related corporation may require an Optionee holding
a stock option to pay the Company the amount of any taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
stock option. Subject to the Plan and applicable law and unless the
Administrative Committee determines otherwise, the Optionee may satisfy these
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock from the shares otherwise
issuable to such Optionee or by transferring shares of Common Stock to the
Company, in such amounts as are equivalent to the fair market value of the
withholding obligation. The Company shall have the right to withhold from any
shares of Common Stock issuable pursuant to the exercise of a stock option or
from any cash amounts otherwise due or to become due from the Company to the
Optionee an amount equal to such taxes.
8. TRANSFERABILITY OF OPTIONS
8.1. Except to the extent permitted by Section 422 of the Code and by
the Administrative Committee, and except as provided in Sections 8.2, 8.3, and
8.4 below,
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no stock option shall be transferable or exercisable by any person other than
the Optionee to whom such stock option was originally granted.
8.2. In the event of the demise of an Optionee while in the employ of
the Company, any stock options held by the Optionee shall pass to the person or
persons entitled thereto pursuant to the will of the Optionee or applicable laws
of descent and distribution (such person or persons are sometimes herein
referred to collectively as the "Qualified Successor" of the Optionee). Any
right under any stock option which the Optionee could have exercised immediately
prior to the date of his or her demise shall, subject to Section 9 below, be
exercisable by the Qualified Successor for a period of up to one (1) year
following such demise.
8.3. In the event of the demise of an Optionee, following termination
of the Optionee's employment or services for the Company on account of
Disability, but prior to the expiration of the period of up to one (1) year
specified in Section 9.3 below, any right under any stock option which the
Optionee could have exercised immediately prior to the date of his or her demise
shall, subject to Section 9 below, pass to and be exercisable by the Qualified
Successor of the Optionee until the expiration of such period of up to one (1)
year following the date of demise of the Optionee. The term "Disability" refers
to a condition resulting from injury or illness to the Optionee which prevents
the Optionee from performing the duties of the Optionee as previously performed,
and could be reasonably expected to perform on behalf of the Company, for a
period of 365 consecutive days. Disability shall be deemed to occur on the first
day following the initial 365 day period. In the event that a disabled Optionee
returns to the performance of his or her employment or services for the Company
within the disability period, but can fully perform the employment or services
for less than thirty (30) days, and then relapses to his or her disability, the
disability period shall not be considered to have been interrupted.
8.4. In the event of the demise of an Optionee, following termination
of the Optionee's employment or services for the Company for any reason other
than Disability but prior to the expiration of the three (3) month period
specified in Section 9.4 below, any right under any stock option which the
Optionee could have exercised immediately prior to the date of his or her demise
shall, subject to Section 9 below, pass to and be exercisable by the Qualified
Successor of the Optionee until the expiration of such period of up to one (1)
year following the date of termination of the Optionee's employment or services
with the Company.
8.5. In the event that two or more persons constitute the Qualified
Successor of an Optionee, all rights of such Qualified Successor shall be
exercisable, if at all, by the unanimous agreement of such persons.
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9. TERMINATION OF OPTIONS
To the extent not earlier exercised, a stock option shall terminate at
the earliest of the following dates:
9.1. The date specified in such stock option, which date shall not be
extended for any reason;
9.2. A period of up to one (1) year following the date of termination
of the Optionee's employment or services on behalf of the Company on account of
such Optionee's demise;
9.3. A period of up to one (1) year following the date of termination
of the Optionee's employment or services on behalf of the Company on account of
such Optionee's Disability, as defined in Section 8.3 above.
9.4. A period of up to three (3) months following the date of
termination of the Optionee's employment or services on behalf of the Company
for any reason other than the Optionee's demise or Disability;
9.5. The date of any sale, transfer or hypothecation, or any attempted
sale, transfer or hypothecation, of such stock option, by the Optionee or his or
her Qualified Successor, except as expressly permitted by the Administrative
Committee pursuant to Section 8.1;
9.6. The date of filing of a voluntary or involuntary petition under
the bankruptcy laws of the United States, or under the insolvency laws of any
state, for the estate of the Optionee or his or her Qualified Successor; and
9.7. The date specified in Section 10.2 below for such termination in
the event of a Terminating Event (as defined in Section 10.2 below).
10. ADJUSTMENTS TO OPTIONS
10.1. In the event that there is a material alteration in the capital
structure of the Company on account of a reorganization, merger, capitalization,
stock split, reverse stock split, stock dividend or otherwise, then the
Administrative Committee shall make such adjustments to this Plan and to the
stock options then outstanding and thereafter granted under this Plan as the
Administrative Committee determines to be appropriate and equitable under the
circumstances. Such adjustments may include, without limitation (a) a change in
the number or kind of shares of stock of the Company covered by such stock
options, and/or (b) a change in the Option Price
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payable per share; provided, however, that the aggregate Option Price applicable
to the unexercised portion of existing stock options shall not be altered, it
being intended that any adjustments made with respect to such stock options
shall apply only to the price per share and the number of shares subject
thereto. For purposes of this Section 10.1, neither (i) the issuance of
additional shares of Common Stock or other securities of the Company in exchange
for adequate consideration (including services), nor (ii) the conversion into
Common Stock of any securities of the Company now or hereafter outstanding,
shall be deemed material alterations in the capital structure of the Company. In
the event the Administrative Committee shall determine that the nature of a
material alteration in the capital structure of the Company is such that it is
not feasible or advisable to make adjustments to this Plan or to the stock
options granted hereunder, such event shall be deemed a Terminating Event as
defined in Section 10.2 below.
10.2. In the event of (a) the dissolution or liquidation of the
Company, (b) a merger or other reorganization of the Company with one or more
corporations as a result of which the Company will not be a surviving
corporation, (c) the sale of all or substantially all of the assets of the
Company or a material division of the Company, (d) a sale or other transfer,
pursuant to a tender offer or otherwise, of more than fifty percent (50%) of the
then outstanding shares of Common Stock of the Company, (e) an acquisition by
the Company resulting in an extraordinary expansion of the Company's business or
the addition of a material new line of business, or (f) a material change in the
capital structure of the Company that is subject to this Section 10.2 in
accordance with the last sentence of Section 10.1 above (any of such events is
herein referred to as a "Terminating Event"), the Administrative Committee shall
determine whether provision will be made in connection with the Terminating
Event for an appropriate assumption of the stock options theretofore granted
under this Plan (which assumption may be effected by means of a payment to each
Optionee (by the Company or any other person or entity involved in the
Terminating Event), in cancellation of the stock options held by him or her, of
the difference between the then fair market value of the aggregate number of
shares of Common Stock then subject to such stock options and the aggregate
exercise price that would have to be paid to acquire such shares) or for
substitution of appropriate new options covering stock of a successor
corporation to the Company or stock of an Affiliate of such successor
corporation. If the Administrative Committee determines that such an appropriate
assumption or substitution will be made, the Administrative Committee shall give
notice of such determination to the Optionees under this Plan, and the
provisions of such assumption or substitution, and any adjustments made (i) to
the number and kind of shares subject to the stock options outstanding under
this Plan (or to options issued in substitution therefor), (ii) to the Option
Prices, and/or (iii) to the terms and
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conditions of the stock options, shall be binding upon such Optionees. If the
Administrative Committee determines that no such assumption or substitution will
be made, the Administrative Committee shall give notice of such determination to
the Optionees, whereupon each Optionee shall have the right for a period of
thirty (30) days following such notice to exercise in full or in part any
unexercised or unexpired stock options then held by him or her, without regard
to any vesting provision to which such stock options may have otherwise been
subject pursuant to Section 5.1.5 above. Upon the expiration of said period of
thirty (30) days, all stock options then outstanding shall expire to the extent
not earlier exercised, and this Plan shall terminate.
11. RIGHT OF REPURCHASE; MARKET STANDOFF; ESCROW
11.1 RIGHT OF REPURCHASE
The Administrative Committee shall have the discretion to authorize the
issuance of unvested shares of Common Stock pursuant to the exercise of a stock
option. Should the Optionee cease to be employed by or provide services to the
Company, then all shares of Common Stock issued upon exercise of a stock option
which are unvested at the time of cessation of employment or services shall be
subject to repurchase at the exercise price paid for such shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise) shall be established by the Administrative
Committee and set forth in the agreement evidencing such right.
All of the Company's outstanding repurchase rights under this Section
11.1 are assignable by the Company at any time and shall remain in full force
and effect in the event of a Terminating Event; provided that if the
Administrative Committee determines that an assumption or substitution of stock
options outstanding under the Plan will not be made in connection with the
Terminating Event and the vesting of such stock options is therefore accelerated
pursuant to Section 10.2, the repurchase rights under this Section 11.1 shall
terminate and all shares subject to such terminated rights shall immediately
vest in full.
The Administrative Committee shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of employment or
services, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under a stock option
and thereby accelerate the vesting of such shares in whole or in part at any
time.
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11.2 MARKET STANDOFF
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act"), including the
Company's initial public offering, a person shall not sell, or make any short
sale of, loan, hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to, any shares issued pursuant to a
stock option granted under the Plan without the prior written consent of the
Company or its underwriters. Such limitations shall be in effect only if and to
the extent and for such period of time as may be requested by the Company or
such underwriters and agreed to by the Company's officers and directors;
provided, however, that in no event shall the weighted average number of days in
such period exceed 180 days. The limitations of this paragraph shall in all
events terminate two years after the effective date of the Company's initial
public offering.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 11.2, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 11.2, the Company
may impose stop-transfer instructions with respect to the purchased shares until
the end of the applicable standoff period.
11.3 ESCROW
To ensure that shares of Common Stock acquired upon exercise of a stock
option that are subject to any repurchase right, shareholders agreement and/or
security for any promissory note will be available for repurchase, the
Administrative Committee may require the Optionee to deposit the certificate or
certificates evidencing such shares with an agent designated by the
Administrative Committee under the terms and conditions of escrow and security
agreements approved by the Administrative Committee. If the Administrative
Committee does not require such deposit as a condition of exercise of a stock
option, the Administrative Committee reserves the right at any time to require
the Optionee to so deposit the certificate or certificates in escrow. The
Company shall bear the expenses of the escrow.
As soon as practicable after the expiration of any repurchase rights or
shareholders agreement, and after full repayment of any promissory note secured
by
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the shares in escrow, the agent shall deliver to the Optionee the shares no
longer subject to such restrictions and no longer security for any promissory
note.
In the event shares held in escrow are subject to the Company's
exercise of a repurchase option or shareholders agreement, the notices required
to be given to the Optionee shall be given to the agent and any payment required
to be given to the Optionee shall be given to the agent. Within thirty (30) days
after payment by the Company, the agent shall deliver the shares which the
Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
In the event of any stock dividend, stock split or consolidation of
shares or any like capital adjustment of any of the outstanding securities of
the Company, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of ownership of shares
acquired upon exercise of a stock option shall be subject to any repurchase
rights, shareholders agreement, and/or security for any promissory note with the
same force and effect as the shares subject to such repurchase rights,
shareholders agreement and security interest immediately before such event.
12. TERMINATION AND AMENDMENT
12.1. Unless earlier terminated as provided below, this Plan shall
terminate on, and no stock option shall be granted under this Plan after, the
tenth (10th) anniversary of the date immediately preceding the date this Plan is
adopted by the Board. Such termination shall not affect the rights of the
Administrative Committee or the Company under the plan (including but not
limited to rights under Section 10 and Section 11 above) with respect to any
stock options theretofore granted or shares of Common Stock issued upon exercise
thereof.
12.2. The Board may at any time terminate, suspend, or amend the terms
of this Plan; provided, however, that, to the extent required by Section 422 of
the Code and except as provided in Section 10 above, the Board may not, without
prior approval by holders of shares of Common Stock constituting at least a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the meeting at which such approval is sought:
12.2.1 Increase the aggregate number of shares of Common Stock
reserved for issuance upon exercise of stock options granted under this Plan;
12.2.2 Change the class of employees who are eligible to receive
Incentive Stock Options under this Plan; or
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12.2.3 Make any change in the terms of this Plan which would cause the
Incentive Stock Options granted hereunder to lose their qualification as
incentive stock options under Section 422 of the Code.
12.3. No stock option may be granted during any suspension or after
termination of this Plan. Amendment, suspension, or termination of this Plan
shall not, without the consent of the Optionee, alter or impair any rights or
obligations with respect to any stock option theretofore granted or shares of
Common Stock acquired upon exercise thereof.
13. OPTION AGREEMENT; LEGEND
Each stock option granted hereunder shall be evidenced by a written
agreement executed by the Company and the Optionee. Such agreement shall contain
the terms of the stock option as specified pursuant to Section 5 above, together
with such other terms, conditions, and provisions not inconsistent with such
terms and the conditions of this Plan as the Administrative Committee deems
advisable. Such agreement shall also provide that, by accepting a stock option
granted under this Plan, the Optionee, for himself or herself, for his or her
Qualified Successor, and for his or her heirs, successors, and assigns:
13.1. Recognizes, agrees and acknowledges that no registration
statement under the 1933 Act or under any state securities laws, will have been
filed as to either the stock option or any shares of Common Stock that may be
acquired upon exercise of such stock option;
13.2. Warrants and represents that the stock option and any shares of
Common Stock of the Company acquired upon exercise of the option will be
acquired and held by the Optionee for the Optionee's own account, for investment
purposes only, and not with a view towards the distribution or public offering
thereof nor with any present intention of reselling or distributing the same at
any particular future time;
13.3. Acknowledges and consents to the appearance of a printed legend
on the back of each stock certificate representing shares of Common Stock issued
upon exercise of such stock option, which legend shall read as follows:
NOTICE: TRANSFER AND OTHER RESTRICTIONS
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES ACT (COLLECTIVELY, THE "SECURITIES LAWS"). THE SHARES HAVE
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BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS THE SHARES (I) ARE REGISTERED UNDER THE
SECURITIES LAWS, OR (II) ARE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE CORPORATION IS PROVIDED AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFER, AND MAY BE
SUBJECT TO REPURCHASE BY THE CORPORATION, PURSUANT TO THE PROVISIONS OF
(A) THE CORPORATION'S STOCK OPTION PLAN AND/OR A STOCK OPTION AGREEMENT
BETWEEN THE HOLDER AND THE CORPORATION, AND/OR (B) A SHAREHOLDERS
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION. INFORMATION CONCERNING THESE RESTRICTIONS MAY BE OBTAINED
FROM THE CORPORATION OR ITS LEGAL COUNSEL.
13.4. Agrees not to sell, transfer, or otherwise dispose of any shares
of Common Stock that may be acquired upon exercise of the stock option unless
(i) there is an effective registration statement under the 1933 Act covering the
proposed disposition and compliance with governing state securities laws, (ii)
the Optionee delivers to the Company, at the Optionee's expense, a "no-action"
letter or similar interpretative opinion, satisfactory in form and substance to
the Company, from the staff of each appropriate securities agency, to the effect
that such shares may be disposed of by the Optionee in the manner proposed, or
(iii) the Optionee delivers to the Company, at the Optionee's expense, a legal
opinion, satisfactory in form and substance to the Company, of legal counsel
designated by the Optionee and satisfactory to the Company, to the effect that
the proposed disposition is exempt from registration under the 1933 Act and
governing state securities laws; and
13.5. Agrees to indemnify the Company and hold it harmless from and
against any loss, claim or liability, including attorneys' fees or other legal
expenses incurred in the defense thereof, incurred by the Company as a result of
any breach by the Optionee of, or any inaccuracy in, any representation,
warranty, covenant, or other provision contained in such agreement.
If a registration statement under the 1933 Act is hereafter filed with respect
to Incentive Stock Options granted or to be granted hereunder and the shares of
Common Stock that may be acquired upon exercise of such stock options, then,
following the
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effectiveness thereof, the provisions in agreements representing stock options
that would otherwise be required by this Section 13 may, in the discretion of
the Administrative Committee, be modified or eliminated.
14. MISCELLANEOUS PROVISIONS
14.1. Nothing contained in this Plan shall obligate the Company to
employ an Optionee for any period, nor shall this Plan interfere in any way with
the right of the Company to reduce such Optionee's compensation.
14.2. The provisions of this Plan, each stock option issued to an
Optionee hereunder, and the agreement evidencing such stock option under Section
13 above shall be binding upon such Optionee, the Qualified Successor of such
Optionee, and the heirs, successors, and assigns of such Optionee.
14.3. Where the context so requires, references herein to the singular
shall include the plural, and vice versa, and references to a particular gender
shall include either or both genders.
14.4. This Plan shall be construed, administered, and enforced in
accordance with the laws of the United States, to the extent applicable hereto,
as well as the laws of the State of Washington.
15. EFFECTIVE DATE OF PLAN
This Plan shall be effective upon adoption of a resolution of the Board
approving this Plan. This Plan shall be subject to approval, within twelve (12)
months before or after the date this Plan is adopted by the Board, by holders of
shares of Common Stock constituting at least a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at the meeting at
which such approval is sought. The Plan shall also be subject to the requirement
of RCW 21.20.310(10) that the Administrator of Securities of the Department of
Licensing of the State of Washington be provided with notification of the
adoption of this Plan. No stock option granted hereunder shall be exercisable
until such shareholder approval and notification requirements have been
satisfied. If either of these requirements is not satisfied by August 1,1995,
this Plan, and any stock options granted hereunder prior to such date, shall be
void.
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16
AMAZON.COM, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
(AS OF DECEMBER 20, 1996 FOR NEW GRANTS)
AMAZON.COM, INC., a Delaware corporation (the "Company"), hereby
establishes and sets forth the terms of the AMAZON.COM, INC. AMENDED AND
RESTATED 1994 STOCK OPTION PLAN (the "Plan"), which for reference purposes shall
be dated September 15, 1994.
1. PURPOSE OF PLAN
The purpose of the Plan is to enhance the long-term stockholder value
of the Company by offering opportunities to employees, directors, officers,
consultants, advisors and independent contractors of the Company and any
Affiliate of the Company (as defined below) to participate in the success and
growth of the Company and to encourage them to remain in the service of the
Company. This Plan will seek to accomplish this purpose by providing for the
grant to such persons of options to acquire shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"). Options granted hereunder
may be issued as "incentive stock options" as such term is defined in Section
422 of the Internal Revenue Code of 1986, as the same may be amended from time
to time (the "Code"). The Plan and each such "incentive stock option" are
intended to comply with all of the requirements of said Section 422, and of all
other provisions of the Code applicable to "incentive stock options" and to
plans issuing the same (hereinafter referred to as "Incentive Stock Options").
Options granted hereunder also may be issued as nonqualified stock options not
intended to qualify as Incentive Stock Options (hereinafter referred to as
"Nonqualified Stock Options").
2. ADMINISTRATION OF THE PLAN
2.1. The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless a committee of the Board is appointed in accordance
with Section 2.2 or 2.4 below (the Board, or such committee, if appointed, will
be referred to in this Plan as the "Administrative Committee").
2.2. The Board may at any time appoint a committee, consisting of not
less than two of its members, to administer this Plan on behalf of the Board in
accordance with such terms and conditions not inconsistent with this Plan as the
Board may prescribe. Once appointed, the committee shall continue to serve until
otherwise directed by the Board. From time to time the Board may increase the
size of the
17
committee and appoint additional members, remove members (with or without cause)
and appoint new members in their place, fill vacancies however caused, and/or
remove all members of the committee and thereafter directly administer this
Plan.
2.3. A majority of the members of the Administrative Committee shall
constitute a quorum, and, subject to the limitations in this Section 2, all
actions of the Administrative Committee shall require the affirmative vote of
members who constitute a majority of such quorum. Members of the Administrative
Committee may vote on any matters affecting the administration of this Plan or
the grant of stock options pursuant to this Plan, except that no such member
shall act upon the granting of a stock option to himself or herself (but any
such member may be counted in determining the existence of a quorum at any
meeting of the Administrative Committee during which action is taken with
respect to the granting of a stock option to him or her).
2.4. Notwithstanding the foregoing provisions of this Section 2, if and
so long as the Company has registered any class of any equity security pursuant
to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall consider in selecting the Administrative Committee and the
membership of any committee acting as Administrative Committee, with respect to
any persons subject or likely to become subject to Section 16 of the Exchange
Act, the provisions regarding (a) "outside directors" as contemplated by Section
162(m) of the Code and (b) "nonemployee directors" as contemplated by Rule 16b-3
under the Exchange Act. The Board may delegate the responsibility for
administering the Plan with respect to designated classes of eligible persons to
different committees consisting of one or more members of the Board, subject to
such limitations as the Board deems appropriate.
2.5. The following provisions shall apply to the Administrative
Committee:
2.5.1 The Administrative Committee shall have the authority (a) to
administer this Plan in accordance with its express terms; (b) to determine all
questions arising in connection with the administration, interpretation, and
application of this Plan, including all questions relating to the value of the
Common Stock; (c) to correct any defect, supply any information and reconcile
any inconsistency in such manner and to such extent as shall be deemed necessary
or advisable to carry out the purpose of this Plan; (d) to prescribe, amend and
rescind rules and regulations relating to the administration of this Plan; (e)
to determine the duration and purposes of leaves of absence which may be granted
to participants without constituting a termination of employment for purposes of
this Plan; and (f) to make all other determinations necessary or advisable for
administration of this Plan.
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2.5.2 Exercise of the foregoing authority by the Administrative
Committee shall be consistent with the intent that the Incentive Stock Options
issued under this Plan be qualified under the terms of Section 422 of the Code
(including any amendments thereto and any similar successor provision).
2.5.3 All determinations made by the Administrative Committee in good
faith on matters referred to in this Section 2.5 shall be final, conclusive, and
binding upon all persons. The Administrative Committee shall have all powers
necessary or appropriate to accomplish its duties under this Plan.
3. ELIGIBILITY
3.1. An individual shall be eligible to participate in this Plan
provided that such individual is (a) an employee, director, officer, consultant,
agent, advisor or independent contractor of the Company or an Affiliate and (b)
selected by the Administrative Committee to receive one or more stock options
under this Plan. Each person so selected by the Administrative Committee shall
sometimes hereinafter be referred to as an "Optionee." No person shall be
eligible to be granted an Incentive Stock Option hereunder unless such person is
then a bona fide employee of the Company or an Affiliate.
3.2. As used in this Plan, an "Affiliate" of a corporation shall refer
to a "parent corporation" of such corporation as described in Section 424(e) of
the Code or a "subsidiary corporation" of such corporation as described in
Section 424(f) of the Code.
3.3. No stock option shall be granted hereunder to any person who is
not a resident of the State of Washington unless the Administrative Committee
shall have determined, based on the advice of counsel, that the grant of such
Incentive Stock Option (and the exercise thereof by the Optionee) will not
violate the securities laws of the state where the Optionee resides.
4. AUTHORIZED SHARES
The aggregate number of shares of Common Stock reserved for issuance
upon exercise of stock options granted under this Plan shall be Three Million
Two Hundred Thousand (3,200,000). This number shall be subject to any adjustment
required or permitted pursuant to the provisions of Section 10 below. If any
stock option granted under the terms of this Plan shall expire or terminate for
any reason without having been exercised in full and/or shares of Common Stock
subject to repurchase are repurchased by the Company, the unpurchased shares of
Common Stock formerly
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subject to such stock option, or such repurchased shares, shall again be
available for purposes of this Plan.
5. OPTION TERMS
5.1. With respect to each stock option to be granted to an Optionee
selected by the Administrative Committee in accordance with Section 3 above, the
Administrative Committee shall appropriately designate such options as Incentive
Stock Options or as Nonqualified Stock Options and shall specify the following
terms:
5.1.1 The number of shares of Common Stock subject to such
stock option.
5.1.2 The date on which the grant of such stock option shall
be effective (the "Date of Grant").
5.1.3 The period of time during which such stock option shall
be exercisable, which, in the case of an Incentive Stock Option, shall in no
event be more than ten (10) years following its Date of Grant; provided,
however, if such Incentive Stock Option is granted to an Optionee who on the
Date of Grant owns, either directly or indirectly within the meaning of Section
424(d) of the Code, more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an Affiliate of the Company, the
period of time during which such Incentive Stock Option shall be exercisable
shall in no event be more than five (5) years following its Date of Grant.
5.1.4 The price or prices at which such stock option shall be
exercisable by the Optionee (the "Option Price"); provided, however, that, in
the case of an Incentive Stock Option, the Option Price shall in no event be
less than the fair market value, on the Date of Grant, of the shares of Common
Stock subject thereto; and provided, further, that, if, in the case of an
Incentive Stock Option, such Incentive Stock Option is granted to an Optionee
who on the Date of Grant owns, either directly or indirectly within the meaning
of Section 424(d) of the Code, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or an Affiliate of the
Company, then the Option Price shall be at least one hundred ten percent (110%)
of the fair market value, on the Date of Grant, of the Common Stock subject
thereto.
5.1.5 The Administrative Committee shall have complete
discretion with respect to the terms of any vesting schedule pursuant to which
the right of the Optionee to exercise such stock option shall be contingent,
including, without limitation, discretion (a) to allow full and immediate
vesting following the Date of
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Grant of a stock option, (b) to permit partial vesting in stated percentage
amounts based on the length of the holding period of the stock option, or (c) to
permit full vesting after a stated holding period has passed. Following
termination of an Optionee's employment or services with the Company, a stock
option that is subject to vesting under this Section 5.1.5 shall not vest
further on account of the holding period thereof subsequent to such date of
termination unless the Administrative Committee determines otherwise.
5.1.6 Whether shares of Common Stock acquired upon exercise of
such stock option will be subject to repurchase in accordance with Section 11
below.
5.1.7 Such other terms and conditions as the Administrative
Committee deems advisable and as are consistent with the terms and conditions of
this Plan, including, without limitation, any alternate repurchase provisions to
those set forth in Section 11 below.
5.2. Notwithstanding any provision of this Section 5 to the contrary,
no Incentive Stock Option shall be granted hereunder after the date immediately
preceding the tenth (10th) anniversary of the date this Plan is adopted by the
Board. Except as expressly provided herein, nothing contained in this Plan shall
require that the terms and conditions of stock options granted hereunder be
uniform.
5.3. Each stock option shall require that, unless the Common Stock
shall at such time be publicly traded, as a condition to exercise by the
Optionee of the stock option, the Optionee shall execute and deliver to the
Company the Shareholders Agreement in substantially the form attached hereto as
Exhibit A, as the same may have been amended through the date of exercise of
such stock option, or a counterpart thereof (the "Shareholders Agreement"),
together with, unless the Optionee is unmarried, a spousal consent in the form
attached hereto, unless the Optionee has previously executed and delivered such
documents and they are in effect at the time the Optionee exercises the option.
6. LIMITATION ON EXERCISE OF OPTIONS
To the extent the aggregate fair market value of the Common Stock with
respect to which, during any calendar year, one or more Incentive Stock Options
under this Plan (and/or one or more options under any other plan maintained by
the Company or any of its Affiliates for the granting of options intended to
qualify under Section 422 of the Code) are exercisable for the first time by an
Optionee exceeds One Hundred Thousand Dollars and 00/100 ($100,000.00) (said
value to be determined as of the respective Dates of Grant of such options),
such portion in excess of One Hundred Thousand Dollars and 00/100 ($100,000.00)
shall be subject to delayed
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exercisability or treated as a Nonqualified Stock Option, as set forth by the
Administrative Committee in the agreement(s) evidencing the stock option.
7. EXERCISE OF OPTION
Subject to Section 6 above and any terms of a stock option specified
pursuant to Section 5 above, an Optionee or the Qualified Successor of an
Optionee pursuant to Sections 8.2 and 8.3 below may exercise a stock option or
any part thereof (unless partial exercise is specifically prohibited by the
terms of the stock option), by giving written notice thereof to the Company at
its principal place of business. Such notice shall include a written
representation that the shares to be acquired will be acquired and held for
investment, and not for resale or distribution, and shall be accompanied by any
documents required by Section 5.3 above. Such notice shall also include full
payment of the Option Price to the extent the stock option is so exercised and
any withholding tax obligation that may arise in connection with such exercise.
Such payment shall be in lawful money of the United States and shall be payable
in cash or by certified or cashier's check; provided, however, that in the
discretion of the Administrative Committee, such payment may be made, in whole
or in part, in shares of Common Stock or in any other form approved by the
Administrative Committee. Following the exercise of a stock option, the
Administrative Committee shall cause the information statement required by
Section 6039 of the Code to be furnished to the Optionee within the time and in
the manner prescribed by law.
The Company or any related corporation may require an Optionee holding
a stock option to pay the Company the amount of any taxes required by any
government to be withheld or otherwise deducted and paid with respect to such
stock option. Subject to the Plan and applicable law and unless the
Administrative Committee determines otherwise, the Optionee may satisfy these
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock from the shares otherwise
issuable to such Optionee or by transferring shares of Common Stock to the
Company, in such amounts as are equivalent to the fair market value of the
withholding obligation. The Company shall have the right to withhold from any
shares of Common Stock issuable pursuant to the exercise of a stock option or
from any cash amounts otherwise due or to become due from the Company to the
Optionee an amount equal to such taxes.
8. TRANSFERABILITY OF OPTIONS
8.1. Except to the extent permitted by Section 422 of the Code and by
the Administrative Committee, and except as provided in Sections 8.2, 8.3, and
8.4 below,
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no stock option shall be transferable or exercisable by any person other than
the Optionee to whom such stock option was originally granted.
8.2. In the event of the demise of an Optionee while in the employ of
the Company, any stock options held by the Optionee shall pass to the person or
persons entitled thereto pursuant to the will of the Optionee or applicable laws
of descent and distribution (such person or persons are sometimes herein
referred to collectively as the "Qualified Successor" of the Optionee). Any
right under any stock option which the Optionee could have exercised immediately
prior to the date of his or her demise shall, subject to Section 9 below, be
exercisable by the Qualified Successor for a period of up to one (1) year
following such demise.
8.3. In the event of the demise of an Optionee, following termination
of the Optionee's employment or services for the Company on account of
Disability, but prior to the expiration of the period of up to one (1) year
specified in Section 9.3 below, any right under any stock option which the
Optionee could have exercised immediately prior to the date of his or her demise
shall, subject to Section 9 below, pass to and be exercisable by the Qualified
Successor of the Optionee until the expiration of such period of up to one (1)
year following the date of demise of the Optionee. The term "Disability" refers
to a condition resulting from injury or illness to the Optionee which prevents
the Optionee from performing the duties of the Optionee as previously performed,
and could be reasonably expected to perform on behalf of the Company, for a
period of 365 consecutive days. Disability shall be deemed to occur on the first
day following the initial 365 day period. In the event that a disabled Optionee
returns to the performance of his or her employment or services for the Company
within the disability period, but can fully perform the employment or services
for less than thirty (30) days, and then relapses to his or her disability, the
disability period shall not be considered to have been interrupted.
8.4. In the event of the demise of an Optionee, following termination
of the Optionee's employment or services for the Company for any reason other
than Disability but prior to the expiration of the three (3) month period
specified in Section 9.4 below, any right under any stock option which the
Optionee could have exercised immediately prior to the date of his or her demise
shall, subject to Section 9 below, pass to and be exercisable by the Qualified
Successor of the Optionee until the expiration of such period of up to one (1)
year following the date of termination of the Optionee's employment or services
with the Company.
8.5. In the event that two or more persons constitute the Qualified
Successor of an Optionee, all rights of such Qualified Successor shall be
exercisable, if at all, by the unanimous agreement of such persons.
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9. TERMINATION OF OPTIONS
To the extent not earlier exercised, a stock option shall terminate at
the earliest of the following dates:
9.1. The date specified in such stock option;
9.2. A period of up to one (1) year following the date of termination
of the Optionee's employment or services on behalf of the Company on account of
such Optionee's demise;
9.3. A period of up to one (1) year following the date of termination
of the Optionee's employment or services on behalf of the Company on account of
such Optionee's Disability, as defined in Section 8.3 above.
9.4. A period of up to three (3) months following the date of
termination of the Optionee's employment or services on behalf of the Company
for any reason other than the Optionee's demise or Disability; provided, that
with respect to employees of the Company, and unless the Administrative
Committee at any time determines otherwise, "termination of the Optionee's
services" for purposes of this Section 9.4 shall mean any reduction in the
Optionee's regular hours of employment to less than thirty (30) hours per week;
and
9.5. The date of any sale, transfer or hypothecation, or any attempted
sale, transfer or hypothecation, of such stock option, by the Optionee or his or
her Qualified Successor, except as expressly permitted by the Administrative
Committee pursuant to Section 8.1.
