<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMAZON.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 91-1646860
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1516 SECOND AVENUE
SEATTLE, WASHINGTON 98101
(206) 622-2335
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JEFFREY P. BEZOS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMAZON.COM, INC.
1516 SECOND AVENUE
SEATTLE, WASHINGTON 98101
(206) 622-2335
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SCOTT L. GELBAND
ELIZABETH W. KORRELL
PERKINS COIE LLP
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
==========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER NOTE(2) OFFERING PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
10% Senior Discount Notes Due 2008.. $530,000,000 100% $530,000,000 $156,350
==========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933, as amended.
(2) Equals the aggregate principal amount of the securities being registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT SPECIFICALLY STATING THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 12, 1998
PROSPECTUS
[LOGO]
AMAZON.COM, INC.
OFFER TO EXCHANGE ITS
10% SENIOR DISCOUNT NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10% SENIOR DISCOUNT NOTES DUE 2008
WHICH WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933
------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998, UNLESS EXTENDED.
Amazon.com, Inc., a Delaware corporation ("Amazon.com" or the "Company"),
hereby offers to exchange (the "Exchange Offer"), upon the terms and conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), up to $530,000,000 aggregate principal amount at
maturity of its 10% Senior Discount Notes due 2008 (the "Exchange Notes") for a
like principal amount at maturity of its 10% Senior Discount Notes due 2008 (the
"Original Notes" and, together with the Exchange Notes, the "Notes").
The terms of the Exchange Notes are identical in all material respects
(including principal amount at maturity, rate of accretion, interest rate and
maturity) to the terms of the Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the Exchange Notes will generally be
freely transferable by holders thereof (each, a "Holder" and, collectively, the
"Holders") (except as provided herein), and are not subject to any covenant of
the Company regarding registration. The Exchange Notes will be issued under the
indenture governing the Original Notes. For a description of the principal terms
of the Exchange Notes, see "Description of the Exchange Notes."
The Notes will mature on May 1, 2008. The Original Notes were, and the
Exchange Notes will be, issued at a substantial discount from their principal
amount at maturity, and there will not be any payment of interest on the Notes
prior to November 1, 2003. Each Original Note has a principal amount at maturity
of $1,000 and an initial Accreted Value (as defined herein) of $615.07. The
Accreted Value of the Exchange Notes initially will be equal to the Accreted
Value of the Original Notes at the time of the consummation of the Exchange
Offer. The Notes will fully accrete to face value on May 1, 2003. From and after
May 1, 2003, the Notes will bear interest, which will be payable in cash at a
rate of 10% per annum on each May 1 and November 1 (the "Interest Payment
Dates"), commencing November 1, 2003.
The Notes are redeemable, at the option of the Company, in whole or in
part, at any time on or after May 1, 2003, at the redemption prices set forth
herein, plus accrued interest, if any, to the date of redemption. At any time
prior to May 1, 2001, the Company also may redeem up to 35% of the aggregate
principal amount at maturity of the Notes with the proceeds of one or more sales
of Capital Stock (other than Disqualified Stock) (as defined herein) at 110% of
their Accreted Value on the redemption date, plus accrued and unpaid interest,
if any, to the date of redemption; provided that after any such redemption at
least 65% of the aggregate principal amount at maturity of Notes originally
issued remains outstanding. In addition, at any time prior to May 1, 2003, the
Company may redeem all, but not less than all, of the Notes at the redemption
price equal to the sum of (i) the Accreted Value on the redemption date, plus
(ii) accrued and unpaid interest, if any, to the redemption date, plus (iii) the
Applicable Premium (as defined herein). See "Description of the Exchange Notes."
(Continued on next page)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of the Original Notes on , 1998.
------------------------
SEE "RISK FACTORS," COMMENCING ON PAGE 11, FOR A DESCRIPTION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE> 3
(Continued from previous page)
The Original Notes were issued and sold on May 8, 1998, in a transaction
(the "Offering") not registered under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon the exemptions provided in Section 4(2)
of the Securities Act and Rule 144A under the Securities Act. Accordingly, the
Original Notes may not be reoffered, resold or otherwise pledged, hypothecated
or transferred unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder in order to satisfy certain of the obligations of
the Company under a registration rights agreement relating to the Original
Notes. See "The Exchange Offer -- Purpose of the Exchange Offer." The Company is
making the Exchange Offer in reliance upon an interpretation by the Staff of the
Securities and Exchange Commission (the "Commission") set forth in a series of
no-action letters issued to third parties, although the Company has not sought,
and does not intend to seek, its own no-action letter, and there can be no
assurance that the Staff of the Commission would make a similar determination
with respect to the Exchange Offer. Based upon the Commission's interpretations,
the Company believes that the Exchange Notes issued pursuant to the Exchange
Offer in exchange for Original Notes may be offered for resale, resold and
otherwise transferred by Holders thereof (other than by any Holder that is (i)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act (an "Affiliate"), (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii) a broker-dealer who acquired Original
Notes as a result of market making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such Holders' business and such Holders are not engaged in, and do not
intend to engage in, and have no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. Any Holder that cannot
rely upon such interpretations must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. See "The Exchange Offer -- Resales of the Exchange Notes."
Each broker-dealer who receives Exchange Notes pursuant to the Exchange
Offer in exchange for Original Notes acquired for its own account as a result of
market-making activities or other trading activities may be a statutory
underwriter and must acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes. The Letter of Transmittal that is filed as an exhibit to the
Registration Statement of which this Prospectus is a part states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Original Notes are designated for trading in the PORTAL Market. The
Exchange Notes constitute a new issue of securities for which there is no
established trading market. Any Original Notes not tendered and accepted in the
Exchange Offer will remain outstanding. To the extent Original Notes are
tendered and accepted in the Exchange Offer, a Holder's ability to sell
untendered, and tendered but unaccepted, Original Notes could be adversely
affected. Following consummation of the Exchange Offer, the Holders of Original
Notes will continue to be subject to the existing restrictions on transfer
thereof, and the Company will have no further obligation to such Holders to
provide for the registration under the Securities Act of the Original Notes.
Morgan Stanley & Co. Incorporated ("Morgan Stanley" or the "Placement Agent")
has advised the Company that it currently intends to make a market in the
Exchange Notes; however, it is not obligated to do so, and any market-making
activity may be discontinued at any time without notice. Therefore, there can be
no assurance that an active trading market will develop or as to the liquidity
of the trading market for either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange, but is otherwise subject
to customary conditions. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998, unless extended by the Company to such other
date and time as the Company, in its sole discretion, may determine (the
"Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date; otherwise such tenders
are irrevocable. Upon satisfaction or waiver of all of the conditions of the
Exchange Offer, the Company will accept, promptly after the Expiration Date, all
Original Notes properly tendered (such date of acceptance, the "Exchange Date")
and will issue the Exchange Notes promptly after acceptance of the Original
Notes. There will be no cash proceeds to the Company from the Exchange Offer.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received for Original Notes where such Original Notes were acquired for its own
account as a result of market-making activities or other trading activities. The
Company will make copies of this Prospectus available to any broker-dealer for
use in connection with any such resale.
2
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, as well as at the following Commission
Regional Offices: Seven World Trade Center, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies can
be obtained from the Commission by mail at prescribed rates. Requests should be
directed to the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants, such as the Company, that file electronically
with the Commission. The address of such site is http://www.sec.gov.
Whether or not the Company is then required to file reports with the
Commission, so long as any of the Notes are outstanding, the Company is required
by the terms of the Indenture, dated May 8, 1998 (the "Indenture") between the
Company and The Bank of New York, as trustee (the "Trustee"), under which the
Original Notes were issued and under which the Exchange Notes are to be issued,
to furnish to the Trustee and each Holder, or supply to the Trustee for
forwarding to each such Holder without cost to such Holder, such reports and
other information as it has filed with the Commission pursuant to Section 13(a)
or 15(d) under the Exchange Act, or would be required to file by such sections
of the Exchange Act if it were subject thereto. In addition, at all times prior
to the registration of the Original Notes, the Company has agreed to furnish to
any Holder of Notes, and prospective investors upon their request, the
information required to be delivered pursuant to Rule 144A under the Securities
Act.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered by this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain parts of which are omitted from this
Prospectus in accordance with the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are summaries of the material terms thereof and are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement is qualified in its entirety by such reference. Items omitted
from this Prospectus but contained in the Registration Statement may be
inspected and copied as described above.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
000-22513) are incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998; and
(3) The Company's Current Reports on Form 8-K filed April 27, 1998, April
28, 1998, May 1, 1998 and May 6, 1998.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the Exchange Offer shall be deemed to be incorporated by
reference in this Prospectus and to be part hereof from the date of filing such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference
3
<PAGE> 5
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (EXCLUDING EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN) ARE AVAILABLE UPON REQUEST WITHOUT CHARGE FROM THE SECRETARY OF THE
COMPANY, 1516 SECOND AVENUE, SEATTLE, WASHINGTON 98101 (TELEPHONE NUMBER (206)
622-2335). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE FIVE DAYS PRIOR TO THE DATE ON WHICH A FINAL INVESTMENT DECISION
IS TO BE MADE.
------------------------
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements based on current expectations, estimates and
projections about the Company's industry, management's beliefs and certain
assumptions made by management. All statements, trends, analyses and other
information contained in this Prospectus relative to trends in net sales, gross
margin, anticipated expense levels and liquidity and capital resources, as well
as other statements, including, but not limited to, words such as "anticipate,"
"believe," "plan," "estimate," "expect," "seek" and "intend," and other similar
expressions, constitute forward-looking statements. These forward-looking
statements involve risks and uncertainties, and actual results may differ
materially from those anticipated or expressed in such statements. Potential
risks and uncertainties include, among others, those set forth herein under
"Risk Factors," as well as set forth under "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Overview," "-- Liquidity and
Capital Resources" and " -- Additional Factors That May Affect Future Results"
in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 and under "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview" and "-- Liquidity and Capital Resources" and
"Business -- Additional Factors That May Affect Future Results" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. Particular
attention should be paid to the cautionary statements involving the Company's
limited operating history, the unpredictability of its future revenues, the
unpredictable and evolving nature of its business model, the intensely
competitive online commerce and retail book and music industries and the risks
associated with capacity constraints, systems development, management of growth,
acquisitions, any new products and international or domestic business expansion.
Except as required by law, the Company undertakes no obligation to update any
forward-looking statement, whether as a result of new information, future events
or otherwise. Readers, however, should carefully review the factors set forth in
other reports or documents that the Company files from time to time with the
Commission.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following Summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in or incorporated by
reference to this Prospectus. Investors should carefully consider the
information set forth under the caption "Risk Factors."
THE COMPANY
Amazon.com, Inc. ("Amazon.com" or the "Company") is the leading online
retailer of books. Since opening for business as "Earth's Biggest Bookstore" in
July 1995, Amazon.com has become one of the most widely known, used and cited
commerce sites on the World Wide Web (the "Web"). Amazon.com strives to offer
its customers compelling value through innovative use of technology, broad
selection, high-quality content, a high level of customer service, competitive
pricing and personalized services. The Company offers a catalog of approximately
3.0 million titles, easy-to-use search and browse features, e-mail services,
personalized shopping services, Web-based credit card payment and direct
shipping to customers. The Company currently offers other information-based
products, such as music, and intends over time to expand its catalog into other
product categories. Amazon.com has virtually unlimited online shelf space and
offers customers a vast selection through an efficient search-and-retrieval
interface.
Operating as an online book retailer, Amazon.com has grown rapidly since
first opening its Web site in July 1995. Through March 31, 1998, the Company had
sales of more than $251 million to approximately 2.3 million customer accounts
in over 150 countries. Repeat customers accounted for over 60% of orders in the
quarter ended March 31, 1998. International sales represented 21% of net sales
in the quarter ended March 31, 1998.
Amazon.com's objective is to be the leading online retailer of
information-based products and services, with an initial focus on books and,
more recently, music. The Company's key strategies to attain this goal include:
creating customer loyalty by delivering a compelling value proposition; building
strong brand recognition and maintaining market leadership; continuing to expand
revenue opportunities; creating and executing a superior economic model;
maintaining technology focus and expertise; building strong supplier
relationships; and attracting and retaining exceptional employees.
Amazon.com was incorporated in 1994 in the State of Washington and
reincorporated in 1996 in Delaware. The Company's principal corporate offices
are located in Seattle, Washington. The mailing address and telephone number of
the principal executive offices of the Company are 1516 Second Avenue, Seattle,
Washington 98101, (206) 622-2335. Amazon.com completed its initial public
offering in May 1997 and its common stock is listed on the Nasdaq National
Market under the symbol "AMZN."
"Amazon.com" and "Earth's Biggest Bookstore" are service marks of
Amazon.com, Inc. All other products, company names and logos are marks of their
respective companies.
Information contained on the Company's Web site will not be deemed to be a
part of this Prospectus. As used herein, "titles" offered by the Company means
the number of items offered in the Company catalog and includes books, CDs,
videotapes, audiotapes and other products.
5
<PAGE> 7
SUMMARY OF THE EXCHANGE OFFER
REGISTRATION RIGHTS
AGREEMENT..................... Holders are entitled to exchange the Original
Notes for Exchange Notes registered under the
Securities Act with substantially identical
terms. The Exchange Offer is intended to
satisfy these rights. After the Exchange Offer
is complete, Holders will no longer be entitled
to any exchange or registration rights with
respect to the Original Notes.
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000
principal amount at maturity of Exchange Notes
that have been registered under the Securities
Act for each $1,000 principal amount at
maturity of the Original Notes. In order to be
exchanged, an outstanding Original Note must be
properly tendered and accepted. All outstanding
Original Notes that are validly tendered and
not validly withdrawn will be exchanged for
Exchange Notes.
As of this date, there are $530,000,000
aggregate principal amount at maturity of the
Original Notes outstanding.
The Company will issue registered Exchange
Notes promptly after the expiration of the
Exchange Offer.
RESALES....................... Except as indicated herein, the Company
believes that the Exchange Notes may be offered
for resale, resold and otherwise transferred by
Holders without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that:
(i) the Exchange Notes are being acquired in
the ordinary course of a Holder's business;
(ii) a Holder is not participating, does not
intend to participate, and has no arrangement
or understanding with any person to
participate, in the distribution of the
Exchange Notes; and
(iii) a Holder is not an Affiliate of the
Company.
