Sample Business Contracts

Nonqualified Stock Option Letter Agreement - Inc. and Joy D. Covey

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                                AMAZON.COM, INC.


TO:      Joy D. Covey

         We are pleased to inform you that you have been selected by the Board
of Directors of, 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

         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,

         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                       Portion of Total Option Which Is
                       VESTED                                                  Vested
                       ------                                                  ------
<S>         <C>                                                           <C>
                  DECEMBER 9, 1997                                              20%
                  DECEMBER 9, 1998                                              40%
            Every three months thereafter                                 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 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
<PAGE>   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.


                  (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

<PAGE>   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

<PAGE>   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

<PAGE>   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

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

<PAGE>   6
                          ACCEPTANCE AND ACKNOWLEDGMENT

         I, a resident of the State of Washington, accept the incentive stock
option described in this Agreement and in, 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

        -  -                                    Joy Covey
-------------------------              ----------------------------------------
Taxpayer I.D. Number                             ---------------------

                                       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.


                                  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