9.6 The date specified in Section 10.2 below for such termination in
the event of a Terminating Event (as defined in Section 10.2 below).
10. ADJUSTMENTS TO OPTIONS
10.1. In the event that there is a material alteration in the capital
structure of the Company on account of a reorganization, merger, capitalization,
stock split, reverse stock split, stock dividend or otherwise, then the
Administrative Committee shall make such adjustments to this Plan and to the
stock options then outstanding and thereafter granted under this Plan as the
Administrative Committee determines to be appropriate and equitable under the
circumstances. Such adjustments may include, without limitation (a) a change in
the number or kind of shares of stock of the Company covered by such stock
options, and/or (b) a change in the Option Price payable per share; provided,
however, that the aggregate Option Price applicable to
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the unexercised portion of existing stock options shall not be altered, it being
intended that any adjustments made with respect to such stock options shall
apply only to the price per share and the number of shares subject thereto. For
purposes of this Section 10.1, neither (i) the issuance of additional shares of
Common Stock or other securities of the Company in exchange for adequate
consideration (including services), nor (ii) the conversion into Common Stock of
any securities of the Company now or hereafter outstanding, shall be deemed
material alterations in the capital structure of the Company. In the event the
Administrative Committee shall determine that the nature of a material
alteration in the capital structure of the Company is such that it is not
feasible or advisable to make adjustments to this Plan or to the stock options
granted hereunder, such event shall be deemed a Terminating Event as defined in
Section 10.2 below.
10.2. In the event of (a) the dissolution or liquidation of the
Company, (b) a merger or other reorganization of the Company with one or more
corporations as a result of which the Company will not be a surviving
corporation, (c) the sale of all or substantially all of the assets of the
Company, or (d) a sale or other transfer, pursuant to a tender offer or
otherwise, of more than fifty percent (50%) of the then outstanding shares of
Common Stock of the Company (any of such events is herein referred to as a
"Terminating Event"), the Administrative Committee shall determine whether
provision will be made in connection with the Terminating Event for an
appropriate assumption of the stock options theretofore granted under this Plan
(which assumption may be effected by means of a payment to each Optionee (by the
Company or any other person or entity involved in the Terminating Event), in
cancellation of the stock options held by him or her, of the difference between
the then fair market value of the aggregate number of shares of Common Stock
then subject to such stock options and the aggregate exercise price that would
have to be paid to acquire such shares) or for substitution of appropriate new
options covering stock of a successor corporation to the Company or stock of an
Affiliate of such successor corporation. If the Administrative Committee
determines that such an assumption or substitution will be made, the
Administrative Committee shall give notice of such determination to the
Optionees under this Plan, and the provisions of such assumption or
substitution, and any adjustments made (i) to the number and kind of shares
subject to the stock options outstanding under this Plan (or to options issued
in substitution therefor), (ii) to the Option Prices, and/or (iii) to the terms
and conditions of the stock options, shall be binding upon such Optionees. Any
such determination shall be made in the sole discretion of the Administrative
Committee and shall be final, conclusive and binding on all Optionees. If the
Administrative Committee, in its sole discretion, determines that no such
assumption or substitution will be made, the Administrative Committee shall give
notice of such determination to the Optionees, whereupon each Optionee
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shall have the right for a period of thirty (30) days following such notice to
exercise in full or in part any unexercised or unexpired stock options then held
by him or her, without regard to any contingent vesting provision to which such
stock options may have otherwise been subject pursuant to Section 5.1.5 above.
Upon the expiration of said period of thirty (30) days, all stock options then
outstanding shall expire to the extent not earlier exercised, and this Plan
shall terminate.
11. RIGHT OF REPURCHASE; MARKET STANDOFF; ESCROW
11.1 RIGHT OF REPURCHASE
The Administrative Committee shall have the discretion to authorize the
issuance of unvested shares of Common Stock pursuant to the exercise of a stock
option. Should the Optionee cease to be employed by or provide services to the
Company, then all shares of Common Stock issued upon exercise of a stock option
which are unvested at the time of cessation of employment or services shall be
subject to repurchase at the exercise price paid for such shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise) shall be established by the Administrative
Committee and set forth in the agreement evidencing such right.
All of the Company's outstanding repurchase rights under this Section
11.1 are assignable by the Company at any time and shall remain in full force
and effect in the event of a Terminating Event; provided that if the
Administrative Committee determines that an assumption or substitution of stock
options outstanding under the Plan will not be made in connection with the
Terminating Event and the vesting of such stock options is therefore accelerated
pursuant to Section 10.2, the repurchase rights under this Section 11.1 shall
terminate and all shares subject to such terminated rights shall immediately
vest in full.
The Administrative Committee shall have the discretionary authority,
exercisable either before or after the Optionee's cessation of employment or
services, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Optionee under a stock option
and thereby accelerate the vesting of such shares in whole or in part at any
time.
11.2 MARKET STANDOFF
In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act"), including the
Company's initial public offering, a person shall not sell, or make any short
sale of, loan, hypothecate,
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pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any shares issued pursuant to a stock option granted under the Plan
without the prior written consent of the Company or its underwriters. Such
limitations shall be in effect only if and to the extent and for such period of
time as may be requested by the Company or such underwriters and agreed to by
the Company's officers and directors; provided, however, that in no event shall
the weighted average number of days in such period exceed 180 days. The
limitations of this paragraph shall in all events terminate two years after the
effective date of the Company's initial public offering.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 11.2, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 11.2, the Company
may impose stop-transfer instructions with respect to the purchased shares until
the end of the applicable standoff period.
11.3 ESCROW
To ensure that shares of Common Stock acquired upon exercise of a stock
option that are subject to any repurchase right, shareholders agreement and/or
security for any promissory note will be available for repurchase, the
Administrative Committee may require the Optionee to deposit the certificate or
certificates evidencing such shares with an agent designated by the
Administrative Committee under the terms and conditions of escrow and security
agreements approved by the Administrative Committee. If the Administrative
Committee does not require such deposit as a condition of exercise of a stock
option, the Administrative Committee reserves the right at any time to require
the Optionee to so deposit the certificate or certificates in escrow. The
Company shall bear the expenses of the escrow.
As soon as practicable after the expiration of any repurchase rights or
shareholders agreement, and after full repayment of any promissory note secured
by the shares in escrow, the agent shall deliver to the Optionee the shares no
longer subject to such restrictions and no longer security for any promissory
note.
In the event shares held in escrow are subject to the Company's
exercise of a repurchase option or shareholders agreement, the notices required
to be given to the Optionee shall be given to the agent and any payment required
to be given to the
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Optionee shall be given to the agent. Within thirty (30) days after payment by
the Company, the agent shall deliver the shares which the Company has purchased
to the Company and shall deliver the payment received from the Company to the
Optionee.
In the event of any stock dividend, stock split or consolidation of
shares or any like capital adjustment of any of the outstanding securities of
the Company, any and all new, substituted or additional securities or other
property to which the Optionee is entitled by reason of ownership of shares
acquired upon exercise of a stock option shall be subject to any repurchase
rights, shareholders agreement, and/or security for any promissory note with the
same force and effect as the shares subject to such repurchase rights,
shareholders agreement and security interest immediately before such event.
12.
TERMINATION AND AMENDMENT
12.1. Unless earlier terminated as provided below, this Plan shall
terminate on, and no stock option shall be granted under this Plan after, the
tenth (10th) anniversary of the date immediately preceding the date this Plan is
adopted by the Board. Such termination shall not affect the rights of the
Administrative Committee or the Company under the Plan (including but not
limited to rights under Section 10 and Section 11 above) with respect to any
stock options theretofore granted or shares of Common Stock issued upon exercise
thereof.
12.2. The Board may at any time terminate, suspend, or amend the terms
of this Plan; provided, however, that, to the extent required by Section 422 of
the Code and except as provided in Section 10 above, the Board may not, without
prior approval by holders of shares of Common Stock constituting at least a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the meeting at which such approval is sought:
12.2.1 Increase the aggregate number of shares of Common Stock
reserved for issuance upon exercise of stock options granted under this Plan;
12.2.2 Change the class of employees who are eligible to receive
Incentive Stock Options under this Plan; or
12.2.3 Make any change in the terms of this Plan which would cause the
Incentive Stock Options granted hereunder to lose their qualification as
incentive stock options under Section 422 of the Code.
12.3. No stock option may be granted during any suspension or after
termination of this Plan. Amendment, suspension, or termination of this Plan
shall
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not, without the consent of the Optionee, alter or impair any rights or
obligations with respect to any stock option theretofore granted or shares of
Common Stock acquired upon exercise thereof.
13. OPTION AGREEMENT; LEGEND
Each stock option granted hereunder shall be evidenced by a written
agreement executed by the Company and the Optionee. Such agreement shall contain
the terms of the stock option as specified pursuant to Section 5 above, together
with such other terms, conditions, and provisions not inconsistent with such
terms and the conditions of this Plan as the Administrative Committee deems
advisable. Such agreement shall also provide that, by accepting a stock option
granted under this Plan, the Optionee, for himself or herself, for his or her
Qualified Successor, and for his or her heirs, successors, and assigns:
13.1. Recognizes, agrees and acknowledges that no registration
statement under the 1933 Act or under any state securities laws, will have been
filed as to either the stock option or any shares of Common Stock that may be
acquired upon exercise of such stock option;
13.2. Warrants and represents that the stock option and any shares of
Common Stock of the Company acquired upon exercise of the option will be
acquired and held by the Optionee for the Optionee's own account, for investment
purposes only, and not with a view towards the distribution or public offering
thereof nor with any present intention of reselling or distributing the same at
any particular future time;
13.3. Acknowledges and consents to the appearance of a printed legend
on the back of each stock certificate representing shares of Common Stock issued
upon exercise of such stock option, which legend shall read as follows:
NOTICE: TRANSFER AND OTHER RESTRICTIONS
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES ACT (COLLECTIVELY, THE "SECURITIES LAWS"). THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, OFFERED FOR SALE OR
OTHERWISE TRANSFERRED UNLESS THE SHARES (I) ARE REGISTERED UNDER THE
SECURITIES LAWS, OR (II) ARE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES LAWS AND THE CORPORATION IS PROVIDED AN
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OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SHARES ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFER, AND MAY BE
SUBJECT TO REPURCHASE BY THE CORPORATION, PURSUANT TO THE PROVISIONS OF
(A) THE CORPORATION'S STOCK OPTION PLAN AND/OR A STOCK OPTION AGREEMENT
BETWEEN THE HOLDER AND THE CORPORATION, AND/OR (B) A SHAREHOLDERS
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION. INFORMATION CONCERNING THESE RESTRICTIONS MAY BE OBTAINED
FROM THE CORPORATION OR ITS LEGAL COUNSEL.
13.4. Agrees not to sell, transfer, or otherwise dispose of any shares
of Common Stock that may be acquired upon exercise of the stock option unless
(i) there is an effective registration statement under the 1933 Act covering the
proposed disposition and compliance with governing state securities laws, (ii)
the Optionee delivers to the Company, at the Optionee's expense, a "no-action"
letter or similar interpretative opinion, satisfactory in form and substance to
the Company, from the staff of each appropriate securities agency, to the effect
that such shares may be disposed of by the Optionee in the manner proposed, or
(iii) the Optionee delivers to the Company, at the Optionee's expense, a legal
opinion, satisfactory in form and substance to the Company, of legal counsel
designated by the Optionee and satisfactory to the Company, to the effect that
the proposed disposition is exempt from registration under the 1933 Act and
governing state securities laws; and
13.5. Agrees to indemnify the Company and hold it harmless from and
against any loss, claim or liability, including attorneys' fees or other legal
expenses incurred in the defense thereof, incurred by the Company as a result of
any breach by the Optionee of, or any inaccuracy in, any representation,
warranty, covenant, or other provision contained in such agreement.
If a registration statement under the 1933 Act is hereafter filed with respect
to Incentive Stock Options granted or to be granted hereunder and the shares of
Common Stock that may be acquired upon exercise of such stock options, then,
following the effectiveness thereof, the provisions in agreements representing
stock options that would otherwise be required by this Section 13 may, in the
discretion of the Administrative Committee, be modified or eliminated.
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14. MISCELLANEOUS PROVISIONS
14.1. Nothing contained in this Plan shall obligate the Company to
employ an Optionee for any period, nor shall this Plan interfere in any way with
the right of the Company to reduce such Optionee's compensation.
14.2. The provisions of this Plan, each stock option issued to an
Optionee hereunder, and the agreement evidencing such stock option under Section
13 above shall be binding upon such Optionee, the Qualified Successor of such
Optionee, and the heirs, successors, and assigns of such Optionee.
14.3. Where the context so requires, references herein to the singular
shall include the plural, and vice versa, and references to a particular gender
shall include either or both genders.
14.4. This Plan shall be construed, administered, and enforced in
accordance with the laws of the United States, to the extent applicable hereto,
as well as the laws of the state of Washington.
15. EFFECTIVE DATE OF PLAN
This Plan shall be effective upon adoption of a resolution of the Board
approving this Plan. This Plan shall be subject to approval, within twelve (12)
months before or after the date this Plan is adopted by the Board, by holders of
shares of Common Stock constituting at least a majority of the shares of Common
Stock represented in person or by proxy and entitled to vote at the meeting at
which such approval is sought. The Plan shall also be subject to the requirement
of RCW 21.20.310(10) that the Administrator of Securities of the Department of
Licensing of the State of Washington be provided with notification of the
adoption of this Plan. No stock option granted hereunder shall be exercisable
until such shareholder approval and notification requirements have been
satisfied. If either of these requirements is not satisfied by August 1,1995,
this Plan, and any stock options granted hereunder prior to such date, shall be
void.
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EXHIBIT 10.21
AMAZON.COM, INC.
1997 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the Amazon.com, Inc. 1997 Stock Option Plan (the "Plan") is
to enhance the long-term stockholder value of Amazon.com, Inc., a Delaware
corporation (the "Company"), by offering opportunities to employees, directors,
officers, consultants, agents, advisors and independent contractors of the
Company and its Subsidiaries (as defined in Section 2) to participate in the
Company's growth and success, and to encourage them to remain in the service of
the Company and its Subsidiaries and to acquire and maintain stock ownership in
the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
2.1
BOARD
"Board" means the Board of Directors of the Company.
2.2
CAUSE
"Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor violations), in each case
as determined by the Plan Administrator, and its determination shall be
conclusive and binding.
2.3
CODE
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2.4
COMMON STOCK
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
2.5
CORPORATE TRANSACTION
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in
which the Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted into cash,
securities or other property (other than a merger of the Company in which
the holders of Common Stock immediately prior to the
2
merger have the same proportionate ownership of capital stock of the
surviving corporation immediately after the merger);
(b) Consummation of any sale, lease, exchange or other transfer in
one transaction or a series of related transactions of all or
substantially all of the Company's assets other than a transfer of the
Company's assets to a majority-owned subsidiary corporation (as the term
"subsidiary corporation" is defined in Section 8.3) of the Company; or
(c)
Approval by the holders of the Common Stock of any plan or
proposal for the liquidation or dissolution of the Company.
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.6
DISABILITY
"Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.
2.7
EARLY RETIREMENT
"Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.
2.8
EXCHANGE ACT
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9
FAIR MARKET VALUE
The "Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for a single trading day or (b)
if the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, the average of the high and low per share sales prices for the
Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is no such
reported price for the Common Stock for the date in question, then such price on
the last preceding date for which such price exists shall be determinative of
the Fair Market Value.
2.10
GRANT DATE
"Grant Date" means the date the Plan Administrator adopted the granting
resolution. If, however, the Plan Administrator designates in a resolution a
later date as the date an Option is to be granted, then such later date shall be
the "Grant Date."
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2.11
INCENTIVE STOCK OPTION
"Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
2.12
NONQUALIFIED STOCK OPTION
"Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.13
OPTION
"Option" means the right to purchase Common Stock granted under
Section 7.
2.14
OPTIONEE
"Optionee" means (i) the person to whom an Option is granted; (ii) for an
Optionee who has died, the personal representative of the Optionee's estate, the
person(s) to whom the Optionee's rights under the Option have passed by will or
by the applicable laws of descent and distribution, or the beneficiary
designated in accordance with Section 9; or (iii) person(s) to whom an Option
has been transferred in accordance with Section 9.
2.15
PLAN ADMINISTRATOR
"Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
2.16
RETIREMENT
"Retirement" means retirement as of the individual's normal retirement
date as that term is defined by the Plan Administrator from time to time for
purposes of the Plan.
2.17
SECURITIES ACT
"Securities Act" means the Securities Act of 1933, as amended.
2.18
SUBSIDIARY
"Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
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SECTION 3. ADMINISTRATION
3.1
PLAN ADMINISTRATOR
The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting OF two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees consisting of one
or more members of the Board, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time.
3.2
ADMINISTRATION AND INTERPRETATION BY THE PLAN ADMINISTRATOR
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the number
of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option and the terms of any
instrument that evidences the Option. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan's
administration. The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1
AUTHORIZED NUMBER OF SHARES
Subject to adjustment from time to time as provided in Section 10.1, a
maximum of 4 million shares of Common Stock shall be available for issuance
under the Plan, except that any shares of Common Stock that, as of the date the
Plan is approved by the Company's stockholders, are available for issuance under
the Company's Amended and Restated 1994 Stock Option Plan (or that thereafter
become available for issuance under that Plan in accordance with its terms as in
effect on such date) and that are not issued under that Plan shall be added to
the aggregate number of shares available for issuance under the Plan. Shares
issued under the Plan shall be drawn from authorized and unissued shares or
shares now held or subsequently acquired by the Company as treasury shares.
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4.2
LIMITATIONS
Subject to adjustment from time to time as provided in Section 10.1, not
more than 250,000 shares of Common Stock may be made subject to Options under
the Plan to any individual in the aggregate in any one fiscal year of the
Company, except that the Company may make additional one-time grants of up to 1
million shares to newly hired individuals, such limitation to be applied in a
manner consistent with the requirements of, and only to the extent required for
compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.
4.3
REUSE OF SHARES
Any shares of Common Stock that have been made subject to an Option that
cease to be subject to the Option (other than by reason of exercise of the
Option to the extent it is exercised for shares) and/or shares of Common Stock
subject to repurchase which are subsequently repurchased by the Company, shall
again be available for issuance in connection with future grants of Options
under the Plan; provided, however, that for purposes of Section 4.2, any such
shares shall be counted in accordance with the requirements of Section 162(m) of
the Code.
SECTION 5. ELIGIBILITY
Options may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects. Options may also be granted to consultants, agents,
advisors and independent contractors who provide services to the Company and its
Subsidiaries.
SECTION 6. AWARDS
6.1
FORM AND GRANT OF OPTIONS
The Plan Administrator shall have the authority, in its sole discretion,
to determine the type or types of awards to be made under the Plan. Such awards
may consist of Incentive Stock Options and/or Nonqualified Stock Options.
Options may be granted singly or in combination.
6.2
ACQUIRED COMPANY OPTION AWARDS
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of an Acquired Entity) and the new Option is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan
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Administrator, except as may be required for compliance with Rule 16b-3 under
the Exchange Act, and the persons holding such awards shall be deemed to be
Optionees.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
7.1
GRANT OF OPTIONS
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.
7.2
OPTION EXERCISE PRICE
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options.
7.3
TERM OF OPTIONS
The term of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant Date.
7.4
EXERCISE AND VESTING OF OPTIONS
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option will be immediately exercisable and
the shares subject to the Option will vest according to the following schedule,
which may be waived or modified by the Plan Administrator at any time:
Period of Optionee's Continuous Employment
or Service With the Company or Its
Subsidiaries
Percent of Total Option
From the Grant Date
That Is Vested
-------------------------------After 1 year
After 2 years
Each three-month period completed thereafter
After 5 years
20%
40%
An additional 5%
100%
Any unvested shares acquired upon exercise of an Option shall be subject to
repurchase by the Company upon termination of the Optionee's employment or
services in accordance with the provisions of Section 13.1.
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To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time for vested shares and any number in its
discretion for unvested shares (or the lesser number of remaining shares covered
by the Option).
To the extent required by the Plan Administrator, as a condition to
exercise by the Optionee of an Option, the Optionee shall execute and deliver to
the Company a Shareholders Agreement in substantially the form in use at the
time of exercise, unless either (i) the Optionee has previously executed and
delivered such Shareholder Agreement and it is in effect at the time the
Optionee exercises the Option or (ii) such Shareholders Agreement is no longer
in effect with respect to other holders of Common Stock.
7.5
PAYMENT OF EXERCISE PRICE
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
one or both of the following alternative forms: (a) tendering (either actually
or, if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, by attestation) Common Stock already owned by the
Optionee for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a Fair
Market Value on the day prior to the exercise date equal to the aggregate Option
exercise price or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, the exercise price for shares purchased under an
Option may be paid, either singly or in combination with one or more of the
alternative forms of payment authorized by this Section 7.5, by (y) a promissory
note delivered pursuant to Section 12 or (z) such other consideration as the
Plan Administrator may permit.
7.6
POST-TERMINATION EXERCISES
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if an Optionee ceases to be employed
by, or to provide services to, the Company or its Subsidiaries, which provisions
may be waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option will be
exercisable
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according to the following terms and conditions, which may be waived or modified
by the Plan Administrator at any time.
In case of termination of the Optionee's employment or services other than
by reason of death or Cause, the Option shall be exercisable, to the extent of
the number of shares vested at the date of such termination, only (a) within one
year if the termination of the Optionee's employment or services is coincident
with Retirement, Early Retirement at the Company's request or Disability or (b)
within three months after the date the Optionee ceases to be an employee,
director, officer, consultant, agent, advisor or independent contractor of the
Company or a Subsidiary if termination of the Optionee's employment or services
is for any reason other than Retirement, Early Retirement at the Company's
request or Disability, but in no event later than the remaining term of the
Option. Any Option exercisable at the time of the Optionee's death may be
exercised, to the extent of the number of shares vested at the date of the
Optionee's death, by the personal representative of the Optionee's estate, the
person(s) to whom the Optionee's rights under the Option have passed by will or
the applicable laws of descent and distribution or the beneficiary designated
pursuant to Section 9 at any time or from time to time within one year after the
date of death, but in no event later than the remaining term of the Option. Any
portion of an Option that is not vested on the date of termination of the
Optionee's employment or services shall terminate on such date, unless the Plan
Administrator determines otherwise. In case of termination of the Optionee's
employment or services for Cause, the Option shall automatically terminate upon
first notification to the Optionee of such termination, unless the Plan
Administrator determines otherwise. If an Optionee's employment or services with
the Company are suspended pending an investigation of whether the Optionee shall
be terminated for Cause, all the Optionee's rights under any Option likewise
shall be suspended during the period of investigation.
With respect to employees, unless the Plan Administrator at any time
determines otherwise, "termination of the Optionee's employment or services" for
purposes of the Plan (including without limitation this Section 7 and Section
13) shall mean any reduction in the Optionee's regular hours of employment to
less than thirty (30) hours per week. A transfer of employment or services
between or among the Company and its Subsidiaries shall not be considered a
termination of employment or services. The effect of a Company-approved leave of
absence on the terms and conditions of an Option shall be determined by the Plan
Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:
8.1
DOLLAR LIMITATION
To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be subject to delayed exercisability or treated as a
Nonqualified Stock Option as set forth by the Plan Administrator in the
agreement(s)
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evidencing the Option. In the event the Optionee holds two or more such Options
that become exercisable for the first time in the same calendar year, such
limitation shall be applied on the basis of the order in which such Options are
granted.
8.2
10% STOCKHOLDERS
If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years. The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.
8.3
ELIGIBLE EMPLOYEES
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.
8.4
TERM
The term of an Incentive Stock Option shall not exceed 10 years.
8.5
EXERCISABILITY
To qualify for Incentive Stock Option tax treatment, an Option designated
as an Incentive Stock Option must be exercised within three months after
termination of employment for reasons other than death, except that, in the case
of termination of employment due to total disability, such Option must be
exercised within one year after such termination. Employment shall not be deemed
to continue beyond the first 90 days of a leave of absence unless the Optionee's
reemployment rights are guaranteed by statute or contract. For purposes of this
Section 8.5, "total disability" shall mean a mental or physical impairment of
the Optionee that is expected to result in death or that has lasted or is
expected to last for a continuous period of 12 months or more and that causes
the Optionee to be unable, in the opinion of the Company, to perform his or her
duties for the Company and to be engaged in any substantial gainful activity.
Total disability shall be deemed to have occurred on the first day after the
Company has furnished its opinion of total disability to the Plan Administrator.
8.6
TAXATION OF INCENTIVE STOCK OPTIONS
In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Optionee must hold the shares issued
upon the exercise of an Incentive Stock Option for two years after the Grant
Date of the Incentive Stock Option and one year from the date of exercise. An
Optionee may be subject to the alternative minimum tax at the time of exercise
of an Incentive Stock Option. The Plan Administrator may require an Optionee to
give the Company prompt notice of any disposition of shares acquired by the
exercise of an Incentive Stock Option prior to the expiration of such holding
periods.
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8.7
PROMISSORY NOTES
The amount of any promissory note delivered pursuant to Section 12 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.
SECTION 9. ASSIGNABILITY
No Option granted under the Plan may be assigned, pledged or transferred
by the Optionee other than by will or by the applicable laws of descent and
distribution, and, during the Optionee's lifetime, such Option may be exercised
only by the Optionee or a permitted assignee or transferee of the Optionee (as
provided below). Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Plan Administrator, in its sole discretion, may
permit such assignment, transfer and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the Option after the Optionee's
death; provided, however, that any Option so assigned or transferred shall be
subject to all the same terms and conditions contained in the instrument
evidencing the Option.
SECTION 10. ADJUSTMENTS
10.1
ADJUSTMENT OF SHARES
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to stockholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1, (ii) the
maximum number and kind of securities that may be made subject to Options to any
individual as set forth in Section 4.2, and (iii) the number and kind of
securities that are subject to any outstanding Option and the per share price of
such securities, without any change in the aggregate price to be paid therefor.
The determination by the Plan Administrator as to the terms of any of the
foregoing adjustments shall be conclusive and binding.
10.2
CORPORATE TRANSACTION
Except as otherwise provided in the instrument that evidences the Option,
in the event of a Corporate Transaction, the Plan Administrator shall determine
whether provision will be made in connection with the Corporate Transaction for
an appropriate assumption of the Options theretofore granted under the Plan
(which assumption may be effected by means of a payment to each Optionee (by the
Company or any other person or entity involved in the Corporate Transaction), in
exchange for the cancellation of the Options held by such Optionee, of the
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difference between the then Fair Market Value of the aggregate number of shares
of Common Stock then subject to such Options and the aggregate exercise price
that would have to be paid to acquire such shares) or for substitution of
appropriate new options covering stock of a successor corporation to the Company
or stock of an affiliate of such successor corporation. If the Plan
Administrator determines that such an assumption or substitution will be made,
the Plan Administrator shall give notice of such determination to the Optionees,
and the provisions of such assumption or substitution, and any adjustments made
(i) to the number and kind of shares subject to the outstanding Options (or to
the options in substitution therefor), (ii) to the exercise prices, and/or (iii)
to the terms and conditions of the stock options, shall be binding on the
Optionees. Any such determination shall be made in the sole discretion of the
Plan Administrator and shall be final, conclusive and binding on all Optionees.
If the Plan Administrator, in its sole discretion, determines that no such
assumption or substitution will be made, the Plan Administrator shall give
notice of such determination to the Optionees, and each Option that is at the
time outstanding shall automatically accelerate so that each such Option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable, except that such acceleration will not occur
if, in the opinion of the Company's outside accountants, it would render
unavailable "pooling of interest" accounting for a Corporate Transaction that
would otherwise qualify for such accounting treatment. All such Options shall
terminate and cease to remain outstanding immediately following the consummation
of the Corporate Transaction, except to the extent assumed by the successor
corporation or an affiliate thereof.
10.3
FURTHER ADJUSTMENT OF OPTIONS
Subject to Section 10.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Optionees, with respect to Options. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Options so as to provide for earlier, later, extended or additional time for
exercise and other modifications, and the Plan Administrator may take such
actions with respect to all Optionees, to certain categories of Optionees or
only to individual Optionees. The Plan Administrator may take such action before
or after granting Options to which the action relates and before or after any
public announcement with respect to such sale, merger, consolidation,
reorganization, liquidation or change in control that is the reason for such
action.
10.4
LIMITATIONS
The grant of Options will in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 11. WITHHOLDING
The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant or exercise
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of any Option. Subject to the Plan and applicable law, the Plan Administrator
may, in its sole discretion, permit the Optionee to satisfy withholding
obligations, in whole or in part, by paying cash, by electing to have the
Company withhold shares of Common Stock or by transferring shares of Common
Stock to the Company, in such amounts as are equivalent to the Fair Market Value
of the withholding obligation. The Company shall have the right to withhold from
any shares of Common Stock issuable pursuant to an Option or from any cash
amounts otherwise due or to become due from the Company to the Optionee an
amount equal to such taxes. The Company may also deduct from any Option any
other amounts due from the Optionee to the Company or a Subsidiary.
SECTION 12. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To assist an Optionee (including an Optionee who is an officer or a
director of the Company) in acquiring shares of Common Stock pursuant to an
Option granted under the Plan, the Plan Administrator, in its sole discretion,
may authorize, either at the Grant Date or at any time before the acquisition of
Common Stock pursuant to the Option, (a) the extension of a loan to the Optionee
by the Company, (b) the payment by the Optionee of the purchase price, if any,
of the Common Stock in installments, or (c) the guarantee by the Company of a
loan obtained by the Optionee from a third party. The terms of any loans,
installment payments or loan guarantees, including the interest rate and terms
of repayment, will be subject to the Plan Administrator's discretion. Loans,
installment payments and loan guarantees may be granted with or without
security. The maximum credit available is the purchase price, if any, of the
Common Stock acquired, plus the maximum federal and state income and employment
tax liability that may be incurred in connection with the acquisition.
SECTION 13. REPURCHASE RIGHTS; ESCROW
13.1
REPURCHASE RIGHTS
The Plan Administrator shall have the discretion to authorize the issuance
of unvested shares of Common Stock pursuant to the exercise of an Option. In the
event of termination of the Optionee's employment or services, all shares of
Common Stock issued upon exercise of an Option which are unvested at the time of
cessation of employment or services shall be subject to repurchase at the
exercise price paid for such shares. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise) shall be established by the Plan Administrator and set forth in the
agreement evidencing such right.
All of the Company's outstanding repurchase rights under this Section 13.1
are assignable by the Company at any time and shall remain in full force and
effect in the event of a Corporate Transaction; provided that if the vesting of
Options is accelerated pursuant to Section 10.2, the repurchase rights under
this Section 13.1 shall terminate and all shares subject to such terminated
rights shall immediately vest in full.
The Plan Administrator shall have the discretionary authority, exercisable
either before or after the Optionee's cessation of employment or services, to
cancel the Company's outstanding
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repurchase rights with respect to one or more shares purchased or purchasable by
the Optionee under an Option and thereby accelerate the vesting of such shares
in whole or in part at any time.
13.2
ESCROW
To ensure that shares of Common Stock acquired upon exercise of an Option
that are subject to any repurchase right, stockholders agreement and/or security
for any promissory note will be available for repurchase, the Plan Administrator
may require the Optionee to deposit the certificate or certificates evidencing
such shares with an agent designated by the Plan Administrator under the terms
and conditions of escrow and security agreements approved by the Plan
Administrator. If the Plan Administrator does not require such deposit as a
condition of exercise of an Option, the Plan Administrator reserves the right at
any time to require the Optionee to so deposit the certificate or certificates
in escrow. The Company shall bear the expenses of the escrow.
As soon as practicable after the expiration of any repurchase rights or
stockholders agreement, and after full repayment of any promissory note secured
by the shares in escrow, the agent shall deliver to the Optionee the shares no
longer subject to such restrictions and no longer security for any promissory
note.
In the event shares held in escrow are subject to the Company's exercise
of a repurchase option or stockholders agreement, the notices required to be
given to the Optionee shall be given to the agent and any payment required to be
given to the Optionee shall be given to the agent. Within 30 days after payment
by the Company, the agent shall deliver the shares which the Company has
purchased to the Company and shall deliver the payment received from the Company
to the Optionee.