If the Company's belief is inaccurate and a
Holder transfers any Exchange Note without
delivering a prospectus meeting the
requirements of the Securities Act or without
an exemption from such requirements, such
Holder may incur liability under the Securities
Act. The Company does not assume or indemnify
Holders against such liability.
Each broker-dealer that is issued Exchange
Notes for its own account in exchange for
Original Notes which were acquired by such
broker-dealer as a result of market-making or
other trading activities must acknowledge that
it will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of the Notes issued
in the Exchange Offer. A broker-dealer may use
this Prospectus for an offer to resell, resale
or other retransfer of the Exchange Notes. See
"The Exchange Offer -- Resales of the Exchange
Notes."
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998,
unless the Company decides to extend the
Expiration Date.
6
<PAGE> 8
CONDITIONS OF THE EXCHANGE
OFFER......................... The Exchange Offer is not subject to any
condition other than that the Exchange Offer
not violate applicable law or any applicable
interpretation of the Staff of the Commission.
See "The Exchange Offer -- Conditions of the
Exchange Offer."
PROCEDURES FOR TENDERING
ORIGINAL NOTES................ Each Holder of Original Notes wishing to
participate in the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with such Original Notes
and any other required documentation to The
Bank of New York, as exchange agent for the
Notes (the "Exchange Agent"), at the address
set forth herein. By executing the Letter of
Transmittal, each Holder will represent to the
Company (on its own behalf and on behalf of any
beneficial owner of any Original Note subject
to the Letter of Transmittal) that, among other
things, (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such Exchange Notes, (ii)
neither the Holder nor any such other person is
participating in or intends to participate in a
distribution of such Exchange Notes, (iii)
neither the Holder nor any other person has an
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and (iv) neither the Holder nor
any such other person is an Affiliate of the
Company. See "The Exchange Offer -- Procedures
for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Original Notes in
the Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Original Notes, either make appropriate
arrangements to register ownership of the
Original Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may
not be able to be completed prior to the
Expiration Date. See "The Exchange
Offer -- Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES.................... If Holders wish to tender their Original Notes
and time will not permit the required documents
to reach the Exchange Agent by the Expiration
Date, or the procedure for book-entry transfer
cannot be completed on time or certificates for
registered Original Notes cannot be delivered
on time, such Holders may tender their Original
Notes pursuant to the procedures described in
this Prospectus in "The Exchange
Offer-- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. Holders may withdraw the tender of their Notes
at any time prior to 5:00 p.m. New York City
time on , 1998.
7
<PAGE> 9
CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES.............. The exchange of Original Notes for the Exchange
Notes will not be a taxable exchange for U.S.
federal income tax purposes. Therefore, Holders
will not recognize any taxable gain or loss or
other income as a result of such exchange. The
tax treatment of the Exchange Notes will be the
same as for the Original Notes. See "Certain
Federal Income Tax Consequences."
USE OF PROCEEDS............... The Company will not receive any proceeds from
the issuance of the Exchange Notes pursuant to
the Exchange Offer. The Company will pay all
expenses incident to the Exchange Offer. See
"Use of Proceeds."
EXCHANGE AGENT................ The Bank of New York is serving as Exchange
Agent in connection with the Exchange Offer.
8
<PAGE> 10
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes, except that the Exchange Notes will be registered under
the Securities Act and, therefore, will not bear legends restricting their
transfer and generally will not be entitled to registration under the Securities
Act. The Exchange Notes will evidence the same debt as the Original Notes and
both the Original Notes and the Exchange Notes are and will be governed by the
same Indenture.
SECURITIES OFFERED............ $530,000,000 aggregate principal amount at
maturity ($325,987,100 aggregate initial
Accreted Value) of 10% Senior Discount Notes
due 2008.
MATURITY...................... May 1, 2008.
YIELD AND INTEREST............ The Original Notes were, and the Exchange Notes
will be, sold at a substantial discount from
their principal amount at maturity, and there
will not be any payment of interest on the
Notes prior to November 1, 2003. The Notes will
fully accrete to face value on May 1, 2003.
From and after May 1, 2003, the Notes will bear
interest, which will be payable in cash, at a
rate of 10% per annum on each May 1 and
November 1, commencing November 1, 2003.
OPTIONAL REDEMPTION........... The Notes are redeemable, at the option of the
Company, in whole or in part, at any time on or
after May 1, 2003, at the redemption prices set
forth herein, plus accrued interest, if any, to
the date of redemption. At any time prior to
May 1, 2001, the Company also may redeem up to
35% of the aggregate principal amount at
maturity of the Notes with the proceeds of one
or more sales of Capital Stock (other than
Disqualified Stock), at 110% of their Accreted
Value on the redemption date, plus accrued and
unpaid interest, if any, to the date of
redemption; provided that after any such
redemption at least 65% of the aggregate
principal amount at maturity of Notes
originally issued remains outstanding. In
addition, at any time prior to May 1, 2003, the
Company may redeem all, but not less than all,
of the Notes at a redemption price equal to the
sum of (i) the Accreted Value on the redemption
date, plus (ii) accrued and unpaid interest, if
any, to the redemption date, plus (iii) the
Applicable Premium. See "Description of the
Exchange Notes -- Optional Redemption."
CHANGE OF CONTROL............. Upon a Change of Control (as defined herein),
the Company will be required to make an Offer
to Purchase (as defined herein) the Notes at a
purchase price equal to 101% of their Accreted
Value on the date of purchase, plus accrued
interest, if any. There can be no assurance
that the Company will have sufficient funds
available at the time of any Change of Control
to make any required debt repayment (including
repurchases of the Notes). See "Description of
the Exchange Notes -- Repurchase of Notes Upon
a Change of Control."
RANKING....................... The Original Notes are, and the Exchange Notes
will be, senior unsecured indebtedness of the
Company ranking pari passu with the Company's
existing and future unsubordinated, unsecured
indebtedness and senior in right of payment to
all subordinated indebtedness of the Company.
The Notes will be effectively subordinated to
all secured indebtedness and to all existing
and future
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<PAGE> 11
liabilities of the Company's subsidiaries,
including trade payables. As of March 31, 1998,
as adjusted for the offering of the Original
Notes and application of the net proceeds
therefrom, the Company would have had
approximately $2.4 million of indebtedness
outstanding (other than the Notes), all of
which would have been secured indebtedness. See
"Risk Factors -- Substantial Indebtedness;
Ability to Service Debt."
CERTAIN COVENANTS............. The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as
defined herein) to incur indebtedness, pay
dividends, prepay subordinated indebtedness,
repurchase capital stock, make investments,
create liens, engage in transactions with
stockholders and affiliates, sell assets and
engage in mergers and consolidations. However,
these limitations are subject to a number of
important qualifications and exceptions. See
"Description of the Exchange Notes --
Covenants."
ORIGINAL ISSUE DISCOUNT....... The Exchange Notes will be treated as a
continuation of the Original Notes for U.S.
federal income tax purposes. The Original Notes
were issued with original issue discount. For
U.S. federal income tax purposes, Holders of
the Notes are required to include the amount of
original issue discount in income in advance of
receipt of cash to which the income is
attributable. See "Certain Federal Income Tax
Consequences."
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<PAGE> 12
RISK FACTORS
An investment in the Exchange Notes offered hereby involves a high degree
of risk. The following risk factors, together with the other information set
forth in this Prospectus, should be considered carefully before purchasing the
Exchange Notes offered hereby. The term "Note" or "Notes" includes the Original
Notes and the Exchange Notes.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES
The Company was incorporated in July 1994 and commenced offering products
for sale on its Web site in July 1995. Accordingly, the Company has a limited
operating history on which to base an evaluation of its business and prospects.
The Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
online commerce. Such risks for the Company include, but are not limited to, an
evolving and unpredictable business model and the management of growth. To
address these risks, the Company must, among other things, maintain and increase
its customer base, implement and successfully execute its business and marketing
strategy and its expansion into new product and geographic markets, continue to
develop and upgrade its technology and transaction-processing systems, improve
its Web site, provide superior customer service and order fulfillment, respond
to competitive developments and attract, retain and motivate qualified
personnel. There can be no assurance that the Company will be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
Since inception, the Company has incurred significant losses, and as of
March 31, 1998 had an accumulated deficit of $42.9 million. The Company believes
that its success will depend in large part on its ability to (i) extend its
brand position, (ii) provide its customers with outstanding value and a superior
shopping experience and (iii) achieve sufficient sales volume to realize
economies of scale. Accordingly, the Company intends to continue to invest
heavily in marketing and promotion, product development and technology and
operating infrastructure development. The Company also offers attractive pricing
programs, which have reduced its gross margins. Because the Company has
relatively low product gross margins, achieving profitability given planned
investment levels depends on the Company's ability to generate and sustain
substantially increased revenue levels. As a result, the Company believes that
it will continue to incur substantial operating losses for the foreseeable
future and that the rate at which such losses will be incurred may increase
significantly from current levels. In addition, expenses associated with the
amortization of intangibles resulting from the Company's recent acquisitions and
interest expenses related to the Original Notes will further affect the
Company's net loss. Although the Company has experienced significant revenue
growth in recent periods, such growth rates are not sustainable and will
decrease in the future. In view of the rapidly evolving nature of the Company's
business and its limited operating history, the Company believes that
period-to-period comparisons of its operating results, including the Company's
gross profit and operating expenses as a percentage of net sales, are not
necessarily meaningful and should not be relied on as an indication of future
performance.
UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY
As a result of the Company's limited operating history and the emerging
nature of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are based
largely on its investment plans and estimates of future revenues and are to a
large extent fixed. Sales and operating results generally depend on the volume
of, timing of and ability to fulfill orders received, which are difficult to
forecast. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects, financial
condition and results of operations. Further, as a strategic response to changes
in the competitive environment, the Company may from time to time make certain
pricing, service, marketing or acquisition decisions that could have a material
adverse effect on its business, prospects, financial condition
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<PAGE> 13
and results of operations. For example, the Company has agreed in certain of its
promotional arrangements with Internet aggregators to make significant fixed
payments. There can be no assurance that these arrangements will generate
adequate revenues to cover the associated expenditures, and any significant
shortfall could have a material adverse effect on the Company's financial
condition and results of operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include (i) the Company's ability to retain existing
customers, attract new customers at a steady rate and maintain customer
satisfaction, (ii) the Company's ability to acquire product, to maintain
appropriate inventory levels and to manage fulfillment operations, (iii) the
Company's ability to maintain gross margins in its existing business and in
future product lines and markets, (iv) the development, announcement or
introduction of new sites, services and products by the Company and its
competitors, (v) price competition or higher wholesale prices in the industry,
(vi) the level of use of the Internet and online services and increasing
consumer acceptance of the Internet and other online services for the purchase
of consumer products such as those offered by the Company, (vii) the Company's
ability to upgrade and develop its systems and infrastructure, (viii) the
Company's ability to attract new personnel in a timely and effective manner,
(ix) the level of traffic on the Company's Web site, (x) the Company's ability
to manage effectively its development of new business segments and markets, (xi)
the Company's ability to successfully manage the integration of operations and
technology of acquisitions or other business combinations, (xii) technical
difficulties, system downtime or Internet brownouts, (xiii) the amount and
timing of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (xiv) the number of popular
books introduced during the period, (xv) the level of merchandise returns
experienced by the Company, (xvi) governmental regulation and taxation policies,
(xvii) disruptions in service by common carriers due to strikes or otherwise,
and (xviii) general economic conditions and economic conditions specific to the
Internet, online commerce and the book industry.
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail book industry are generally significantly higher in the
fourth calendar quarter of each year.
Due to the foregoing factors, in one or more future quarters the Company's
operating results may fall below the expectations of securities analysts or
investors. In such event, the trading price of the Company's securities would
likely be materially adversely affected.
COMPETITION
The online commerce market, particularly over the Web, is new, rapidly
evolving and intensely competitive. In addition, the retail book and music
industries are intensely competitive. The Company's current or potential
competitors include (i) various online booksellers and vendors of other products
such as CDs and videotapes, including entrants into narrow specialty niches,
(ii) a number of indirect competitors that specialize in online commerce or
derive a substantial portion of their revenues from online commerce, through
which retailers other than the Company may offer products, and (iii) publishers,
distributors and retail vendors of books, music and other products, including
Barnes & Noble, Inc., Bertelsmann AG and other large specialty booksellers and
integrated media corporations, many of which possess significant brand
awareness, sales volume and customer bases. The Company believes that the
principal competitive factors in its market are brand recognition, selection,
personalized services, convenience, price, accessibility, customer service,
quality of search tools, quality of editorial and other site content and
reliability and speed of fulfillment. Many of the Company's competitors have
longer operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than the Company.
Certain of the Company's competitors may be able to secure merchandise from
vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition may result in reduced
operating margins, loss of market share and a
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<PAGE> 14
diminished brand franchise. There can be no assurance that the Company will be
able to compete successfully against current and future competitors.
The Company expects that competition in the online commerce market will
intensify in the future. For example, as various market segments obtain large,
loyal customer bases, participants in those segments may seek to leverage their
market power to the detriment of participants in other market segments. In
addition, new technologies and the expansion of existing technologies may
increase the competitive pressures on online retailers, including the Company.
For example, "shopping agent" technologies will permit customers to quickly
compare the Company's prices with those of its competitors. Competitive
pressures created by any one of the Company's competitors, or by the Company's
competitors collectively, could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
SYSTEM DEVELOPMENT AND OPERATION RISKS
The Company's revenues depend on the number of visitors who shop on its Web
site and the volume of orders it fulfills. Any system interruptions resulting in
the unavailability of the Company's Web site or in reduced order fulfillment
performance would reduce the volume of goods sold and the attractiveness of the
Company's product and service offerings. The Company has experienced periodic
system interruptions, which it believes will continue to occur from time to
time. The Company uses an internally developed system for its Web site, search
engine and substantially all aspects of transaction processing, including order
management, cash and credit card processing, purchasing, inventory management
and shipping. The Company will be required to add additional software and
hardware and further develop and upgrade its existing technology,
transaction-processing systems and network infrastructure to accommodate
increased traffic on its Web site and increased sales volume through its
transaction-processing systems. Any inability to do so may cause unanticipated
system disruptions, slower response times, degradation in levels of customer
service, impaired quality and speed of order fulfillment, or delays in reporting
accurate financial information. There can be no assurance that the Company will
be able to accurately project the rate or timing of increases, if any, in the
use of its Web site or in a timely manner to effectively upgrade and expand its
transaction-processing systems or to smoothly integrate any newly developed or
purchased modules with its existing systems. Any inability to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Substantially all the Company's computer and communications hardware is
located at a single leased facility in Seattle, Washington. The Company's
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins, earthquake and similar
events. The Company does not currently have redundant systems or a formal
disaster recovery plan and does not carry sufficient business interruption
insurance to compensate it for losses that may occur. Despite the implementation
of network security measures by the Company, its servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of critical data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing events could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
MANAGEMENT OF POTENTIAL GROWTH
The Company has rapidly and significantly expanded its operations and
anticipates that further expansion will be required to address potential growth
in its customer base, to expand its product and service offerings and its
international operations, and to pursue other market opportunities. The
Company's employee base has similarly expanded, growing from 158 employees as of
December 31, 1996 to 796 employees as of March 31, 1998. The expansion of the
Company's operations and employee base has placed, and is expected to continue
to place, a significant strain on the Company's management, operational and
financial resources. To manage the expected growth of its operations and
personnel, the Company will be required to improve existing and implement new
transaction-processing, operational and financial systems, procedures and
controls, as well as to expand, train and manage its growing employee base.
