Sample Business Contracts


1994 Stock Option Plan - Amazon.com Inc.


                                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
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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

                                       -4-
<PAGE>   5
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

                                       -5-
<PAGE>   6
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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<PAGE>   7
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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<PAGE>   8
         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

                                       -8-
<PAGE>   9
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

                                       -9-
<PAGE>   10
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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<PAGE>   11
         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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<PAGE>   12
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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<PAGE>   13
          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

                                      -13-
<PAGE>   14
         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

                                      -14-
<PAGE>   15
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.

                                      -15-
<PAGE>   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
<PAGE>   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.

                                       -2-
<PAGE>   18
          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

                                       -3-
<PAGE>   19
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

                                       -4-
<PAGE>   20
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

                                       -5-
<PAGE>   21
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,

                                      -6-
<PAGE>   22
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.

                                      -7-
<PAGE>   23
         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

                                      -8-
<PAGE>   24
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

                                      -9-
<PAGE>   25
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,

                                      -10-
<PAGE>   26
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

                                      -11-
<PAGE>   27
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

                                      -12-
<PAGE>   28
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

                                      -13-
<PAGE>   29
         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.

                                      -14-
<PAGE>   30
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.

                                      -15-


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