In the event of any stock dividend, stock split or consolidation of shares
or any like capital adjustment of any of the outstanding securities of the
Company, any and all new, substituted or additional securities or other property
to which the Optionee is entitled by reason of ownership of shares acquired upon
exercise of an Option shall be subject to any repurchase rights, stockholders
agreement, and/or security for any promissory note with the same force and
effect as the shares subject to such repurchase rights, stockholders agreement
and/or security interest immediately before such event.
SECTION 14. MARKET STANDOFF
In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, including the Company's initial public offering, a person
shall not sell, or make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Option granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect only if and to the extent and for such period of time as may be requested
by the Company or such underwriters and agreed to by the Company's officers and
directors; provided, however, that in no event shall the weighted
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average number of days in such period exceed 180 days. The limitations of this
paragraph shall in all events terminate two years after the effective date of
the Company's initial public offering.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 14, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 14, the Company may
impose stop-transfer instructions with respect to the purchased shares and any
new, substituted or additional securities distributed with respect to the
purchased shares until the end of the applicable standoff period.
SECTION 15. AMENDMENT AND TERMINATION OF PLAN
15.1
AMENDMENT OF PLAN
The Plan may be amended only by the Board in such respects as it shall
deem advisable; however, to the extent required for compliance with Section 422
of the Code or any applicable law or regulation, stockholder approval will be
required for any amendment that will (a) increase the total number of shares as
to which Options may be granted under the Plan, (b) modify the class of persons
eligible to receive Options, or (c) otherwise require stockholder approval under
any applicable law or regulation.
15.2
TERMINATION OF PLAN
The Board may suspend or terminate the Plan at any time. The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the stockholders.
15.3
CONSENT OF OPTIONEE
The amendment or termination of the Plan shall not, without the consent of
the Optionee, impair or diminish any rights or obligations under any Option
theretofore granted under the Plan.
Any change or adjustment to an outstanding Incentive Stock Option shall
not, without the consent of the Optionee, be made in a manner so as to
constitute a "modification" that would cause such Incentive Stock Option to fail
to continue to qualify as an Incentive Stock Option.
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SECTION 16. GENERAL
16.1
OPTION AGREEMENTS
Options granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
16.2
CONTINUED EMPLOYMENT OR SERVICES; RIGHTS IN OPTIONS
None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to be retained in the employ of the Company or limit the Company's right
to terminate the employment or services of any person.
16.3
REGISTRATION
The Company shall be under no obligation to any Optionee to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
As a condition to the exercise of an Option, the Company may require the
Optionee to represent and warrant at the time of any such exercise or receipt
that such shares are being purchased or received only for the Optionee's own
account and without any present intention to sell or distribute such shares if,
in the opinion of counsel for the Company, such a representation is required by
any relevant provision of the aforementioned laws. At the option of the Company,
a stop-transfer order against any such shares may be placed on the official
stock books and records of the Company, and a legend indicating that such shares
may not be pledged, sold or otherwise transferred, unless an opinion of counsel
is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Optionee as may from time to
time be necessary to comply with the federal and state securities laws.
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16.4
NO RIGHTS AS A STOCKHOLDER
No Option shall entitle the Optionee to any dividend, voting or other
right of a stockholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Option, free of all applicable
restrictions.
16.5
COMPLIANCE WITH LAWS AND REGULATIONS
Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Optionees who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Optionees. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.
16.6
NO TRUST OR FUND
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Optionee, and no Optionee
shall have any rights that are greater than those of a general unsecured
creditor of the Company.
16.7
SEVERABILITY
If any provision of the Plan or any Option is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Option under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such jurisdiction,
person or Option, and the remainder of the Plan and any such Option shall remain
in full force and effect.
SECTION 17. EFFECTIVE DATE
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's stockholders at any time within 12
months of such adoption.
Adopted by the Board on February 25, 1997 and approved by the Company's
stockholders on February 25, 1997.
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PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
Date of
Adoption/
Amendment/
Adjustment
----------
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Section
-------
Effect of Amendment
-------------------
Date of
Stockholder
Approval
--------
1
EXHIBIT 10.22
AMAZON.COM, INC.
AMENDED AND RESTATED
INCENTIVE STOCK OPTION LETTER AGREEMENT
TO:
Sheldon Kaphan
This Amended and Restated Incentive Stock Option Letter Agreement
(this "Agreement") amends and supersedes paragraph 2(c) of the Employment
Agreement between you and the Company dated October 24, 1994, regarding the
grant to you of a stock option (the "Option") for the purchase of 709,568
shares (the "Option Shares") of the Common Stock of Amazon.com, Inc., a
Delaware corporation (the "Company") at an exercise price of $.001471 per
share (reflects stock split effected on November 23, 1996).
The terms of the Option are as set forth in this Agreement and in the
Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), a copy of
which is attached. This Agreement is limited by and subject to the express
terms and provisions of the Plan. Unless otherwise provided in this Agreement,
defined terms will have the meaning given to such terms in the Plan.
1.
DATE OF GRANT:
24, 1994.
The Option is granted effective as of October
2.
STATUS OF OPTION: The Option is intended to be an incentive
stock option as described in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), but the Company does not represent or warrant that the
Option qualifies as such.
3.
TERM: Your right to exercise each vesting installment of the
Option will expire five years after the vesting date for that installment,
unless sooner terminated as a result of termination of your employment or
services with the Company or upon a Terminating Event, as described in the Plan
and Section 12 of this Agreement.
4.
VESTING: The Option shall vest according to the schedule set
forth in Section 2(c)(i) of your Employment Agreement, a copy of which is
attached hereto as Exhibit A and incorporated herein by reference. Any Option
Shares that have not yet vested according to the schedule set forth in Exhibit
A shall be considered "Unvested Shares." Upon cessation of your employment or
services on behalf of the Company for any reason, no further vesting of the
Option will occur and any unvested portion of the Option will terminate.
2
4.1
ACCELERATION OF VESTING SCHEDULE: In the event (i) the
Company enters into a purchase and sale agreement whereby substantially all of
the Company's assets will be sold to an unrelated thirty party or (ii) more
than ninety-five percent (95%) of the total issued and outstanding shares of
the Company are to be sold pursuant to a stock transfer agreement to an
unrelated third party (herein an "Accelerating Event"), any installments of the
option not yet vested shall conditionally vest and the Employee will have the
right to exercise such installment(s) of the option subject to the following:
(a)
Exercise. The terms and conditions of the Employee's
right to exercise any installment as set forth herein shall remain the same
except that the exercise must occur concurrent with the successful consummation
of the Accelerating Event.
(b)
Failure to Exercise or Consummate. In the event the
Employee fails to exercise any installment of the option concurrent with the
consummation of the Accelerating Event, or, for whatever reason, the
Accelerating Event is not consummated, the Employee's right to exercise the
conditionally vested shares expire and the vesting schedule as set forth in
Exhibit A shall control the date of the Employee's right to exercise the next
installment of the option.
(c)
Accelerating Event. Accelerating Event shall not
include (i) corporate reorganizations where shareholders of the successor
company(s) are substantially the same as the Company's shareholders and/or (ii)
the assignment of shares of stock in the Company among family members, whether
for estate planning or otherwise.
5.
RIGHT TO EXERCISE: The Option shall be immediately
exercisable for any or all of the Option Shares, subject to your agreement that
any unvested shares of stock purchased upon exercise are subject to the
Company's repurchase rights set forth in paragraph 6 below. Notwithstanding
the foregoing, the aggregate fair market value of the stock with respect to
which you may exercise the Option for the first time during any calendar year,
together with any other incentive stock options which are exercisable by you
for the first time under any Company plan during any such year, as determined
in accordance with Section 422 of the Code, shall not exceed $100,000 (the
"$100,000 Exercise Limitation"). To the extent the exercisability of the
Option is deferred by reason of the $100,000 Exercise Limitation, the deferred
portion of the Option will first become exercisable in the first calendar year
or years thereafter in which the $100,000 Exercise Limitation would not be
contravened.
6.
COMPANY REPURCHASE RIGHT:
(a)
By executing this Agreement, you hereby grant to the
Company an option (the "Repurchase Option") to repurchase any Option Shares
that remain Unvested Shares on the earlier of (i) the date you cease to be
employed by or provide services to the Company (including a parent or
subsidiary of the Company) for any reason whatsoever, including, without
limitation, termination with or without cause, death or permanent disability
and (ii) the date you or your legal representative attempts to sell, exchange,
transfer, pledge or
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otherwise dispose of any Unvested Shares (other than pursuant to a Terminating
Event, as that term is defined in Section 10.2 of the Plan).
(b)
The Company may exercise the Repurchase Option by
giving you written notice within 60 days after (i) such termination of
employment or services (or exercise of the Option, if later) or (ii) the
Company has received notice of the attempted disposition. If the Company fails
to give notice within such 60-day period, the Repurchase Option shall
terminate, unless you and the Company have extended the time for the exercise
of the Repurchase Option. The Repurchase Option must be exercised, if at all,
for all the Unvested Shares, except as you and the Company otherwise agree.
(c)
Payment to you by the Company shall be made in cash
within 30 days after the date of the mailing of the written notice of exercise
of the Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness you owe to the Company shall be treated as payment to you in cash
to the extent of the unpaid principal and any accrued interest canceled. The
purchase price per share being repurchased by the Company shall be an amount
equal to your original cost per share, as adjusted as provided in the Plan.
You shall deliver the shares of stock being repurchased to the Company at the
same time as the Company delivers the purchase price to you.
(d)
You hereby authorize and direct the Company's Chief
Financial Officer or transfer agent to transfer to the Company any Unvested
Shares as to which the Repurchase Option is exercised.
(e)
The Company shall have the right to assign the
Repurchase Option at any time, whether or not the Repurchase Option is then
exercisable, to one or more persons as may be selected by the Company.
(f)
The Repurchase Option shall remain in full force and
effect in the event of a Terminating Event, provided that if the Administrative
Committee determines that an assumption or substitution of options outstanding
under the Plan will not be made in connection with the Terminating Event and
the vesting of such options is therefore accelerated pursuant to Section 10.2
of the Plan, the Repurchase Option shall terminate and all Unvested Shares
shall immediately vest in full.
(g)
Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the
Company, to terminate your employment or services on behalf of the Company, for
any reason, with or without cause.
(h)
Subject to the terms and conditions of this
Agreement, the Unvested Shares may not be sold, transferred, pledged,
encumbered or disposed of under any circumstances, whether voluntarily, by
operation of law, by gift or by the applicable laws of descent and
distribution. Any attempted transfer of any Unvested Shares in conflict with
this Agreement shall be null and void.
-3-
4
7.
MARKET STANDOFF: By executing this Agreement, you hereby
agree that, in connection with any underwritten public offering by the Company
of its equity securities pursuant to an effective registration statement filed
under the federal Securities Act of 1933, as amended (the "Securities Act"),
including the Company's initial public offering, you shall not sell or make any
short sale of, loan, hypothecate, pledge, grant any option for the purchase of,
or otherwise dispose of or transfer for value or otherwise agree to engage in
any of the foregoing transactions with respect to, any Option Shares without
the prior written consent of the Company or its underwriters. Such limitations
(the "Market Standoff") shall be in effect only if and to the extent and for
such period of time as may be requested by the Company or such underwriters and
agreed to by the Company's officers and directors; provided, however, that in
no event shall the weighted average number of days in such period exceed 180
days. The Market Standoff shall in all events terminate two years after the
effective date of the Company's initial public offering. In order to enforce
the Market Standoff, the Company may impose stop-transfer instructions with
respect to the Option Shares until the end of the applicable standoff period.
8.
SHAREHOLDERS AGREEMENT: By accepting the Option you hereby
agree to execute, on the date you exercise the Option, a shareholders agreement
(the "Shareholders Agreement") in the form in use at such time (unless at such
time the Company's Common Stock is publicly traded or the Shareholders
Agreement has otherwise terminated), whereby under certain circumstances you
grant the Company and certain of its other shareholders a right of first offer
to purchase the Option Shares and agree not to dispose of the Option Shares
until after December 31, 1999 without the Company's prior consent.
9.
CAPITAL ADJUSTMENTS: In the event of any stock dividend,
stock split or consolidation of shares or any like capital adjustment of any of
the outstanding securities of the Company, any and all new, substituted or
additional securities or other property to which you are entitled by reason of
ownership of the Option Shares shall be immediately subject to this Agreement
and shall be included in the definition of the Option Shares for all purposes
and shall be subject to the Repurchase Option, the Shareholders Agreement, the
Market Standoff and other terms of this Agreement. While the aggregate
repurchase price for Unvested Shares shall remain the same after each such
event, the repurchase price per Unvested Share upon execution of the Repurchase
Option shall be appropriately adjusted.
10.
METHOD OF EXERCISE: The Option may be exercised by written
notice to the Company, in form and substance satisfactory to the Company, which
must state the election to exercise the Option, the number of shares of stock
for which the Option is being exercised and such other representations and
agreements as to your investment intent with respect to such shares as may be
required pursuant to the provisions of this Agreement and the Plan. The
written notice must be accompanied by full payment of the exercise price for
the number of shares of stock being purchased.
-4-
5
11.
FORM OF PAYMENT: The Option exercise price may be paid, in
whole or in part, (i) in cash, by check, or by cash equivalent, or (ii) by any
other form of payment permitted by the Plan Administrator.
12.
EARLY TERMINATION: The Option will terminate in its entirety
three months after cessation of employment or services on behalf of the Company
or its affiliated companies, unless cessation is due to (i) disability, in
which case the Option shall terminate one year after cessation of employment or
services on behalf of the Company, or (ii) death, in which case the Option will
terminate one year after death.
13.
LIMITED TRANSFERABILITY: The Option is not transferable
except by will or by the applicable laws of descent and distribution. During
your lifetime only you can exercise the Option. The Plan provides for exercise
of the Option by the personal representative of your estate or the beneficiary
thereof following your death.
14.
NOTICE OF DISQUALIFYING DISPOSITION: To obtain certain tax
benefits afforded to incentive stock options under Section 422 of the Code, an
optionee must hold the shares issued upon the exercise of an incentive stock
option for two years after the date of grant of the option and one year from
the date of exercise. An optionee may be subject to the alternative minimum
tax at the time of exercise. Tax advice should be obtained when exercising any
option and prior to the disposition of the shares issued upon the exercise of
any option. By executing this Agreement, you hereby agree to promptly notify
the Company's Chief Financial Officer if you dispose of any of the Option
Shares within one year from the date you exercise all or part of the Option or
within two years of the date of grant of the Option.
15.
REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO
SECTION 13 OF THE PLAN, WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING
TO FEDERAL AND STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION
CAN BE EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. By
accepting the Option, you hereby acknowledge that you have read Section 13 of
the Plan and that you are hereby making the representations and acknowledgments
to the Company, and entering into the indemnity and other obligations to the
Company, therein specified.
16.
BINDING EFFECT: This Agreement shall inure to the benefit of
the successors and assigns of the Company and be binding upon you and your
heirs, executors, administrators, successors and assigns.
-5-
6
Please execute the following Acceptance and Acknowledgment and return
it to the undersigned.
Very truly yours,
AMAZON.COM, INC.
By Joy Covey
-------------------------------Its CFO
-------------------------------
-6-
7
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the incentive stock
option described in this Agreement and in Amazon.com, Inc.'s Amended and
Restated 1994 Stock Option Plan, and acknowledge receipt of a copy of this
Agreement and a copy of the Plan. I have read and understand the Plan,
including the provisions of Section 13, and I hereby make the representations,
warranties and acknowledgments, and undertake the indemnity and other
obligations, therein specified. As a condition to my exercise of this stock
option, I agree to execute the Company's Shareholders Agreement and Stock
Purchase Agreement in effect at such time.
Dated:
January 14, 1997
555-84-0722
- --------------------Taxpayer I.D. Number
Sheldon J. Kaphan
------------------------------------Sheldon J. Kaphan
Address
7748 32nd Ave NE
---------------------------Seattle, WA 98115
------------------------------------By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of his or her execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by
all the terms and conditions of this Agreement and the Plan.
Dated:
-------------------------------------------------------Spouse's Signature
------------------------------------Printed Name
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated:
January 14, 1997
-----------------------Sheldon J. Kaphan
------------------------------------Optionee's Signature
-7-
1
EXHIBIT 10.23
AMAZON.COM, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO: Tom A. Alberg
Date of Grant:
December 6, 1995
We are pleased to inform you that you have been selected by the Board
of Directors (the "Board") of Amazon.com, Inc. (the "Company") to receive a
nonqualified stock option for the purchase of 10,000 shares of the Company's
Common Stock at an exercise price of $2.00 per share.
TERM: The term of the option is five years from date of grant, unless
sooner terminated.
VESTING: The option will vest and become exercisable according to the
following schedule:
Date on and After Which
Option is Exercisable
---------------------
Exercisable Portion
of Total Option
---------------
Date of Grant
Date of Grant + 2 Years
Date of Grant + 4 Years
4,000 Shares
An additional 3,000 Shares
An additional 3,000 Shares
EXERCISE: During your lifetime only you can exercise the option. The
option may be exercised by the personal representative of your estate, by the
beneficiary you have designated on forms prescribed by and filed with the
Company, or the beneficiary of your estate following your death. You may use
the Notice of Exercise of Nonqualified Stock Option in the form attached to
this Agreement when you exercise the option.
The Board of Directors may, in its sole discretion at the time of
exercise, determine that the exercise of this option is subject to your
execution of a Shareholders Agreement, in the form in use at the time of
exercise, whereby under certain circumstances, you grant to specified persons a
right to purchase the shares acquired by you upon exercise of the option.
PAYMENT FOR SHARES:
The option may be exercised by the delivery of:
(a)
Cash, personal check (unless, at the time of exercise, the
Company determines otherwise), bank certified or cashier's check;
(b)
Unless the Board in its sole discretion determines otherwise,
shares of the capital stock of the Company held by you for a period of at least
six months having a fair market value at the time of exercise, as determined in
good faith by the Board, equal to the exercise price; or
2
(c)
After such time as the Company may have its common stock
publicly traded on a national securities exchange or other national trading
market, a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.
WITHHOLDING TAXES: As a condition to the exercise of the option, you
must make such arrangements as the Company may require for the satisfaction of
any federal, state or local withholding tax obligations that may arise in
connection with such exercise. The Company has the right to retain without
notice sufficient shares of stock to satisfy the withholding obligation. To
the extent permitted or required by the Company, you may satisfy the
withholding obligation by electing to have the Company or a related corporation
withhold from the shares to be issued upon exercise that number of shares
having a fair market value equal to the amount required to be withheld. If you
are subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), you must comply with certain requirements in order to
make such election.
TERMINATION: If your relationship with the Company as an advisor,
consultant or member of the Board ceases for any reason, and unless by its
terms the option sooner terminates or expires, then you may exercise, for a
six-month period, that portion of the option which is exercisable at the time
of such cessation, but the option will terminate at the end of such period
following such cessation as to all shares for which it has not theretofore been
exercised. Any portion of the option which is not exercisable at the time of
such cessation shall terminate upon such cessation.
TRANSFERABILITY OF OPTION: This option and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner by you (whether by operation of law or otherwise) other than by will
or by the applicable laws of descent and distribution and shall not be subject
to execution, attachment or similar process. This option is personal to you
and is exercisable solely by you. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of any right or privilege
conferred hereby, contrary to the provisions hereof, or the sale or levy or any
attachment or similar process upon the rights and privileges conferred hereby
will be null and void. Notwithstanding the foregoing, to the extent permitted
by applicable law and regulation, the Company, in its sole discretion, may
permit you to (i) during your lifetime, designate a person who may exercise the
option after your death by giving written notice of such designation to the
Company (such designation may be changed from time to time by you by giving
written notice to the Company revoking any earlier designation and making a new
designation) or (ii) transfer the option and the rights and privileges
conferred hereby.
NO STATUS AS SHAREHOLDER: Neither you nor any party to whom your
rights and privileges under the option pass will be, or have any of the rights
or privileges of, a shareholder of the Company with respect to any of the
shares issuable upon the exercise of this option unless and until this option
has been exercised.
-2-
3
CONTINUATION OF RELATIONSHIP: Nothing in this option will confer upon
you any right to continue in the employ or other relationship of the Company or
of a related corporation, or to interfere in any way with the right of the
Company or of any such related corporation to terminate your employment or
other relationship with the Company at any time.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION: The aggregate number and
class of shares covered by this option and the exercise price per share thereof
(but not the total price), will all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Company resulting from a split-up or consolidation of shares or any like
capital adjustment, or the payment of any stock dividend.
(A)
EFFECT OF LIQUIDATION OR REORGANIZATION:
(1)
Cash, Stock or Other Property for Stock. Except as
provided in subsection (a)(2), upon a merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation of the Company, as
a result of which the shareholders of the Company receive cash or other
property in exchange for or in connection with their shares of Common Stock and
will hold less than 50% of the voting securities of the acquiring entity, this
option will terminate, but you will have the right immediately prior to any
such merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise your option in whole or in part
whether or not the vesting requirements set forth in this agreement have been
satisfied.
(2)
Conversion of Options on Stock for Stock Exchange.
If the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or
stock, separation or reorganization, this option will be converted into an
option to purchase shares of Exchange Stock. The amount and price of converted
options will be determined by adjusting the amount and price of this option in
the same proportion as used for determining the number of shares of Exchange
Stock that holders of shares of Common Stock are entitled to receive in such
merger, consolidation, acquisition of property or stock, separation or
reorganization. If, as a result of such transaction, the shareholders of the
Company immediately prior to the transaction will hold less than 50% of the
voting securities of the acquiring entity immediately after the transaction,
the converted option will be fully vested whether or not the vesting
requirements set forth in this agreement have been satisfied; provided,
however, that such acceleration will not occur if, in the opinion of the
Company's independent accountants, such acceleration would render unavailable
"pooling of interests" accounting treatment for any reorganization, merger or
consolidation of the Company for which pooling of interests accounting
treatment is sought by the Company.
(B)
FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by this
option, any fractional shares resulting from such adjustment will be
disregarded and the option will cover only the number of full shares resulting
from such adjustment.
-3-
4
(C)
DETERMINATION OF BOARD TO BE FINAL
All adjustments referred to herein will be made by the Board of
Directors, and its determination as to what adjustments will be made, and the
extent thereof, will be final, binding and conclusive.
SECURITIES REGULATION: Shares will not be issued pursuant to this
option unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto complies with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed.
As a condition to the exercise of this option, the Company may require
you to represent and warrant at the time of any such exercise that the shares
are being purchased only for investment and without any present intention to
sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on
stock certificates in order to assure exemption from registration. The Company
may also require such other action or agreement by you as may from time to time
be necessary to comply with the federal and state securities laws. THIS
PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THIS
OPTION OR THE SHARES ISSUABLE HEREUNDER.
Should any of
stock subject
shares issued
authorized by
-4-
the Company's capital stock of the same class as the
to this option be listed on a national securities exchange, all
hereunder if not previously listed on such exchange will be
that exchange for listing thereon prior to the issuance thereof.
5
Please execute the Acceptance and Acknowledgment set forth below on
the enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
AMAZON.COM, INC.
_______________________________
By
Jeff P. Bezos
---------------------------Its
President
---------------------------
-5-
6
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the nonqualified
stock option described herein. I have read and understand the Agreement.
Dated:
December 6, 1995
538-34-5268
- -------------------------Taxpayer I.D. Number
Tom A. Alberg
--------------------Tom A. Alberg
Address
3404 East Ward
---------------------------Seattle, WA 98112
----------------------------------------------------------------------By her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of his execution of this Agreement,
acknowledges that she has read this Agreement and is familiar with the terms
and provisions thereof, and agrees to be bound by all the terms and conditions
of this Agreement.
Dated:
December 6, 1995
Judith Beck
---------------------------Spouse's Signature
Judith Beck
---------------------------Printed Name
By his signature below, the Optionee represents that he is not legally
married as of the date of execution of this Agreement.
Dated:
December 6, 1995
----------------------------Optionee's Signature
7
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
To:
Amazon.com, Inc.
I, a resident of the State of Washington, hereby exercise my
nonqualified stock option granted by Amazon.com, Inc. (the "Company") on
December 6, 1995, and notify the Company of my desire to purchase ________
shares of Common Stock of the Company (the "Securities") at the exercise price
of $__________ per share which were offered to me pursuant to said option.
I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Securities; (2) I have had the opportunity to ask questions and
receive answers concerning the information received about the Securities and
the Company; and (3) I have been given the opportunity to obtain any additional
information I deem necessary to verify the accuracy of any information obtained
concerning the Securities and the Company.
I am aware that the Securities have not been registered under the
Federal Securities Act of 1933 (the "1933 Act") or any state securities laws,
pursuant to exemption(s) from registration. I understand that the reliance by
the Company on such exemption(s) is predicated in part upon the truth and
accuracy of the statements by me in this Notice of Exercise.
I hereby represent and warrant that I am purchasing the Securities for
my own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities.
I understand that because the Securities have not been registered
under the 1933 Act, I must continue to bear the economic risk of the investment
for an indefinite time and the Securities cannot be sold unless the Securities
are subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of
the Securities unless (1) there is an effective registration statement under
the 1933 Act and applicable state securities laws covering any such transaction
involving the Securities or (2) the Company receives an opinion of my legal
counsel (concurred in by legal counsel for the Company) stating that such
transaction is exempt from registration or the Company otherwise satisfies
itself that such transaction is exempt from registration.
I consent to the placing of a legend on my certificate(s) for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the Securities and
Exchange Commission ("SEC") may not be relied on for the resale or distribution
of the Securities by me.
8
I understand that the Company has no obligation to me to register the
Securities with the SEC and has not represented to me that it will
register the Securities.
I AM ADVISED, PRIOR TO MY PURCHASE OF THE SECURITIES, THAT NEITHER THE
OFFERING OF THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER THE SECURITIES ACT OF 1933, THE WASHINGTON STATE SECURITIES
ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE "ACTS") AND THAT THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER ANY OF THE ACTS AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER THE ACTS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Dated:
--------------- ------------------------------Taxpayer I.D. Number
Address
---------------------------------------------------------------------------------------------
---------------------------------Tom A. Alberg
9
RECEIPT
_________________________ hereby acknowledges receipt from
______________ in payment for ______________ shares of Common Stock of
Amazon.com, Inc., a Washington corporation, of $_____________ in the form of
[ ]
Cash
[ ]
Check (personal, cashier's or bank certified)
[ ]
__________ shares of the Company's Common Stock, fair market
value $_______ per share held by the Optionee for a period of
at least six months
[ ]
Copy of irrevocable instructions to Broker
____________________________
Date:
_______________
For:
Amazon.com, Inc.
1
EXHIBIT 10.24
AMAZON.COM, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO:
Tom A. Alberg
Date of Grant: December 6, 1995
We are pleased to inform you that you have been selected by the Board
of Directors (the "Board") of Amazon.com, Inc. (the "Company") to receive a
nonqualified stock option for the purchase of 10,000 shares of the Company's
Common Stock at an exercise price of $4.00 per share.
TERM: The term of the option is five years from date of grant, unless
sooner terminated.
VESTING: The option will vest and become exercisable according to the
following schedule:
Date on and After Which
Option is Exercisable
---------------------
Exercisable Portion
of Total Option
---------------
Date of Grant
Date of Grant + 2 Years
Date of Grant + 4 Years
4,000 Shares
An additional 3,000 Shares
An additional 3,000 Shares
EXERCISE: During your lifetime only you can exercise the option. The
option may be exercised by the personal representative of your estate, by the
beneficiary you have designated on forms prescribed by and filed with the
Company, or the beneficiary of your estate following your death. You may use
the Notice of Exercise of Nonqualified Stock Option in the form attached to
this Agreement when you exercise the option.
The Board of Directors may, in its sole discretion at the time of
exercise, determine that the exercise of this option is subject to your
execution of a Shareholders Agreement, in the form in use at the time of
exercise, whereby under certain circumstances, you grant to specified persons a
right to purchase the shares acquired by you upon exercise of the option.
PAYMENT FOR SHARES:
The option may be exercised by the delivery of:
(a)
Cash, personal check (unless, at the time of exercise, the
Company determines otherwise), bank certified or cashier's check;
(b)
Unless the Board in its sole discretion determines otherwise,
shares of the capital stock of the Company held by you for a period of at least
six months having a fair market value at the time of exercise, as determined in
good faith by the Board, equal to the exercise price; or
2
(c)
After such time as the Company may have its common stock
publicly traded on a national securities exchange or other national trading
market, a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.
WITHHOLDING TAXES: As a condition to the exercise of the option, you
must make such arrangements as the Company may require for the satisfaction of
any federal, state or local withholding tax obligations that may arise in
connection with such exercise. The Company has the right to retain without
notice sufficient shares of stock to satisfy the withholding obligation. To
the extent permitted or required by the Company, you may satisfy the
withholding obligation by electing to have the Company or a related corporation
withhold from the shares to be issued upon exercise that number of shares
having a fair market value equal to the amount required to be withheld. If you
are subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), you must comply with certain requirements in order to
make such election.
TERMINATION: If your relationship with the Company as an advisor,
consultant or member of the Board ceases for any reason, and unless by its
terms the option sooner terminates or expires, then you may exercise, for a
six-month period, that portion of the option which is exercisable at the time
of such cessation, but the option will terminate at the end of such period
following such cessation as to all shares for which it has not theretofore been
exercised. Any portion of the option which is not exercisable at the time of
such cessation shall terminate upon such cessation.
TRANSFERABILITY OF OPTION: This option and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner by you (whether by operation of law or otherwise) other than by will
or by the applicable laws of descent and distribution and shall not be subject
to execution, attachment or similar process. This option is personal to you
and is exercisable solely by you. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of any right or privilege
conferred hereby, contrary to the provisions hereof, or the sale or levy or any
attachment or similar process upon the rights and privileges conferred hereby
will be null and void. Notwithstanding the foregoing, to the extent permitted
by applicable law and regulation, the Company, in its sole discretion, may
permit you to (i) during your lifetime, designate a person who may exercise the
option after your death by giving written notice of such designation to the
Company (such designation may be changed from time to time by you by giving
written notice to the Company revoking any earlier designation and making a new
designation) or (ii) transfer the option and the rights and privileges
conferred hereby.
NO STATUS AS SHAREHOLDER: Neither you nor any party to whom your
rights and privileges under the option pass will be, or have any of the rights
or privileges of, a shareholder of the Company with respect to any of the
shares issuable upon the exercise of this option unless and until this option
has been exercised.
-2-
3
CONTINUATION OF RELATIONSHIP: Nothing in this option will confer upon
you any right to continue in the employ or other relationship of the Company or
of a related corporation, or to interfere in any way with the right of the
Company or of any such related corporation to terminate your employment or
other relationship with the Company at any time.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION: The aggregate number and
class of shares covered by this option and the exercise price per share thereof
(but not the total price), will all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Company resulting from a split-up or consolidation of shares or any like
capital adjustment, or the payment of any stock dividend.
(A)
EFFECT OF LIQUIDATION OR REORGANIZATION:
(1)
Cash, Stock or Other Property for Stock. Except as
provided in subsection (a)(2), upon a merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation of the Company, as
a result of which the shareholders of the Company receive cash or other
property in exchange for or in connection with their shares of Common Stock and
will hold less than 50% of the voting securities of the acquiring entity, this
option will terminate, but you will have the right immediately prior to any
such merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise your option in whole or in part
whether or not the vesting requirements set forth in this agreement have been
satisfied.
(2)
Conversion of Options on Stock for Stock Exchange.
If the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or
stock, separation or reorganization, this option will be converted into an
option to purchase shares of Exchange Stock. The amount and price of converted
options will be determined by adjusting the amount and price of this option in
the same proportion as used for determining the number of shares of Exchange
Stock that holders of shares of Common Stock are entitled to receive in such
merger, consolidation, acquisition of property or stock, separation or
reorganization. If, as a result of such transaction, the shareholders of the
Company immediately prior to the transaction will hold less than 50% of the
voting securities of the acquiring entity immediately after the transaction,
the converted option will be fully vested whether or not the vesting
requirements set forth in this agreement have been satisfied; provided,
however, that such acceleration will not occur if, in the opinion of the
Company's independent accountants, such acceleration would render unavailable
"pooling of interests" accounting treatment for any reorganization, merger or
consolidation of the Company for which pooling of interests accounting
treatment is sought by the Company.