There can be no assurance that the Company's current and planned personnel,
systems, procedures and controls will be adequate to support the Company's
future operations, that management will be able to hire, train, retain, motivate
and manage required personnel
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<PAGE> 15
or that Company management will be able to successfully identify, manage and
exploit existing and potential market opportunities. If the Company is unable to
manage growth effectively, such inability could have a material adverse effect
on the Company's business, prospects, financial condition and results of
operations.
RISKS OF NEW BUSINESS AREAS
The Company over time intends to expand its operations by promoting new or
complementary products or sales formats and by expanding the breadth and depth
of its product or service offerings. Expansion of the Company's operations in
this manner would require significant additional expenses and development,
operations and editorial resources and would strain the Company's management,
financial and operational resources. Furthermore, the Company may not benefit
from the first-mover advantage that it experienced in the online book market,
and gross margins attributable to new business areas may be lower than those
associated with the Company's existing business activities. There can be no
assurance that the Company will be able to expand its operations in a
cost-effective or timely manner. Furthermore, any new business launched by the
Company that is not favorably received by consumers could damage the Company's
reputation or the Amazon.com brand. The lack of market acceptance of such
efforts or the Company's inability to generate satisfactory revenues from such
expanded services or products to offset their cost could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. Gross margins attributable to new business areas may be lower than
those associated with the Company's existing business activities. In particular,
the Company has announced plans to offer music to customers, and anticipates
that music product gross margin, which is expected to be lower than book gross
margin, will affect overall gross margin proportionately to its impact on
product mix.
RISKS OF INTERNATIONAL EXPANSION
The Company expects to expand its presence in foreign markets and has
recently acquired two international online booksellers to accelerate this
expansion. To date, the Company has only limited experience in sourcing,
marketing and distributing products on an international basis and in developing
localized versions of its Web site and other systems. The Company expects to
incur significant costs in establishing international facilities and operations,
in promoting its brand internationally, in developing localized versions of its
Web site and other systems and in sourcing, marketing and distributing products
in foreign markets. There can be no assurance that the Company's international
efforts will be successful. If the revenues resulting from international
activities are inadequate to offset the expense of establishing and maintaining
foreign operations, such inadequacy could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations. In
addition, there are certain risks inherent in doing business on an international
level, such as unexpected changes in regulatory requirements, export and import
restrictions, tariffs and other trade barriers, difficulties in staffing and
managing foreign operations, longer payment cycles, political instability,
fluctuations in currency exchange rates, seasonal reductions in business
activity in other parts of the world and potentially adverse tax consequences,
any of which could adversely affect the success of the Company's international
operations. Furthermore, it is possible that governments in certain foreign
jurisdictions may have or enact legislation with respect to the Internet or
other online services in such areas as content, network security, encryption or
distribution that may affect the Company's ability to conduct business abroad.
There can be no assurance that one or more of such factors would not have a
material adverse effect on the Company's future international operations and,
consequently, on the Company's business, prospects, financial condition and
results of operations.
RISKS OF BUSINESS COMBINATIONS AND STRATEGIC ALLIANCES
The Company may choose to expand its operations or market presence by
entering into business combinations, investments, joint ventures or other
strategic alliances with third parties such as the Company's recent acquisition
of three Internet companies. Any such transaction would be accompanied by risks
commonly encountered in such transactions, which could include, among others,
the difficulty of assimilating the operations, technology and personnel of the
combined companies, the potential disruption of the Company's ongoing business,
the inability to retain key technical and managerial personnel, the inability of
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management to maximize the financial and strategic position of the Company
through the successful integration of acquired businesses, additional expenses
associated with amortization of acquired intangible assets, the maintenance of
uniform standards, controls and policies and the impairment of relationships
with existing employees and customers. There can be no assurance that the
Company would be successful in overcoming these risks or any other problems
encountered in connection with such business combinations, investments, joint
ventures or other strategic alliances, or that such transactions would not have
a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
RAPID TECHNOLOGICAL CHANGE
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Amazon.com online store. The
Internet and the online commerce industry are characterized by rapid
technological change, changes in user and customer requirements and preferences,
frequent new products and service introductions embodying new technologies and
the emergence of new industry standards and practices that could render the
Company's existing Web site and proprietary technology and systems obsolete. The
Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop new
services and technology that address the increasingly sophisticated and varied
needs of its prospective customers and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.
The development of a Web site and other proprietary technology entails
significant technical, financial and business risks. There can be no assurance
that the Company will successfully implement new technologies or adapt its Web
site, proprietary technology and transaction-processing systems to customer
requirements or emerging industry standards. If the Company is unable, for
technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing market conditions or customer requirements, such inability
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the continued
services and on the performance of its senior management and other key
personnel, particularly Jeffrey P. Bezos, its President, Chief Executive Officer
and Chairman of the Board. The Company does not have long-term employment
agreements with any of its key personnel and maintains no "key person" life
insurance policies. The loss of the services of its executive officers or other
key employees could have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
RELIANCE ON CERTAIN SUPPLIERS
The Company purchases a substantial majority of its products from two major
vendors, Ingram Book Group ("Ingram") and Baker & Taylor, Inc. Ingram is the
Company's single largest supplier and accounted for 58% and 59% of the Company's
inventory purchases in 1997 and 1996, respectively. The Company has no long-term
contracts or arrangements with any of its vendors that guarantee the
availability of merchandise, the continuation of particular payment terms or the
extension of credit limits. There can be no assurance that the Company's current
vendors will continue to sell merchandise to the Company on current terms or
that the Company will be able to establish new or extend current vendor
relationships to ensure acquisition of merchandise in a timely and efficient
manner and on acceptable commercial terms. If the Company were unable to develop
and maintain relationships with vendors that would allow it to obtain sufficient
quantities of merchandise on acceptable commercial terms, such inability could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
SUBSTANTIAL INDEBTEDNESS; ABILITY TO SERVICE DEBT
As of March 31, 1998, as adjusted for the offering of the Original Notes
and application of the net proceeds therefrom, the Company would have had
approximately $2.4 million of indebtedness outstanding (other than the Notes),
consisting of capitalized lease obligations and other equipment financing. The
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<PAGE> 17
accretion of original issue discount on the Notes will cause an increase in
indebtedness of approximately $204.0 million by May 1, 2003. The Indenture
permits the incurrence of substantial amounts of additional indebtedness by the
Company and its subsidiaries. The Company may incur substantial additional
indebtedness in the future. The level of the Company's indebtedness could have
important consequences to Holders of the Notes, including the following: (i) the
debt service requirements of any additional indebtedness could make it more
difficult for the Company to make payments on the Notes; (ii) the ability of the
Company to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes may be
limited; (iii) in the future, the Company may be required to dedicate a
substantial portion of its cash flow from operations to the payment of principal
and interest on its indebtedness and other obligations; (iv) the Company's level
of indebtedness could in the future limit its flexibility in planning for, or
reacting to changes in, its business; and (v) the Company's level of
indebtedness in the future could make it more vulnerable in the event of a
downturn in its business. The Company has experienced earnings before interest,
taxes, depreciation and amortization ("EBITDA") losses since inception. For the
year ended December 31, 1997, and the quarter ended March 31, 1998, as adjusted
for the offering of the Original Notes and application of the net proceeds
therefrom, the Company's earnings before fixed charges would have been
insufficient to cover fixed charges by $27.6 million and $9.3 million,
respectively. There can be no assurance that the Company will be able to improve
its earnings before fixed charges or that the Company will be able to meet its
debt service obligations, including its obligations under the Notes. In the
event the Company's cash flow is inadequate to meet its obligations, the Company
could face substantial liquidity problems. If the Company is unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required
payments, or if the Company otherwise fails to comply with the various covenants
in its indebtedness, it would be in default under the terms thereof, which would
permit the holders of such indebtedness to accelerate the maturity of such
indebtedness and could cause defaults under other indebtedness of the Company.
Such defaults could result in a default on the Notes and could delay or preclude
payment of principal of, or interest on, the Notes. The ability of the Company
to meet its obligations will be dependent upon its future performance, which
will be subject to prevailing economic conditions and to financial, business and
other factors beyond the control of the Company.
ORIGINAL ISSUE DISCOUNT; POSSIBLE UNFAVORABLE TAX AND OTHER LEGAL CONSEQUENCES
FOR HOLDER OF NOTES
The Original Notes were, and the Exchange Notes will be, sold at a
substantial discount from their principal amount at maturity. Although cash
interest will not accrue on the Notes prior to May 1, 2003, and there will be no
periodic payments of cash interest on the Notes prior to November 1, 2003,
original issue discount (the difference between the stated redemption price at
maturity and the issue price of the Notes) will accrue from the issue date of
the Original Notes. Original issue discount will be includible as interest
income periodically in a U.S. holder's gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments to which the income is
attributable. See "Certain Federal Income Tax Consequences." Prospective
investors should consult their tax advisors about the application of U.S.
federal income tax law, as well as any applicable state, local or foreign tax
laws. If a bankruptcy case were commenced by or against the Company under the
U.S. Bankruptcy Code after the issuance of the Notes, the claim of a holder of a
Note with respect to the principal amount thereof may be limited to an amount
equal to the sum of (i) the initial Accreted Value and (ii) that portion of the
original issue discount that is not deemed to constitute "unmatured interest'
for purposes of the U.S. Bankruptcy Code. Any original issue discount that was
not amortized as of any such bankruptcy filing would constitute "unmatured
interest."
POTENTIAL DEPENDENCE OF COMPANY ON SUBSIDIARIES FOR REPAYMENT OF NOTES
The Original Notes are, and the Exchange Notes will be, obligations of the
Company exclusively. The Company anticipates that in the future an increasing
portion of its operations will be conducted through direct and indirect
subsidiaries. The Company's cash flow and, consequently, its ability to service
its indebtedness, including the Notes, will therefore depend to some extent upon
the cash flow of its subsidiaries and the payment of funds by those subsidiaries
to the Company in the form of loans, dividends or otherwise. The subsidiaries
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether in the form of loans,
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dividends or otherwise. In addition, the Company's subsidiaries are likely to
become parties to financing arrangements, including secured financing
arrangements, and such financing arrangements may contain limitations on the
ability of such subsidiaries to pay dividends or to make loans or advances to
the Company. Because the Company's subsidiaries will not guarantee the payment
of the principal or interest on the Notes, any right of the Company to receive
assets of any of its subsidiaries upon liquidation or reorganization (and the
consequent right of holders of the Notes to participate in the distribution or
realize proceeds from those assets) will be effectively subordinated to the
claims of the creditors of any such subsidiary (including trade creditors and
holders of indebtedness, including subordinated indebtedness, of such
subsidiary), except if and to the extent the Company is itself a creditor of
such subsidiary, in which case the claims of the Company would nonetheless be
effectively subordinated to any security interests in the assets of the general
unsecured obligations of such subsidiary.
The Notes are unsecured and therefore will be effectively subordinated to
any secured indebtedness of the Company with respect to the assets securing such
indebtedness. The Indenture permits the Company and its subsidiaries to incur
indebtedness to finance, among other things, the acquisition of inventory,
equipment and real property and to finance working capital and capital
expenditures for its business and to secure such indebtedness. In the event of
bankruptcy, liquidation, dissolution, reorganization or similar proceedings with
respect to the Company, the holders of secured indebtedness will be entitled to
proceed against the collateral that secures such indebtedness, and to receive
proceeds from the sale and other distributions in respect of such collateral,
and such collateral will not be available for satisfaction of any amounts owed
under the Notes. In addition, to the extent such assets do not satisfy in full
the secured indebtedness, the holders of such indebtedness would have a claim
for any shortfall that would be pari passu (or effectively senior if such
indebtedness were issued by a subsidiary) with the Notes. Accordingly, there may
only be limited assets remaining to satisfy any claims of the holders of the
Notes upon an acceleration of the Notes.
FINANCIAL AND OPERATING RESTRICTIONS
Certain covenants contained in the Indenture impose operating and financial
restrictions on the Company and its Restricted Subsidiaries. Such restrictions
affect, and in certain cases significantly limit, among other things, the
ability of the Company or its Restricted Subsidiaries to incur indebtedness, pay
dividends, prepay subordinated indebtedness, repurchase capital stock, make
investments, create liens, engage in transactions with stockholders and
affiliates, sell assets and engage in mergers or consolidations. A default under
such indebtedness could result in an acceleration of the Notes, in which case
the holders of the Notes may not be paid in full.
RISKS ASSOCIATED WITH DOMAIN NAMES
The Company currently holds various Web domain names relating to its brand,
including the "Amazon.com" domain name. The acquisition and maintenance of
domain names generally is regulated by governmental agencies and their
designees. For example, in the United States, the National Science Foundation
has appointed Network Solutions, Inc. as the exclusive registrar for the ".com,"
".net" and ".org" generic top-level domains. The regulation of domain names in
the United States and in foreign countries is subject to change. Governing
bodies may establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, there can be no assurance that the Company will be able to acquire or
maintain relevant domain names in all countries in which it conducts business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. The
Company, therefore, may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of its
trademarks and other proprietary rights. Any such inability could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any domestic
or foreign governmental agency, other than regulations applicable to businesses
generally and laws or regulations directly applicable to
17
<PAGE> 19
access to online commerce. However, due to the increasing popularity and use of
the Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, pricing, content, copyrights, distribution
and characteristics and quality of products and services. Furthermore, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws that may impose additional burdens on
those companies conducting business online. The adoption of any additional laws
or regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for the Company's products and
services and increase the Company's cost of doing business, or otherwise have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. Moreover, the applicability to the Internet
and other online services of existing laws in various jurisdictions governing
issues such as property ownership, sales and other taxes, libel and personal
privacy is uncertain and may take years to resolve. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to the Company's business, or the application of
existing laws and regulations to the Internet and other online services could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
CONSEQUENCES OF FAILURE TO EXCHANGE
The issuance of the Exchange Notes in exchange for the Original Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Company of such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of Original
Notes desiring to tender such Original Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to the
tenders of Original Notes for exchange.
