AMAZON.COM, INC. INVESTOR RIGHTS AGREEMENT JUNE 21, 1996 TABLE OF CONTENTS Page SECTION 1. Restrictions on Transferability, Registration Rights . . . . . . . . . . . . . . . 1 1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Notice of Proposed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.5 Requested Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.6 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.7 Registration on Form S-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.8 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.9 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.11 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.12 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.13 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 11 1.14 Standoff Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.15 Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 2. Affirmative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 11 2.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.2 Operating Plan and Budget . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.4 Assignment of Rights to Financial Information . . . . . . . . . . . . . . . . 12 2.5 Proprietary Information Agreement . . . . . . . . . . . . . . . . . . . . . . 12 2.6 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.7 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.8 Initial Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.1 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.2 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.7 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.8 Effect of Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . 14 3.9 Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.10 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 EXHIBIT A Schedule of Investors EXHIBIT B Restrictive Legend 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. '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- 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- 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- 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- 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 -6- 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. -7- (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. -8- 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. -9- (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 -10- 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, -11- 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. -12- 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. -13- 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. -14- 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.] -15- 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] 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] 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 EXHIBIT B RESTRICTIVE LEGEND
Investor Rights Agreement
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