(B)
FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by this
option, any fractional shares resulting from such adjustment will be
disregarded and the option will cover only the number of full shares resulting
from such adjustment.
-3-
4
(C)
DETERMINATION OF BOARD TO BE FINAL
All adjustments referred to herein will be made by the Board of
Directors, and its determination as to what adjustments will be made, and the
extent thereof, will be final, binding and conclusive.
SECURITIES REGULATION: Shares will not be issued pursuant to this
option unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto complies with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed.
As a condition to the exercise of this option, the Company may require
you to represent and warrant at the time of any such exercise that the shares
are being purchased only for investment and without any present intention to
sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on
stock certificates in order to assure exemption from registration. The Company
may also require such other action or agreement by you as may from time to time
be necessary to comply with the federal and state securities laws. THIS
PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THIS
OPTION OR THE SHARES ISSUABLE HEREUNDER.
Should any of
stock subject
shares issued
authorized by
-4-
the Company's capital stock of the same class as the
to this option be listed on a national securities exchange, all
hereunder if not previously listed on such exchange will be
that exchange for listing thereon prior to the issuance thereof.
5
Please execute the Acceptance and Acknowledgment set forth below on
the enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
AMAZON.COM, INC.
By
Jeff P. Bezos
---------------------------Its
President
---------------------------
-5-
6
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the nonqualified
stock option described herein. I have read and understand the Agreement.
Dated:
December 6, 1995
538-34-5268
- ------------------------------Taxpayer I.D. Number
Tom A. Alberg
--------------------------------Tom A. Alberg
Address
3404 East Ward
--------------------------Seattle, WA 98112
----------------------------------------------------------------------By her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of his execution of this Agreement,
acknowledges that she has read this Agreement and is familiar with the terms
and provisions thereof, and agrees to be bound by all the terms and conditions
of this Agreement.
Dated:
December 6, 1995
Judith Beck
---------------------------Spouse's Signature
Judith Beck
----------------------------Printed Name
By his signature below, the Optionee represents that he is not legally
married as of the date of execution of this Agreement.
Dated:
December 6, 1995
-----------------------------Optionee's Signature
7
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
To:
Amazon.com, Inc.
I, a resident of the State of Washington, hereby exercise my
nonqualified stock option granted by Amazon.com, Inc. (the "Company") on
December 6, 1995, and notify the Company of my desire to purchase ________
shares of Common Stock of the Company (the "Securities") at the exercise price
of $__________ per share which were offered to me pursuant to said option.
I hereby represent and warrant that (1) I have been furnished with all
information which I deem necessary to evaluate the merits and risks of the
purchase of the Securities; (2) I have had the opportunity to ask questions and
receive answers concerning the information received about the Securities and
the Company; and (3) I have been given the opportunity to obtain any additional
information I deem necessary to verify the accuracy of any information obtained
concerning the Securities and the Company.
I am aware that the Securities have not been registered under the
Federal Securities Act of 1933 (the "1933 Act") or any state securities laws,
pursuant to exemption(s) from registration. I understand that the reliance by
the Company on such exemption(s) is predicated in part upon the truth and
accuracy of the statements by me in this Notice of Exercise.
I hereby represent and warrant that I am purchasing the Securities for
my own personal account for investment and not with a view to the sale or
distribution of all or any part of the Securities.
I understand that because the Securities have not been registered
under the 1933 Act, I must continue to bear the economic risk of the investment
for an indefinite time and the Securities cannot be sold unless the Securities
are subsequently registered or an exemption from registration is available.
I agree that I will in no event sell or distribute all or any part of
the Securities unless (1) there is an effective registration statement under
the 1933 Act and applicable state securities laws covering any such transaction
involving the Securities or (2) the Company receives an opinion of my legal
counsel (concurred in by legal counsel for the Company) stating that such
transaction is exempt from registration or the Company otherwise satisfies
itself that such transaction is exempt from registration.
I consent to the placing of a legend on my certificate(s) for the
Securities stating that the Securities have not been registered and setting
forth the restriction on transfer contemplated hereby and to the placing of a
stop transfer order on the books of the Company and with any transfer agents
against the Securities until the Securities may be legally resold or
distributed.
I understand that at the present time Rule 144 of the Securities and
Exchange Commission ("SEC") may not be relied on for the resale or distribution
of the Securities by me.
8
I understand that the Company has no obligation to me to register the
Securities with the SEC and has not represented to me that it will register the
Securities.
I AM ADVISED, PRIOR TO MY PURCHASE OF THE SECURITIES, THAT NEITHER THE
OFFERING OF THE SECURITIES NOR ANY OFFERING MATERIALS HAVE BEEN REVIEWED BY ANY
ADMINISTRATOR UNDER THE SECURITIES ACT OF 1933, THE WASHINGTON STATE SECURITIES
ACT OR ANY OTHER APPLICABLE SECURITIES ACT (THE "ACTS") AND THAT THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER ANY OF THE ACTS AND THEREFORE CANNOT BE RESOLD
UNLESS THEY ARE REGISTERED UNDER THE ACTS OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Dated:
________________
_________________________
Taxpayer I.D. Number
Address___________________________
__________________________________
__________________________________
________________________________
Tom A. Alberg
9
RECEIPT
_________________________ hereby acknowledges receipt from
______________ in payment for ______________ shares of Common Stock of
Amazon.com, Inc., a Washington corporation, of $_____________ in the form of
[ ]
Cash
[ ]
Check (personal, cashier's or bank certified)
[ ]
__________ shares of the Company's Common Stock, fair market
value $_______ per share held by the Optionee for a period of
at least six months
[ ]
Copy of irrevocable instructions to Broker
____________________________
Date:
______________
For:
Amazon.com, Inc.
1
EXHIBIT 10.25
AMAZON.COM, INC.
NONQUALIFIED STOCK OPTION LETTER AGREEMENT
TO:
Joy D. Covey
We are pleased to inform you that you have been selected by the Board
of Directors of Amazon.com, Inc., a Delaware corporation (the "Company"), to
receive a stock option (the "Option") for the purchase of 40,000 shares (the
"Option Shares") of the Company's Common Stock at an exercise price of $1.50 per
share.
The terms of the Option are as set forth in this Agreement and in the
Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), a copy of
which is attached. This Agreement is limited by and subject to the express terms
and provisions of the Plan. Unless otherwise provided in this Agreement, defined
terms will have the meaning given to such terms in the Plan.
1. DATE OF GRANT: The Option is granted effective as of December 20,
1996.
2. STATUS OF OPTION: The Option is a nonqualified stock option.
3. TERM: The term of the Option is ten years from the date of grant,
unless sooner terminated as a result of termination of your employment or
services with the Company or upon a Terminating Event, as described in the Plan
and Section 12 of this Agreement.
4. VESTING: The Option shall vest according to the following schedule:
DATE ON AND AFTER
WHICH OPTION IS
VESTED
-----DECEMBER 9, 1997
DECEMBER 9, 1998
Every three months thereafter
Portion of Total Option Which Is
Vested
-----20%
40%
An additional 5%
Any Option Shares that have not yet vested according to the schedule set forth
above shall be considered "Unvested Shares." Upon cessation of your employment
or services on behalf of the Company for any reason, no further vesting of the
Option will occur and any unvested portion of the Option will terminate.
4.1
the
for
not
ACCELERATION OF VESTING: In the event of a "Transfer of Control"
vesting schedule set forth above shall accelerate automatically by one year
each remaining unvested installment of the Option. Such acceleration shall
be contingent
2
upon any change in employment status, role, or responsibility level occurring in
connection with such an event. For this purpose, a Transfer of Control shall be
deemed to have occurred in the event of any of the following events with respect
to the Company: (i) the direct or indirect sale or exchange by the stockholders
of the Company of all or substantially all of the stock of the Company where the
stockholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange; (ii) a merger in which the
Company is not the surviving corporation; (iii) a merger in which the Company is
the surviving corporation where the stockholders of the Company before such
merger do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such merger; (iv)
the sale, exchange, or transfer of all or substantially all of the Company's
assets; or (v) a liquidation or dissolution of the Company.
5. RIGHT TO EXERCISE: The Option shall be immediately exercisable for
any or all of the Option Shares, subject to your agreement that any unvested
shares of stock purchased upon exercise are subject to the Company's repurchase
rights set forth in paragraph 6 below.
6. COMPANY REPURCHASE RIGHT:
(a) By accepting the Option, you hereby grant to the Company
an option (the "Repurchase Option") to repurchase any Option Shares that remain
Unvested Shares on the earlier of (i) the date you cease to be employed by or
provide services to the Company (including a parent or subsidiary of the
Company) for any reason whatsoever, including, without limitation, termination
with or without cause, death or permanent disability and (ii) the date you or
your legal representative attempts to sell, exchange, transfer, pledge or
otherwise dispose of any Unvested Shares (other than pursuant to a Terminating
Event, as that term is defined in Section 10.2 of the Plan).
(b) The Company may exercise the Repurchase Option by giving
you written notice within 60 days after (i) such termination of employment or
services (or exercise of the Option, if later) or (ii) the Company has received
notice of the attempted disposition. If the Company fails to give notice within
such 60-day period, the Repurchase Option shall terminate, unless you and the
Company have extended the time for the exercise of the Repurchase Option. The
Repurchase Option must be exercised, if at all, for all the Unvested Shares,
except as you and the Company otherwise agree.
(c) Payment to you by the Company shall be made in cash within
30 days after the date of the mailing of the written notice of exercise of the
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness you owe to the Company shall be treated as payment to you in cash
to the extent of the unpaid principal and any accrued interest canceled. The
purchase price per share being repurchased by the
-2-
3
Company shall be an amount equal to your original cost per share, as adjusted as
provided in the Plan. You shall deliver the shares of stock being repurchased to
the Company at the same time as the Company delivers the purchase price to you.
(d) You hereby authorize and direct the Company's Chief
Financial Officer or transfer agent to transfer to the Company any Unvested
Shares as to which the Repurchase Option is exercised.
(e) The Company shall have the right to assign the Repurchase
Option at any time, whether or not the Repurchase Option is then exercisable, to
one or more persons as may be selected by the Company.
(f) The Repurchase Option shall remain in full force and
effect in the event of a Terminating Event, provided that if the Administrative
Committee determines that an assumption or substitution of options outstanding
under the Plan will not be made in connection with the Terminating Event and the
vesting of such options is therefore accelerated pursuant to Section 10.2 of the
Plan, the Repurchase Option shall terminate and all Unvested Shares shall
immediately vest in full.
(g) Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the
Company, to terminate your employment or services on behalf of the Company, for
any reason, with or without cause.
(h) Subject to the terms and conditions of this Agreement, the
Unvested Shares may not be sold, transferred, pledged, encumbered or disposed of
under any circumstances, whether voluntarily, by operation of law, by gift or by
the applicable laws of descent and distribution. Any attempted transfer of any
Unvested Shares in conflict with this Agreement shall be null and void.
7. MARKET STANDOFF: By accepting the Option, you hereby agree that, in
connection with any underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
federal Securities Act of 1933, as amended (the "Securities Act"), including the
Company's initial public offering, you shall not sell or make any short sale of,
loan, hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose of or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to, any Option Shares without the prior
written consent of the Company or its underwriters. Such limitations (the
"Market Standoff") shall be in effect only if and to the extent and for such
period of time as may be requested by the Company or such underwriters and
agreed to by the Company's officers and directors; provided, however, that in no
event shall the weighted average number of days in such period exceed 180 days.
The Market Standoff shall in all events terminate two years after the effective
date of the Company's initial public offering. In order to enforce the Market
Standoff, the Company may impose stop-transfer
-3-
4
instructions with respect to the Option Shares until the end of the applicable
standoff period.
8. SHAREHOLDERS AGREEMENT: By accepting the Option you hereby agree to
execute, on the date you exercise the Option, a shareholders agreement (the
"Shareholders Agreement") in the form in use at such time (unless at such time
the Company's Common Stock is publicly traded or the Shareholders Agreement has
otherwise terminated), whereby under certain circumstances you grant the Company
and certain of its other shareholders a right of first offer to purchase the
Option Shares and agree not to dispose of the Option Shares until after December
31, 1999 without the Company's prior consent.
9. CAPITAL ADJUSTMENTS: In the event of any stock dividend, stock split
or consolidation of shares or any like capital adjustment of any of the
outstanding securities of the Company, any and all new, substituted or
additional securities or other property to which you are entitled by reason of
ownership of the Option Shares shall be immediately subject to this Agreement
and shall be included in the definition of the Option Shares for all purposes
and shall be subject to the Repurchase Option, the Shareholders Agreement, the
Market Standoff and other terms of this Agreement. While the aggregate
repurchase price for Unvested Shares shall remain the same after each such
event, the repurchase price per Unvested Share upon execution of the Repurchase
Option shall be appropriately adjusted.
10. METHOD OF EXERCISE: The Option may be exercised by written notice
to the Company, in form and substance satisfactory to the Company, which must
state the election to exercise the Option, the number of shares of stock for
which the Option is being exercised and such other representations and
agreements as to your investment intent with respect to such shares as may be
required pursuant to the provisions of this Agreement and the Plan. The written
notice must be accompanied by full payment of the exercise price for the number
of shares of stock being purchased.
11. FORM OF PAYMENT: The Option exercise price may be paid, in whole or
in part, (i) in cash, by check, or by cash equivalent, or (ii) by any other form
of payment permitted by the Plan Administrator.
12. EARLY TERMINATION: The Option will terminate in its entirety three
months after cessation of employment or services on behalf of the Company or its
affiliated companies, unless cessation is due to (i) disability, in which case
the Option shall terminate one year after cessation of employment or services on
behalf of the Company, or (ii) death, in which case the Option will terminate
one year after death.
13. LIMITED TRANSFERABILITY: The Option is not transferable except by
will or by the applicable laws of descent and distribution. During your lifetime
only you can
-4-
5
exercise the Option. The Plan provides for exercise of the Option by the
personal representative of your estate or the beneficiary thereof following your
death.
14. REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 13
OF THE PLAN, WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL
AND STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE
EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. By accepting the
Option, you hereby acknowledge that you have read Section 13 of the Plan and
that you are hereby making the representations and acknowledgments to the
Company, and entering into the indemnity and other obligations to the Company,
therein specified.
15. BINDING EFFECT: This Agreement shall inure to the benefit of the
successors and assigns of the Company and be binding upon you and your heirs,
executors, administrators, successors and assigns.
Please execute the following Acceptance and Acknowledgment and return
it to the undersigned.
Very truly yours,
AMAZON.COM, INC.
By
Jeff P. Bezos
------------------------------------------Its
---------------------------------------5-
6
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the incentive stock
option described in this Agreement and in Amazon.com, Inc.'s Amended and
Restated 1994 Stock Option Plan, and acknowledge receipt of a copy of this
Agreement and a copy of the Plan. I have read and understand the Plan, including
the provisions of Section 13, and I hereby make the representations, warranties
and acknowledgments, and undertake the indemnity and other obligations, therein
specified. As a condition to my exercise of this stock option, I agree to
execute the Company's Shareholders Agreement and Stock Purchase Agreement in
effect at such time.
Dated as of:
Dec 23, 1996
573-72-1593
- ------------------------Taxpayer I.D. Number
Joy Covey
------------------------------------------------------------
Address 2432 E. Calhoun
--------------------------------Seattle, WA 98112
------------------------------------------------------------------------------By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of his or her execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.
Dated:
--------------------------------------------------------Spouse's Signature
--------------------------------------------Printed Name
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated:
Jan 5, 1997
--------------Joy Covey
--------------------------Optionee's Signature
1
EXHIBIT 10.26
AMAZON.COM, INC.
INCENTIVE STOCK OPTION LETTER AGREEMENT
TO:
Joy D. Covey
We are pleased to inform you that you have been selected by the Board
of Directors of Amazon.com, Inc., a Delaware corporation (the "Company"), to
receive a stock option (the "Option") for the purchase of 160,000 shares (the
"Option Shares") of the Company's Common Stock at an exercise price of $1.50 per
share.
The terms of the Option are as set forth in this Agreement and in the
Company's Amended and Restated 1994 Stock Option Plan (the "Plan"), a copy of
which is attached. This Agreement is limited by and subject to the express terms
and provisions of the Plan. Unless otherwise provided in this Agreement, defined
terms will have the meaning given to such terms in the Plan.
1. DATE OF GRANT: The Option is granted effective as of December 20,
1996.
2. STATUS OF OPTION: The Option is intended to be an incentive stock
option as described in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), but the Company does not represent or warrant that the
Option qualifies as such.
3. TERM: The term of the Option is ten years from the date of grant,
unless sooner terminated as a result of termination of your employment or
services with the Company or upon a Terminating Event, as described in the Plan
and Section 12 of this Agreement.
4. VESTING: The Option shall vest according to the following schedule:
DATE ON AND AFTER WHICH OPTION IS
VESTED
-----DECEMBER 9, 1997
DECEMBER 9, 1998
Every three months thereafter
PORTION OF TOTAL OPTION WHICH IS
VESTED
-----20%
40%
An additional 5%
Any Option Shares that have not yet vested according to the schedule set forth
above shall be considered "Unvested Shares." Upon cessation of your employment
or services on behalf of the Company for any reason, no further vesting of the
Option will occur and any unvested portion of the Option will terminate.
2
4.1 ACCELERATION OF VESTING: In the event of a "Transfer of Control"
the vesting schedule set forth above shall accelerate automatically by one year
for each remaining unvested installment of the Option. Such acceleration shall
not be contingent upon any change in employment status, role, or responsibility
level occurring in connection with such an event. For this purpose, a Transfer
of Control shall be deemed to have occurred in the event of any of the following
events with respect to the Company: (i) the direct or indirect sale or exchange
by the stockholders of the Company of all or substantially all of the stock of
the Company where the stockholders of the Company before such sale or exchange
do not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such sale or exchange; (ii) a
merger in which the Company is not the surviving corporation; (iii) a merger in
which the Company is the surviving corporation where the stockholders of the
Company before such merger do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the Company after
such merger; (iv) the sale, exchange, or transfer of all or substantially all of
the Company's assets; or (v) a liquidation or dissolution of the Company.
5. RIGHT TO EXERCISE: The Option shall be immediately exercisable for
any or all of the Option Shares, subject to your agreement that any unvested
shares of stock purchased upon exercise are subject to the Company's repurchase
rights set forth in paragraph 6 below. Notwithstanding the foregoing, except as
provided in paragraph 15 below, the aggregate fair market value of the stock
with respect to which you may exercise the Option for the first time during any
calendar year, together with any other incentive stock options which are
exercisable by you for the first time under any Company plan during any such
year, as determined in accordance with Section 422 of the Code, shall not exceed
$100,000 (the "$100,000 Exercise Limitation"). To the extent the exercisability
of the Option is deferred by reason of the $100,000 Exercise Limitation, the
deferred portion of the Option will first become exercisable in the first
calendar year or years thereafter in which the $100,000 Exercise Limitation
would not be contravened.
6. COMPANY REPURCHASE RIGHT:
(a) By accepting the Option, you hereby grant to the Company
an option (the "Repurchase Option") to repurchase any Option Shares that remain
Unvested Shares on the earlier of (i) the date you cease to be employed by or
provide services to the Company (including a parent or subsidiary of the
Company) for any reason whatsoever, including, without limitation, termination
with or without cause, death or permanent disability and (ii) the date you or
your legal representative attempts to sell, exchange, transfer, pledge or
otherwise dispose of any Unvested Shares (other than pursuant to a Terminating
Event, as that term is defined in Section 10.2 of the Plan).
(b) The Company may exercise the Repurchase Option by giving
you written notice within 60 days after (i) such termination of employment or
services (or
-2-
3
exercise of the Option, if later) or (ii) the Company has received notice of the
attempted disposition. If the Company fails to give notice within such 60-day
period, the Repurchase Option shall terminate, unless you and the Company have
extended the time for the exercise of the Repurchase Option. The Repurchase
Option must be exercised, if at all, for all the Unvested Shares, except as you
and the Company otherwise agree.
(c) Payment to you by the Company shall be made in cash within
30 days after the date of the mailing of the written notice of exercise of the
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness you owe to the Company shall be treated as payment to you in cash
to the extent of the unpaid principal and any accrued interest canceled. The
purchase price per share being repurchased by the Company shall be an amount
equal to your original cost per share, as adjusted as provided in the Plan. You
shall deliver the shares of stock being repurchased to the Company at the same
time as the Company delivers the purchase price to you.
(d) You hereby authorize and direct the Company's Chief
Financial Officer or transfer agent to transfer to the Company any Unvested
Shares as to which the Repurchase Option is exercised.
(e) The Company shall have the right to assign the Repurchase
Option at any time, whether or not the Repurchase Option is then exercisable, to
one or more persons as may be selected by the Company.
(f) The Repurchase Option shall remain in full force and
effect in the event of a Terminating Event, provided that if the Administrative
Committee determines that an assumption or substitution of options outstanding
under the Plan will not be made in connection with the Terminating Event and the
vesting of such options is therefore accelerated pursuant to Section 10.2 of the
Plan, the Repurchase Option shall terminate and all Unvested Shares shall
immediately vest in full.
(g) Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or subsidiary of the
Company, to terminate your employment or services on behalf of the Company, for
any reason, with or without cause.
(h) Subject to the terms and conditions of this Agreement, the
Unvested Shares may not be sold, transferred, pledged, encumbered or disposed of
under any circumstances, whether voluntarily, by operation of law, by gift or by
the applicable laws of descent and distribution. Any attempted transfer of any
Unvested Shares in conflict with this Agreement shall be null and void.
7. MARKET STANDOFF: By accepting the Option, you hereby agree that, in
connection with any underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
federal Securities Act of
-3-
4
1933, as amended (the "Securities Act"), including the Company's initial public
offering, you shall not sell or make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose of or
transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Option Shares without the prior written
consent of the Company or its underwriters. Such limitations (the "Market
Standoff") shall be in effect only if and to the extent and for such period of
time as may be requested by the Company or such underwriters and agreed to by
the Company's officers and directors; provided, however, that in no event shall
the weighted average number of days in such period exceed 180 days. The Market
Standoff shall in all events terminate two years after the effective date of the
Company's initial public offering. In order to enforce the Market Standoff, the
Company may impose stop-transfer instructions with respect to the Option Shares
until the end of the applicable standoff period.
8. SHAREHOLDERS AGREEMENT: By accepting the Option you hereby agree to
execute, on the date you exercise the Option, a shareholders agreement (the
"Shareholders Agreement") in the form in use at such time (unless at such time
the Company's Common Stock is publicly traded or the Shareholders Agreement has
otherwise terminated), whereby under certain circumstances you grant the Company
and certain of its other shareholders a right of first offer to purchase the
Option Shares and agree not to dispose of the Option Shares until after December
31, 1999 without the Company's prior consent.
9. CAPITAL ADJUSTMENTS: In the event of any stock dividend, stock split
or consolidation of shares or any like capital adjustment of any of the
outstanding securities of the Company, any and all new, substituted or
additional securities or other property to which you are entitled by reason of
ownership of the Option Shares shall be immediately subject to this Agreement
and shall be included in the definition of the Option Shares for all purposes
and shall be subject to the Repurchase Option, the Shareholders Agreement, the
Market Standoff and other terms of this Agreement. While the aggregate
repurchase price for Unvested Shares shall remain the same after each such
event, the repurchase price per Unvested Share upon execution of the Repurchase
Option shall be appropriately adjusted.
10. METHOD OF EXERCISE: The Option may be exercised by written notice
to the Company, in form and substance satisfactory to the Company, which must
state the election to exercise the Option, the number of shares of stock for
which the Option is being exercised and such other representations and
agreements as to your investment intent with respect to such shares as may be
required pursuant to the provisions of this Agreement and the Plan. The written
notice must be accompanied by full payment of the exercise price for the number
of shares of stock being purchased.
-4-
5
11. FORM OF PAYMENT: The Option exercise price may be paid, in whole or
in part, (i) in cash, by check, or by cash equivalent, or (ii) by any other form
of payment permitted by the Plan Administrator.
12. EARLY TERMINATION: The Option will terminate in its entirety three
months after cessation of employment or services on behalf of the Company or its
affiliated companies, unless cessation is due to (i) disability, in which case
the Option shall terminate one year after cessation of employment or services on
behalf of the Company, or (ii) death, in which case the Option will terminate
one year after death.
13. LIMITED TRANSFERABILITY: The Option is not transferable except by
will or by the applicable laws of descent and distribution. During your lifetime
only you can exercise the Option. The Plan provides for exercise of the Option
by the personal representative of your estate or the beneficiary thereof
following your death.
14. NOTICE OF DISQUALIFYING DISPOSITION: To obtain certain tax benefits
afforded to incentive stock options under Section 422 of the Code, an optionee
must hold the shares issued upon the exercise of an incentive stock option for
two years after the date of grant of the option and one year from the date of
exercise. An optionee may be subject to the alternative minimum tax at the time
of exercise. Tax advice should be obtained when exercising any option and prior
to the disposition of the shares issued upon the exercise of any option. By
accepting the Option, you hereby agree to promptly notify the Company's Chief
Financial Officer if you dispose of any of the Option Shares within one year
from the date you exercise all or part of the Option or within two years of the
date of grant of the Option.
15. EXCEPTION TO $100,000 EXERCISE LIMITATION: Notwithstanding any
other provision of this Agreement, if compliance with the $100,000 Exercise
Limitation as set forth in paragraph 5 above will result in the exercisability
of any vested shares being delayed more than 30 days beyond the vesting date for
such shares, the Option shall be deemed to be two options. The first Option
shall be for the maximum number of shares subject to the Option that can comply
with the $100,000 Exercise Limitation without causing the Option to be
unexercisable as to vested shares. The second Option, which shall not be treated
as an incentive stock option, shall be for the balance of the shares subject to
the Option and shall be exercisable on the same terms and at the same time as
set forth in this Agreement; provided, however, that (i) the second sentence of
paragraph 4 above shall not apply to the second option and (ii) such shares
shall become vested shares on the same date or dates as set forth in this
Agreement without regard to this paragraph. Unless you specifically elect to the
contrary in your written notice of exercise, the first option shall be deemed to
be exercised first to the maximum possible extent and then the second option
shall be deemed to be exercised.
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16. REGISTRATION: YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 13
OF THE PLAN, WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL
AND STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE
EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. By accepting the
Option, you hereby acknowledge that you have read Section 13 of the Plan and
that you are hereby making the representations and acknowledgments to the
Company, and entering into the indemnity and other obligations to the Company,
therein specified.
17. BINDING EFFECT: This Agreement shall inure to the benefit of the
successors and assigns of the Company and be binding upon you and your heirs,
executors, administrators, successors and assigns.
Please execute the following Acceptance and Acknowledgment and return
it to the undersigned.
Very truly yours,
AMAZON.COM, INC.
By
Jeff P. Bezos
--------------------------------------Its
------------------------------------6-
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ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the incentive stock
option described in this Agreement and in Amazon.com, Inc.'s Amended and
Restated 1994 Stock Option Plan, and acknowledge receipt of a copy of this
Agreement and a copy of the Plan. I have read and understand the Plan, including
the provisions of Section 13, and I hereby make the representations, warranties
and acknowledgments, and undertake the indemnity and other obligations, therein
specified. As a condition to my exercise of this stock option, I agree to
execute the Company's Shareholders Agreement and Stock Purchase Agreement in
effect at such time.
Dated as of: Dec 23, 1996
---------------573-72-1593
- ----------------------------Taxpayer I.D. Number
Joy Covey
-------------------------------------------------
Address 2432 E. Calhoun
---------------------------Seattle, WA 98112
--------------------------------------------------------------------By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of his or her execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.
Dated:
---------------------------------------------------Spouse's Signature
----------------------------------Printed Name
By his or her signature below, the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
Dated:
Jan 5, 1997
-----------------Joy Covey
---------------------------------------Optionee's Signature
1
EXHIBIT 10.27
SUBROGATION AGREEMENT
This Subrogation Agreement ("Agreement") is entered into as of June 19,
1996 by and among Amazon.com, Inc., a Delaware corporation ("Amazon"), and
Jeffrey P. Bezos ("Bezos").
RECITALS
A.
Bezos is the founder and chief executive officer of Amazon and
has a significant equity interest in Amazon. Amazon is the successor in
interest to Amazon.com, Inc., a Washington corporation.
B.
Bezos has personally guaranteed certain obligations of Amazon
to Wells Fargo Bank and Seafirst Bank (along with any successors in
interest, the "Bank"); and
C.
It is the intention of the parties hereto that in the event Bezos is
required to honor his personal guarantee (the "Guarantee"), then Bezos will be
subrogated to the rights of the Bank against Amazon.
AGREEMENTS
1.
Definitions. As used herein, the following terms shall have
the following meanings:
Guarantee Enforcement Action. Any action taken by the Bank in
enforcing the Bank's rights against Bezos under the Guarantee, whether or not
such action involves formal proceedings such as litigation or arbitration.
Guarantee Expenses. Any expense reasonably incurred by Bezos as a
result of a Guarantee Enforcement Action. Guarantee Expenses shall include,
without limitation, amounts paid to the Bank in settlement or judgment (or other
award) resulting from a Guarantee Enforcement Action, along with reasonable
costs of defense of any Guarantee Enforcement Action (including reasonable legal
fees and disbursements of counsel, and including any expert witness fees or
other reasonable costs incurred in such defense).
2.
Subrogation Agreement. Subject to the provisions of paragraphs 3 and
4 below, Bezos shall be subrogated to the Bank's rights against Amazon for all
Guarantee Expenses incurred by Bezos. Amazon hereby acknowledges the subrogation
rights of Bezos under such circumstances and agrees to execute such further and
other documents as Bezos may reasonably request in order to evidence any such
subrogation rights, whether before or after Bezos incurs Guarantee
2
Expenses. Without limiting the generality of the foregoing, upon satisfaction in
full of the obligations of Amazon to which the Guarantee relates, Bezos shall be
entitled to enforce all rights the Bank would otherwise have had against Amazon,
including enforcement of any security instruments Amazon may have executed in
favor of the Bank.
3.
No Modification of Guaranty Limitations. Nothing herein shall
be deemed to violate or modify in any way the provisions of the Guarantee.
4.
Burdens of Proof. In the event of any dispute over the
applicability or enforcement of this Agreement, the following standards
shall apply:
(a) Settlement or Judgment Amounts. Any amounts paid directly by
Bezos to the Bank in settlement or judgment (or pursuant to any other award) of
any Guarantee Enforcement Action shall conclusively be deemed to be reasonable.
(b)
Defense Costs. Amazon shall have the burden of proof of
demonstrating the reasonableness of such costs and fees that it has
incurred and the unreasonableness of any costs and fees that Bezos has
incurred.
5.
Other Provisions.
(a) Attorneys' Fees. In the event of any dispute over the
applicability or enforcement of this Agreement, Amazon shall pay all costs of
dispute (including reasonable legal fees and disbursements of counsel for both
parties, and including any expert witness fees or other reasonable costs
incurred in such dispute).
(b) Counterparts. This Agreement may be executed in any number of
counterparts, by manual execution, or by facsimile, all of which taken together
shall constitute one and the same instrument.
(c) Notices. Any notices desired or required to be given under this
Agreement shall be given to the addresses set forth in, and in accordance with,
the respective Guarantee Agreements.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington, as pplied to contracts
entered into and to be performed entirely within such State.
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This Agreement has been executed by the parties as of the date first
written above.
AMAZON.COM, INC.
By Jeff P. Bezos
----------------------------------Name: Jeffrey P. Bezos
-------------------------------Title: Chief Executive Officer
------------------------------JEFFREY P. BEZOS
Jeff P. Bezos
---------------------------------Jeffrey P. Bezos
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EXHIBIT 10.28
LEASE AGREEMENT
-----------------------------JULY 1, 1996
Lessor:
Trident Investments, Inc.
Tenant:
Amazon.com, Inc.