Original Notes that are not validly tendered will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof, and the Company will have no further
obligation to provide for the registration under the Securities Act of such
Original Notes. In addition, any holder of Original Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent that Original Notes are tendered in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Original Notes could be
adversely affected. Each broker or dealer that receives Exchange Notes for its
own account in exchange for Original Notes where such Exchange Notes were
acquired by such broker or dealer as a result of market-making activities or
other trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "The Exchange
Offer -- Consequences of Failure to Exchange" and "Plan of Distribution."
LACK OF PUBLIC MARKET
The Exchange Notes are a new issue of securities for which there is
currently no active trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or to seek approval for
quotation through any automated quotation system. Morgan Stanley has advised the
Company that it currently intends to make a market in the Exchange Notes;
however, it is not obligated to do so and any market-making activity may be
discontinued at any time without notice. Therefore, there can be no assurance
that an active trading market for the Exchange Notes will develop or as to the
liquidity of or the trading market for the Exchange Notes. If a trading market
does not develop, Holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market could cease to continue at any
time. If a trading market develops for the Exchange Notes, they may trade at a
discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities and other factors, including general
economic conditions and the Company's financial condition, performance and
prospects.
18
<PAGE> 20
USE OF PROCEEDS
The Exchange Offer is being effected to satisfy the Company's obligations
under the Original Notes, the Indenture and the Registration Rights Agreement
(as defined herein). The Company will not receive any cash proceeds from the
Exchange Offer. In consideration of issuing the Exchange Notes in the Exchange
Offer, the Company will receive an equal principal amount of Original Notes.
Original Notes that are properly tendered in the Exchange Offer and not validly
withdrawn will be accepted, canceled and retired and cannot be reissued.
The net proceeds from the sale of the Original Notes was approximately
$315.7 million after deducting selling commissions and transaction expenses. The
Company used approximately $75.0 million of such proceeds to retire the Senior
Loan (as defined herein) and expects to use the remaining net proceeds for
general corporate purposes, including working capital to fund anticipated
operating losses, the expansion of the Company's core business, investments in
new business segments and markets, including the Company's planned sales of
music products and international expansion, and capital expenditures. The
Company expects, if the opportunity arises, to use an unspecified portion of the
net proceeds to acquire or invest in complementary businesses, products and
technologies. From time to time, in the ordinary course of business, the Company
has and will continue to evaluate potential acquisitions of and investments in
such businesses, products or technologies.
On December 23, 1997, the Company borrowed $75.0 million pursuant to a
three-year senior secured term loan (the "Senior Loan"). The Senior Loan was
secured by a first priority lien on substantially all of the Company's assets.
The Company had the option to choose from the following interest rate options:
(i) a variable rate adjusted every one, two, three or six months at the
Company's option and based on the London Interbank Offered Rate plus 3.50% per
annum for the first six months of the Senior Loan and 4.00% thereafter or (ii) a
variable rate of interest based on the lender's Base Rate plus 1.50% per annum
for the first six months of the Senior Loan and 2.00% thereafter (10.00% at
December 31, 1997). As of March 31, 1998, $75.0 million aggregate principal
amount was outstanding with respect to the Senior Loan. The Company repaid the
Senior Loan in full with a portion of the net proceeds from the Offering on May
8, 1998.
RATIO OF EARNINGS TO FIXED CHARGES
The Company has incurred significant losses since inception, and as of
March 31, 1998 had an accumulated deficit of $42.9 million. To date, the Company
has not generated earnings sufficient to cover total fixed charges in any of its
fiscal years. For the year ended December 31, 1997, and the fiscal quarter ended
March 31, 1998, as adjusted for the offering of the Original Notes and
application of the net proceeds therefrom, the Company's earnings before fixed
charges would have been insufficient to cover fixed charges by $27.6 million and
$9.3 million, respectively. See "Risk Factors -- Limited Operating History;
Accumulated Deficit; Anticipated Losses" and " -- Unpredictability of Future
Revenues; Potential Fluctuations in Quarterly Operating Results; Seasonality"
and "Selected Financial Data."
19
<PAGE> 21
CAPITALIZATION
The following table sets forth (i) the actual cash and cash equivalents and
capitalization of the Company as of March 31, 1998 and (ii) such cash and cash
equivalents and capitalization as adjusted for the sale of the Original Notes
and application of the net proceeds therefrom.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
ACTUAL AS ADJUSTED
---------- --------------
(in thousands, except share
and per share data)
<S> <C> <C>
Cash and cash equivalents................................... $98,600 $339,307
======= ========
Long-term debt:
Senior Discount Notes due 2008............................ $ -- $325,987
Senior Loan............................................... 75,000 --
Other long-term debt, net of current portion(1)........... 1,702 1,702
Stockholders' equity:
Preferred stock, $0.01 par value per share; 10,000,000
shares authorized;
no shares issued and outstanding.......................... -- --
Common stock, $0.01 par value per share; 100,000,000 shares
authorized; 48,325,684 shares issued and outstanding,
actual and as adjusted(2)................................. 483 483
Additional paid-in capital.................................. 63,711 63,711
Deferred compensation....................................... (1,493) (1,493)
Accumulated deficit......................................... (42,874) (44,922)
------- --------
Total stockholders' equity........................ 19,827 17,779
------- --------
Total capitalization........................................ $96,529 $345,468
======= ========
</TABLE>
- ---------------
(1) Represents $1,521 under fixed asset financing agreements and $181 of capital
lease obligations.
(2) As adjusted for the Company's 2-for-1 stock split payable June 1, 1998.
20
<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 and
the Company's Annual Report on Form 10-K for the year ended December 31, 1997,
which are incorporated by reference herein. See "Incorporation of Documents by
Reference." The statement of operations data for the quarter ended March 31,
1998 and the balance sheet data at March 31, 1998, with the exception of the
other operating data, are derived from financial statements of the Company,
which are included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998, which is incorporated by reference herein. See
"Incorporation of Documents by Reference." The statement of operations data for
each of the years in the three-year period ended December 31, 1997 and the
balance sheet data at December 31, 1997 and 1996, with the exception of the
other operating data, are derived from financial statements of the Company,
which have been audited by Ernst & Young LLP, independent auditors, and are
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997, which is incorporated by reference herein. See "Incorporation of
Documents by Reference." The statement of operations data for the period from
July 5, 1994 (inception) to December 31, 1994 and the balance sheet data at
December 31, 1995 and 1994, with the exception of the other operating data, are
derived from the financial statements of the Company which were also audited by
Ernst & Young LLP, and which are included in the Company's Registration
Statement on Form S-1 (Registration No. 333-23795), dated May 15, 1997. The
historical results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
FOR THE PERIOD
THREE FROM
MONTHS JULY 5, 1994
ENDED YEAR ENDED DECEMBER 31, (INCEPTION)
MARCH 31, --------------------------- TO DECEMBER 31,
1998 1997 1996 1995 1994
----------- -------- ------- ------ ---------------
(unaudited) (in thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 87,375 $147,758 $15,746 $ 511 $ --
Cost of sales.............................. 68,054 118,945 12,287 409 --
-------- -------- ------- ------ ------
Gross profit............................... 19,321 28,813 3,459 102 --
Operating expenses:
Marketing and sales...................... 19,503 38,964 6,090 200 --
Product development...................... 6,729 12,485 2,313 171 38
General and administrative............... 1,963 6,573 1,035 35 14
-------- -------- ------- ------ ------
Total operating expenses......... 28,195 58,022 9,438 406 52
-------- -------- ------- ------ ------
Loss from operations....................... (8,874) (29,209) (5,979) (304) (52)
Interest income............................ 1,640 1,898 202 1 --
Interest expense........................... (2,025) (279) -- -- --
-------- -------- ------- ------ ------
Net loss................................... $ (9,259) $(27,590) $(5,777) $ (303) $ (52)
======== ======== ======= ====== ======
Basic and diluted loss per share(1)........ $ (0.20) $ (0.64) $ (0.16) $(0.01) $(0.00)
======== ======== ======= ====== ======
Shares used in computation of basic and
diluted loss per share(1)................ 46,622 43,302 37,088 28,788 35,460
======== ======== ======= ====== ======
OTHER OPERATING DATA:
Net cash provided by (used in) operating
activities............................... $ (6,555) $ 3,522 $(1,735) $ (232) $ (24)
Capital expenditures(2).................... 2,071 11,604 1,214 52 28
EBITDA(3).................................. (5,451) (22,633) (5,491) (284) (47)
Deficiency of earnings available to cover
fixed charges(4)......................... (9,259) (27,590) (5,777) (303) (52)
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
FOR THE PERIOD
THREE FROM
MONTHS JULY 5, 1994
ENDED YEAR ENDED DECEMBER 31, (INCEPTION)
MARCH 31, --------------------------- TO DECEMBER 31,
1998 1997 1996 1995 1994
----------- -------- ------- ------ ---------------
(unaudited) (in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 98,600 $109,810 $ 6,248 $ 996 $ 52
Working capital (deficiency)............... 84,415 93,517 2,270 920 (16)
Total assets............................... 145,007 149,006 8,271 1,084 76
Total debt................................. 77,386 78,202 -- -- --
Stockholders' equity....................... 19,827 28,486 3,401 977 8
</TABLE>
- ---------------
(1) As adjusted for the Company's 2-for-1 stock split payable June 1, 1998.
(2) Capital expenditures include assets acquired under capital leases.
(3) EBITDA is provided because it is a commonly accepted financial indicator
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance. EBITDA is presented to enhance the
understanding of the Company's operating results and is not intended to
represent cash flows or results of operations in accordance with generally
accepted accounting principles ("GAAP") for the periods indicated. EBITDA is
not a measurement under GAAP and is not necessarily comparable with
similarly titled measures of other companies. Net cash flows from operating
activities as determined using GAAP are also presented in Other Operating
Data.
(4) Earnings consist of income (loss) before provision for income taxes plus
fixed charges. Fixed charges consist of interest charges and amortization of
debt expense and discount or premium related to indebtedness, whether
expensed or capitalized, and that portion of rental expense the Company
believes to be representative of interest.
22
<PAGE> 24
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were initially issued and sold by the Company on May 8,
1998 (the "Closing Date") to Morgan Stanley, the Placement Agent thereof,
pursuant to a Placement Agreement, dated May 5, 1998 (the "Placement
Agreement"). The Placement Agent subsequently resold the Original Notes to
"qualified institutional buyers" in reliance on Rule 144A under the Securities
Act and to other institutional "accredited investors" within the meaning of Rule
501(a)(1), (2), (3), or (7) under the Securities Act. Pursuant to the Placement
Agreement, the Company and the Placement Agent entered into a Registration
Rights Agreement on May 8, 1998 (the "Registration Rights Agreement"). Pursuant
to the Registration Rights Agreement, the Company agreed to use commercially
reasonable efforts to consummate the Exchange Offer on or prior to November 8,
1998. A copy of the Registration Rights Agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part, and the
description of the terms of the Registration Rights Agreement is qualified in
its entirety by reference thereto. The Registration Statement of which this
Prospectus is a part is intended to satisfy the Company's obligations with
respect to the registration of the Original Notes in accordance with the terms
of the Registration Rights Agreement and the Indenture. Following the
consummation of the Exchange Offer, holders of Original Notes not validly
tendered in the Exchange Offer and holders of Exchange Notes will not have any
further registration rights (other than certain registration rights granted to
Morgan Stanley, as hereinafter indicated). In addition, holders of Original
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for Original Notes could be adversely
affected. See "Risk Factors -- Consequences of Failure to Exchange."
TERMS OF THE EXCHANGE OFFER
The Company intends the following terms to provide for the conduct of the
Exchange Offer in accordance with the provisions of the Registration Rights
Agreement, the Indenture, the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations of the Commission thereunder.
Upon the terms and subject to the conditions set forth in this Prospectus and in
the accompanying Letter of Transmittal, the Company will accept any and all
Original Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on , 1998, or such later time and date to which the
Exchange Offer is extended by the Company in its sole discretion, which time and
date, as indicated herein or as extended, is referred to herein as the
"Expiration Date." The Company will issue $1,000 principal amount at maturity of
Exchange Notes in exchange for each $1,000 principal amount at maturity of
Original Notes accepted in the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and thus will not bear restrictive legends
restricting their transfer pursuant to the Securities Act and (ii) the Exchange
Notes will not be subject to any covenant regarding registration under the
Securities Act, including any such rights under the Registration Rights
Agreement or the Indenture, which rights, in any event, will terminate with
respect to the Original Notes upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be issued under, and be entitled to the benefits of, the
Indenture, which also authorized the issuance of the Original Notes, such that
both the Exchange Notes and the Original Notes will be treated as a single class
of debt securities under the Indenture.
Holders of Original Notes that are accepted for exchange will not receive
accrued interest thereon at the time of the consummation of the Exchange Offer.
The Accreted Value of the Exchange Notes initially will be equal to the Accreted
Value of the Original Notes at the time of the consummation of the Exchange
Offer. From and after May 1, 2003, the Exchange Notes will bear interest, which
will be payable in cash, at a rate of 10% per annum on each May 1 and November
1, commencing November 1, 2003.
23
<PAGE> 25
As of the date of this Prospectus, $530,000,000 aggregate principal amount
at maturity of Original Notes was outstanding. There will be no fixed record
date for determining holders of the Original Notes entitled to participate in
the Exchange Offer.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof (oral
notice being promptly confirmed in writing) to The Bank of New York, as Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of the
Original Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indenture in connection with
the Exchange Offer.
