Amazon.com 2001 Annual Report Download - page 75

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock Option Plans
The Company’s stock option plans consist of the 1999 Nonofficer Employee Stock Option Plan, the 1997
Stock Incentive Plan and the Amended and Restated 1994 Stock Option Plan. Shares reserved under these Plans
at December 31, 2001 consist of 40 million shares in the 1999 Nonofficer Employee Stock Option Plan,
94 million shares in the 1997 Stock Incentive Plan and 58 million shares in the 1994 Stock Option Plan, of which
up to a maximum of 21,025,075 shares that are not issued under that plan may be added to the aggregate number
of shares available for issuance under the 1997 Stock Incentive Plan. In connection with certain acquisitions in
1999, the Company assumed outstanding options to purchase common stock originally issued under the acquired
companies’ stock option plans. The Company’s stock option plans as well as the assumed stock option plans are
hereby collectively referred to as the “Plans.”
Generally, the Company’s Board of Directors grants options at an exercise price of not less than the fair
market value of the Company’s common stock at the date of grant. Each outstanding option granted prior to
December 20, 1996 has a term of five years from the date of vesting. Generally, outstanding options granted on or
subsequent to December 20, 1996 have a term of 10 years from the date of grant. Subject to Internal Revenue
Service limitations, options granted under the Company’s plans prior to April 1999 and granted under certain
assumed plans generally became exercisable immediately but are subject to a restriction on transfer that vests over a
period of time. Options granted under the Plans since April 1999 generally vest and become exercisable in
accordance with the following vesting schedule: 20% after year one, 20% after year two and 5% at the end of each
quarter for years three through five. Certain outstanding options that were granted during 2000 and 2001 vest and
become exercisable at the rate of 50% after year one and 50% after year two. During the first quarter of 2001, the
Company offered a limited non-compulsory exchange of employee stock options to employees meeting certain
eligibility criteria. Options granted pursuant to this stock option exchange vest and become exercisable at the rate of
25% after 6 months from the date of grant and 4.166% per month for the succeeding 18 months. Certain options
granted in the third quarter of 2001 generally vest and become exercisable as follows: (i) the option vests quarterly
in equal installments over a 36, 48 or 60 month period commencing on dates ranging from grant date to October 1,
2003, (ii) the option vests 5% to 12.5% on a date approximately 12 to 16 months from date of grant with the
balance vesting quarterly in equal installments over a 48 to 60 month period or (iii) the option vests 4% to 12.5% on
dates approximately 6 months and 18 months from the date of grant with the balance vesting quarterly in equal
installments over a 24 or 60 month period. Shares issued upon exercise of options that are unvested are restricted
and subject to repurchase by the Company at the exercise price upon termination of employment or services and
such restrictions lapse over the original vesting schedule. At December 31, 2001, approximately 1.1 million shares
of restricted common stock, which includes restricted shares issued in connection with acquisitions, as well as
shares issued to certain key employees in 2001, were subject to repurchase or forfeiture.
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