Property:
Fourth Floor
Columbia Building
1516 Second Avenue
Seattle, WA 98101
------------------------------
2
TABLE OF CONTENTS
SECTION 1 - LEASED PREMISES..........................................1
SECTION 2 - TERM.....................................................1
SECTION 3 - RENT.....................................................1
SECTION 4 - DEPOSITS.................................................2
SECTION 5 - USE......................................................2
SECTION 6 - COMMON AREAS.............................................3
SECTION 7 - INITIAL LEASEHOLD IMPROVEMENTS...........................3
SECTION 8 - IMPROVEMENTS BY TENANT...................................3
SECTION 9 - LIENS....................................................4
SECTION 10 - HOLD HARMLESS...........................................4
SECTION 11 - INSURANCE...............................................5
SECTION 12 - CASUALTY DAMAGE OR DESTRUCTION..........................5
SECTION 13 - CONDEMNATION............................................6
SECTION 14 - DAMAGE FROM OTHER.......................................6
SECTION 15 - ASSIGNMENT AND SUBLETTING...............................7
SECTION 16 - DEFAULT.................................................7
SECTION 17 - LESSOR'S REMEDIES.......................................7
SECTION 18 - ACCESS..................................................8
SECTION 19 - SURRENDER OF PREMISES AND HOLDING OVER..................8
SECTION 20 - COMPLIANCE WITH LAW.....................................9
SECTION 21 - RULES AND REGULATIONS...................................9
SECTION 22 - ESTOPPEL CERTIFICATES...................................9
SECTION 23 - SUBORDINATION...........................................10
SECTION 24 - TENANT'S PROPERTY.......................................10
SECTION 25 - REMOVAL OF PROPERTY.....................................10
SECTION 26 - NOTICES.................................................10
SECTION 27 - LESSOR MAINTENANCE......................................11
SECTION 28 - TENANT MAINTENANCE......................................11
SECTION 29 - OPERATING COSTS.........................................11
SECTION 30 - WAIVER OF SUBROGATION RIGHTS............................14
SECTION 31 - ATTORNEYS' FEES.........................................14
SECTION 32 - WAIVER..................................................15
3
SECTION 33 - OPTION TO EXPAND.........................................15
SECTION
34 - RIGHT OF FIRST REFUSAL...................................15
SECTION 35 - OPTION TO EXTEND.........................................15
SECTION 36 - PARKING..................................................16
SECTION 37 - OPTION TO TERMINATE......................................17
SECTION 38 - AMERICANS WITH DISABILITIES ACT..........................17
SECTION 39 - ENVIRONMENTAL PROVISIONS.................................17
SECTION 40 - LESSOR REPRESENTATION AND WARRANTIES.....................18
SECTION 41 - LESSOR DEFAULT...........................................18
SECTION 42 - MISCELLANEOUS PROVISIONS.................................18
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LEASE AGREEMENT
THIS LEASE AGREEMENT is made and executed as of this 1st day of July,
1996, between Trident Investments, Inc., a Washington corporation, ("Lessor")
and Amazon.com, Inc., a Delaware corporation, ("Tenant").
SECTION 1 -- LEASED PREMISES
1.1
On and subject to the terms, and conditions set forth in this Lease,
Lessor hereby leases to Tenant and Tenant hereby leases from Lessor those
certain premises (the "Premises") in the building currently known as the
Columbia Building (the "Building"), which Building is located at 1516 Second
Avenue, Seattle, Washington, on the land, described in Exhibit 1 (the "Land").
The Premises are known as Suite 400 and consist of the entire fourth floor of
the Building.
1.2
Lessor and Tenant tentatively agree that the rentable area of the
Premises is 12,686 square feet. If during the first three (3) months of the Term
Tenant gives notice to Lessor, Lessor and Tenant shall agree on a licensed
architect to remeasure the Premises at Tenant's expense. If the architect
determines that the rentable square footage of the Premises is other than 12,686
square feet, Base Rent shall be adjusted proportionately and Lessor shall
refund, or Tenant shall pay, the difference as the case may be.
1.3
The term "Project" means all parts of the Building and the
supporting facilities of the Building, including Common Areas, the Land and all
equipment and other property of Lessor used in connection with the Building, the
Common Areas and the Land.
SECTION 2 -- TERM
2.1
On and subject to the terms and conditions
any exhibit or addendum hereto, the term of this
period of three (3) years and shall begin on the
("Commencement Date"), and shall and on the 31st
Date").
set forth herein or in
Lease ("Term") shall be for a
1st day of August, 1996,
day of July, 1999. ("Expiration
2.2
If the Premises are not ready for occupancy by Tenant at the
Commencement Date stated in Section 2.1, this Lease shall not be void or
voidable nor shall Lessor be liable or responsible to Tenant or third parties
for any claims, liabilities, loss or damage therefrom or by any reason thereof,
except that rent shall abate as to that portion of the Premises which are not
ready for occupancy by
5
September 15, 1996, until such time as the Premises are delivered to Tenant in
the condition required by this Lease. Tenant shall be entitled to enter the
Premises prior to the Commencement Date for the purpose of installing phone
wire, computer cable and furniture provided Tenant shall not interfere with any
existing tenancy at the Premises during such period.
2.3
If for any reason Lessor is unable to provide to Tenant possession
of the Premises in the condition required by this Lease by September 15, 1996,
then Tenant shall have the right to terminate this Lease upon notice to Lessor.
Lessor shall return all sums previously paid by Tenant to Lessor within ten (10)
days of such notice of termination.
SECTION 3 -- RENT
3.1
Base Rent. Tenant agrees to pay to Lessor as rent the following
sums ("Base Rent"):
3.1.1 The sum of THIRTEEN THOUSAND SEVEN HUNDRED FORTY-THREE and
17/100 DOLLARS ($13,743.17) per month for the period of August 1, 1996, through
July 31, 1997; and
3.1.2 The sum of FOURTEEN THOUSAND FIVE HUNDRED THIRTY-SIX and
04/100 DOLLARS ($14,536.04) per month for the period of August 1, 1997, through
July 31, 1999.
3.2
Payment of Rent.
3.2.1 The rent described in paragraph 3.1 above shall be due and
payable in advance on the first day of each calendar month during the Term of
this Lease and any extension or renewals thereof commencing on the 1st day of
August, 1996.
3.2.2 All other Rent will be payable when due pursuant to this
Lease.
3.2.3 Tenant hereby agrees to so pay all Rent to Lessor without
demand and without reduction, abatement, counterclaim or offset at such address
as may be designated by Lessor from time to time.
3.3
Interest on Past Due Rent. Tenant hereby acknowledges that late
payment by Tenant to Lessor of rent or other sums due hereunder will cause
Lessor to incur costs not contemplated by this Lease, and the exact amount of
such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed upon Lessor by the terms of any mortgage
or deed of trust
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covering the Premises. Therefore, in the event Tenant shall fail to pay any
installment of rent or other sum due hereunder within five (5) days after such
amount is due Tenant shall pay to Lessor as additional rent a late charge equal
to interest upon said sum at the rate of twelve percent (12%) per annum from the
data such sum was due until paid. A $20.00 charge will be paid by the Tenant to
the Lessor for each returned check. In the event Lessor pays any sum or expense
on behalf of Tenant which Tenant is obligated to pay hereunder, or in the event
Lessor expends any other sum or incurs any expense or Tenant fails to pay any
sum due hereunder which is not rent or additional rent, Lessor shall be entitled
to receive interest upon said sum at the rate of twelve percent (12%) per annum
from the date such sum was due until paid. Tenant further agrees to pay any and
all interest and/or penalties due by reason of Tenant's failure to make any
payments to any entities other than Lessor which are required to be made by
Tenant hereunder.
SECTION 4 -- DEPOSITS
Upon execution of this Lease, Tenant shall deposit with Lessor the
sum of TWENTY-EIGHT THOUSAND TWO HUNDRED SEVENTY-NINE and 21/100 DOLLARS
($28,279.21) (the "Deposit") as prepaid Rent and a security deposit. The
Deposit shall be allocated as follows:
4.1
Rent. THIRTEEN THOUSAND SEVEN HUNDRED FORTY-THREE and 17/100 DOLLARS
($13,743.17) of the Deposit shall be applied to the monthly installment of Base
Rent due on August 1, 1996.
4.2
Security Deposit. FOURTEEN THOUSAND FIVE HUNDRED THIRTY-SIX and
04/100 DOLLARS ($14,536.04) of the Deposit shall constitute a security deposit
for the performance by Tenant of the provisions of this Lease. If Tenant is in
default, Lessor may, but shall not be obligated to, use the security deposit, or
any portion of it, to cure Tenant's default; and Tenant shall, on demand,
immediately pay to Lessor the sum necessary to replenish the security deposit to
that initially deposited with Lessor. If Tenant is not in default of any
material obligations, terms, covenants, conditions and agreements to be
performed or observed by Tenant under this Lease, or if any default is curable
by application of all or a portion of the Deposit, then Lessor shall return the
security deposit, or balance thereof, to Tenant within sixty (60) days after the
end of the Lease Term. Lessor's obligations with respect to the security deposit
are those of a debtor and not a trustee. Lessor may maintain the security
deposit or may commingle the security deposit with Lessor's general or other
funds. Lessor shall not be required to pay Tenant interest on security deposit.
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SECTION 5 -- USE
5.1
The Premises are to be used and occupied by Tenant solely for the
purpose of operating thereon an office facility for its business. Tenant agrees
that it has determined to its satisfaction that the Premises can be used for
these purposes, and waives any right to terminate this Lease solely on the basis
that the Premises cannot be used for such purposes during the Lease Term.
5.2
Tenant shall not do, bring, or keep anything in or about the
Premises or the Project that will increase the existing rate of insurance on the
Project or any part thereof, or any of its contents, or that will cause the
cancellation of any insurance covering the Project, or any part thereof, or any
of its contents. If the rate of any insurance carried by Lessor is increased as
a result of Tenant's use, Tenant shall pay to Lessor within ten (10) days before
the date Lessor is obligated to pay a premium on the insurance, or within ten
(10) days after Lessor delivers to Tenant a statement from Lessor's insurance
carrier stating that the rate increase was caused solely by an activity of
Tenant on the Premises as permitted in this Lease, whichever date is later, a
sum equal to the difference between the original premium and the increased
premium.
5.3
Tenant shall not do or permit any of its agents,
or visitors to do anything in or about the Premises or
any way obstruct or interfere with the rights of other
the Project or injure or annoy or disturb them; or use
the Project to be used for any unlawful purpose.
employees, invitees
the Project which will in
tenants or occupants of
or allow the Premises or
5.4
Tenant shall not commit or suffer to be committed any waste in or
upon the Premises or the Project.
5.5
Tenant shall not place upon or install in the windows or other
openings or exterior sides of doors or walls of the Premises or any part of the
Premises visible from the exterior of the Premises, or anywhere also on the
Project, any signs, symbols, drapes or other materials without the prior written
consent of Lessor, which consent will not be unreasonably withheld, provided in
the event that Tenant leases two or more floors of the Building, and for so long
as Tenant continues to lease two or more floors of the Building, Tenant shall be
entitled to install and maintain, at Tenant's cost, reasonable signage on the
exterior of the Building provided such signage does not damage the Building and
does not interfere with other signage on the Building. Lessor shall place
Tenant's name on the building standard signs in the ground floor lobby at the
expense of Tenant and Tenant may install its own sign(s) in the elevator
lobby(ies) of the floors that Tenant occupies.
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SECTION 6 -- COMMON AREAS
6.1
The term "Common Areas" means areas and facilities outside the
Premises that are provided and designated by Lessor from time to time for the
general use and convenience of tenant and of other tenants of the Building and
their respective authorized representatives, guests, and invitees. Common areas
may include, without limitation, designated pedestrian walkways and patios,
landscaped areas, public lobbies, elevators, sidewalks, loading areas, parking
areas, service corridors, restrooms, stairways, arcades, and roads.
6.2
Lessor gives to Tenant and its authorized representatives the
nonexclusive right to use the Common Areas, with others who are entitled to use
the Common Areas, subject to Lessor's rights set forth in Section 6.3. Customers
of Tenant may not use such common areas except to the extent necessary to enter
the Premises from the street entrance.
6.3
Lessor shall have the right to:
6.3.1 Establish and enforce reasonable rules and regulations
applicable to all tenants concerning the maintenance, management, use and
operation of the Common Areas, so long as such rules and regulations do not
create a monetary cost to Tenant. Any existing rules and regulations are
attached to this Lease as Exhibit 3.
6.3.2 Close any of the Common Areas to the extent required in the
opinion of Lessor's counsel to prevent a dedication of any of the Common Areas
or the accrual of any rights of any person or of the public to the Common Areas.
6.3.3 Close temporarily any of the Common Areas for purposes of
cleaning, maintenance, alterations, improvements or additions.
6.3.4
Areas.
Designate other property to become part of the Common
6.3.5 Make changes to the Common Areas including, without
limitation, changes in the location of driveways, entrances, exits, vehicular
parking spaces and parking areas.
SECTION 7 -- INITIAL LEASEHOLD IMPROVEMENTS
7.1
Lessor shall make those improvements to the Premises which are shown
on the attached Exhibit 2 and shall steam clean the carpets and touch up
existing paint. Lessor shall under no condition be required to install or pay
for any other
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tenant improvements of any kind. Tenant shall not remove any tenant improvements
installed by Lessor without Lessor's prior written approval.
SECTION 8 -- IMPROVEMENTS BY TENANT
8.1
On and subject to the terms and condition set forth in this Section
and in Section 9, Tenant may make, at its expense, such alterations, additions
improvements (collectively called "Tenant Improvements") to the interior of the
Premises during the term of this Lease that Tenant requires in order to use the
Premises for the uses permitted in Section 5.1, provided that the following
requirements have first been satisfied;
8.1.1 Tenant shall submit to Lessor reasonably detailed final plans
and specifications and working drawings of the proposed Tenant Improvements, the
name of Tenant's proposed contractor who must provide Lessor with a Certificate
of Insurance covering Contractor's Liability and Property Damage in an amount
not less than Two Hundred Fifty Thousand and no/100 Dollars ($250.000.00), and
naming Lessor as an additional insured. Said Certificate to be issued prior to
commencement of the Tenant Improvement work.
8.1.2 Lessor shall have given Tenant written notice of Lessor's
approval of said final plans, specifications, working drawings, the proposed
contractor, and insurance carried by the proposed contractors, Lessor shall be
deemed to have approved said plans, specifications, drawings, contractor and
insurance if Lessor has not disapproved the same within ten (10) Business Days
after Lessor received them. Lessor shall not unreasonably withhold or delay its
approval; Lessor shall give Tenant written notice of the reasons for Lessor's
disapproval.
8.1.3 The Tenant Improvements shall be approved by all appropriate
government agencies, and all applicable permits and authorizations shall be
obtained before commencement of any Tenant Improvements.
8.1.4 Prior to the commencement of construction of such improvements
Tenant at its sole cost shall cause its selected contractor to furnish to Lessor
a performance and completion bond issued by an insurance company qualified to do
business in the State of Washington and approved by Lessor in a sum equal to the
cost of such Improvements (as determined by the construction contract between
Tenant and its contractor) guaranteeing the completion of such Improvements,
free and clear of all liens and other charges, in accordance with the plans and
specification approved by Lessor.
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8.2
All Tenant Improvement shall be completed with due diligence in
compliance with all applicable laws, with the plans and specifications and
working drawings approved by Lessor, and by the contractor approved by Lessor.
8.3
All debris, trash, refuse and waste materials shall be stored only
within the Premises and shall be regularly removed therefrom by Tenant at its
cost.
8.4
Tenant Improvements shall be made in a manner that will not
unreasonably disturb or interfere with other tenants in the Building.
8.5
All Tenant Improvements, other than trade fixtures and computer
cabling, shall become the property of Lessor and shall remain on and be
surrendered with the Premises on the expiration or earlier termination of the
Lease, except that Lessor may elect, in writing at the time of approving Tenant
Improvements, to require Tenant to remove any Tenant Improvements so approved.
If Lessor so elects, Tenant at its cost shall remove the Tenant Improvements and
repair any damage caused by such removal before the last day of the term or
expiration of the Lease.
8.6
Tenant shall not make changes to locks on doors or add to, disturb
or in any way change any plumbing or electrical wiring without the prior written
consent of Lessor and in accordance with the requirements of this section.
Tenant may install phone and computer cabling in the Premises and Lessor agrees
to continually grant to Tenant access through the Building as shall be
reasonably designated by Lessor for such cabling.
SECTION 9 -- LIENS
Tenant shall pay all costs for construction done by it or caused to be
done by it on the Premises as permitted by this lease. Tenant shall keep the
Premises and Project free and clear from any liens or lien claims arising out of
work performed, material furnished or obligations incurred by or on behalf of
Tenant, and Tenant shall indemnify and hold Lessor harmless from any liability
for losses or damages resulting directly or indirectly from any such liens or
lien claims. If Tenant shall desire to contest the correctness or the validity
of any such lien, it shall furnish Lessor adequate security of the value or in
the amount of the claim, plus estimated costs and interest, or a bond of a
responsible corporate surety authorized to do business in the State of
Washington and approved by Lessor, in such amount, conditioned on the discharge
of the lien. If a final judgment establishing the validity or existence of a
lien for any amount is entered, Tenant shall pay and satisfy the same
immediately.
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SECTION 10 -- HOLD HARMLESS
Lessor, its agents and employees shall not be liable to Tenant or its
officers, contractors, licensees, agents, servants, employees, customers,
guests, invitees or visitors, or to any third party for any damage to person or
property caused or arising from or in connection with any act, omission or
neglect of Tenant. Tenant agrees to indemnify Lessor and hold it harmless from
and against any and all liability, claims, causes of action, damages, costs and
expenses (including without limitation, attorneys' fees), arising from or in
connection with any act, omission, or neglect of Tenant or its officers,
contractors, licensees, agents, servants, employees, guests, invitees,
customers, or visitors; any breach or default under this Lease by Tenant; or any
accident, injury or damage, howsoever and by whomsoever caused, to any person or
property, occurring in or about the Premises, which are caused by the act or
negligence of Tenant, or its officers, agents, or employees. Tenant's
obligations under this Section 10 arising by reason of any events occurring
during the term of this Lease or any extension or renewals thereof shall survive
the expiration or termination of this Lease. The foregoing provisions shall not
be construed to make Tenant responsible for loss, damage, liability, claims,
causes of action or expense resulting from injuries to third parties caused by
the negligence of Lessor, or its officers, contractors, licensees, agents
employees, or invitees.
SECTION 11 -- INSURANCE
11.1
Tenant at its cost shall obtain and maintain in full force and
effect during the Term of this Lease and any extensions or renewals thereof
policies of comprehensive public liability insurance with minimum limits of:
$50,000 per occurrence and
$1,000,000 appropriate bodily injury and
$250,000 property damages
or
$1,000,000 combined single limits
Such policies shall insure performance by Tenant of Tenant's obligations set
forth in Section 11. Lessor shall be named as an additional insured and the
policies shall contain cross liability endorsements.
11.2
Tenant at its cost shall maintain on all of Tenant's personal
Property, and Tenant's Improvements a policy or policies of standard fire and
extended coverage insurance with vandalism and malicious mischief endorsement to
the extent of replacement value; however, at no time less than an amount as
shall be equal to the value of Tenant's improvements and personal property. In
addition, said policy shall
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also provide for business interruption and loss of income at an amount necessary
to ensure meeting all continuing financial obligations of Tenant, for a period
of not less than four (4) months. The proceeds from any such policy shall be
used by Tenant for the repair and replacement of Tenant's Personal Property
and/or the restoration of Leasehold Improvements. "Tenant's Personal Property"
includes Tenant's movable equipment, furniture, furnishings, merchandise, and
other movable personal property including trade fixtures.
11.3
Each policy of insurance required under this Lease shall:
11.3.1 Be issued by an insurance company authorized to do business
in the State of Washington and rated Bests "A" or better.
11.3.2 Contain an endorsement requiring thirty (30) days written
notice from the insurance company to both parties and Lessor's lender (if any)
before cancellation or change in the coverage, scope or amount of any such
policy.
11.4 Each policy of insurance required under this Lease, or a certificate
of such policy, together with evidence of payment of premiums, shall be
deposited with the Lessor at the commencement of the Term; and on renewal of the
policy, not less than five (5) days before expiration of the term of the policy.
SECTION 12 -- CASUALTY DAMAGE OR DESTRUCTION
12.1 In the event that fire or other casualty renders the Premises
totally or partially untenantable, Tenant shall immediately give Lessor written
notice thereof ("Tenant's First Notice"). If the casualty occurs during the last
six (6) months of the Term (or the Extended Term) and such casualty was not
caused by Tenant, Tenant may terminate this Lease on thirty (30) days written
notice.
12.2 If the Premises or the Building are totally or partially damaged or
destroyed by fire or other casualty so as to render the Premises totally or
partially untenantable, Lessor may at its option, restore the Premises to the
same condition as the Commencement Date. Within thirty (30) days from the date
Lessor received Tenant's First Notice, Lessor shall give Tenant written notice
(the "Lessor's Notice") stating:
12.2.1
Lessor elects to restore the Premises; or
12.2.2 Lessor elects not to restore the Premises and Lessor
elects to terminate this Lease
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12.3 If Lessor elects to restore the Premises, then Lessor shall restore
the Premises within ninety (90) days from the date of the casualty and this
Lease shall remain in full force and effect except that, during the period from
damage or destruction until restoration, the Base Rent shall be abated in the
same ratio as that portion of the Premises which Lessor determines is unfit for
occupancy bears to the whole of the Premises, provided that there shall be no
such abatement if the damage or destruction is due in whole or in part to the
act, omission or neglect of Tenant, its agents, employees, contractors, invitees
or visitors. If Lessor's Notice states that Lessor elects not to restore the
Premises, then Tenant shall have the option to terminate this Lease by
delivering written notice thereof ("Tenant's Second Notice") to Lessor within
thirty (30) days from the date Tenant receives Lessor's Notice. If Tenant so
delivers Tenant's Second Notice, than all rent owed up to the time of such
damage or destruction shall be paid by Tenant and this Lease shall terminate and
be at an end as of the date of such damage or destruction. If Tenant does not so
deliver Tenant's Second Notice, then this Lease shall remain in full force and
effect, except that, from and after the date of such damage or destruction, Rent
shall be abated in the same manner and to the same extent as is provided in this
Section 12.3 in the case of Lessor's election to restore the Premises.
12.4 If the Building shall be substantially damaged or destroyed by fire
or other casualty (i.e. greater than 50% diminution in value) such that Lessor
shall decide not to rebuild or restore the building, but such damage or
destruction shall not render the Premises totally or partially untenantable,
Lessor may, at its option, terminate this Lease by notice in writing to Tenant
within thirty (30) days after such damage or destruction. Such notice shall be
effective sixty (60) days after receipt thereof by Tenant. All Rent owed up to
the time of the effective date of such notice shall be paid by Tenant and this
Lease shall terminate as of the effective date of such notice.
12.5 The proceeds of any insurance policies carried by Lessor on the
Project and any part thereof shall belong to and be paid to Lessor. Tenant shall
have no interest in or right to such proceeds and shall make no claims against
Lessor of Lessors' insurer for any such proceeds.
12.6 Nothing in this Section and no termination of the Lease pursuant to
this Section shall relieve Tenant of any liability under Section 29.2 of this
Lease.
SECTION 13 -- CONDEMNATION
13.1
Definitions
13.1.1 "Condemnation" means (a) the exercise of any governmental
power, whether by legal proceedings or otherwise, by a condemnor and (b) a
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voluntary sale or transfer by Lessor to any Condemnor, either under threat of
Condemnation or while legal proceedings for Condemnation are pending.
13.1.2 "Date of Taking" means the date the Condemnor has the right
to possession of the property being condemned.
13.1.3 "Condemnor" means any public or quasi public authority, or
private corporation or individual, having the power of Condemnation.
13.2 If all or part of the premises are taken by Condemnation, this Lease
shall terminate as to the part so taken as of the Date of Taking and all Rent
shall be paid to that date. If a portion of the premises is taken and the
remaining portion is unsuitable for Tenant's continued use, Tenant may by
written notice to Lessor within ten (10) days after notice of such Condemnation,
terminate this Lease as of the Date of Taking. Except as provided in Section
13.3, if Tenant does not have or does not exercise the option to terminate, this
Lease shall remain in full force and effect as to that portion of the Premises
not taken by Condemnation, except that Minimum Rent shall be reduced, effective
on the Date of Taking, by an amount that is in the same ratio to the Base Rent
as the total number of square feet in the Premises taken bears to the Net Usable
Area of the Premises immediately before the Date of Taking (provided that if
circumstances make abatement based on square footage unreasonable, the Minimum
Rent shall abate by a reasonable amount.
13.3 If any substantial part of the Project is taken by Condemnation,
(i.e. greater than 50% diminuation in value) whether or not such Condemnation
shall affect the Premises, Lessor shall have the option to terminate this Lease
effective as of the Date of taking, by written notice to Tenant within sixty
(60) days after the Date of Taking.
13.4 Lessor reserves all rights to damages to the Premises for any
partial or total taking by Condemnation and Tenant hereby assigns to Lessor any
right Tenant may have to such damages or award. Tenant shall make no claim
against Lessor or Condemnor for damages for termination of Tenant's leasehold
interest. Tenant shall have the right to claim and recover from the Condemnor
compensation for any cost and expense to which Tenant may be put for Tenant's
moving expenses or taking of Tenant's Personal Property or interference with
Tenant's business, provided that such damages may be claimed only if they are
awarded separately and not out of or as a part of the damages or award
recoverable by Lessor.
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SECTION 14 -- DAMAGE FROM OTHER
14.1 Except as otherwise expressly provided in this Lease, Lessor shall
not be liable or responsible to Tenant for any loss or damage to any property or
person occasioned by theft, burglary, act or neglect of any tenant or occupant
of the Building or of any other person, fire or other casualty, act of God,
public enemy, injunction, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority.
14.2 Notwithstanding anything in this
liable to Tenant for any damage to any
or the Project occasioned by bursting,
plumbing or other pipes (including but
refrigerant lines), sprinklers, tanks,
or other similar cause, above, upon or
caused by Lessor's act or neglect.
Lease, Lessor shall in no event be
personal property in or on the Premises
rupture, leakage or overflow of any
not limited to water, steam and/or
drains, drinking fountains or washstands,
about the Premises or the project not
SECTION 15 -- ASSIGNMENT AND SUBLETTING
15.1 Tenant shall not (voluntarily, involuntarily or other wise) assign,
encumber, transfer or dispose of all or any part of its interest in this Lease,
or in the Premises, or sublease all or any part of the Premises, or allow any
other person or entity (except Tenant's authorized representative) to occupy or
use all or any part of the Premises, without first obtaining Lessor's written
consent which consent shall be granted provided any such assignee assumes, in
writing, the terms and conditions of Tenant under this Lease and provided that
such assignee provides evidence to Lessor that such assignee is at lease as
financially strong as Tenant was at the time of the execution of this Lease.
15.2. No assignment or subleasing by Tenant shall relieve Tenant of any
obligation under this Lease. Any assignee or sublessee approved by Lessor shall
be jointly and severally liable with Tenant for the payment of Rents and for the
performance of all covenants, terms, and conditions of this Lease and of any
approved sublease.
15.3 No consent to any assignment, encumbrance, transfer, disposition or
sublease shall constitute a further waiver of the provisions of this Section 16.
15.4 Subject to the foregoing provisions, this Lease shall be binding
upon and inure to the benefit of the parties and their respective successors.
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SECTION 16 -- DEFAULT
16.1 The occurrence of any of the following shall constitute a default by
Tenant under this Lease:
16.1.1 Failure by Tenant to make any payment of Rent as and when
due, where such failure shall continue for five (5) business days.
16.1.2 Any assignment, encumbrance, transfer, disposition or
sublease made in violation of Section 15.
16.1.3 Failure by Tenant to perform or observe any other provision
of this Lease by it to be performed or observed if the failure is not cured
within five (5) business days after notice has been given by Lessor to Tenant.
If the default cannot reasonably be cured within five (5) business days, Tenant
shall not be in default if Tenant commences to cure the default within the 5-day
period and diligently and in good faith continues to cure the default.
16.1.4 Any writ of attachment or writ of execution is levied upon
any right or interest of Tenant under this Lease, or any petition is filed by or
against Tenant to declare Tenant a bankrupt or insolvent or to delay, reduce or
modify Tenant's debt or obligations, or any petition is filed or other action
taken to reorganize or modify Tenant's structure; or Tenant is declared
insolvent according to law; or an assignment of Tenant's property is made for
the benefit of creditors; or a receiver or trustee is appointed for Tenant or
its property (provided that no such levy or petition filed against Tenant shall
constitute a default if Tenant shall vigorously contest the same by appropriate
proceedings and shall remove or vacate the same within thirty (30) days from the
date of its creation, service, or filing).
SECTION 17 -- LESSOR'S REMEDIES
17.1 In the event of a default by Tenant, Lessor may have any one or more
of the following described remedies in addition to all other rights and remedies
provided in the Lease and now or hereafter available at law or in equity:
17.1.1 Lessor may terminate this Lease and forthwith repossess the
Premises and remove all persons and property therefrom, and shall be entitled to
recover forthwith as damages the sum of money equal to the total of (a) the cost
of recovering the Premises, (b) the unpaid Rent owed at the time of termination,
plus interest on the unpaid Rent from due date at the rate provided in Section
3.3, (c) the amount by which the balance of the Rent for the remainder of the
term exceeds the
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amount of the loss of rent that Tenant proves could have been reasonably
avoided, and (d) any other sum of money and damages owed by Tenant to Lessor; or
17.1.2 Lessor may continue this Lease in full force and effect.
Lessor, may, but shall not be obligated to, re-enter the Premises and relet the
same or any part thereof, for the account of Tenant. Such reletting may be for a
period shorter or longer than the remaining term of this Lease, and may be upon
such terms and for such rent as shall be satisfactory to Lessor. Tenant shall be
liable to Lessor for all costs incurred by Lessor in reletting all or any part
of the Premises, including but not limited to; all costs and expenses of
re-entering and recovering possession of the Premises; all costs and expenses
required by the reletting; brokers' commissions; all costs and expense incurred
by Lessor in collecting the rent accruing from such reletting. If a sufficient
sum shall not be realized from reletting to pay (a) all costs and expenses of
reletting, (b) Rent due at the time of reletting together with interest thereon
at the rate provided in Section 3.3, and (c) Rent coming due hereunder, then
Tenant shall satisfy and pay any such deficiency upon demand therefor from time
to time. If the Premises are not relet, then Tenant shall pay to Lessor the Rent
reserved to this Lease upon demand therefor from time to time. Tenant agrees
that Lessor may file suit to recover any sums coming due under the terms of this
Section 17.1.2 from time to time, on one or more occasions, and Lessor shall not
be obligated to wait until the expiration of the term of this Lease. Any such
reletting shall not be construed as an election on the part of Lessor to
terminate this Lease unless a written notice of such intention is given to
Tenant by Lessor. Notwithstanding any such reletting without termination, Lessor
may at any time thereafter elect to terminate this Lease for Tenant's previous
default.
17.1.3 Lessor, at any time after Tenant commits a default, may but
shall not be obligated to cure the default at Tenant's cost. If Lessor at any
time, by reason of Tenant's default, pays any sum or does any act that requires
the payment of any sum, the sum paid by Lessor shall be due immediately from
Tenant to Lessor at the time the sum is paid by Lessor, and if repaid by Tenant
at a later date, shall bear interest at the rate provided in Section 3.3 until
repaid.
17.1.4 The option to expand described in Section 33, Right of First
Refusal described in Section 34 and option to extend described in Section 35,
unless previously exercised, shall be thereby rendered null and void.
SECTION 18 -- ACCESS
18.1 Lessor and its authorized representatives shall have the right,
during the final 120 days of the Term, to enter the premises at reasonable
times, and after reasonable prior notice to Tenant to inspect, clean, make
repairs, alterations, or
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additions to the Premises, to show the Premises to prospective tenants,
purchasers or others, and for other reasonable purposes deemed necessary or
desirable by Lessor provided that Lessor shall not unreasonably interfere with
Tenant's business operation. Tenant shall not be entitled to any abatement or
reduction in Rent by reason thereof. Nothing in this Section shall be deemed to
impose any obligation upon Lessor not expressly stated elsewhere in this Lease.