Holders of Notes who tender Original Notes in the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXTENSION; AMENDMENTS
In order to extend the Exchange Offer, the Company must notify the Exchange
Agent of any extension by oral or written notice (oral notice being promptly
confirmed in writing) and will make public announcement thereof, prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Expiration Date, (iii) if any
of the conditions set forth below under "-- Conditions of the Exchange Offer
shall not have been satisfied, to terminate the Exchange Offer, or (iv) to amend
the terms of the Exchange Offer in any manner, by giving oral or written notice
(oral notice being promptly confirmed in writing) of such delay, extension,
termination or amendment to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by a public announcement thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company promptly
will disclose such amendments by means of a prospectus supplement that will be
distributed to The Depository Trust Company ("DTC") and the Company will extend
the Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such
five-to-ten-business-day period.
Without limiting the manner in which the Company may choose to make a
public announcement of any delay, extension, termination or amendment of the
Exchange Offer, the Company shall not have an obligation to publish, advertise
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to the Expiration Date. In addition, (i) certificates for such Original Notes
must be received by the Exchange Agent along with the Letter of Transmittal,
(ii) a timely confirmation of book-entry transfer (a "Book-Entry Confirmation")
of such Original Notes, if such procedure is available, into the Exchange
Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under "-- Exchange
Agent" prior to the Expiration Date.
24
<PAGE> 26
The tender by a Holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such owner's name or obtain a properly
completed assignment from the registered Holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States unless the Original Notes tendered pursuant thereto are tendered
(i) by a registered Holder or (ii) for the account of an Eligible Institution
(as defined below).
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Original Notes listed therein, such Original Notes must
be endorsed or accompanied by a properly completed bond power signed by such
registered Holder as such registered Holder's name appears on such Original
Notes.
If the Letter of Transmittal or any Original Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Original Notes, none of the
Company, the Exchange Agent, or any other person shall be under any duty to give
such notification or incur any liability for failure to give such notification.
Tenders of Original Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Original Notes received
by the Exchange Agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
25
<PAGE> 27
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "-- Conditions of
the Exchange Offer," to terminate the Exchange Offer and, to the extent
permitted by applicable law, purchase Original Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers could differ from the terms of the Exchange Offer.
By tendering, each Holder will represent to the Company (on its own behalf
and on behalf of any beneficial owner of any Original Note subject to the Letter
of Transmittal) that, among other things, (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such Exchange Notes, (ii) neither the Holder
nor any such other person is participating in or intends to participate in a
distribution of such Exchange Notes, (iii) neither the Holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, and (iv) neither the Holder nor any such
other person is an Affiliate of the Company.
In all cases, issuance of Exchange Notes that are accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of certificates for such Original Notes or a timely Book-Entry
Confirmation of such Original Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed duly executed Letter of
Transmittal and all other required documents. If any tendered Original Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Original Notes are submitted for a greater principal amount
than the Holder desires to exchange, such unaccepted or nonexchanged Original
Notes will be returned without expense to the tendering Holder thereof (or, in
the case of Original Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such nonexchanged Original Notes will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Original Notes by causing the
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Original Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "-- Exchange Agent" on or prior to the Expiration Date or
the guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if
(a) the tender is made through an a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible Guarantor Institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Original Notes and the principal amount of Original Notes tendered
stating that the tender is being made
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<PAGE> 28
thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Original Notes
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Original Notes in proper form for transfer and other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Original Notes to be withdrawn (the
"Depositor"), (ii) identify the Original Notes to be withdrawn (including the
certificate number), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Original Notes
were tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Original Notes register the transfer of such Original Notes in the name of the
person withdrawing the tender, and (iv) specify the name in which any such
Original Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Original Notes so withdrawn will
be deemed not to have been validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Original
Notes so withdrawn are validly retendered. Any Original Notes which have been
tendered but which are not accepted for payment will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Original Notes may be retendered by following one of the procedures described
above under "-- Procedures for Tendering" at any time prior to the Expiration
Date.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Original Notes. See "-- Conditions of the Exchange Offer." For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Original Notes for exchange when, as and if the Company has given oral
or written notice thereof (oral notice being promptly confirmed in writing) to
the Exchange Agent.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Original
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Original Notes if, in the sole judgment of the Company, the
Exchange Offer would violate any law, statute, rule or regulation or an
interpretation thereof of the Staff of the Commission. If the Company determines
in its sole discretion that this condition is not satisfied, the Company may (i)
refuse to accept any Original Notes and return all tendered Original Notes to
the tendering Holders, (ii) extend the Exchange Offer and retain all Original
Notes tendered prior to the Expiration Date, subject, however, to the rights of
Holders to withdraw such Original Notes (see "-- Withdrawal of Tenders") or
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<PAGE> 29
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all validly tendered Original Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered Holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such
five-to-ten-business-day period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests of or Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
BY REGISTERED OR CERTIFIED MAIL, BY OVERNIGHT COURIER OR BY HAND:
The Bank of New York
Reorganization Section
101 Barclay Street, Floor 7 East
New York, NY 10286
Attention:
or
BY FACSIMILE:
The Bank of New York
Attention:
Facsimile Number: (212) 815-6339
In addition, Letters of Transmittal and any other required documentation
should be sent to the Exchange Agent at the address set forth above, except
where facsimile transmission is specifically authorized (e.g., withdrawals and
Notices of Guaranteed Delivery). DELIVERY OF THE LETTER OF TRANSMITTAL TO AN
ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be paid by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptance of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
its reasonable out-of-pocket expenses in connection therewith.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Original Notes pursuant to the Exchange Offer. If, however, a transfer
tax is imposed for any reason other than the exchange of the Original Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to the tendering Holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Original Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Original Notes may be resold only (i)
to the Company or any subsidiary thereof, (ii) so long as the Original Notes are
eligible
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<PAGE> 30
for resale pursuant to Rule 144A, to a person whom the seller reasonably
believes is a "qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act, purchasing for its own account or for the account of a
"qualified institutional buyer" to whom notice is given that the resale, pledge
or other transfer is being made in reliance on Rule 144A, (iii) outside the
United States to non-U.S. persons in an offshore transaction in compliance with
Rule 904 under the Securities Act, (iv) pursuant to an exemption from
registration in accordance with Rule 144 (if available), (v) to an institutional
"accredited investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) of
the Securities Act) that, prior to such transfer, furnishes to the Trustee a
signed letter containing certain representations and agreements relating to the
registration of transfer of the Original Notes and, if such transfer is in
respect of a principal amount of Original Notes at the time of transfer of less
than $100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act, and (vi) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United States
and subject to certain requirements of the Trustee being met. The liquidity of
the Original Notes could be adversely affected by the Exchange Offer. See "Risk
Factors -- Consequences of Failure to Exchange." Following the consummation of
the Exchange Offer, holders of the Original Notes will have no further
registration rights under the Registration Rights Agreement (other than certain
registration rights granted to Morgan Stanley).
RESALES OF THE EXCHANGE NOTES
Based on an interpretation by the Staff of the Commission set forth in
certain no-action letters issued to third parties, the Company believes that the
Exchange Notes or interests therein issued pursuant to the Exchange Offer in
exchange for Original Notes or interests therein may be offered for resale,
resold and otherwise transferred by a Holder thereof (other than (i) a
broker-dealer who purchases such Exchange Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) a person that is an Affiliate of the Company) without
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that the Holder is acquiring the Exchange Notes in the
ordinary course of its business and not participating, and had no arrangement or
understanding with any person to participate, in the distribution of Exchange
Notes. Each broker-dealer that receives the Exchange Notes for its own account
in exchange for the Original Notes must represent that the Original Notes
tendered in the Exchange Offer were acquired by such broker-dealer as a result
of market-making activities or other trading activities and must acknowledge
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time or time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Original Notes where such Original Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
intends to make this Prospectus (as it may be amended or supplemented) available
to any broker-dealer for use in connection with any such resale for a period of
180 days after the last Exchange Date. See "Plan of Distribution."
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The Exchange Notes will be recorded at the same
carrying value as the Original Notes, as reflected in the Company's accounting
records on the date of the exchange. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes are to be issued under the Indenture. A copy of the
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein, and those
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<PAGE> 31
terms made a part thereof by reference to the Trust Indenture Act of 1939, as
amended. Whenever particular defined terms of the Indenture not otherwise
defined herein are referred to, such defined terms are incorporated herein by
reference. For definitions of certain capitalized terms used in the following
summary, see "-- Certain Definitions."
GENERAL
The Notes are senior unsecured obligations of the Company, limited to
$530.0 million aggregate principal amount at maturity, and will mature on May 1,
2008. Although for federal income tax purposes a significant amount of original
issue discount, taxable as ordinary income, will be recognized by a Holder as
such discount accrues from the issue date of the Notes, no interest will be
payable on the Notes prior to November 1, 2003. Interest on the Notes will
accrue at the rate shown on the front cover of this Prospectus beginning May 1,
2003 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semiannually (to Holders of record at the close of
business on the April 15 or October 15 immediately preceding the Interest
Payment Date) on May 1 and November 1 of each year, commencing November 1, 2003.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee at 101 Barclay Street, New York,
New York 10286); provided that, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their addresses as they
appear in the Security Register.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after May 1, 2003 and prior to maturity,
upon not less than 30 nor more than 60 days' prior notice mailed by first-class
mail to each Holder's last address as it appears in the Security Register, at
the Redemption Prices (expressed in percentages of principal amount at maturity)
set forth below, plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is prior to the Redemption Date to receive interest due on an Interest
Payment Date), if redeemed during the 12-month period commencing May 1 of the
years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003................................................. 105.000%
2004................................................. 103.333
2005................................................. 101.667
2006 and thereafter.................................. 100.000
</TABLE>
In addition, at any time prior to May 1, 2001, the Company may redeem up to
35% of the aggregate principal amount at maturity of the Notes with the Net Cash
Proceeds of one or more sales of Capital Stock of the Company (other than
Disqualified Stock), at any time as a whole or from time to time in part, at a
Redemption Price (expressed as a percentage of Accreted Value on the Redemption
Date) of 110%; provided that at least 65% of the aggregate principal amount at
maturity of the Notes originally issued on the Closing Date remains outstanding
after each such redemption and notice of any such redemption is mailed within 60
days after the related sale of Capital Stock.
At any time prior to May 1, 2003, the Company may redeem all, but not less
than all, of the Notes at a Redemption Price equal to the sum of (i) the
Accreted Value on the Redemption Date, plus (ii) accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date), plus (iii) the Applicable Premium.
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the Accreted Value of such Note on such Redemption
Date and (ii) the excess of (A) the present value at such Redemption Date of the
redemption price of such Note on May 1, 2003 (such redemption price being
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<PAGE> 32
that described in the first paragraph of this "Optional Redemption" section),
computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (B) the Accreted Value of such Note on such Redemption Date. Calculation of
the Applicable Premium will be made by the Company or on behalf of the Company
by such Person as the Company shall designate; provided that such calculation
shall not be a duty or obligation of the Trustee.
"Treasury Rate" means the yield to maturity at the time of computation of
U.S. Treasury securities with a constant maturity (as compiled and published in
the most recent Federal Reserve Statistical Release H.15(519) that has become
publicly available at least two Business Days prior to the Redemption Date (or,
if such Statistical Release is no longer published, any publicly available
source or similar market data)) most nearly equal to the period from the
Redemption Date to May 1, 2003; provided, however, that if the period from the
Redemption Date to May 1, 2003 is not equal to the constant maturity of the U.S.
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of U.S. securities for which such
yields are given, except that if the period from the Redemption Date to May 1,
2003 is less than one year, the weekly average yield on actually traded U.S.
Treasury securities adjusted to a constant maturity of one year shall be used.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided that no Note of $1,000 in principal amount at
maturity or less shall be redeemed in part. If any Note is to be redeemed in
part only, the notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the Original Note.
SINKING FUND
There will be no sinking fund payments for the Notes.
REGISTRATION RIGHTS
There will be no registration rights with respect to the Exchange Notes,
except that the Company has granted certain registration rights to Morgan
Stanley and that certain brokers or dealers registered under the Exchange Act
who may be deemed to be "underwriters" with respect to the Exchange Notes may be
entitled to continuing registration rights which the Company granted with
respect to the Exchange Notes. See "Plan of Distribution."
RANKING
The Notes are senior unsecured indebtedness of the Company ranking pari
passu with the Company's existing and future unsubordinated, unsecured
indebtedness and senior in right of payment to all subordinated indebtedness of
the Company. The Notes will be effectively subordinated to all secured
indebtedness and to all existing and future liabilities of the Company's
subsidiaries, including trade payables. As of March 31, 1998, as adjusted for
the offering of the Original Notes and application of the net proceeds
therefrom, the Company would have had approximately $2.4 million of indebtedness
outstanding (other than the Notes), all of which would have been secured
indebtedness. In addition, the Notes will be effectively subordinated to all
existing and future liabilities (including trade payables) of the Company's
subsidiaries.
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<PAGE> 33
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of any other capitalized term used herein for which
no definition is provided.