18.2 Tenant shall be entitled to enter upon the Premises prior to the
commencement date of the Term for the purpose of installing cable and furniture
provided Tenant shall in no event disturb or interfere with the rights of any
existing tenancy at the Premises.
SECTION 19 -- SURRENDER OF PREMISES AND HOLDING OVER
19.1 On expiration or earlier termination of this Lease, Tenant shall
surrender to Lessor the Premises and all leasehold improvements made by either
party (except those improvement that Tenant is obligated to remove pursuant to
Section 8.5) in the same condition as on the Commencement Date, ordinary wear
and tear, and damage by fire or other causality not caused by Tenant, excepted.
19.2 If Tenant, with Lessors written consent, remains in possession of
the Premises after termination of this Lease, such possession by Tenant shall be
deemed to be a month-to-month tenancy, Tenant shall pay all Rent provided in
this Lease; and all provisions of this Lease shall apply to the month-to-month
tenancy, except those pertaining to any option to extend the term hereof.
19.3 If Tenant, without Lessor's written consent, remains in possession
of the Premises after the termination of this Lease, Tenant shall pay, as
liquidated damages, the greater of;
19.3.1 One hundred fifty percent of the Rent which Tenant was
obligated to pay for the month immediately preceding the end of the Term of this
Lease for each month or any part thereof of any such holdover; or
19.3.2 If Lessor has leased all or part of the Premises to other
tenants effective upon the termination of this Lease, the total rent which such
other tenants have agreed to pay for the Premises.
In the event of any unauthorized holding over, Tenant shall also indemnify
Lessor against all claims for damages by any other tenants to whom Lessor may
have leased all or any part of the Premises effective upon the termination of
this Lease.
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SECTION 20 -- COMPLIANCE WITH LAW
20.1 Tenant shall not use the Premises or the Project, or permit anything
to be done in or about the Premises or Project which will in any way conflict
with any law.
20.2 Tenant shall, at its sole cost and expense, comply with any judicial
decision, statute, ordinance, resolution, rule, administrative order, or other
requirement of any municipal, county, state, federal or other government agency
or authority having jurisdiction over the parties or the Premises, or both, in
effect either at the time of execution of the Lease or at any time during the
Term of the Lease (including without limitation, any regulation or order of a
quasi-official entity or body) which relates to or affects the condition, use or
occupancy of the Premise (collectively called "law" or "laws"). Without limiting
the foregoing, Tenant shall have the obligation, at Tenants' cost, to alter and
modify the Premises in compliance and conformity with all laws relating to the
condition, use or occupancy of the Premises during the Term, except that Tenant
shall not be obligated to comply with any law that requires structural
alterations or modifications to the Premises unless such alterations or
modifications are required as the result of Tenants particular and specific use
of the Premise at the time. Lessor shall in no event be required to make such
required structure alterations or modifications to the Premises. This section
does not apply with respect to Environmental Laws or the Americans with
Disabilities Act which are covered in Section 38 and 39.
20.3 The judgment of any court of competent jurisdiction or the admission
of Tenant in any action against Tenant, whether Lessor is a party thereto or
not, that Tenant has violated any law shall be conclusive of the fact as between
Lessor and Tenant.
20.4 Tenant's agreement to comply with all laws does not extend to making
structural alterations or doing remedial work required by any existing or future
statute, code or ordinance, or to correcting pre-existing conditions or defects
on the Premises or Building existing on the Commencement Date.
20.5 All of Lessor's work on the Premises and Building shall comply with
all applicable laws and regulations.
SECTION 21 -- RULES AND REGULATIONS
Lessor shall have the right to promulgate from time to time rules and
regulations and amendments thereto for the safety, care and cleanliness of the
Premises, the Project, or for the preservation of good order, so long as such
rules
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and regulations do not create a monetary cost to Tenant. Any such rules and
regulations now existing are attached to this Lease as Exhibit 3.
SECTION 22 -- ESTOPPEL CERTIFICATES
Tenant shall, from time to time, upon written request of Lessor, execute,
acknowledge and deliver to Lessor or its designee a written statement stating:
the date this Lease was executed and the date it expires; the date Tenant
entered into occupancy of the Premises; the amount of Rent and the date to which
Rent has been paid; that this Lease is in full force and effect and has not been
assigned, modified, supplemented or amended in any way (or specifying the date
and terms of any agreement so affecting his Lease); that this Lease represents
the entire agreement between the parties; that all obligations under this Lease
to be performed by the Lessor have been satisfied (or specifying in what respect
Lessor has failed to perform; that there are no existing defenses or offsets
which the Tenant has against the enforcement of this Lease by the Lessor (or
specifying any defenses or offsets claimed by Tenant); that no Rent has been
paid more than one month in advance, and that no security has been deposited
with Lessor (or, if so, the amount thereof). It is agreed that any such
statement delivered pursuant to this Section may be relied upon by a prospective
purchaser of Lessor's interest or a mortgagee of Lessor's interest or assignee
of any mortgage upon Lessor's interest in the Land or the Building. If Tenant
shall fail to respond within 10 days after receipt by Tenant of a written
request by Lessor as herein provided, Tenant shall be deemed to have given such
statement as above provided without modification; and shall be deemed to have
admitted about the following items: that this Lease is in full force and effect;
that there are no uncured defaults in Lessor's performance; that the security
deposit is as stated in this Lease; and that not more than one months Rent has
been paid in advance.
SECTION 23 -- SUBORDINATION
Tenant agrees that this Lease shall be subordinate to all present and
future mortgages, deeds of trust, ground leases and other encumbrances for
security affecting the Premises, the Building and/or the Land, and to all
renewals and modifications, supplements, replacements, consolidations and
extensions thereof provided such instruments executed subsequent to the
execution of this Lease provide that the mortgagee or Lessor shall not disturb
Tenant's occupancy for so long as Tenant complies with the terms of this Lease.
Lessor reserves the right to subordinate such mortgages, deeds of trust, ground
leases or encumbrances to his Lease. Tenant agrees to execute, acknowledge and
deliver any and all reasonable instruments requested by Lessor which are
necessary or proper to effect such subordination or to make this Lease prior to
the lien of any ground lease, mortgage, deed of trust, or other
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encumbrance for security; and if Tenant shall fail to do so within 10 days after
receipt of written demand therefor by Lessor, Tenant shall be deemed to have
appointed Lessor as tenant's attorney in fact, in Tenants name and place solely
to execute such reasonable documents as may be reasonably necessary to do so. If
the premises should be purchased or otherwise acquired by any person in
connection with any sale or other proceeding under the terms of such mortgage,
deed of trust, ground lease, or other encumbrance, Tenant shall, on request,
attorn to any such transferee.
SECTION 24 -- TENANT'S PROPERTY
Tenant's movable equipment, furniture furnishings, merchandise and other
movable property including trade fixtures (collectively called "Tenant's
Personal Property") installed or located at the Premises shall be and remain the
property of Tenant. On expiration of the Lease term, Tenant shall remove all
such property. Tenant shall repair or reimburse Lessor for the cost of repairing
any damage to the Premises or the Project resulting from the installation or
removal of Tenant's Personal Property of Tenant.
SECTION 25 -- REMOVAL OF PROPERTY
All Tenant's Personal Property remaining on the Premises or in the Project
at the expiration or earlier termination of this Lease shall conclusively be
deemed abandoned and may be removed by Lessor. Except as otherwise required by
law Lessor may store such property in any place selected by Lessor including but
not limited to a public warehouse at the expense and risk of Tenant, with the
right to sell any or all of such stored property at public or private sale, in
such manner and at such times and places as Lessor in its sole discretion may
deem proper, without notice to Tenant; and the proceeds of such sale shall be
applied first to the cost of such sale, second to payment of the costs of
removal and storage, and third to payment of any other sums which may then be
due from Tenant to Lessor under any of the terms of this Lease with the balance,
if any, to he paid to Tenant.
SECTION 26 -- NOTICES
Any notice under this Lease must be in writing and be personally
delivered, delivered by recognized overnight courier service or given by mail.
Any notice given by mail must be sent, postage prepaid, by certified or
registered mail, return receipt requested. All notices must be addressed to the
parties at the following addresses or at such other addresses as the parties may
from time to time direct in writing:
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Lessor:
Trident Investments, Inc.
1516 Second Ave., Suite 420
Seattle, WA 98101
Attn: Joseph W. Edmonds
Tenant:
Amazon.com, Inc.
(prior to occupancy
2250 First Ave. S.
of the Premises)
Seattle, WA 98134
Attn: Jeffrey P. Bezos
(after occupancy of
Amazon.com, Inc.
the Premises)
1516 Second Ave., Suite 400
Seattle, WA 98101
Attn: Jeffrey P. Bezos
Any notice will be deemed to have been given, if personally delivered,
when delivered, and if delivered by courier service, one (1) business day after
deposit with the courier service, and if mailed, two (2) business days after
deposit at any post office in the United States of America.
SECTION 27 -- LESSOR MAINTENANCE
27.1 Except as otherwise provided in this Lease, Lessor shall
maintain in reasonably good order and condition;
27.1.1 The foundation, bearing and exterior walls,
subflooring, beating, ventilating, air conditioning systems and roof of
the Building;
27.1.2 The electrical, plumbing, and sewage systems in the Building
lying outside the interior walls located along the exterior walls of the
Premises;
27.1.3
and
Window frames, gutters and downspouts on the Building;
27.1.4
Common areas.
27.2 In the event any repair or maintenance described in Section 27.1 is
occasioned by the act omission, or neglect of Tenant or any persons who may be
in or upon the Premises or the Project with the express or implied consent of
Tenant (including Tenant's officers, contractors, agents, invitees, customers
guests, employees), Tenant shall pay to Lessor the costs of such maintenance and
repair on demand by Lessor, or if the repair is not one which can reasonably be
cured within ten (10) business days, for the amount of time reasonably necessary
to complete such repairs provided such repairs are commenced within such period.
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27.3 Lessor shall not be in default under this Lease and shall not be
liable to Tenant for any loss or damage to person or property, or any
inconvenience or interference with Tenant's business caused by or resulting from
Lessor's failure to perform its obligations under Section 27.1 unless such
failure shall persist for ten (10) business days after written notice of the
need for repair or maintenance has been given by Tenant to Lessor.
27.4 There shall be no abatement of rent and Lessor shall not be liable
or responsible to Tenant for any loss or damage for inconvenience to, or
interference with Tenant's use of the Premises which may arise through repair,
maintenance or alteration of any part of the Project except to the extent of
Lessor's negligence.
SECTION 28 -- TENANT MAINTENANCE
28.1 Tenant's taking possession of the Premises shall constitute Tenant's
acknowledgment that the Premises are in good condition and repair. Tenant, at
its sole cost and expense, shall keep the Premises and every part thereof
(including but not limited to initial leasehold improvements made by Tenant and
Tenant Improvements) and Tenant's Personal Property in good condition and
repair, ordinary wear and tear, and damage from fire or other casualty not
caused by Tenant, excepted.
28.2 Tenant shall be liable for any damage to the Project caused by or
resulting from the act, omission or neglect of Tenant, its agents, employees,
contractors, invitees, customers or visitors.
28.3 Tenant is not liable for maintaining or repairing pre-existing
defects in the Premises or repairs necessitated by the Lessor's negligence,
intentional act, default, fire or other casualty, condemnation or ordinary wear
and tear.
SECTION 29 -- OPERATING COSTS
29.1 Definitions: "Base Rate" means $2.87 per square foot during the
initial term. If Tenant extends the term under Section 35, then during the
extension term, "Base Rate" is the actual Operating Costs per square foot
experienced during the final Lease Year of the initial term.
"Operating Cost Increases" means the amount by which annual Operating
Costs per square foot for the Building exceeds the Base Rate. The Building is
agreed to contain 50,179 square feet.
"Lease Year" means January 1 to December 31.
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"Tenant's Share of Operating Cost Increases" means the square foot area of
the Premises multiplied by the Operating Cost Increases.
"Operating Costs" means all of Lessor's costs, charges and expenses of
operating and maintaining the Building, including the Common Areas, including,
without limitation:
(1) all taxes and assessments (including, but not limited to, real and
personal property taxes and assessments, local improvement district assessments
and other special purpose assessments, and taxes on rent or gross receipts);
(2) water, sewer and all other utility charges (other than utilities
separately metered and paid directly by Tenant or other tenants)
(3)
janitorial and all other cleaning service;
(4)
refuse and trash removal;
(5)
refurbishing and repainting and carpet replacement;
(6)
air conditioning, heating, ventilation and elevator service;
(7)
pest control;
(8)
lighting systems, fire detection and security services;
(9)
landscape maintenance;
(10)
management (fees and/or personnel costs);
(11) parking lot, road, sidewalk and driveway patching, resurfacing
and maintenance;
(12)
snow and ice removal;
(13) amortization in accordance with generally accepted accounting
principals of capital improvements as Lessor may in the future install to comply
with governmental regulations and rules or undertaken in good faith with a
reasonable exception of reducing operating costs (the useful life of which shall
be a reasonable period of time as determined by Lessor);
(14) cost of legal services (except those incurred directly
relating to a particular occupant of the Building); and
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(15)
accounting services, labor, supplies, materials and tools.
"Operating Costs" specifically excludes the following:
(a) The cost of repairs of other work occasioned fire, windstorm or other
casualty or loss in excess of the insurance proceeds therefor (or, if greater,
the proceeds that would have been available had Lessor maintained the insurance
required to be maintained by Lessor pursuant to this Lease), or by the exercise
of eminent domain;
(b) Costs resulting from the correction of any latent construction defects
in all or any portion of the Building of Project, or any condition that is, as
of the date of this Lease, not in compliance with applicable laws, codes, rules
or regulations;
(c)
Rental concessions or lease buyouts;
(d) The costs of renovating or otherwise improving or decorating, painting
or redecorating space (exclusive of common areas) for any tenants or other
occupants of the Building, including, without limitation, Tenant;
(e) The amounts by which the cost of any work or service performed for and
electricity applied to any tenant or occupant (other than Tenant) exceeds the
greater of (i) the cost of the standard amount of level of such work, service or
electricity provided to tenants or occupants of the Building in general, or (ii)
the cost of the amount or level of work, service or electricity made available
by Lessor to Tenant under this Lease;
(f)
Premium rates paid on service or other contracts;
(g) Overhead or profit paid to Lessor, subsidiaries or affiliates of
Lessor, for services on or to the Building if and to the extent the cost
therefor exceeds competitive costs for such services in comparable office
buildings located within five (5) miles of the Building;
(h) Payments of principal, interest or other payments of any kind on any
deeds to secure debt, mortgages, ground or underlying leases, or other
hypothecations for security of all or any part of the Building by Lessor;
(i)
Rents payable in connection with any ground or underlying
lease of all or any portion of the Building;
(j)
Lessor's general overhead and any other expense not directly
related to the Building;
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(k) All items, services and/or goods for which Tenant or any other tenant,
occupant, person or other party is obligated to reimburse Lessor or to pay third
parties;
(l) Advertising and promotional expenses with respect to leasing
space in or selling the Building;
(m) Brokerage, legal and professional fees expended by Lessor in
connection with negotiating and entering into any leases and any related
instruments (including, without limitation, guaranties, surrender agreements,
leasing amendments and consents to assignment or subletting) with any tenant or
other occupant of any portion of the Building, and the enforcement of any such
instruments;
(n) Estate, inheritance, gift, franchise and income taxes of
Lessor;
(o) Wages, salaries and other compensation paid to employees of
the Lessor at the Building who are at or above the level of Building
manager;
(p) The costs and expenses of maintenance and operation of any
parking facility in or serving the Building;
(q) All items that would be capitalized under generally accepted
accounting principles as of the date hereof;
(r) The cost of defending against claims in regard to the existence or
release of hazardous substances or materials at the Building and costs of any
clean-up of any such hazardous substances or materials (except with respect to
those costs for which Tenant is otherwise responsible pursuant to the express
terms of this Lease);
(s) Costs and expenses incurred in connection with compliance with
or the contesting or settlement of any claimed violation of law or
requirements of law;
(t) Interest, penalties or damages incurred by Lessor for late payment of
taxes or assessments or under any agreement to which Lessor is a party by reason
of the breach or default of Lessor;
(u)
Expenses incurred in connection with relocating tenants in the
Building;
(v) All other items for which Tenant or any other tenant, occupant or
other party compensates Lessor, so that no duplication of payments by Tenant or
to Lessor shall occur; and
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(w) Charges for electricity used in connection with the Building which
shall be determined as set forth in paragraph 29.9 below.
29.2 Tenant's Obligation. Tenant shall pay Tenant's Share of
Operating Cost Increases during the term of this Lease, as the same may be
extended.
29.3 Monthly Payment. In the first day of each calendar month,
Tenant shall pay to Lessor one-twelfth (1/12) of Tenant's Share of
Operating Cost Increases.
29.4 Estimates of Operating Costs. Prior to the commencement of each
Lease Year or as soon thereafter as possible, Lessor shall furnish to Tenant a
written statement ("Operating Estimate") of Lessor's reasonable estimate of the
Operating Costs expected to be incurred during the Lease Year and showing
Lessor's estimate of Tenant's Share of Operating Cost Increases.
29.5 Late Estimates. Failure by Lessor to provide an Operating Estimate
shall not constitute a waiver of Tenant's obligations under this Section. If
Lessor shall not have furnished an Operating Estimate at the times contemplated
herein, then until the first day of the month after such Operating Estimate is
furnished to Tenant, Tenant shall pay to Lessor on the first day of each month
an amount equal to the monthly sum payable by Tenant to Lessor in respect of the
last month of the preceding Lease Year. In such event, promptly after such
Operating Estimate is furnished to Tenant (a) if there is a deficiency, Tenant
shall promptly pay the amount of such deficiency, or (b) if there has been an
overpayment, Lessor shall promptly refund such amount to Tenant. Notwithstanding
the foregoing, if Lessor does not deliver an Operating Estimate to Tenant prior
to the Commencement Date, Tenant's obligations under this Section 29 shall not
commence until the first day of the month following that in which Lessor
delivers to Tenant an Operating Estimate.
29.6 Revised Estimates. Lessor may at any time or from time to time
furnish to Tenant a revised Operating Estimate and, in such case, Tenant's Share
of Operating Cost Increases for the remainder of the Lease Year shall be based
upon such revised Operating Estimate.
29.7 Annual Operating Statement. Within ninety (90) days after the end of
each Lease Year, Lessor shall furnish to Tenant and "Annual Operating Statement"
showing the actual Operating Costs for the Lease Year. If the Annual Operating
Statement shows that the sum paid by Tenant under this Section exceeded Tenant's
Share of Operating Cost Increases owed for such Lease Year, Lessor shall
promptly refund such excess to Tenant. If the Annual Operating Statement shows
that the sums so paid by Tenant were less than Tenant's Share of Operating Cost
Increases owed for such Lease Year, Tenant shall promptly pay the amount of such
deficiency.
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29.8 If actual Operating Costs for a particular Lease Year exceed should
at any time during the initial Term of this Lease exceed $3.52 per square foot
then, for purposes of this Section, Operating Costs shall be deemed to be $3.52
per square foot.
29.9 The parties acknowledge that the Base Rate described above does not
include charges for electricity used at the Building. Tenant agrees to pay for
increases in the electricity used in connection with the Building in accordance
with the terms and conditions of this Section except that the Base Rate for such
calculation shall be $.48 per square foot and the provisions of paragraph 29.8
above shall not apply.
29.10 Tenant's Operating Expense Audit. Lessor must maintain books and
records for all Operating Costs, utilities, insurance, taxes and other charges
paid to Lessor by Tenant, in accordance with generally accepted accounting
principles. Lessor's accounting to Tenant for Operating Costs shall be certified
by Lessor as true and correct and shall be prepared in reasonable detail by
Lessor. The statements furnished to Tenant shall constitute a final
determination as between Lessor and Tenant unless Tenant, within 60 days after
they are furnished, notifies Lessor that it disputes their accuracy or their
appropriateness. Pending the resolution of such dispute, Tenant shall pay to
Lessor the uncontested portion. Tenant shall have the right, during reasonable
business hours and upon reasonable prior notice to Lessor, to examine and/or
audit Lessor's books and records with respect to Operating Costs paid or payable
by Tenant, and if such examination reveals that Lessor overstated Operating
Costs by 3% or more, the overpayment shall be returned to Tenant, and the costs
of such examination and/or audit shall be paid by Lessor. Lessor shall use best
efforts to facilitate Tenant's audit of Lessor's books and records.
SECTION 30 -- WAIVER OF SUBROGATION RIGHTS
Neither Lessor or Tenant shall be liable to the other or to any insurance
company (by way of subrogation or otherwise) insuring the other party for any
loss or damage to any building, structure or tangible personal property of the
other or of any third party occurring in or about the Premises or Building, even
though such loss or damage might have been occasioned by the negligence of such
party, its agents or employees, if such loss or damage would fall within the
scope of a fire and extended coverage (all risk) policy of insurance, whether or
not the party suffering the loss actually maintained such insurance. Each party
shall obtain from its respective insurer under each insurance policy it
maintains a waiver of all rights of subrogation which the insurer of one party
may have against the other party, and Lessor and Tenant shall each indemnify the
other against any loss or expense, including reasonable attorneys' fees,
resulting from the failure to obtain such a waiver.
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SECTION 31 -- ATTORNEYS' FEES
If either party commences an action against the other party arising out of
or in connection with this Lease, the prevailing party in any such action, at
trial or on appeal, shall be entitled to have and recover from the other party
reasonable attorney's fees and costs.
SECTION 32 -- WAIVER
32.1 No delay or omission in the exercise of any right or remedy of
Lessor or Tenant in connection with any default by Tenant or Lessor shall impair
such right or remedy or be construed as a waiver of any default. The receipt and
acceptance by Lessor of delinquent Rent shall not constitute a waiver of any
other default; but shall constitute only a waiver of timely payment for the
particular Rent payment involved.
32.2 No act or conduct of Lessor, including without limitation the
acceptance of the keys to the Premises shall constitute an acceptance of the
surrender of the Premises by Tenant before the expiration of the Term of the
Lease. Only notice from Lessor to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of the Lease.
32.3 Lessor's consent to, or approval of, any act by Tenant requiring
Lessor's consent or approval shall not be deemed to waive or render unnecessary
Lessor's consent to or approval of any subsequent act by Tenant.
SECTION 33 -- OPTION TO EXPAND
33.1 Tenant shall be entitled to expand the Premises to include the
entire second or third floor of the Building provided: (i) Tenant gives written
notice to Lessor of its intention to so expand by not later than June 15, 1997;
and (ii) such notice provides that such expansion shall not occur earlier than
six (6) months after the giving thereof or January 1, 1997, whichever occurs
later. Landlord shall be entitled to determine whether such expansion shall be
to the second or third floor of the Building and shall make that determination
within ninety (90) days after receipt of the foregoing notice from Tenant. Upon
the giving of such notice Tenant shall pay to Lessor a deposit equal to the
lasts months rent for such expanded premises, which deposit shall be held in
accordance with the provisions of paragraph 4.2 hereof. Lessor shall deliver the
expansion space to Tenant in substantially comparable condition to its condition
on the date Tenant exercises the expansion option, and clean the carpets and
touch up the paint prior to Tenant's occupancy of such expanded space The annual
rent for such expanded premises shall equal the rentable square footage thereof
multiplied by FOURTEEN and no/100 DOLLARS ($14.00), which sum shall
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be payable monthly in accordance with the provisions of Section 3 hereof. All
other terms and conditions, including the Expiration Date and Option to Extend,
shall remain unchanged. After the date of expansion "Premises" shall be deemed
to include the expansion space.
33.2 In the event that Tenant at any time leases the entire second or
third floor of the Building the parties agree that the option to expand which is
the subject of this Section 33 shall terminate as a result thereof.
SECTION 34 -- RIGHT OF FIRST REFUSAL
In the event that Lessor receives an offer, which Lessor is willing to
accept, from any third party for the lease of any portion of the Building,
excluding retail space on the first floor of the Building or the basement area
of the Building, at any time prior to the expiration or sooner termination of
this Lease, Lessor agrees to provide the terms and conditions of such offer to
Tenant in a written notice. Within five (5) business days after receipt of such
notice, Tenant shall notify Lessor, in writing, in the event that Tenant wishes
to lease that portion of the Building described in the notice given by Lessor
upon the terms and conditions set forth therein. In the event that Tenant fails
to respond to the notice given by Lessor within said five (5) day period, the
right of first refusal which is the subject of this Section shall terminate as
to such offer. In the event that Tenant gives Lessor notice of its election to
lease that portion of the Building described in the notice given by Lessor, the
parties agree to promptly enter into a lease agreement upon the terms and
conditions thereof.
SECTION 35 -- OPTION TO EXTEND
35.1 Tenant is given the option to extend the initial Term of this Lease
on all of the terms and conditions contained in this Lease except Base Rent for
an additional term of three (3) years ("Extended Terms") following expiration of
the initial Term of this Lease. The option shall be exercised by Tenant giving
written notice of exercise of the option ("Option Notice") to Lessor not more
than two hundred ten (210) days and not less than one hundred eighty (180) days
before the expiration of the initial Term of this Lease. Provided that Tenant is
not in default on the date of giving the Option Notice or on the date the
Extended Term is to commence, the Extended Term shall commence on the day
following the expiration of the initial Term. The words "Term" or "Lease Term"
shall mean the aggregate of the Initial Term and any Extended Term with respect
to which Tenant has effectively exercised the foregoing option(s).
35.2 The Base Rent for the Extended Term shall be determined as
follows:
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35.2.1 The Base Rent for the Extended Term shall be the greater of
the annual Base Rent in effect for the initial Term or the Market Rent. The
Market Rent shall be the fair market rent paid under a comparable lease for
comparable space by a tenant in a building of comparable quality in an area
within a radius of two (2) miles of Premises. Tenant improvements shall not be
taken into account in determining Market Rent. Market Rent shall be annual rent
determined on a per square foot of Rentable Area in the Premises basis, as
follows:
(a)
The parties shall have thirty (30) days after Lessor receives the
Option Notice in which to agree on Market Rent.
(b)
If the parties are unable to agree on Market Rent within that
period, then within ten (10) days after the expiration of that period, each
party, at its cost and by giving notice to the other party, shall appoint an
unbiased real estate appraiser with at lease five years' full-time commercial
appraisal experience in the Seattle area to appraise and set the Market Rent. If
a party does not appoint an appraiser within ten (10) days after the other party
has given notice of the name of its appraisers, the single appraiser appointed
shall be the sole appraiser and shall set the Market Rent. If the two appraisers
are appointed by the parties as stated in this Section, they shall meet promptly
and attempt to set the Market Rent. If they are unable to agree within thirty
(30) days after the second appraiser has been appointed, they shall attempt to
select a third appraiser meeting the qualifications stated in this Section
within ten (10) days after the last day the two appraisers are given to set the
Market Rent. If they are unable to agree on the third appraiser, either of the
parties to this Lease, by giving ten (10) days notice to the other party, can
apply to the presiding judge of the Superior Court for King County for the
selection of a third appraiser who meets the qualification stated in this
Section. Each of the parties shall bear one half of the cost of appointing the
third appraiser and of the paying the third appraiser's fee. The third
appraiser, however selected, shall be a person who has not previously acted in
any substantial capacity for either party.
(c)
Within thirty (30) days after the selection of the third appraiser,
a majority of the appraisers may, by agreement, determine the Market Rent. If a
majority of the appraisers are unable to determine the Market Rent within the
stipulated period of time, the market rents set by the three appraisers shall be
added together, their total divided by three; the resulting quotient shall be
the Market Rent, provided that if the low market rent and/or the high market
rent are/is more than ten percent (10%) lower and/or higher than the middle
market rent then the low and/or high market rent shall be disregarded, the
remaining two market rents shall be added together and their total divided by
two; the resulting quotient shall be the Market Rent. If both the low market
rent and the high market rent are disregarded, as stated
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in this Section, the middle market rent shall be the Market Rent. After the
Market Rent has been set, the appraisers shall immediately notify the parties.
(d)
In setting the Market Rent, the appraiser or appraisers shall not
consider the highest and best use for the Premises and shall restrict their
analysis to the use of the Premises allowed under in this Lease.
SECTION 36 -- PARKING
36.1 During the term of this Lease and prior to the expiration or sooner
termination hereof, Lessor agrees to make available to Tenant, at the same rate
paid by other monthly parkers, the use of one parking space for each 1,200
square feet of rentable space leased by Tenant in the Building in the parking
garage located next to the Building. The parties understand that Lessor does not
own the above parking garage and Tenant agrees to pay all charges assessed by
the owner of such parking garage for the use of such parking spaces, provided
the charges are at the same rate paid by other monthly parkers. The use of all
such parking spaces by Tenant shall cease upon the expiration or sooner
termination of the Lease.
36.2 In the event that Tenant leases the second floor of the Building
Lessor shall lease to Tenant during the existence of such second floor lease the
parking lot located adjacent to the Building, which parking lot is legally
described as follows:
Lot 4, Block 23, Addition to the Town of Seattle, as laid out by
A.A. Denny (commonly known as A.A. Denny's 3rd Addition to the City
of Seattle, according to the plat thereof recorded in Volume 1 of
Plats, page 33, in King County, Washington.
The amount of rent which Tenant shall pay for such parking lot shall be fair
market rent for the lot as-a-whole (i.e.. not a per parking spot rate)
determined in accordance with the provisions of paragraph 35.2 above, which rent
shall be paid in advance on the first day of each month and the terms and
conditions of this Lease shall apply to the lease of such parking lot. Lessor
shall not be required to provide parking pursuant to paragraph 36.1 above in
connection with Tenant's occupancy on the second floor.
SECTION 37 -- OPTION TO TERMINATE
Tenant shall have the option of terminating this Lease provided (i) Tenant
gives written notice to Lessor of its intention to terminate this Lease by not
later than fifteen (15) months after the Start Date (defined below); (ii) such
termination shall occur no sooner than eighteen (18) months after the Start
Date; and (iii) Tenant pays to Lessor at the time of giving such notice a sum
equal to all unamortized commissions paid by
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Lessor in connection with this Lease, all unauthorized expenses for tenant
improvements made by Lessor and a sum equal to the rent which would have been
payable hereunder for a period of one (1) month after the date of termination.
Lessor shall deliver a statement of such expenses to Tenant with ten (10) days
of Tenant's request therefore. In the event that Tenant has expanded to the
third floor of the Building prior to the termination of the Lease as provided
herein, the parties agree that upon termination as provided in this Section 37
Tenant shall pay to Lessor, in addition to the sums described above, a sum equal
the rent which would have been payable for such third floor for two months.
Start Date means the Commencement Date provided that if Tenant takes occupancy
of the entire second or third floor, Start Date means the date that Tenant takes
occupancy of all of either such floor.
SECTION 38 -- AMERICANS WITH DISABILITIES ACT
Lessor warrants that all portions of the Building and the Project comply
with the Americans with Disabilities Act (the "ADA"). Lessor shall defend,
indemnify and hold Tenant harmless from and against any and all claims,
liability, costs or expense arising out of any violation of the Americans with
Disabilities Act now or hereafter alleged with regard to the Building or the
Project.
SECTION 39 -- ENVIRONMENTAL PROVISIONS
39.1 "Environmental Laws" means any and all state, federal, and local
statutes, regulations and ordinances relating to the protection of human health
and the environment.
39.2 "Hazardous Material" means any hazardous or toxic substance,
material or waste, including, but not limited to, those substances, materials
and wastes listed in the United States Department of Transportation of Hazardous
Materials Table (49 C.F.R. 172.101) or by the United States Environmental
Protection Agency as hazardous substances (40 C.F.R. Part 302 and amendments
thereto), petroleum products and their derivatives, and such other substances,
materials and wastes as become regulated or subject to cleanup authority under
any Environmental Laws.
39.3 Except with respect to releases of Hazardous Materials caused by
Tenant, Lessor shall undertake any and all preventive, investigatory, or
remedial actions (including emergency response, removal, containment, and other
remedial actions) that are either: (a) required by an applicable Environmental
Laws or governmental authorities; or (b) necessary to prevent or minimize
property damage, personal injury, or damage to the environment, or the threat of
any such damage or injury, by releases of or exposure to Hazardous Material in
connection with the
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Building or Premises or the operations of Lessor in the Building. Landlord
represents and warrants that asbestos is not present in the Premises.
39.4 Lessor agrees to defend (with counsel approved by Tenant), fully
indemnify, and hold entirely free and harmless Tenant from and against all
claims, judgments, damages, penalties, fines, costs, liabilities, or losses
(including, without limitations, sums paid in settlement of claims, attorneys'
fees, consultant fees, and expert fees) which arise during or after the term of
the Lease and which are imposed on, paid by, or asserted against Tenant by
reason or on account of, or in connection with, or arising out of the presence
or suspected presence of Hazardous Material in the structures, soil, ground
water, or soil vapor on or about the Building or Premises, or the migration of
Hazardous Material off of or onto the Land, or the violation of any
Environmental Law, except to the extent that the Hazardous Material is present
or the violation occurred as a result of Tenant's activities in the Building.
39.5 Tenant agrees to defend (with counsel approved by Lessor), fully
indemnify, and hold entirely free and harmless Lessor from and against all
claims, judgments, damages, penalties, fines, costs, liabilities, or losses
(including, without imitation, sums paid in settlement of claims, attorneys'
fees, consultant fees, and expert fees) which arise during or after the term of
the Lease and which are imposed on, paid by or asserted against Lessor by reason
or on account of, or in connection with, or arising out of the presence or
suspected presence of Hazardous Material in the structures, soil, ground water,
or soil vapor on or about the Building or Premises or the violation of any
Environmental Law, to the extent that the Hazardous Material is present or the
violation occurred as a result of Tenant's activities in the Building or
Premises.
39.6 Section 39.1 through 39.6 shall survive the expiration or earlier
termination of this Lease.
SECTION 40 -- LESSOR REPRESENTATION AND WARRANTIES
Lessor represents and warrants to Tenant as follows: (i) Lessor has full
power, authority and legal right to execute, deliver, perform and observe the
provisions of this Lease; (ii) Lessor's execution, delivery, performance and
observance of the provisions of this Lease will not result in breach or
violation of any (A) governmental law, rule or regulation, (B) any provision of
Lessor's organizational documents, (C) any court order, judgment or decree, or
(D) any material agreement or instrument to which Lessor or any entity or person
related to Lessor is a party; and (iii) no additional consent, approval or
authorization is required for Lessor to enter into, deliver or perform its
obligations under this Lease.
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SECTION 41 -- LESSOR DEFAULT
Lessor shall be in default under this Lease if Lessor fails to perform or
observe any provision of this Lease by it to be performed or observed if the
failure is not cured within five (5) days after notice has been given by Tenant
to Lessor. If the default cannot reasonably be cured within the five (5) day
period, Lessor shall not be in default if Lessor commences to cure the default
within the five (5) day period and diligently and in good faith continues to
cure the default within a reasonable period of time. In the event of a default
by Lessor under this Lease, Tenant may (i) cure Lessor's default and by
independent action recover from Lessor the cost of such cure or (ii) terminate
this Lease, in which case this Lease shall be of no further force or effect and
neither party shall have any further obligation to the other.
SECTION 42 -- MISCELLANEOUS PROVISIONS
42.1 Time of Essence.
this Lease.
Time is of the essence of each provision of
42.2 Authority. Each party represents and warrants to the other that it
has authority to enter into this Lease and that its execution and delivery of
this Lease has been duly authorized. Each individual executing this Lease on
behalf of each party represents and warrants that he/she is duly authorized to
execute and deliver this Lease on behalf of said party.
42.3 Commissions. Lessor agrees to pay a commission of five percent (5%)
of the gross rental payments described in Section 3 to Kidder Mathews & Segner,
Inc., and a commission of two and one half percent (2.5%) of the gross rental
payments described in Section 3 to Colliers Macaulay Nicolls International. One
half (1/2) of these commissions shalt be paid upon the mutual execution of this
Lease and payment to Lessor by Tenant of the deposits described in Section 4,
and the other one half (1/2) of such commissions shall be paid at such time as
Tenant takes possession of the Premises. In the event that Tenant expands to
other premises in the Building as provided in this Lease, Lessor agrees, at the
time of such expansion and after payment to Lessor of any deposit required in
connection therewith, to pay a commission of two and one half percent (2.5%) of
the gross rental payments payable in connection with such expansion to Kidder
Mathews & Segner, Inc., and a commission of two and one half percent (2.5%) of
the gross rental payments payable in connection with such expansion to Colliers
Macaulay Nicolls International.
42.4 Exhibits. All exhibits referred to are attached to this Lease
and incorporated by reference.
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42.5 Interpretation and Construction. This Lease shall be governed by and
construed and interpreted in accordance with the laws of the State of
Washington.
42.6 Integrated Agreement and Modifications. This Lease contains all
covenants and agreements between Lessor and Tenant relating in any manner to the
rent, use and occupancy of the Premises, Tenant's use of the Building, and all
other matters set forth in this Lease. No prior agreements or understanding
pertaining to the same shall be valid or of any force or effect; and the
covenants and agreements of this Lease shall not be altered, modified or added
to except in writing signed by Lessor and Tenant.
42.7 Use of Definitions. The definitions contained in this Lease
shall be used to interpret this Lease.
42.8 Captions. The captions of this Lease shall have no effect on
its interpretation.
42.9 Singular and Plural. When required by the context of this
Lease, the singular shall include the plural.
42.10 Joint and Several Obligations. "Party" shall mean Lessor or
Tenant; and if more than one person or entity is Lessor or Tenant, the
obligations imposed on that party shall be joint and several.
42.11 Severability. The unenforceability, invalidity, or illegality of any
provision of this Lease shall not render any other provisions unenforceable,
invalid, or illegal.
42.12 Recordation. This Lease shall not be recorded, except that, at the
request of either party, the parties shall execute a memorandum of this Lease in
recordable form.
42.13 Transfer and Assignment of Premises by Lessor. Lessor shall have the
right to transfer and assign, in whole or in part, all of its rights and
obligations hereunder and in the Premises, the Building, and/or the Land. In the
event of any such transfer or assignment, other than a transfer for security
purposes only, the transferor shall be automatically relieved of any and all
obligations and liabilities on the part of Lessor accruing from and after the
effective date of the transfer and Tenant agrees to attorn to the transferee. So
long as there is no default by Tenant hereunder, this Lease shall remain in full
force and effect for the term hereof.
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42.14 Name. Tenant shall not use the name of the Building for any purpose
other than as an address of the business to be conducted by the Tenant on the
Premises.
42.15 Cumulative Remedies. All rights and remedies of Lessor or
Tenant under this Lease shall be cumulative and shall not exclude any
rights or remedies otherwise available.
TRIDENT INVESTMENTS, INC.
By: Bruce D. Berreth
---------------------------------Bruce D. Berreth, Authorized Agent
AMAZON.COM, INC.
By: Jeffrey P. Bezos
---------------------------------Jeffrey P. Bezos
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Bruce D. Berreth is the
person who appeared before me, and said person acknowledged that he signed this
instrument, on oath stated that he is authorized to execute the instrument and
acknowledged it as the authorized agent of Trident Investments, Inc. to be the
free and voluntary act of such party for the uses and purposes mentioned in this
instrument.
Dated this 16th day of July, 1996
[ILLEGIBLE]
- ---------------------------Notary Public in and for the
State of Washington,
residing at Seattle
My appointment expires 7/10/98
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STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Jeffrey P. Bezos is the
person who appeared before me, and said person acknowledged that he signed this
instrument, on oath stated that (s)he is authorized to execute the instrument
and acknowledged it as the President of Amazon.com, Inc. to be the free and
voluntary act of such party for the uses and purposes mentioned in this
instrument.
Dated this 15th day of July, 1996
[ILLEGIBLE]
- ---------------------------Notary Public in and for the
State of Washington,
residing at Seattle
My appointment expires 4/8/98
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EXHIBIT "1"
LEGAL DESCRIPTION
Lots 5 and 8, Block 23, Addition to the Town of Seattle, as laid out by
A.A. Denny (commonly known as A.A. Denny's 3rd Addition to the City of Seattle,)
according to the plat thereof recorded in Volume 1 of Plats, page 33, in King
County, Washington;
EXCEPT the southwesterly 12 feet thereof condemned for widening 2nd
Avenue in King County Superior Court Cause Number 39151 under Ordinance Number
9311 of the City of Seattle;
Situate in the County of King, State of Washington.
40
AMENDMENT OF
LEASE AGREEMENT
THIS AMENDMENT OF LEASE AGREEMENT is made and executed as of this 12th
day of December, 1996, between Trident Investments, Inc., a Washington
corporation, ("Lessor"), and Amazon.com, Inc., a Delaware corporation,
("Tenant").
RECITALS
(A) Lessor and Tenant entered into that certain Lease Agreement (the
"Lease") dated July 1, 1996, in connection with those certain premises (the
"Premises") commonly known as suite 400 of the building currently known as the
Columbia Building (the "Building"), which Building is located at 1516 Second
Avenue, Seattle, Washington, on land which is described as follows:
Lots 5 and 8, Block 23, Addition to the Town of Seattle, as
laid out by A.A. Denny (commonly known as A.A. Denny's 3rd
Addition to the City of Seattle,) according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King
County, Washington;
EXCEPT the southwesterly 12 feet thereof condemned for
widening 2nd Avenue in King County Superior Court Cause Number
39151 under Ordinance Number 9311 of the City of
Seattle;
Situate in the County of King, State of Washington;
(B) Tenant has exercised its option to Expand as described in Section
33 of the Lease and has also requested additional space in the Building,
(C) The parties wish to amend the Lease to provide for such additional
space on the terms and conditions set forth herein; and
(D) The parties wish to reduce their agreement herein to writing.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties do hereby agree as follows:
(1) The parties acknowledge that pursuant to Section 33 of the Lease
Tenant, by letter dated September 11, 1996, elected to expand the Premises to
the second or third floor of the Building and that Lessor, pursuant to said
Section has notified Tenant that the foregoing expansion of the Premises shall
be on the third floor of the Building. The parties agree that possession of the
third floor of the Building shall occur on April 1, 1997, and that Tenant shall
pay to Lessor a deposit of first and last months' rent in the amount of
$27,566.00 as provided in said Section 33 upon the execution hereof. Tenant
shall be entitled to enter the third floor from and after March 17, 1997, to
install phone wire, computer cabling, furniture and other Tenant improvements
approved by Lessor pursuant to the Lease.
AMENDMENT OF
LEASE AGREEMENT
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(2) Tenant has requested, in addition to the expansion of the Premises
to the third floor of the Building as provided in Section 33 of the Lease, that
Tenant be allowed to further expand the Premises to the entire second floor of
the Building. Lessor agrees to lease to Tenant, and Tenant agrees to lease from
Lessor, the entire second floor of the Building on the same terms and conditions
upon which Tenant has expanded the Premises to the third floor of the Building.
The parties agree that possession of the second floor of the Building shall be
given to Tenant on January 1, 1997, and that Tenant shall pay to Lessor, upon
the execution hereof, a deposit of first and last months' rent in the amount of
$27,554.34 which shall be applied in the same manner in which the deposit for
the third floor is being applied as provided in said Section 33. Tenant shall be
entitled to enter the second floor from and after December 16, 1996, to install
phone wire, computer cabling, furniture and other Tenant improvements approved
by Lessor pursuant to the Lease.
(3) During the term of the Lease Lessor agrees to rent, on terms
acceptable to Lessor, the parking lot located next to the Building to Diamond
Parking Inc., which parking lot is legally described as follows:
Lot 4, Block 23, Addition to the Town of Seattle, as laid out
by A.A. Denny (commonly known as A.A. Denny's 3rd Addition to
the City of Seattle,) according to the plat thereof recorded
in Volume 1 of Plats, page 33, in King County, Washington.
So long as Lessor rents the parking lot described above to Diamond Parking Inc.
the parties agree that Lessor shall have thereby fulfilled all of its
obligations pursuant to the Lease to provide parking in connection with Tenant's
occupancy of the second floor of the Building. Tenant shall make its own
arrangements with Diamond Parking Inc. for parking.
(4) The parties acknowledge that Tenant shall have no further option to
expand the Premises as provided in Section 33 of the Lease.
(5) As a result of the foregoing expansion the parties acknowledge and
agree that the term "Premises" as used in the Lease and this Amendment shall
refer to the second and fourth floors after January 1, 1997, and to the second,
third and fourth floors of the Building after April 1, 1997.
(6) The Base Rent as described in Section 3.1 of the Lease shall
increase as follows:
(a)
For the period of January 1, 1997, through March 31, 1997,
inclusive, from $13,743.17 per month to $27,520.34 per month;
(b)
For the period of April 1, 1997, through July 31, 1997,
inclusive, from $27,520.34 per month to $41,303.34 per month;
and
(c)
For the period of August 1, 1997, through July 31, 1999,
inclusive, from $41,303.34 to $42,096.21.
(7) Lessor shall, prior to Tenant's occupancy of the second and third
floors of the Building respectively, make the following improvements and no
other:
AMENDMENT OF
LEASE AGREEMENT
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42
(a)
Make the improvements described in Section 33.1 of the Lease
to the third floor of the Building; and
(b)
Install a simplex lock system on doors in the interior
stairways of the Building giving access to the second, third
and fourth floors of the Building provided the cost thereof
does not exceed $1,500.00, and Tenant agrees to pay any cost
in excess of such amount for such lock system.
No improvements shall be made to the second floor of the Building and, with the
exception of the foregoing improvements, Tenant shall accept the second the
third floors in "as is" condition.
(8) The parties acknowledge that the Expiration Date of the Term of the
Lease, as provided in Section 2 thereof, is July 31, 1999, and shall remain
unchanged subject to Tenant's right to extend in Section 35 of the Lease.
(9) Section 37 of the Lease is hereby amended, in its entirety, to
provide as follows:
SECTION 37 - OPTION TO TERMINATE
Tenant shall have the option of terminating the Lease provided
(i) Tenant gives written notice to Lessor of its intention to
terminate this Lease by not later than fifteen (15) months
after April 1, 1997; (ii) such termination shall occur no
sooner than eighteen (18) months after April 1, 1997; and
(iii) Tenant pays to Lessor at the time of giving such notice
a sum equal to all unamortized commissions paid by Lessor in
connection with the Lease, including those commissions paid
pursuant to this Amendment, all unamortized expenses for
tenant improvements made by Lessor, including those expenses
paid in connection with the tenant improvements described in
this Amendment, and a sum equal to the rent which would have
been payable pursuant to the Lease in connection with the
fourth floor of the Building for a period of one (1) month
after the date of termination, and the rent which would have
been payable pursuant to the Lease in connection with the
second and third floors of the Building for a period of two
(2) months after the date of termination. Lessor shall inform
Tenant of the amount of the sum in item (iii) of the preceding
sentence within ten (10) days after written inquiry from the
Tenant.
(10) The amount which Tenant shall pay for operating Expenses as
provided in Section 29 of the Lease during its occupancy of the second and third
floors of the Building shall be the same amount per square foot that Tenant pays
pursuant to said Section 29 in connection with its occupancy of the fourth floor
of the Building.
(11) Lessor and Tenant tentatively agree that the rentable area of the
second floor of the Building is 11,809 square feet and that the rentable area of
the third floor of the Building in 11,814 square feet. If during the first three
(3) months after Tenant takes occupancy of the second and third floors of the
Building, respectively, Tenant gives notice to Lessor, Lessor and Tenant shall
agree on a licensed architect to remeasure the second or third floor of the
Building, as the case may than be, at
AMENDMENT OF
LEASE AGREEMENT
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43
Tenant's expense. If the architect determines that the rentable square footage
of either the second or the third floor is other than as set forth in this
paragraph above, Base Rent shall be adjusted proportionately and Lessor shall
refund, or Tenant shall pay, the difference as the case may be.
(12) In the event, and only in the event, that Tenant executes this
Amendment, pays the deposits described herein and occupies the second and third
floors of the Building as provided above, Lessor agrees to pay a commission
equal to 5% of the total payments of rent agreed to by Tenant in connection with
the second and third floors of the Building, which commission shall be shared
equally by Colliers International and Kidder Mathews and Segner, Inc., the
Brokers involved in the transaction evidenced hereby. That portion of the
foregoing commission attributable to rents earned in connection with Tenant's
occupancy of each floor shall be paid only at such time as Tenant actually takes
possession of each floor respectively.
(13) All other terms and conditions of the Lease shall remain
unchanged.
TRIDENT INVESTMENTS, INC.
by: Joseph W. Edmonds
--------------------------------------Joseph W. Edmonds, President
AMAZON.COM, INC.
by: Jeffrey P. Bezos
--------------------------------------Jeffrey P. Bezos, President
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Joseph W.
Edmonds signed this instrument, on oath stated that he is authorized to execute
the instrument acknowledged it as the President of Trident Investments, Inc. to
be the free and voluntary act of such party for the uses and purposes mentioned
in this instrument.
Dated this 31st day of December, 1996
__[illegible]________________________
Notary Public in and for the
State of Washington,
residing at King County
My appointment expires 8/14/00
AMENDMENT OF
LEASE AGREEMENT
Page 4 of 5
44
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Jeffrey P.
Bezos signed this instrument, on oath stated that he is authorized to execute
the instrument acknowledged it as the President of Amazon.com, Inc. to be the
free and voluntary act of such party for the uses and purposes mentioned in this
instrument.
Dated this 30th day of December, 1996
Sandy Plagemann
---------------------------Notary Public in and for the
State of Washington,
residing at Bellevue
My appointment expires 3/9/97
AMENDMENT OF
LEASE AGREEMENT
Page 5 of 5
45
SECOND
AMENDMENT OF
LEASE AGREEMENT
THIS SECOND AMENDMENT OF LEASE AGREEMENT ("Second Amendment") is made
and executed as of this 9th day of January, 1997, between Trident Investments,
Inc., a Washington corporation, ("Lessor"), and Amazon.com, Inc., a Delaware
corporation, ("Tenant").
RECITALS
(A) Lessor and Tenant entered into that certain Lease
"Lease") dated July 1, 1996, in connection with those
known as suite 400 of the building currently known as
"Building"), which Building is located at 1516 Second
Washington, on land which is described as follows:
Agreement (the
certain premises commonly
the Columbia Building (the
Avenue, Seattle,
Lots 5 and 8, Block 23, Addition to the Town of Seattle, as
laid out by A.A. Denny (commonly known as A.A. Denny's 3rd
Addition to the City of Seattle,) according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King
County, Washington;
EXCEPT the southwesterly 12 feet thereof condemned for
widening 2nd Avenue in King County Superior Court Cause Number
39151 under Ordinance Number 9311 of the City of
Seattle;
Situate in the County of King, State of Washington;
(B) Lessor and Tenant entered into that certain Amendment of Lease
Agreement (the "Amendment") dated December 12, 1996, by which the terms of the
Lease were amended as provided therein;
(C) The parties wish to again amend the Lease, as amended by the
Amendment, to provide for additional space in the Building on the terms and
conditions set forth herein; and
(D) The parties wish to reduce their agreement herein to writing.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties do hereby agree as follows:
(1) Tenant has requested, in addition to the expansion of the
"Premises" as that term is defined in the Amendment, that Tenant be allowed to
further expand the Premises to include those areas of the Building (the
"Additional Space") outlined in red on the attached Exhibit 1, which is by this
reference made a part hereof, as well as the entire mezzanine level of the
Building. Lessor agrees to lease to Tenant, and Tenant agrees to lease from
Lessor, the Additional Space on the same terms and conditions set forth in the
Lease except as provided herein. The parties agree that possession of the
Additional Space shall be given to Tenant on April 1, 1997, and that Tenant
shall pay to Lessor, upon the execution hereof, a deposit of first and last
month's rent in the amount of $10,151.66 which shall be
SECOND AMENDMENT OF
LEASE AGREEMENT
Page 1 of 5
46
applied in the same manner in which the deposit for the third floor of the
Building is being applied as provided in the Amendment. Tenant shall be entitled
to enter that portion of the Additional Space outlined in red on the attached
Exhibit 1 from and after March 1, 1997, to install phone wire, computer cabling,
furniture and other Tenant improvements approved by Lessor pursuant to the
Lease.
(2) Lessor shall have no obligation to provide to Tenant any additional
parking in connection with the lease to Tenant of the Additional Space.
(3) As a result of the foregoing expansion the parties acknowledge and
agree that the term "Premises" as used in the Lease, the Amendment, and this
amendment shall refer to the second and fourth floors after January 1, 1997, and
to the second, third and fourth floors of the Building, as well as the
Additional Space, on and after April 1, 1997.
(4) The Base Rent as described in Section 3.1 of the Lease shall be in
the following amounts:
(a)
For the period of January 1, 1997, through March 31, 1997,
inclusive, the Base Rent shall be $27,520.34 per month;
(b)
For the period of April 1, 1997, through July 31, 1997,
inclusive, the Base Rent shall be $46,379.17 per month; and
(c)
For the period of August 1, 1997, through July 31, 1999,
inclusive, the Base Rent shall be $47,172.04.
(5) Lessor shall, prior to March 1, 1997, make the following
improvements to the Additional Space, and no others, which improvements shall
all be to Building standards and comparable to improvements in other parts of
the Premises:
(a)
Lessor shall make no improvements to the mezzanine area of the
Building;
(b)
Lessor shall repair the floor tiles, or install carpet, at
Tenant's option, in the red lined area labeled "A" on the
attached Exhibit 1 (currently the frame shop);
(c)
Lessor shall make the following improvements to the area of
the Building outlined in red on the attached Exhibit 1 which
is identified as "B" (located behind the tailor shop):
(i)
Complete the installation of drywall on the existing
interior walls of the area and paint such walls;
(ii)
Install an HVAC unit in the area;
(iii)
Provide standard electrical power (eight duplex
receptacles) and lights (eight 2 X 4 fluorescent
lights) to the area;
(iv)
Install carpet or vinyl, at Tenant's option, on the
floor; and
SECOND AMENDMENT OF
LEASE AGREEMENT
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47
(v)
Install a drop ceiling, or maintain a high ceiling,
at Tenant's option;
(d)
Lessor shall remove the existing hallway gate and install it
as shown on Exhibit 1 and shall modify all door locks as
necessary so that no party has access to the Additional Space
other than Lessor, Tenant and the tenant in Suite 103 who will
need access through the hallways and the gate to the
restrooms; and
(e)
Lessor shall install a simplex lock system on the two doors
from the mezzanine area of the Additional Space to the
interior stairways of the Building giving access to the
second, third and fourth floors of the Building.
With the exception of the foregoing improvements, Tenant shall accept the areas
of the Additional Space in the condition they are in (i.e. "as is") as of the
date of this Second Amendment.
(6) The parties acknowledge that the Expiration Date of the Term of the
Lease, as provided in Section 2 thereof, is July 31, 1999, and shall remain
unchanged subject to Tenant's right to extend in Section 35 of the Lease.
(7) In the event that Tenant elects to terminate the Lease pursuant to
Section 37 thereof as amended pursuant to the Amendment of the Lease, the
parties agree that no rent shall be due as a result thereof for the Additional
Space for any period after the date of termination of the Lease, provided,
Tenant shall remain obligated to pay all unamortized commissions paid by Lessor
in connection with the Additional Space as well as all unamortized expenses for
tenant improvements made by Lessor to the Additional Space.
(8) The amount which Tenant shall pay for operating Expenses as
provided in Section 29 of the Lease during its occupancy of the Additional Space
shall be the same amount per square foot that Tenant pays pursuant to said
Section 29 in connection with its occupancy of the fourth floor of the Building.
(9) Lessor and Tenant tentatively agree that the rentable area of the
Additional Space is 6,091 square feet. If during the first three (3) months
after Tenant takes occupancy of the Additional Space Tenant gives notice to
Lessor, Lessor and Tenant shall agree on a licensed architect to remeasure the
Additional Space at Tenant's expense. If the architect determines that the
rentable square footage of the Additional Space is other than as set forth in
this paragraph above, Base Rent shall be adjusted proportionately and Lessor
shall refund, or Tenant shall pay, the difference as the case may be. The
parties acknowledge and agree that the Base Rent for the Additional Space is
$10.00 per square foot per annum.
(10) In the event, and only in the event, that Tenant executes this
Second Amendment and pays the deposit described herein, as provided above,
Lessor agrees to pay a commission equal to 2.5% of the total payments of rent
agreed to by Tenant in connection with the Additional Space, which commission
shall be paid to Kidder Mathews and Segner, Inc., the Broker involved in the
transaction evidenced hereby. The foregoing commission shall be paid only upon
the mutual execution of this Second Amendment and the receipt by Lessor of the
deposit described in paragraph (1) above. Lessor agrees to indemnify Tenant
against claims for any commission that may be due to Colliers International with
respect to this Second Amendment.
SECOND AMENDMENT OF
LEASE AGREEMENT
Page 3 of 5
48
(11) Tenant shall have a right to use the raised area of the first
floor lobby for the establishment of a reception area for reception and
receiving purposes.
(12) All other terms and conditions of the Lease shall remain
unchanged.
TRIDENT INVESTMENTS, INC.
by: Joseph W. Edmonds
--------------------------------------Joseph W. Edmonds, President
AMAZON.COM, INC.
by: Joy Covey
--------------------------------------Joy Covey, CFO
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Joseph W.
Edmonds signed this instrument, on oath stated that he is authorized to execute
the instrument acknowledged it as the President of Trident Investments, Inc. to
be the free and voluntary act of such party for the uses and purposes mentioned
in this instrument.
Dated this _____ day of January, 1997.
_____[illegible]_____________________
Notary Public in and for the
State of Washington,
residing at Redmond, WA
My appointment expires 8/14/00
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Joy Covey
signed this instrument, on oath stated that she is authorized to execute the
instrument acknowledged it as the Chief Financial Officer of Amazon.com, Inc. to
be the free and voluntary act of such party for the uses and purposes mentioned
in this instrument.
Dated this 17th day of January, 1997.
Sandy Plagemann
--------------------------Notary Public in and for the
State of Washington,
SECOND AMENDMENT OF
LEASE AGREEMENT
Page 4 of 5
49
residing at Bellevue
My appointment expires 3/9/97
SECOND AMENDMENT OF
LEASE AGREEMENT
Page 5 of 5
50
THIRD
AMENDMENT OF
LEASE AGREEMENT
THIS THIRD AMENDMENT OF LEASE AGREEMENT ("Third Amendment") is made and
executed as of this 27th day of February, 1997, between Trident Investments,
Inc., a Washington corporation, ("Lessor"), and Amazon.com, Inc., a Delaware
corporation, ("Tenant").
RECITALS
(A) Lessor and Tenant entered into that certain Lease
"Lease") dated July 1, 1996, in connection with those
known as suite 400 of the building currently known as
"Building"), which Building is located at 1516 Second
Washington, on land which is described as follows:
Agreement (the
certain premises commonly
the Columbia Building (the
Avenue, Seattle,
Lots 5 and 8, Block 23, Addition to the Town of Seattle, as
laid out by A.A. Denny (commonly known as A.A. Denny's 3rd
Addition to the City of Seattle,) according to the plat
thereof recorded in Volume 1 of Plats, page 33, in King
County, Washington;
EXCEPT the southwesterly 12 feet thereof condemned for
widening 2nd Avenue in King County Superior Court Cause Number
39151 under Ordinance Number 9311 of the City of Seattle;
Situate in the County of King, State of Washington;
(B) Lessor and Tenant entered into that certain Amendment of Lease
Agreement dated December 12, 1996, and that certain Second Amendment of Lease
Agreement dated January 9, 1997, (collectively the "Amendment") by which the
terms of the Lease were amended as provided therein;
(C) The parties wish to again amend the Lease, as amended by the
Amendment, to change the date upon which the tenancy of Tenant is to commence on
the mezzanine level of the Building; and
(D) The parties wish to reduce their agreement herein to writing.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties do hereby agree as follows:
(1) The parties agree that possession of the entire mezzanine level of
the Building shall be given to Tenant on March 1, 1997, rather then April 1,
1997, as provided in the Second Amendment of Lease Agreement.
THIRD AMENDMENT OF
LEASE AGREEMENT
Page 1 of 3
51
(2) As a result of the foregoing the parties acknowledge and agree that
the term "Premises" as used in the Lease, the Amendment, and this amendment
shall refer to the second and fourth floors of the Building on and after January
1, 1997, to the second, and fourth floors, and the entire mezzanine area of the
Building (which mezzanine area consists of 4,085 square feet) on and after March
1, 1997, and to the second, third and fourth floors of the Building, as well as
the Additional Space (including the mezzanine area) as that term is described in
the Second Amendment of Lease Agreement described above, on and after April 1,
1997.
(3)
The Base Rent as described in Section 3.1 of the Lease shall
be in the following amounts:
(a)
For the period of January 1, 1997, through February
28, 1997, inclusive, the Base Rent shall be
$27,520.34 per month;
(b)
For the period of March 1, 1997, through March 31,
1997, inclusive, the Base Rent shall be $30,924.51
per month;
(c)
For the period of April 1, 1997, through July 31,
1997, inclusive, the Base Rent shall be $46,379.17
per month; and
(d)
For the period of August 1, 1997, through July 31,
1999, inclusive, the Base Rent shall be $47,172.04.
(4)
All other terms and conditions of the Lease, as amended, shall
remain unchanged.
TRIDENT INVESTMENTS, INC.
by:
/s/ Joseph W. Edwards
--------------------------------Joseph W. Edmonds, President
AMAZON.COM, INC.
by:
/s/ Joy Covey
--------------------------------Joy Covey, CFO
THIRD AMENDMENT OF
LEASE AGREEMENT
Page 2 of 3
52
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Joseph W.
Edmonds signed this instrument, on oath stated that he is authorized to execute
the instrument acknowledged it as the President of Trident Investments, Inc. to
be the free and voluntary act of such party for the uses and purposes mentioned
in this instrument.
Dated this 28th day of February, 1997.
John Rohun
Notary Public in and for the
State of Washington residing
at Everett, WA
My appointment expires 02/23/00
STATE OF WASHINGTON
) ss.
County of King
)
)
I certify that I know or have satisfactory evidence that Jeffrey P.
Bezos signed this instrument, on oath stated that he is authorized to execute
the instrument acknowledged it as the President of Amazon.com, Inc. to be the
free and voluntary act of such party for the uses and purposes mentioned in this
instrument.
Dated this 3rd day of March, 1997.
Sandy Plagemann
Notary Public in and for the
State of Washington, residing
at Bellevue
My appointment expires 3/9/97
THIRD AMENDMENT OF
LEASE AGREEMENT
Page 3 of 3
1
EXHIBIT 10.29
BASIC LEASE INFORMATION
Lease Date:
September 30, 1996
Landlord:
PACIFIC NORTHWEST GROUP A, a joint venture
Address of Landlord:
5601 Sixth Avenue South
Seattle, Washington 98108
P.O. Box 80326
Tenant:
a Delaware corporation
AMAZON.COM, Inc.,
Premises:
Seattle, Washington
549 South Dawson Street
98108
"Premises" approximately 50,420 square feet in Building U of
approximately 93,020 square feet (computed from measurements to the exterior of
outside walls of the building and to the center of interior walls), such
premises being shown and outlined in red on the plan attached hereto as Exhibit
A, and being part of the real property described in Exhibit B attached hereto.
Lease Term: Commencing on the "Commencement Date" as hereinafter
defined and ending 36 months thereafter except that in the event the
Commencement Date is a date other than the first day of a calendar month, said
term shall extend for said number of months in addition to the remainder of the
calendar month following the Commencement Date.
Scheduled Term Commencement Date:
November 1, 1996
Monthly Base Rent:
$18,152.00
Security Deposit:
$24,817.00
Tenant's Initial Monthly Escrow Payment for Taxes and Other Charges:
$ 2,113.00
Tenant's Initial Monthly Common Area Maintenance Charge:
$ 2,244.00
Tenant's Initial Monthly Insurance Escrow Payment:
$
Tenant's Initial Monthly Payment Total:
$22,801.00
292.00
The foregoing Basic Lease Information is hereby incorporated into and
made a part of this Lease. Each reference in this Lease to any of the Basic
Lease Information shall mean the respective information herein above set forth
and shall be construed to incorporate all of the
2
terms provided under the particular Lease paragraph pertaining to such
information. In the event of any conflict between any Basic Lease Information
and the Lease, the former shall control.
-2-
3
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between PACIFIC
NORTHWEST GROUP A, hereinafter referred to as "Landlord", and AMAZON.COM, INC.,
a Delaware corporation, hereinafter referred to as "Tenant";
W I T N E S S E T H
1.