"Accreted Value" means, for any Specified Date, the amount provided below
for each $1,000 principal amount at maturity of Notes:
(i) if the Specified Date occurs on one of the following dates (each a
"Semiannual Accrual Date"), the Accreted Value will equal the amount set
forth below for such Semiannual Accrual Date:
<TABLE>
<CAPTION>
SEMIANNUAL ACCRUAL DATE ACCRETED VALUE
----------------------- --------------
<S> <C>
November 1, 1998....................................... $ 644.60
May 1, 1999............................................ $ 676.83
November 1, 1999....................................... $ 710.68
May 1, 2000............................................ $ 746.21
November 1, 2000....................................... $ 783.52
May 1, 2001............................................ $ 822.70
November 1, 2001....................................... $ 863.83
May 1, 2002............................................ $ 907.02
November 1, 2002....................................... $ 952.38
May 1, 2003............................................ $1,000.00
</TABLE>
(ii) if the Specified Date occurs before the first Semiannual Accrual
Date, the Accreted Value will equal the sum of (a) $615.07 and (b) an
amount equal to the product of (1) the Accreted Value for the first
Semiannual Accrual Date less $615.07 multiplied by (2) a fraction, the
numerator of which is the number of days from the Closing Date to the
Specified Date, using a 360-day year of twelve 30-day months, and the
denominator of which is the number of days from the Closing Date to the
first Semiannual Accrual Date, using a 360-day year of twelve 30-day
months;
(iii) if the Specified Date occurs between two Semiannual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semiannual Accrual Date immediately preceding such Specified Date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semiannual Accrual Date less the Accreted Value for
the immediately preceding Semiannual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the immediately
preceding Semiannual Accrual Date to the Specified Date, using a 360-day
year of twelve 30-day months, and the denominator of which is 180; or
(iv) if the Specified Date occurs after the last Semiannual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition and not Incurred in connection with, or in anticipation of,
such Person becoming a Restricted Subsidiary or such Asset Acquisition.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Subsidiaries for such period determined
in conformity with GAAP; provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication): (i) the net
income (or loss) of any Person that is not a Restricted Subsidiary, except to
the extent of the amount of dividends or other distributions actually paid to
the Company or any of its Restricted Subsidiaries by such Person during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below (and, in such case,
except to the extent includible pursuant to clause (i) above), the net income
(or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all
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<PAGE> 34
of the property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; provided that, for the purpose of
determining whether a Restricted Subsidiary may Incur Indebtedness under the
first paragraph of section (a) under the "Limitation on Indebtedness" covenant
only, the total net income of such Restricted Subsidiary will be included; (iv)
any gains or losses (on an after-tax basis) attributable to Asset Sales; (v)
except for purposes of calculating the amount of Restricted Payments that may be
made pursuant to clause (C) of the first paragraph of the "Limitation on
Restricted Payments" covenant described below, any amount paid or accrued as
dividends on Preferred Stock of the Company or any Restricted Subsidiary owned
by Persons other than the Company and any of its Restricted Subsidiaries; (vi)
all extraordinary gains and extraordinary losses; and (vii) any compensation
expense paid or payable solely with Capital Stock (other than Disqualified
Stock) of the Company or any options, warrants or other rights to acquire
Capital Stock (other than Disqualified Stock) of the Company.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person or the acquisition of Capital Stock
of any other Person, in each case pursuant to which such Person shall become a
Restricted Subsidiary or shall be merged into or consolidated with the Company
or any of its Restricted Subsidiaries; provided that such Person's business or
the business or assets acquired are related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock or other
Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted
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<PAGE> 35
Subsidiary and, in each case, that is not governed by the provisions of the
Indenture applicable to mergers, consolidations and sales of all or
substantially all of the assets of the Company; provided that "Asset Sale" shall
not include (a) sales or other dispositions of inventory, receivables and other
current assets, (b) sales, transfers or other dispositions of assets
constituting a Restricted Payment permitted to be made under the "Limitation on
Restricted Payments" covenant, (c) sales, transfers or other dispositions of
assets with a fair market value (as certified in an Officers' Certificate) not
in excess of $10 million in any transaction or series of related transactions,
(d) sales, transfers or other dispositions of obsolete or damaged assets, (e)
sales of Capital Stock of a New Business Subsidiary if the proceeds therefrom
are used in the business of such New Business Subsidiary or (f) sales or other
dispositions of assets for consideration at least equal to the fair market value
of the assets sold or disposed of, to the extent that the consideration received
consists of (x) property or assets (other than current assets) of a nature or
type or that are used in a business (or Capital Stock or Indebtedness of a
company having property or assets of a nature or type or used in a business)
similar or related to the nature or type of the property and assets of, or
business of, the Company and its Restricted Subsidiaries existing on the date of
such sale or other disposition or (y) Capital Stock or Indebtedness of the
Person to whom such assets are sold or disposed.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the total voting power of the Voting Stock of the Company on a
fully diluted basis and such ownership represents a greater percentage of the
total voting power of the Voting Stock of the Company, on a fully diluted basis,
than is beneficially owned by the Existing Stockholders on such date; or (ii)
individuals who on the Closing Date constitute the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination by the Board of Directors for election by the Company's stockholders
was approved by a vote of at least a majority of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's equity, other than Preferred Stock of such
Person, whether outstanding on the Closing Date or issued thereafter, including,
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income, (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and nonrecurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other noncash items reducing Adjusted Consolidated Net Income
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(other than items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less all noncash items
increasing Adjusted Consolidated Net Income, all as determined on a consolidated
basis for the Company and its Restricted Subsidiaries in conformity with GAAP;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the percentage ownership interest in the income of such
Restricted Subsidiary not owned on the last day of such period by the Company or
any of its Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; and the net costs associated with Interest Rate Agreements),
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries and all but the principal component of rentals in
respect of Capitalized Lease Obligations, in each case paid, accrued or
scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof); and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Notes, all
as determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission (such four-fiscal-quarter-period being the "Four-Quarter
Period"); provided that, in making the foregoing calculation, (A) pro forma
effect shall be given to any Indebtedness that is to be Incurred or repaid on
the Transaction Date; (B) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the application of
proceeds of any Asset Disposition) that occur during the period beginning on the
first day of the Four-Quarter Period and ending on the Transaction Date (the
"Reference Period"), as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date and for which financial information
is available of the Person, or division or line of business of the Person, that
is acquired or disposed of.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the
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<PAGE> 37
Notes or (iii) convertible into or exchangeable for Capital Stock referred to in
clause (i) or (ii) above or Indebtedness having a scheduled maturity prior to
the Stated Maturity of the Notes; provided that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
Stated Maturity of the Notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of Notes Upon a Change
of Control" covenants described below and such Capital Stock, or the agreements
or instruments governing the redemption rights thereof, specifically provides
that such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the "Limitation on Asset Sales" covenant and
"-- Repurchase of Notes Upon a Change of Control" described below.
"Existing Stockholders" means Jeffrey P. Bezos, members of his immediate
family and their transferees by will or intestacy, trusts for the benefit of any
of them or any of their lineal descendants and any of their estates; L. John
Doerr; Kleiner Perkins Caulfield & Byers; and any Affiliate of any of the
foregoing.
"Fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution; provided that, for purposes of clause (vii) of
the second paragraph of the "Limitation on Indebtedness" covenant, (x) the fair
market value of any security registered under the Exchange Act shall be the
average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the sale of Capital Stock and (y)
in the event the aggregate fair market value of any other property (other than
cash or cash equivalents) received by the Company exceeds (i) $10.0 million, the
fair market value of such property shall be determined by the directors of the
Company who are not officers or employees of the Company, whose determination
shall be conclusive and evidenced by a Board Resolution, and (ii) $100.0
million, the fair market value of such property shall be determined by a
nationally recognized accounting or investment banking firm and set forth in
their written opinion, which shall be delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
as in effect as of the Closing Date, including, without limitation, those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
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"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a person becoming a
Restricted Subsidiary; provided that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds, Notes,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, (B) that money borrowed and set
aside at the time of the Incurrence of any Indebtedness in order to prefund the
payment of the interest on such Indebtedness shall not be deemed to be
"Indebtedness" so long as such money is held to secure the payment of such
interest and (C) that Indebtedness shall not include any liability for federal,
state, local or other taxes.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, Notes or other similar
instruments issued by, such Person and shall include (i) the designation of a
Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair market
value of the Capital Stock (or any other Investment), held by the Company or any
of its Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
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Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale, and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"New Business Subsidiary" means a Restricted Subsidiary of the Company
whose primary business and operations do not include any of the U.S.-based book
sales and distribution business and operations conducted by the Company and its
Restricted Subsidiaries on the Closing Date.
"Offer to Purchase" means an offer by the Company to purchase Notes from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest (or original issue discount) pursuant to its terms; (iv) that, unless
the Company defaults in the payment of the purchase price, any Note accepted for
payment pursuant to the Offer to Purchase shall cease to accrue interest (or
original issue discount) on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Payment Date, a telegram, facsimile transmission or
letter setting forth the name of such Holder, the principal amount at maturity
of Notes delivered for purchase and a statement that such Holder is withdrawing
its election to have such Notes purchased; and (vii) that Holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered;
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provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof. On the
Payment Date, the Company shall (i) accept for payment on a pro rata basis Notes
or portions thereof validly tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount at maturity to any unpurchased portion of the Note surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount at maturity of $1,000 or an integral multiple thereof. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business or the
assets to be transferred or conveyed are related, ancillary or complementary to
the businesses of the Company and its Restricted Subsidiaries on the date of
such Investment; (ii) Temporary Cash Investments; (iii) payroll, travel,
relocation and similar advances to cover matters that are expected at the time
of such advances ultimately to be treated as expenses in accordance with GAAP;
(iv) stock, obligations or securities received (x) in satisfaction of judgments
or (y) in connection with the sale or disposition of a Person, assets or
business; (v) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and worker's compensation, performance and other
similar deposits; (vi) Interest Rate Agreements and Currency Agreements designed
solely to protect the Company or its Restricted Subsidiaries against
fluctuations in interest rates or foreign currency exchange rates; (vii)
Strategic Investments; (viii) loans or advances to officers or employees of the
Company or any Restricted Subsidiary (other than loans or advances made pursuant
to clause (ix) below) that do not in the aggregate exceed $10.0 million at any
time outstanding; and (ix) loans or advances to Persons who own Indebtedness or
Capital Stock (other than any Affiliate of the Company or any Restricted
Subsidiary) of any Person if such loans or advances are made as part of, or in
connection with, a transaction pursuant to which such person becomes a
Restricted Subsidiary of the Company or any other Restricted Subsidiary or
substantially all of the assets of such Person are acquired by the Company or
any Restricted Subsidiary, in an aggregate amount not to exceed 20% of the total
consideration paid in connection with such acquisition. Any such loans or
advances made within three months after completion of such transaction shall be
deemed to be part of or in connection with such transaction for purposes of this
definition.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its
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Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Limitation on Indebtedness" covenant described
below, (1) to finance the cost (including the cost of design, development,
acquisition, construction, installation, improvement, transportation or
integration) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost, and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired;
(xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary that does not give rise to an Event of Default; (xiv)
Liens securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv ) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (xvi) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are within the
general parameters customary in the industry and incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate Agreements
and Currency Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed solely to protect
the Company or any of its Restricted Subsidiaries from fluctuations in interest
rates, currencies or the price of commodities; (xvii) Liens arising out of
conditional sale, title retention, consignment or similar arrangements for the
sale of goods entered into by the Company or any of its Restricted Subsidiaries
in the ordinary course of business in accordance with the past practices of the
Company and its Restricted Subsidiaries prior to the Closing Date; (xviii) Liens
on or sales of receivables; (xix) Liens that secure Indebtedness Incurred under
clause (ix) or (x) of the second paragraph of part (a) of the "Limitation on
Indebtedness" covenant; and (xx) Liens that secure Indebtedness with an
aggregate principal amount not in excess of $100.0 million at any time
outstanding.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or nonvoting) of such Person's preferred or preference equity, whether
outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of such preferred stock or preference stock.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Services and its successors.
"Specified Date" means any Redemption Date, any Payment Date for an Offer
to Purchase or any date on which the Notes first become due and payable after an
Event of Default.
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"Stated Maturity" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Strategic Investment" means an Investment in any Person (other than an
Unrestricted Subsidiary of the Company) whose primary business is related,
ancillary or complementary to, and such Investment is determined in good faith
by the Board of Directors (or senior officers of the Company to whom the Board
of Directors has duly delegated the authority to make such a determination),
whose determination shall be conclusive and evidenced by a Board Resolution, to
promote or significantly benefit the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company
Incurred to finance an Asset Acquisition which Indebtedness by its terms, or by
the terms of any agreement or instrument pursuant to which such Indebtedness is
Incurred, (i) is expressly made subordinate in right of payment to the Notes and
(ii) provides that no payment of principal or premium, or interest on or any
other payment with respect to, such Indebtedness may be made prior to the
payment in full of all of the Company's obligations under the Notes; provided
that such Indebtedness may provide for and be repaid at any time from the
proceeds of a capital contribution or the sale of Capital Stock (other than
Disqualified Stock) of the Company after the Incurrence of such Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States or any agency thereof or obligations fully and
unconditionally guaranteed by the United States or any agency thereof, (ii) time
deposit accounts, certificates of deposit and money market deposits maturing
within one year of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States, any state
thereof or any foreign country recognized by the United States , and which bank
or trust company has capital, surplus and undivided profits aggregating in
excess of $50.0 million (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) commercial paper, maturing
not more than two years after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States, any state thereof or any foreign country recognized
by the United States with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, (v) securities with maturities of six months or less from the
date of acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States, or by any political subdivision
or taxing authority thereof, and rated at least "A" by S&P or Moody's, (vi) with
respect to security or collateral required to be provided by the Company under
the terms of any lease or in connection with any capital expenditure,
Indebtedness issued by any corporation (other than the Company or an Affiliate
of the Company) incorporated and in existence in any state of the United States
or the District of Columbia and having a rating, at the time as of which such
Investment is made, of "AA" (or higher) according to S&P or "Aa1" (or higher)
according to Moody's, and (vii) funds that do not utilize Indebtedness in order
to make investments and that invest solely in any of the Investments described
in clauses (i) through (vi) above.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
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"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (i) the Subsidiary to be so designated has total
assets of $1,000 or less or (ii) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have been Incurred)
for all purposes of the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
The Indenture contains, among others, the following covenants.
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); provided that (x) the Company may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be greater than zero and less than 6:1 and (y) any Restricted
Subsidiary may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be greater than zero and less than 4:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $300.0 million; (ii) Indebtedness owed (A) to the Company evidenced by a
promissory note or (B) to any of its Restricted Subsidiaries; provided that any
event resulting in any such Restricted Subsidiary's ceasing to be a Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than
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to the Company or another Restricted Subsidiary) shall be deemed, in each case,
to constitute an Incurrence of such Indebtedness not permitted by this clause
(ii); (iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness (other than
Indebtedness Incurred under clause (i), (ii), (iv), (vi), (vii), (ix), (x) or
(xii) of this paragraph; it being understood that Indebtedness Incurred pursuant
to any of such clauses may be refinanced or refunded pursuant to such clauses)
and any refinancings thereof in an amount not to exceed the amount so refinanced
or refunded (plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the Notes or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Notes shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is pari passu
with the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is outstanding,
is expressly made pari passu with, or subordinate in right of payment to, the
remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated
in right of payment to the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made subordinate in right of payment
to the Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes, and (C) such new Indebtedness, determined as of the
date of Incurrence of such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and the Average Life
of such new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and provided further that in no event
may Indebtedness of the Company be refinanced by means of any Indebtedness of
any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate Agreements;
provided that such agreements (x) are designed solely to protect the Company or
its Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (y) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; or (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition), in a
principal amount not to exceed the gross proceeds actually received by the
Company or any Restricted Subsidiary in connection with such disposition; (v)
Indebtedness of the Company, to the extent the net proceeds thereof are promptly
(A) used to purchase Notes tendered in an Offer to Purchase made as a result of
a Change of Control or (B) deposited to defease the Notes as described below
under "-- Defeasance"; (vi) Guarantees of the Notes, Guarantees of Indebtedness
of Restricted Subsidiaries by the Company or by any Restricted Subsidiary if the
Restricted Subsidiary is permitted to Incur such Indebtedness under the
Indenture and Guarantees of Indebtedness of the Company by any Restricted
Subsidiary provided the Guarantee of such Indebtedness is permitted by and made
in accordance with the "Limitation on Issuances of Guarantees by Restricted
Subsidiaries" covenant described below; (vii) Indebtedness of the Company not to
exceed, at any one time outstanding, two times (A) the Net Cash Proceeds
received by the Company after the Closing Date as a capital contribution or from
the issuance and sale of its Capital Stock (other than Disqualified Stock) to a
Person that is not a Subsidiary of the Company, to the extent (I) such capital
contribution or Net Cash Proceeds have not been used pursuant to clause (C)(2)
of the first paragraph or clause (iii), (iv), (vi) or (vii) of the second
paragraph of the "Limitation on Restricted Payments" covenant described below to
make a Restricted Payment; and (II) if such capital contribution or Net Cash
Proceeds are used to consummate a transaction pursuant to which the Company
Incurs Acquired Indebtedness, the amount of such Net Cash Proceeds exceeds
one-half of the amount of Acquired Indebtedness so Incurred and (B) 80% of the
fair market value of property (other than cash and cash equivalents) received by
the Company after the Closing Date from the sale of its Capital Stock (other
than Disqualified Stock) to a Person that is not a Subsidiary of the Company, to
the extent (I) such capital contribution or sale of Capital Stock has not been
used pursuant to clause (iii), (iv), (vi) or (vii) of the second paragraph of
the "Limitation on Restricted Payments" covenant described below to make a
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Restricted Payment and (II) if such capital contribution or Capital Stock is
used to consummate a transaction pursuant to which the Company Incurs Acquired
Indebtedness, 80% of the fair market value of the property received exceeds
one-half of the amount of Acquired Indebtedness so Incurred; provided that such
Indebtedness (other than Indebtedness Incurred under a working capital or
revolving credit facility) does not mature prior to the Stated Maturity of the
Notes and has an Average Life longer than the Notes; (viii) Acquired
Indebtedness; (ix) Indebtedness of the Company Incurred to finance capital
expenditures of the Company or any Restricted Subsidiary in an aggregate
principal amount not to exceed $100.0 million in any fiscal year; provided that
amounts not so Incurred in any fiscal year may be accumulated and Incurred by
the Company in any subsequent fiscal year; (x) Indebtedness of the Company
Incurred to finance seasonal or working capital requirements of the Company and
its Restricted Subsidiaries; (xi) Strategic Subordinated Indebtedness; and (xii)
subordinated Indebtedness of the Company (in addition to Indebtedness permitted
under clauses (i) through (xi) above) in an aggregate principal amount
outstanding at any time not to exceed $300.0 million.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded, with respect to any outstanding
Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included and (2) any
Liens granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders) held by Persons other
than the Company or any of its Restricted Subsidiaries, (ii) purchase, redeem,
retire or otherwise acquire for value any shares of Capital Stock of (A) the
Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Notes, or (iv) make any Investment, other than a Permitted Investment, in any
Person (such payments or any other actions described in clauses (i) through (iv)
above being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment, (A) a Default or Event of
Default shall have occurred and be continuing, (B) the Company could not Incur
at least $1.00 of Indebtedness under the first paragraph of the "Limitation on
Indebtedness" covenant, or (C) the aggregate amount of all Restricted Payments
(the amount, if other than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of (1) 50% of the
aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of the amount of such loss)
(determined by excluding income resulting from transfers of assets by the
Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on
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a cumulative basis during the period (taken as one accounting period) beginning
on the first day of the fiscal quarter immediately following the Closing Date
and ending on the last day of the last fiscal quarter preceding the Transaction
Date for which reports have been filed with the Commission, plus (2) the
aggregate Net Cash Proceeds received by the Company after the Closing Date from
the issuance and sale permitted by the Indenture of its Capital Stock (other
than Disqualified Stock) to a Person who is not a Subsidiary of the Company,
including an issuance or sale permitted by the Indenture of Indebtedness of the
Company for cash subsequent to the Closing Date upon the conversion of such
Indebtedness into Capital Stock (other than Disqualified Stock) of the Company,
or from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Disqualified Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes), in each case except to the
extent such Net Cash Proceeds are used to Incur Indebtedness pursuant to clause
(vii) of the second paragraph under the "Limitation on Indebtedness" covenant,
plus (3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Restricted Subsidiary or
from the Net Cash Proceeds from the sale of any such Investment (except, in each
case, to the extent any such payment or proceeds are included in the calculation
of Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes,
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the "Limitation on Indebtedness" covenant; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company or a
Subsidiary of the Company (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a capital contribution
or a substantially concurrent offering of, shares of Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock); (iv) the making of any principal payment or the
repurchase, redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a capital contribution or a
substantially concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock); (v) payments or distributions, to dissenting
stockholders pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions of
the Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company; (vi) Investments in
any Person; provided that the aggregate amount of Investments made pursuant to
this clause (vi) does not exceed the sum of (a) $50.0 million, plus (b) the
amount of Net Cash Proceeds received by the Company after the Closing Date from
the sale of its Capital Stock (other than Disqualified Stock) to a Person who is
not a Subsidiary of the Company, except to the extent such Net Cash Proceeds are
used to Incur Indebtedness pursuant to clause (vii) under the "Limitation on
Indebtedness" covenant or to make Restricted Payments pursuant to clause (C)(2)
of the first paragraph, or clauses (iii) or (iv) of this paragraph, of this
"Limitation on Restricted Payments" covenant, plus (c) the net reduction in
Investments made pursuant to this clause (vi) resulting from distributions on or
repayments of such Investments or from the Net Cash Proceeds from the sale of
any such Investment (except in each case to the extent any such payment or
proceeds is included in the calculation of Adjusted Consolidated Net Income) or
from such Person becoming a Restricted Subsidiary (valued in each case as
provided in the definition of "Investments"), provided that the net reduction in
any Investment shall not exceed the amount of such Investment; (vii) Investments
acquired in exchange for Capital Stock (other than Disqualified Stock) of the
Company; (viii) the payment of dividends on (x) Preferred Stock issued by a New
Business Subsidiary and
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(y) Preferred Stock (other than Disqualified Stock) issued by the Company that
is convertible into Common Stock of the Company; (ix) the purchase, redemption
or other acquisition or retirement of Common Stock of the Company or any option
or other right to acquire shares of Common Stock of the Company (i) if such
Common Stock, option or other right was issued pursuant to a plan or arrangement
approved by the Company's Board of Directors, and such purchase, redemption or
other acquisition or retirement (x) occurs in accordance with the terms of such
plan or arrangement, from former employees of the Company and its Subsidiaries
or their estates or (y) is from an employee of the Company (other than Jeffrey
P. Bezos and his Affiliates) and the price paid by the Company to such employee
is equal to the exercise or purchase price paid by such employee and (ii) from
employees of the Company or its Subsidiaries in an amount not to exceed $2.0
million in any fiscal year; provided that in the case of clause (ii) amounts not
paid for any such purchase, redemption or other acquisition or retirement in any
fiscal year may be accumulated and paid in any subsequent fiscal year; and (x)
other Restricted Payments in an aggregate amount not to exceed $30.0 million;
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii), (iv) and (vi), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that is pari passu with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant only to
the extent such proceeds are not used for such redemption, repurchase or other
acquisition of Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary other
than a New Business Subsidiary to, create or otherwise cause or suffer to exist
or become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary, or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any amendments, extensions,
refinancings, renewals or replacements of such agreements; provided that the
amendments, encumbrances and restrictions in any such extensions, refinancings,
renewals or replacements are no less favorable in any material respect to the
Holders than those encumbrances or restrictions that are then in effect and that
are being extended, refinanced, renewed or replaced; (ii) existing under or by
reason of applicable law; (iii) existing with respect to any Person or the
property or assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not applicable to
any Person or the property or assets of any Person other than such person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture, or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; (v) with
respect to a Restricted Subsidiary
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and imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary; or (vi) contained in the terms of any
Indebtedness or any agreement pursuant to which such Indebtedness was issued if
(A) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Indebtedness or agreement, (B) the encumbrance or restriction is not materially
more disadvantageous to the Holders of the Notes than is customary in comparable
financings (as determined by the Company) and (C) the Company determines that
any such encumbrance or restriction will not materially affect the Company's
ability to make principal or interest payments on the Notes. Nothing contained
in this "Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant shall prevent the Company or any Restricted
Subsidiary from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock), except (i) to the Company or a Wholly Owned
Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made under the "Limitation on Restricted Payments" covenant if made on the
date of such issuance or sale; or (iv) issuances or sales of (x) Common Stock of
a Restricted Subsidiary; provided that the Company or such Restricted Subsidiary
applies the Net Cash Proceeds, if any, of any such sale (other than any sale of
Common Stock of a New Business Subsidiary) in accordance with clause (A) or (B)
of the "Limitation on Asset Sales" covenant described below and (y) Preferred
Stock of a New Business Subsidiary.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee; provided that this paragraph shall not be
applicable to any Guarantee of any Restricted Subsidiary (x) that existed at the
time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (y) Indebtedness Incurred under a working capital or revolving
credit facility. If the Guaranteed Indebtedness is (A) pari passu with the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be pari passu
with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
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which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or, if such transaction
is pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Restricted Subsidiaries or solely
between Restricted Subsidiaries; (iii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any tax-sharing agreement
between the Company and any other Person with which the Company files a
consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; or (v) any Restricted Payments not prohibited by the
"Limitation on Restricted Payments" covenant. Notwithstanding the foregoing, any
transaction or series of related transactions covered by the first paragraph of
this "Limitation on Transactions With Stockholders and Affiliates" covenant and
not covered by clauses (ii) through (v) of this paragraph, the aggregate amount
of which exceeds $5.0 million in value, must be approved or determined to be
fair in the manner provided for in clause (i)(A) or (B) above.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character (including, without limitation, licenses), or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Notes and all other amounts due under
the Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is subordinated in right of
payment to the Notes, prior to) the obligation or liability secured by such Lien
for so long as such obligation or liability is so secured.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness" covenant;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets securing
the Indebtedness being refinanced; (v) Liens on the Capital Stock of, or any
property or assets of, a Restricted Subsidiary securing Indebtedness of such
Restricted Subsidiary permitted under the "Limitation on Indebtedness" covenant;
or (vi) Permitted Liens.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the
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Company or a Restricted Subsidiary sells or transfers such assets or properties
and then or thereafter leases such assets or properties or any part thereof or
any other assets or properties which the Company or such Restricted Subsidiary,
as the case may be, intends to use for substantially the same purpose or
purposes as the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within 12
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of the "Limitation on
Asset Sales" covenant described below.
LIMITATION ON ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 85% of the consideration received
consists of cash or Temporary Cash Investments. In the event and to the extent
that the Net Cash Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after the Closing Date
in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net
Tangible Assets (determined as of the date closest to the commencement of such
12-month period for which a consolidated balance sheet of the Company and its
Subsidiaries has been filed with the Commission), then the Company shall or
shall cause the relevant Restricted Subsidiary to (i) within 18 months after the
date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company, or any Restricted
Subsidiary providing a Subsidiary Guarantee pursuant to the "Limitation on
Issuances of Guarantees by Restricted Subsidiaries" covenant described above or
Indebtedness of any other Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A) (or enter into
a definitive agreement committing to so invest within 18 months after the date
of such agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company having property
and assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such investment
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a Board Resolution) and (ii) apply (no
later than the end of the 18-month period referred to in clause (i)) such excess
Net Cash Proceeds (to the extent not applied pursuant to clause (i)) as provided
in the following paragraph of this "Limitation on Asset Sales" covenant. The
amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 18-month period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $10.0 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate Accreted Value of Notes equal to the Excess Proceeds on such date, at
a purchase price equal to 100% of the Accreted Value of the Notes on the
relevant Payment Date, plus, in each case, accrued interest (if any) to the
Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the Accreted Value thereof on the relevant
Payment Date, plus accrued interest (if any) to the Payment Date.