PREMISES AND TERM.
A.
In consideration of the obligation of Tenant to pay rental as
herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and Leases to Tenant, and Tenant
hereby takes and leases from Landlord those certain Premises as outlined in red
on Exhibit "A" attached hereto (hereinafter referred to as the "Premises") and
incorporated herein by reference, together with all rights, privileges,
easements, appurtenances, and amenities belonging to or in any way appertaining
to the Premises and together with the buildings and other improvements situated
or to be situated upon land described in Exhibit "B" attached hereto.
B.
TO HAVE AND TO HOLD the same for a term commencing on the
"Commencement Date", as hereinafter defined, and ending thereafter as specified
in the Basic Lease Information, attached hereto, (the "Lease Term"), provided,
however, that, in the event the "Commencement Date" is a date other than the
first day of a calendar month, said term shall extend for said number of months
in addition to the remainder of the calendar month following the "Commencement
Date".
C.
The "Commencement Date" shall be the Scheduled Term
Commencement Date shown in the Basic Lease Information, attached hereto and
incorporated herein by reference, or the date upon which the Premises shall have
been substantially completed in accordance with Section 30 of this Lease,
whichever is earlier. If the Premises shall not have been substantially
completed as aforesaid by the Scheduled Term Commencement Date, Tenant's
obligations to pay rent and its other obligations for payment under this Lease
shall commence on the date the Premises are substantially completed as
aforesaid, and Landlord shall not be liable to Tenant for any loss or damage
resulting from such delay. Landlord shall notify Tenant in writing as soon as
Landlord deems the Premises to be substantially completed and ready for
occupancy. In the event that the Premises have not in fact been substantially
completed as aforesaid, Tenant shall notify Landlord of its objections.
Landlord shall have a reasonable time after delivery of such notice in which to
take such corrective action as may be necessary, and shall notify Tenant in
writing as soon as it deems such corrective action has been completed so that
the Premises are substantially completed and ready for occupancy. The taking of
possession by Tenant shall be deemed conclusively to establish that the
Premises
-3-
4
have been substantially completed in accordance with the plans and
specifications and that the Premises are in good and satisfactory condition, as
of when possession was so taken, except as specifically identified in writing.
Tenant shall have no more than five (5) days after taking possession to develop
a list in writing of such conditions of the Premises which are not in good and
satisfactory condition. Tenant acknowledges that no representations as to the
repair of the Premises have been made by Landlord, unless such are expressly set
forth in this Lease. After the Commencement Date, Tenant shall, upon demand,
execute and deliver to Landlord a letter of acceptance of delivery of the
Premises, specifying the Commencement Date and the rent commencement date, in
recordable form. In the event of any dispute as to the substantial completion
or work performed or required to be performed by Landlord, the certificate of
Landlord's architect or general contractor shall be conclusive.
2.
BASE RENT AND SECURITY DEPOSIT.
A.
Tenant agrees to pay to Landlord Base Rent for the Premises,
in advance, without demand, deduction or set off, for the entire Lease Term
hereof at the rate specified in the Basic Lease Information, payable in monthly
installments. One such monthly installment shall be due and payable on the
date hereof and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the Commencement Date
recited above during the Lease Term, except that the rental payment for any
fractional calendar month at the commencement or end of the Lease period shall
be prorated on the basis of a 30-day month.
B.
In addition, Tenant agrees to deposit with Landlord on the
date hereof a security deposit in the amount specified in the Basic Lease
Information, which sum shall be held by Landlord, without obligation for
interest, as security for the performance of Tenant's covenants and obligations
under this Lease, it being expressly understood and agreed that such deposit is
not an advance rental deposit, not the last month's rent nor a measure of
Landlord's damages in the event of Tenant's default. Upon the occurrence of
any event of default by Tenant, Landlord may, from time to time, without
prejudice to any other remedy provided herein or provided by law, use such
deposit to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default; or to perform any obligation
required of Tenant under the Lease; and Tenant shall pay to Landlord on demand
the amount so applied in order to restore the security deposit to its original
amount. Although the security deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord
to Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled, but in any case no later than
forty-five (45) days after Tenant obligations under this Lease have been
fulfilled.
3.
USE.
The Premises shall be used only for the purpose of general
office mail-order retail, receiving, storing, shipping, assembly, light
manufacturing, and selling (other than
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retail) products, materials and merchandise made and/or distributed by Tenant
and for such other lawful purposes as may be incidental thereto. Outside
storage, including without limitation, trucks and other vehicles, is prohibited
without Landlord's prior written consent. Landlord consents to Tenant storing
up to five (5) cars or trucks in the parking area provided such cars or trucks
are licensed and operable. Tenant shall at its own cost and expense obtain any
and all licenses and permits necessary for its use of the Premises. Tenant
shall comply with all governmental laws, ordinances and regulations applicable
to the use of the Premises, and shall promptly comply with all governmental
orders and directives including but not limited to those regarding the
correction, prevention and abatement of nuisances in or upon, or connected
with, the Premises, except for certificates of occupancy, all at Tenant's sole
expense. Tenant shall not permit any objectionable or unpleasant odors, smoke,
dust, gas, noise or vibrations to emanate from the Premises, nor take any other
action which would constitute a nuisance or would disturb or endanger any other
tenants of the building in which the Premises are situated or unreasonably
interfere with their use of their respective Premises. In addition to any
other remedies Landlord may have for a breach by Tenant of the terms of this
Section 3, Landlord shall have the right to have Tenant evicted from the
Premises. Without Landlord's prior written consent, Tenant shall not receive,
store or otherwise handle any product, material or merchandise which is
explosive or highly inflammable. Tenant will not permit the Premises to be
used for any purpose or in any manner (including without limitation any method
of storage) which would render the insurance thereon void or the insurance risk
more hazardous or cause the State Board of Insurance or other insurance
authority to disallow any sprinkler credits. In the event Tenant's use of
Premises shall result in an increase in insurance premiums, Tenant shall be
solely responsible for said increase.
4.
TAXES AND OTHER CHARGES.
A.
Tenant agrees to pay its proportionate share of any and all
real and personal property taxes, regular and special assessments, license fees
and other charges of any kind and nature whatsoever, payable by Landlord as a
result of any public or quasi-public authority, private party, or owner's
association levy, assessment or imposition against, or arising out of
Landlord's ownership of or interest in, the real estate described in Exhibit
"B" attached hereto, together with the building and the grounds, parking areas,
driveways, roads, and alleys around the building in which the Premises are
located, or any part thereof (hereinafter collectively referred to as the
"Charges"). During each month of the Lease Term, Tenant shall make a monthly
escrow deposit with Landlord (the "Escrow Payment") equal to 1/12 of its
proportionate share of the Charges which will be due and payable to that
particular calendar year. Tenant authorizes Landlord to use the funds
deposited by Tenant with Landlord under this Paragraph 4 to pay the Charges.
Each Escrow Payment shall be due and payable, as additional rent, at the same
time and in the same manner as the payment of monthly rental as provided
herein. The amount of the initial monthly Escrow Payment will be specified in
the Basic Lease Information. The Initial Escrow Payment is based upon Tenant's
proportionate share of the estimated Charges for the year in question, and the
monthly Escrow Payment is subject to increase or decrease as determined by
Landlord to reflect an accurate escrow of Tenant's estimated proportionate
share of the Charges. The Escrow Payment account of
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Tenant shall be reconciled annually. If the Tenant's total Escrow Payments are
less than Tenant's actual pro rata share of the Charges, Tenant shall pay to
Landlord upon demand the difference; if the Tenant's total Escrow Payments are
more than Tenant's actual pro rata share of the Charges, Landlord shall retain
such excess and credit it to Tenant's Escrow Payment account for the successive
year's Charges. Tenant's proportionate share of the Charges shall be computed
by multiplying the Charges by a fraction, the numerator of which shall be the
number of gross leaseable square feet of floor space in the Premises and the
denominator of which shall be the total applicable gross leaseable square
footage or such other equitable apportionment as may be adopted.
B.
If Tenant should fail to pay any Escrow Payments required to
be paid by Tenant hereunder, in addition to any other remedies provided herein,
Landlord may, if it so elects, pay such Escrow Payments or taxes, assessments,
license fees and other charges. Any sums so paid by Landlord shall be deemed
to be so much additional rental owing by Tenant to Landlord and due and payable
upon demand as additional rental plus interest at the rate of eighteen percent
(18%) per annum from the date of payment by Landlord until repaid by Tenant.
C.
(1)
If at any time during the Lease Term, the present
method of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments, fees or charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the rents received
therefrom and/or a franchise tax, assessment, levy or charge measured by or
based, in whole on in part, upon such rents or the present or any future
building or buildings, then all such taxes, assessments, fees or charges, or
the part thereof so measured or based, shall be deemed to be included within
the term "Charges" for the purposes hereof.
(2)
Tenant may, alone or along with other tenants of the
building containing the Premises, at its sole cost and expense, in its or their
own name(s) dispute and contest any Charges by appropriate proceedings
diligently conducted in good faith, but only after Tenant and all other
tenants, if any, joining with Tenant in such contest have deposited with
Landlord the amount so contested and unpaid or their proportionate shares
thereof as the case may be, which shall be held by Landlord without obligation
for interest until the termination of the proceedings, at which time the
amount(s) deposited shall be applied by Landlord toward the payment of the
items held valid (plus any court costs, interest, penalties and other
liabilities associated with the proceedings), and Tenant's share of any excess
shall be returned to Tenant. Tenant further agrees to pay to Landlord upon
demand Tenant's share (as among all Tenants who participated in the contest) of
all court costs, interest, penalties and other liabilities relating to such
proceedings. Tenant hereby indemnifies and agrees to hold harmless the
Landlord from and against any cost, damage or expense (including attorney's
fees) in connection with any such proceedings.
(3)
Any payment to be made pursuant to this Paragraph 4
with respect to the calendar year in which this Lease commences or terminates
shall bear the same ratio to the
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payment which would be required to be made for the full calendar year as that
part of such calendar year covered by the Lease Term bears to a full calendar
year.
D.
Tenant shall be liable for all taxes levied against personal
property and trade fixtures placed by Tenant in the Premises. If any such
taxes are levied against Landlord or Landlord's property and if Landlord elects
to pay the same or if the assessed value of Landlord's property is increased by
inclusion of personal property and trade fixtures placed by Tenant in the
Premises and Landlord elects to pay the taxes based on such increase, Tenant
shall pay to Landlord upon demand that part of such taxes for which Tenant is
primarily liable hereunder.
5.
TENANT'S MAINTENANCE.
A.
Tenant shall at its own cost and expense keep and maintain all
parts of the Premises (except those for which Landlord is expressly responsible
under the terms of this Lease) in good condition, promptly making all necessary
repair and replacements, including but not limited to, windows, glass and plate
glass, doors, any special office entry, interior walls and finish work, floor
and floor covering, downspouts, gutters, heating and air conditioning systems,
dock boards, truck doors, dock bumpers, plumbing work and fixtures, termite and
pest extermination, regular removal of trash and debris, keeping the parking
areas, driveways, alleys and the whole of the Premises in a clean and sanitary
condition. Tenant shall not be obligated to repair any damage caused by fire,
tornado, earthquake, flood or other casualty except in the event the damage is
caused by Tenant and not covered by Paragraph 13(C) below, except that Tenant
shall be obligated to repair all wind damage to glass except with respect to
tornado or hurricane damage.
B.
Tenant shall not damage any demising wall or disturb the
integrity and support provided by any demising wall and shall, at its sole cost
and expense, promptly repair any damage or injury to any demising wall caused
by Tenant or its employees, agents, licensees or invitees.
C.
Tenant and its employees, customers and licensees shall have
the right to use the parking areas, if any, as may be designated by Landlord in
writing, subject to such reasonable rules and regulations as Landlord may from
time to time prescribe and subject to rights of ingress and egress of other
tenants. Landlord shall not be responsible for enforcing Tenant's exclusive
parking rights against any third parties. If Tenant or any other particular
tenant of the building can be clearly identified as being responsible for
obstructions or stoppage of a common sanitary sewage line, then Tenant, if
Tenant is responsible, or such other responsible Tenant, shall pay the entire
cost thereof, upon demand, as additional rent.
D.
Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a maintenance
contractor for servicing all heating and air conditioning systems and equipment
within the Premises.
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6.
LANDLORD'S REPAIRS.
After reasonable notice from Tenant, Landlord shall maintain and
repair the roof, exterior walls and foundations, and the cost thereof shall be
shared as provided in paragraph 7. Tenant shall repair and pay for any damage
to such items to be maintained by Landlord caused by any act, omission or
negligence of Tenant, or Tenant's employees, agents, licensees or invitees, or
caused by Tenant's default hereunder. The term "walls" as used herein shall
not include windows, glass or plate glass, doors, special store fronts or
office entries. Tenant shall promptly give Landlord written notice of defect
or need for repairs. If the nature of the defect is such that the repair can
reasonably be completed within thirty (30) days, the Landlord shall do so. If
the nature of the defect is such that a longer period is required to complete
the repair, the Landlord shall commence the repair within thirty (30) days and
shall use reasonable efforts thereafter to complete the repair. Landlord's
ability with respect to any defects, repairs or maintenance for which Landlord
is responsible under any of the provisions of this Lease shall be limited to
the cost of such repairs or maintenance or the curing of such defect.
7.
MONTHLY COMMON AREA MAINTENANCE CHARGE.
Tenant agrees to pay as an additional charge each month for its
proportionate share of the cost of operation and maintenance of the Common Area
which shall be defined from time to time by Landlord. Common Area costs which
may be incurred by Landlord at its discretion, shall include, but not limited
to those costs incurred for lighting, water, sewage, trash removal, exterior
painting, exterior window cleaning, sweeping, management, accounting, policing,
inspecting, sewer lines, plumbing, paving, landscape maintenance, plant
material replacement and other like charges, and Landlord's fee for supervision
and administration of the items set forth in this paragraph, currently at 10%.
Landlord shall maintain the Common Areas in reasonably good condition and
repair. The proportionate share to be paid by Tenant of the cost of operation
and maintenance of the Common Area shall be computed on the ratio that the
gross leaseable square feet of the Premises bears to the total applicable gross
leaseable square footage or such other equitable apportionment as may be
adopted. Landlord shall make monthly or other periodic charges based upon the
estimated annual cost of operation and maintenance of the Common Area, payable
in advance but subject to adjustment after the end of the year on the basis of
the actual cost for such year. Any such periodic charges shall be due and
payable upon delivery of notice thereof. The Initial Common Area Maintenance
Charge, subject to adjustment as provided herein, shall be due and payable, as
additional rent, at the same time and in the same manner as the time and manner
of the payment of monthly rental as provided herein. The amount of the initial
monthly Common Area Maintenance Charge shall be as specified in the Basic Lease
Information.
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8.
ALTERATIONS.
Tenant shall not make any alterations, additions or improvements to
the Premises (including but not limited to roof and wall penetrations) without
the prior written consent of Landlord. Tenant may, without the consent of
Landlord, but as its own cost and expense and in a good workmanlike manner
erect such shelves, bins, machinery and trade fixtures as it may deem
advisable, without altering the basic character of the building or improvements
and without overloading or damaging such building or improvements, and in each
case complying with all applicable governmental laws, ordinances, regulations
and other requirements. All alterations, additions, improvements and
partitions erected by Tenant shall be and remain the property of Tenant during
the Term of this Lease and Tenant shall, unless Landlord otherwise elects as
hereinafter provided, remove all alterations, additions, improvements and
partitions that are not trade fixtures erected by Tenant and restore the
Premises to their original condition by the date of termination of this Lease
or upon earlier vacating of the Premises, provided, however, that if Landlord
so elects prior to termination of this Lease or upon earlier vacating of the
Premises, such alterations, additions, improvements and partitions shall become
the property of Landlord as of the date of termination of this Lease or upon
earlier vacating of the Premises and shall be delivered up to the Landlord with
the Premises. All shelves, bins, machinery and trade fixtures installed by
Tenant may be removed by Tenant prior to the termination of this Lease if
Tenant so elects, and shall be removed by the date of termination of this Lease
or upon earlier vacating of the Premises if required by Landlord; upon any such
removal Tenant shall restore the Premises to their original condition. All
such removals and restoration shall be accomplished in good workmanlike manner
so as not to damage the primary structure or structural qualities of the
buildings and other improvements situated on the Premises.
9.
SIGNS.
Tenant shall not install signs upon the Premises without Landlord's
prior written approval, and any such signage shall be subject to any applicable
governmental laws, ordinances, regulations and other requirements. Tenant
shall remove all such signs by the termination of this Lease. Such
installations and removals shall be made in such a manner as to avoid injury or
defacement of the building and other improvements, and Tenant shall repair any
injury or defacement, including without limitation discoloration, caused by
such installation and/or removal. Upon approval from Landlord, which shall not
be unreasonably withheld, Tenant shall have the right to install a sign on the
free- standing sign pylon adjacent to the building.
10.
INSPECTION.
A.
Landlord and Landlord's agents and representatives shall have
the right to enter and inspect the Premises at any reasonable time and after
reasonable notice to Tenant, except in an emergency, during business hours, for
the purposes of ascertaining the condition of the Premises or in order to make
such repairs as may be required or permitted to be made by
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Landlord under the terms of this Lease. During the period that is six (6)
months prior to the end of the Term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time during business hours for the purpose of showing the Premises and shall
have the right to erect on the Premises a suitable sign indicating the Premises
are available.
B.
Tenant shall give written notice to Landlord at least thirty
(30) days prior to vacating the Premises and shall arrange to meet with
Landlord for a joint inspection of the Premises prior to vacating. In the
event of Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall be
conclusively deemed correct for purposes of determining Tenant's responsibility
for repairs and restoration. It shall be the responsibility of Tenant, prior
to vacating the Premises, to clean and repair the Premises and restore them to
substantially the condition in which they were in upon delivery of the Premises
to Tenant at the Commencement Date, reasonable wear and tear and casualty
(except in the event ___________________) excepted. Cleaning, repair and
restoration shall include, but not be limited to, removal of all trash,
cleaning of walls, where necessary, cleaning of carpet and flooring,
replacement of light bulbs and tubes, cleaning and wiping down of all fixtures,
maintenance and repair of all heating and air conditioning systems, and all
similar work, which shall be done at the latest practical date prior to
vacation of the Premises.
11.
UTILITIES.
Landlord agrees to provide at its cost water, electricity and gas
service connections into the Premises; but Tenant shall pay for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premises, together with any taxes, penalties,
surcharges or the like pertaining thereto and any maintenance charges for
utilities and shall furnish all electric light bulbs and tubes. If any such
services are not separately metered to Tenant, Tenant shall pay a reasonable
proportion as determined by Landlord of all charges jointly metered with other
Premises. Landlord shall in no event be liable for any interruption or failure
of utility services on the Premises.
12.
ASSIGNMENT AND SUBLETTING.
A.
Tenant shall not have the right, voluntarily or involuntarily,
to assign, convey, transfer, mortgage or sublet the whole or any part of the
Premises under this Lease without the prior written consent of Landlord which
shall not be unreasonably withheld. In the event Tenant applies to Landlord
for consent to assign, convey, transfer or sublet the Premises, Landlord may
condition such consent upon the right to receive one-half of the profit, if
any, which Tenant may realize on account of such assignment, conveyance,
transfer or sublease of the Premises. For purposes of this paragraph, "profit"
shall mean any sum which the assignee, sublessee or transferee is required to
pay, or which is credited to Tenant as rent in excess of the Rents required to
be paid by Tenant to Landlord under this Lease. Landlord also reserves the
right to recapture the Premises or applicable portion thereof in lieu of giving
its consent by
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notice given to Tenant within twenty (20) days after receipt of Tenant's
written request for assignment or subletting. Such recapture shall terminate
this Lease as to the applicable space effective on the prospective date of
assignment or subletting, which shall be the last day of a calendar month and
not earlier than sixty (60) days after receipt of Tenant's request hereunder.
In the event that Landlord shall not elect to recapture and shall thereafter
give its consent, Tenant shall pay Landlord a reasonable fee, not to exceed
$500.00, to reimburse Landlord for processing costs incurred in connection with
such consent.
B.
Notwithstanding any permitted assignment or subletting, Tenant
shall at all times remain directly, primarily and fully responsible and liable
for the payment of the rent herein specified and for compliance with all of its
other obligations under the terms, provisions and covenants of this Lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
Premises or any part thereof are then assigned or sublet, Landlord, in addition
to any other remedies herein provided, or provided by law, may at its option
collect directly from such assignee or subtenant all rents becoming due to
Tenant under such assignment, transfer or sublease and apply such rent against
any sums due to Landlord from Tenant hereunder, and no such collection shall be
construed to constitute a novation or a release of Tenant from the further
performance of Tenant's obligations hereunder.
See attached Addendum 12(c) to Lease.
13.
INSURANCE, FIRE AND CASUALTY DAMAGE.
A.
Landlord agrees to maintain insurance covering the building of
which the Premises are a part in an amount not less than eighty percent (80%)
(or such greater percentage as may be necessary to comply with the provisions
of any co-insurance clauses of the policy) of the "replacement cost" thereof as
such term is defined in the Replacement Cost Endorsement to be attached
thereto, insuring against the perils of Fire, Lightning, Extended Coverage,
Vandalism and Malicious Mischief, extended by Special Extended Coverage
Endorsement to insure against all other Risks of Direct Physical Loss, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
State in which the Premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located
within such state. Subject to the provisions of subparagraph 13, C, D, E
below, such insurance shall be for the sole benefit of Landlord and under its
sole control. In the event the insurance policy shall contain a deductible,
Tenant shall be liable for and pay its equitable share of any deductible
withheld from insurance proceeds or payable under the terms of the insurance
policy in the event of a claim or insured loss thereunder, up to a maximum of
$250,000.00.
B.
Tenant agrees to pay its proportionate share of Landlord's
cost of carrying fire and extended coverage insurance ("Insurance") on the
building. During each month of the term of this Lease, Tenant shall make a
monthly escrow deposit with Landlord equal to one-twelfth of its proportionate
share of the Insurance on the buildings and grounds which will be
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due and payable for that particular year. Tenant authorizes Landlord to use
the funds deposited by him with Landlord under this paragraph to pay the cost
of such insurance. Each Insurance Escrow payment shall be due and payable, as
additional rent, at the same time and manner of the payment of the monthly
rental as provided herein. The initial share of the estimated Insurance for
the year in question, and the monthly Insurance Escrow Payment is subject to
increase or decrease as determined by Landlord to reflect an accurate monthly
escrow of Tenant's estimated proportionate share of this Insurance. The
Insurance Escrow Payment account of Tenant shall be reconciled annually. If
the Tenant's total Insurance Escrow Payments are less than Tenant's actual pro
rata share of the Insurance, Tenant shall pay to Landlord upon demand the
difference; if the total Insurance Escrow Payments of Tenant are more than
Tenant's actual pro rata share of the Insurance, Landlord shall promptly refund
the balance of such excess to Tenant, Provided Tenant's account is current in
all respects. Tenant's cost of insurance shall be computed by multiplying the
cost of insurance by a fraction, the numerator of which shall be the number of
gross leaseable square feet of floor space in the Premises and the denominator
of which shall be the total applicable gross leaseable square footage. The
amount of the initial monthly Insurance Escrow Payment will be as specified in
the Basic Lease Information.
C.
If the building, of which the Premises are a part, should be
damaged or destroyed by fire, tornado or other casualty, Tenant shall give
immediate written notice thereof to Landlord as soon as reasonably possible.
D.
If the building, of which the Premises are a part, should be
totally destroyed by fire, tornado or other casualty, or if it should be so
damaged thereby that rebuilding or repairs cannot in Landlord's estimation be
completed within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage, this Lease shall terminate and the rent
shall be abated during the unexpired portion of this Lease, effective upon the
date of the occurrence of such damage. Landlord shall give notice to Tenant in
writing of its determination to terminate this Lease within ninety (90) days
following the date of the occurrence of such damage.
E.
If the building, of which the Premises are a part, should be
damaged by any peril covered by the insurance to be provided by Landlord under
subparagraph 13(A) above, but only to such extent that rebuilding or repairs
can in Landlord's estimation be completed within two hundred (200) days after
the date upon which Landlord is notified by Tenant of such damage, this Lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such building to
substantially the condition in which it existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partition, fixtures, additions and other improvements which may have been
placed in, or about the Premises by Tenant. If Tenant's use of the Premises is
materially interfered with in whole or in part following such damage, the rent
payable hereunder during the period in which they are unusable shall be reduced
to such extent as may be fair and reasonable under all of the circumstances,
but in any event, rent shall be reduced by at least the same percentage as the
percentage of square feet of
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the Premises as are materially unusable. In the event that Landlord shall fail
to complete such repairs and rebuilding within two hundred (200) days after the
date upon which Landlord is notified by Tenant of such damage, Tenant may at
its option terminate this Lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
F.
Notwithstanding anything herein to the contrary, in the event
the holder of any indebtedness secured by a mortgage or deed of trust covering
the Premises requires that the Insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
See attached Addendum 13G to Lease.
14.
LIABILITY.
Landlord shall not be liable to Tenant or Tenant's employees, agents,
servants, guests, invitees or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its employees, agents, servants, guests, invitees or visitors, or of any other
person entering upon the Premises, or caused by the building and improvements
located on the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the Premises, or due to
any cause whatsoever, and Tenant hereby covenants and agrees that it will at
all times indemnify and hold safe and harmless the property, the Landlord
(including without limitation the trustee and beneficiaries if Landlord is a
trust), Landlord's employees, agents, from any loss, liability, claims, suits,
costs, expenses, including without limitation attorney's fees and damages, both
real and alleged, arising out of any such damage or injury; except injury to
persons or damage to property the cause of which is the negligence of Landlord
or the failure of Landlord to repair any part of the Premises which Landlord is
obligated to repair and maintain hereunder within a reasonable time after the
receipt of written notice from Tenant of needed repairs. Tenant shall procure
and maintain throughout the term of this Lease a policy or policies of
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with:
(i) the Premises; (ii) the condition of the Premises; (iii) Tenant's operations
in and maintenance and use of the Premises; and (iv) Tenant's liability assumed
under this Lease, the limits of such policy or policies to be in the amount of
not less than $1,000,000 per occurrence in respect of injury to persons
(including death) and in respect of property damage or destruction, including
loss of use thereof. All such policies shall be procured by Tenant from
responsible insurance companies satisfactory to Landlord. Certified copies of
such policies, together with evidence of payment of premiums therefor, shall be
delivered to Landlord prior to the commencement date of this Lease. Not less
that fifteen (15) days prior to the expiration date of any such policies,
certified copies of the renewals thereof (bearing notations evidencing the
payment of renewal
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premiums) shall be delivered to Landlord. Such policies shall further provide
that not less than thirty (30) days written notice shall be given to Landlord
before such policy may be cancelled or changed to reduce insurance provided
thereby.
15.
CONDEMNATION.
A.
If the whole or any substantial part of the Premises should be
taken for any public of quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of
the Premises for the purpose for which they are being used, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
lease, effective when the physical taking of said Premises shall occur.
B.
If part of the Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this Lease
is not terminated as provided in the subparagraph above, this Lease shall not
terminate but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all
of the circumstances.
C.
In the event of any such taking or private purchase in lieu
thereof, Landlord shall be entitled to receive the entire award. Tenant shall
be entitled to make a claim in any condemnation proceedings which does not
reduce the amount of Landlord's award, for the value of any furniture,
furnishings and fixtures installed by and at the sole expense of Tenant.
16.
HOLDING OVER.
Tenant will, at the termination of this Lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Landlord agrees in
writing that Tenant may hold over after the expiration or termination of this
Lease, unless the parties hereto otherwise agree in writing on the terms of
such holding over, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than five (5) days advance written notice,
or by Tenant at any time upon not less than thirty (30) days advance written
notice, and all of the other terms and provisions of this Lease shall be
applicable during that period, except that Tenant shall pay Landlord from time
to time upon demand, as rental for the period of any hold over, an amount equal
to one and one-half (1-1/2) the Base Rent in effect on the termination date,
plus all additional rental as defined herein, computed on a daily basis for
each day of the hold over period. No holding over by Tenant, whether with or
without consent of Landlord, shall operate to extend this Lease except as
otherwise expressly provided. The preceding provisions of this paragraph 16
shall not be construed as Landlord's consent for Tenant to hold over.
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17.
QUIET ENJOYMENT.
Landlord covenants that it now has, or will acquire before Tenant
takes possession of the Premises, good fee or Leasehold title to the Premises,
free and clear of all liens and encumbrances, excepting only the lien for
current taxes not yet due, such mortgage or mortgages as are permitted by the
terms of this Lease, zoning ordinances and other building and fire ordinances
and governmental regulations relating to the use of such property, and
easements, restrictions and other conditions of record. In the event this
Lease is a sublease, then Tenant agrees to take the Premises subject to the
provisions of the prior leases. Landlord represents and warrants that it has
full right and authority to enter into this Lease and that Tenant, upon paying
the rental herein set forth and performing its other covenants and agreements
herein set forth, shall peaceably and quietly have, hold and enjoy the Premises
for the term hereof without hindrance or molestation from Landlord, subject to
the terms and provisions of this Lease.
18.
EVENTS OF DEFAULT.
The following events shall be deemed to be events of default by Tenant
under this Lease:
A.
Tenant shall fail to pay any installment of the rent herein
reserved when due, or any payment with respect to taxes hereunder when due, or
any other payment or reimbursement to Landlord required herein when due, and
such failure shall continue for a period of five (5) days from the date such
payment was due.
B.
Tenant shall become insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors.
C.
Tenant shall file a petition under any section or chapter of
the National Bankruptcy Act, as amended, or under any similar law or statute of
the United States or any State thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
D.
A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant.
F.
Tenant shall fail to comply with any term, provision or
covenant of this Lease (other than the foregoing in this Paragraph 18), and
shall not cure such failure within twenty (20) days after written notice
thereof to Tenant, unless such default cannot reasonably be cured within twenty
(20) days in which case Tenant shall not be in default if Tenant commences to
cure within twenty (20) days and diligently prosecutes such cure thereafter.
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19.
REMEDIES.
Upon the occurrence of any such events of default described in
Paragraph 18 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever.
A.
Landlord may accelerate all rent payments due hereunder which
shall then becoming immediately due and payable.
B.
Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, without being liable for prosecution or any claim of damages
therefor, and Tenant agrees to pay to Landlord on demand the amount of all loss
and damage which Landlord may suffer by reason of such termination, whether
through inability to relet the Premises on satisfactory terms or otherwise.
C.
Enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying such Premises or any
part thereof, without being liable for prosecution or any claim for damages
therefor, and relet the Premises for such terms ending before, on or after the
expiration date of the Lease Term, at such rentals and upon such other
conditions (including concessions and prior occupancy periods) as Landlord in
its sole discretion may determine, and receive the rent therefor; and Tenant
agrees to pay to the Landlord on demand any deficiency that may arise by reason
of such reletting. Landlord shall have no obligation to relet the Premises or
any part thereof and shall not be liable for refusal or failure to relet or in
the event of reletting for refusal or failure to collect any rent due upon such
reletting. In the event Landlord is successful in reletting the Premises at a
rental in excess of that agreed to be paid by Tenant pursuant to the terms of
this Lease, Landlord and Tenant each mutually agree that Tenant shall not be
entitled, under any circumstances, to such excess rental, and Tenant does
hereby specifically waive any claim to such excess rental.
D.
Enter upon the Premises, without being liable for prosecution
or any claim for damages therefor, and do whatever Tenant is obligated to do
under the terms of this Lease; and Tenant agrees to reimburse Landlord on
demand for any expenses which Landlord may incur in thus effecting compliance
with Tenant's obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the Tenant from such
action, unless caused by Landlord's gross negligence or intentional act.
E.
Whether or not Landlord retakes possession or relets the
Premises, Landlord shall have the right to recover unpaid rent and all damages
caused by Tenant's default, including attorney's fees. Damage shall include,
without limitation: all rentals lost, all legal expenses and other related
costs incurred by Landlord following Tenant's default, all costs incurred by
Landlord in restoring the Premises to good order and condition, or in
remodeling,
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renovating or otherwise preparing the Premises for reletting, all costs
(including without limitation any brokerage commissi