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There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times, whether or not the Company is then required to file reports
with the Commission, the Company shall file with the Commission all such reports
and other information as it would be required to file with the Commission by
Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The
Company shall supply the Trustee and each Holder or shall supply to the Trustee
for forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days; (c)
default in the performance or breach of the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially all
of the assets of the Company or the failure to make or consummate an Offer to
Purchase in accordance with the "Limitation on Asset Sales" or "Repurchase of
Notes Upon a Change of Control" covenant; (d) the Company defaults in the
performance of or breaches any other covenant or agreement of the Company in the
Indenture or under the Notes (other than a default specified in clause (a), (b)
or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount at maturity of the Notes; (e) there occurs
with respect to any issue or issues of Indebtedness of the Company or any
Significant Subsidiary having an outstanding principal amount of $10.0 million
or more in the aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of default
that has caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 60 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 60 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10.0 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10.0 million during which a stay of enforcement of such final judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; or (h) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the
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Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary, or (C) effects
any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount at maturity of the Notes, then outstanding, by
written notice to the Company (and to the Trustee if such notice is given by the
Holders), may, and the Trustee at the request of such Holders shall, declare the
Accreted Value of, premium, if any, and accrued interest on the Notes to be
immediately due and payable. Upon a declaration of acceleration, such Accreted
Value of, premium, if any, and accrued interest shall be immediately due and
payable. In the event of a declaration of acceleration because an Event of
Default set forth in clause (e) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default triggering such Event of Default pursuant to clause (e) shall
be remedied or cured by the Company or the relevant Significant Subsidiary or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (g) or (h) above occurs with respect to the Company, the
Accreted Value of, premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences if (i)
all existing Events of Default, other than the nonpayment of the Accreted Value
of, premium, if any, and interest on the Notes that have become due solely by
such declaration of acceleration, have been cured or waived and (ii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of defaults, see
"-- Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
Accreted Value of, premium, if any, or interest on, such Note or to bring suit
for the enforcement of any such payment, on or after the due date expressed in
the Notes, which right shall not be impaired or affected without the consent of
the Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one
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transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company unless (i) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States or any jurisdiction thereof
and shall expressly assume, by a supplemental indenture, executed and delivered
to the Trustee, all of the obligations of the Company on all of the Notes and
under the Indenture; (ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company, or any Person becoming the successor obligor of the Notes, as the case
may be, could Incur at least $1.00 of Indebtedness under the first paragraph of
the "Limitation on Indebtedness" covenant; provided that this clause (iii) shall
not apply to a consolidation, merger or sale of all (but not less than all) of
the assets of the Company if all Liens and Indebtedness of the Company or any
Person becoming the successor obligor on the Notes, as the case may be, and its
Restricted Subsidiaries outstanding immediately after such transaction would, if
Incurred at such time, have been permitted to be Incurred (and all such Liens
and Indebtedness, other than Liens and Indebtedness of the Company and its
Restricted Subsidiaries outstanding immediately prior to the transaction, shall
be deemed to have been Incurred) for all purposes of the Indenture; and (iv) the
Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clause (iii) above) and
opinion of counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with; provided, however, that clause (iii) above does not apply
if, in the good faith determination of the Board of Directors of the Company,
whose determination shall be evidenced by a Board Resolution, the principal
purpose of such transaction is to change the state of incorporation of the
Company and any such transaction shall not have as one of its purposes the
evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments or any date on
which the Notes may be redeemed at the option of the Company, in each case in
accordance with the terms of the Indenture and the Notes, (B) the Company has
delivered to the Trustee (i) either (x) an opinion of counsel to the effect that
Holders will not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of its option under this "Defeasance"
provision and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred, which opinion of counsel
must be based upon (and accompanied by a copy of) a ruling of the Internal
Revenue Service to the same effect unless there has been a change in applicable
federal income tax law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the Internal
Revenue Service to the same effect as the aforementioned opinion of counsel and
(ii) an opinion of counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and after the passage
of 123 days following the deposit, the trust fund will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law, (C) immediately after giving effect to such
deposit on a pro forma basis, no Event of Default, or event that after the
giving of notice or lapse of time or both would become an Event of Default,
shall have occurred and be continuing on the date of such deposit or during the
period ending on the 123rd day after the date of such deposit, and such deposit
shall not result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the
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Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound and (D) if at such time the Notes are listed on a
national securities exchange, the Company has delivered to the Trustee an
opinion of counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clause (iii) under "Consolidation, Merger and Sale
of Assets" and all the covenants described herein under "Covenants," clause (c)
under "Events of Default" with respect to such clause (iii) under
"Consolidation, Merger and Sale of Assets," clause (d) under "Events of Default"
with respect to such other covenants and clauses (e) and (f) under "Events of
Default" shall be deemed not to be Events of Default, upon, among other things,
the deposit with the Trustee, in trust, of money and/or U.S. Government
Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments or any date on which the Notes may
be redeemed at the option of the Company, in each case in accordance with the
terms of the Indenture and the Notes, the satisfaction of the provisions
described in clauses (B)(ii), (C) and (D) of the preceding paragraph and the
delivery by the Company to the Trustee of an opinion of counsel to the effect
that, among other things, the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance of
certain covenants and Events of Default and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
or, if applicable, optional redemption date, but may not be sufficient to pay
amounts due on the Notes at the time of the acceleration resulting from such
Event of Default. However, the Company will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the Accreted Value of, or premium, if any,
or interest on, any Note, (iii) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the Redemption
Date) of any Note, (v) reduce the above-stated percentage of outstanding Notes
the consent of whose Holders is necessary to modify or amend the Indenture, (vi)
waive a default in the payment of principal of, premium, if any, or interest on
the Notes or (vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
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CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it under the Indenture as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
BOOK ENTRY; DELIVERY AND FORM
The Exchange Notes will initially be issued in the form of one Global Note
(the "Global Exchange Note") and deposited upon issuance with and registered in
the name of, or on behalf of, DTC or its nominee.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Exchange Notes represented by such
Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owner of an interest in a Global Exchange Note will be able
to transfer that interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Indenture.
Payments of the principal of, and interest on, a Global Exchange Note will
be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Exchange
Note or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Exchange
Note as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Exchange Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear & Cedel Bank will be effected in the ordinary
way in accordance with their respective rules and operating procedures.
The Company expects that DTC will take any action permitted to be taken by
a holder of Exchange Notes (including the presentation of Exchange Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in a Global Exchange Note is credited and
only in respect of such portion of the aggregate principal amount of Exchange
Notes as to which such participant or participants has or have given such
direction.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization'
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect
54
<PAGE> 56
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Exchange Note among participants
of DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
company nor the Trustee will have any responsibility for the performance by DTC
or its participants or indirect participants of its obligations under the rules
and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Notes and a successor depositary is not appointed by the
Company within 90 days, the Company will issue certificated Exchange Notes
("Certificated Exchange Notes") in exchange for the Global Exchange Notes. In
addition, if there is an Event of Default under the Exchange Notes, DTC may
exchange the Global Exchange Note for Certificated Exchange Notes and distribute
such Certificated Exchange Notes to its participants. Finally, beneficial owners
whose interests are represented by the Global Exchange Note may request a
physical certificate.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, which was prepared by Perkins Coie LLP, counsel
to the Company, summarizes the material U.S. federal income tax consequences of
the exchange of the Original Notes for the Exchange Notes pursuant to the
Exchange Offer. This discussion is based on provisions of the Internal Revenue
Code of 1986, as amended, its legislative history, judicial authority, current
administrative rulings and practice, and existing and proposed Treasury
Regulations, all as in effect and existing on the date hereof. Legislative,
judicial or administrative changes or interpretations after the date hereof
could alter or modify the validity of this discussion and the conclusions set
forth below. Any such changes or interpretations may be retroactive and could
adversely affect a Holder of the Original Notes or the Exchange Notes.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular Holders in light of their
personal investment or tax circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of Holders subject to special
treatment under the U.S. federal income tax laws, such as certain financial
institutions, insurance companies, dealers in securities or foreign currency,
tax-exempt organizations, foreign corporations or nonresident alien individuals,
or persons holding Original Notes or Exchange Notes that are a hedge against, or
that are hedged against, currency risk or that are part of a straddle or
conversion transaction, or persons whose functional currency is not the U.S.
dollar. Moreover, the effect of any state, local or foreign tax laws is not
discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER OF AN
ORIGINAL NOTE THAT IS PARTICIPATING IN THE EXCHANGE OFFER IS STRONGLY URGED TO
CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF SUCH HOLDER'S
PARTICULAR TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, OF THE EXCHANGE OF
THE ORIGINAL NOTES FOR THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
EXCHANGE OFFER
The exchange of the Original Notes by any holder for the Exchange Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes should not be considered
to differ materially in kind or extent from the Original Notes. Rather, the
Exchange Notes received by any Holder should be treated as a continuation of the
Original Notes in the hands of such holder. As a result, there should be no
federal income tax consequences to Holders exchanging the Original Notes for the
Exchange Notes pursuant to the Exchange Offer, and the federal income tax
consequences of holding and disposing of the Exchange Notes should be the same
as the federal income tax consequences of
55
<PAGE> 57
holding and disposing of the Original Notes. Accordingly, Holders of the
Exchange Notes will be required to include in income for federal income tax
purposes in advance of the receipt of cash payment to which the income is
attributable original issue discount (which is the excess of the stated
redemption value of the Notes over their issue price) to the same extent as
required for the Original Notes. As in the case of the Original Notes, U.S.
withholding tax may apply to original issue discount on the Exchange Notes for
certain non-U.S. Holders. Also, a holder's adjusted tax basis in the Exchange
Notes will be the same as its adjusted tax basis in the Original Notes exchanged
therefor and its holding period for the Original Notes will be included in its
holding period for the Exchange Notes. Thus, the determination of gain on a sale
or other disposition of the Exchange Notes will be the same as for the Original
Notes.
PLAN OF DISTRIBUTION
Reference is made to "The Exchange Offer" above for a description of the
Exchange Offer, including the purpose of the Exchange Offer, the basis upon
which the Exchange Notes are offered and expenses incurred in connection with
the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus with any resale of Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Notes received in exchange for Original
Notes where such Original Notes were acquired as a result of market-making
activities or other trading activities. The Company will, during the period
ending 180 days after the last Exchange Date, make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale.
Neither the Company nor any of its affiliates has entered into any
arrangement or understanding with any broker-dealer to distribute the Exchange
Notes and will not receive any proceeds from any sale of Exchange Notes by any
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of the resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker or dealer and/or the purchaser of any such
Exchange Notes. Any broker or dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such person may be deemed to be underwriter compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
Morgan Stanley has advised the Company that it intends to make a market in
the Exchange Notes; however, it is not obligated to do so and any such
market-making may be discontinued at any time without notice, in the sole
discretion of Morgan Stanley. To the extent Morgan Stanley is considered an
Affiliate of the Company, the Company has advised Morgan Stanley that it must
comply with the registration and prospectus delivery requirements of the
Securities Act applicable to affiliates in connection with such secondary resale
transactions. See "Risk Factors -- Lack of Public Market." To the extent that
Morgan Stanley is an Affiliate of the Company, the Company is required to file a
shelf registration statement and keep such shelf registration statement
effective in order to provide Morgan Stanley with the ability to resell Exchange
Notes that it acquires from time to time in connection with any market-making
activities.
The Company has agreed in the Registration Rights Agreement to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and expenses of counsel for the underwriters or holders
of the Exchange Notes.
56
<PAGE> 58
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes being offered
hereby will be passed upon for the Company by Perkins Coie LLP, Seattle,
Washington.
EXPERTS
The financial statements of Amazon.com, Inc. appearing in Amazon.com,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
57
<PAGE> 59
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THAT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE
OFFER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Documents by
Reference........................... 3
Forward-Looking Statements............ 4
Prospectus Summary.................... 5
Risk Factors.......................... 11
Use of Proceeds....................... 19
Ratio of Earnings to Fixed Charges.... 19
Capitalization........................ 20
Selected Financial Data............... 21
The Exchange Offer.................... 23
Description of the Exchange Notes..... 29
Certain Federal Income Tax
Consequences........................ 55
Plan of Distribution.................. 56
Legal Matters......................... 57
Experts............................... 57
</TABLE>
======================================================
======================================================
[LOGO]
AMAZON.COM, INC.
OFFER TO EXCHANGE ITS
10% SENIOR DISCOUNT NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY AND ALL
OF ITS OUTSTANDING 10% SENIOR DISCOUNT
NOTES DUE 2008 WHICH WERE
ISSUED AND SOLD IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933
------------------------
PROSPECTUS
------------------------
, 1998
======================================================
<PAGE> 60
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers, as well as other
employees and individuals, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation -- a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise.
Section 10 of the registrant's Bylaws requires indemnification to the full
extent permitted under Delaware law as it now exists or may hereafter be
amended. Subject to any restrictions imposed by Delaware law, the Bylaws provide
an unconditional right to indemnification for all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) actually and reasonably incurred or suffered by
any person in connection with any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative (including,
to the extent permitted by law, any derivative action) by reason of the fact
that such person is or was serving as a director or officer of the registrant or
that, being or having been a director or officer of the registrant, such person
is or was serving at the request of the registrant as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan.
The Bylaws also provide that the registrant may, by action of its Board of
Directors, provide indemnification to its employees and agents with the same
scope and effect as the foregoing indemnification of directors and officers.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) payments of unlawful dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit.
Article 10 of the registrant's Restated Certificate of Incorporation
provides that to the full extent that the DGCL, as it now exists or may
hereafter be amended, permits the limitation or elimination of the liability of
directors, a director of the registrant shall not be liable to the registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Any amendment to or repeal of such Article 10 shall not adversely
affect any right or protection of a director of the registrant for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
The registrant has entered into certain indemnification agreements with its
officers and directors. The indemnification agreements provide the registrant's
officers and directors with further indemnification to the maximum extent
permitted by the DGCL.
II-1
<PAGE> 61
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
4.1 Indenture, dated May 8, 1998, between the registrant and The
Bank of New York, as Trustee (incorporated by reference to
Exhibit 4.1 of the registrant's Quarterly Report on Form
10-Q (File No. 000-22513) for the quarter ended March 31,
1998).
4.2 Form of 10% Senior Discount Notes due 2008.
4.3 Registration Rights Agreement dated May 8, 1998, between the
registrant and Morgan Stanley & Co. Incorporated
(incorporated by reference to Exhibit 4.3 of the
registrant's Quarterly Report on Form 10-Q (File No.
000-22513) for the quarter ended March 31, 1998).
5.1 Opinion of Perkins Coie LLP, counsel to the registrant, as
to legality of the 10% Senior Discount Notes due 2008.
8.1 Opinion of Perkins Coie LLP, counsel to the registrant, as
to certain federal income tax matters.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Perkins Coie LLP (included in Exhibit 5.1).
23.3 Consent of Perkins Coie LLP (included in Exhibit 8.1).
24.1 Power of Attorney (contained on signature page).
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers.
99.4 Form of Exchange Agent Agreement.
</TABLE>
(b) Financial Statement Schedules
All schedules are omitted because they are inapplicable or the requested
information is included as an exhibit to the registrant's Annual Report on Form
10-K for the year ended December 31, 1997, incorporated by reference herein.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act),
that is incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled
II-2
<PAGE> 62
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of, and
included in, the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
II-3
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington on June 4, 1998.
AMAZON.COM, INC.
By: /s/ JEFFREY P. BEZOS
------------------------------------------
Jeffrey P. Bezos
Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Jeffrey P. Bezos and Joy D. Covey, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney in fact and agent to act in his or her name,
place, and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments, and to file the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing, ratifying and
confirming all that said attorneys-in-fact and agents or either of them, or
their or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ JEFFREY P. BEZOS Chairman of the Board, President June 4, 1998
- ----------------------------------------------------- and Chief Executive Officer
Jeffrey P. Bezos (Principal Executive Officer)
/s/ JOY D. COVEY Chief Financial Officer, Vice June 4, 1998
- ----------------------------------------------------- President of Finance and
Joy D. Covey Administration and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
/s/ TOM A. ALBERG Director June 9, 1998
- -----------------------------------------------------
Tom A. Alberg
/s/ SCOTT D. COOK Director June 6, 1998
- -----------------------------------------------------
Scott D. Cook
/s/ L. JOHN DOERR Director June 9, 1998
- -----------------------------------------------------
L. John Doerr
/s/ PATRICIA Q. STONESIFER Director June 9, 1998
- -----------------------------------------------------
Patricia Q. Stonesifer
</TABLE>
II-4
<PAGE> 64
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
4.1 Indenture, dated as of May 8, 1998, between the registrant
and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.1 of the registrant's Quarterly
Report on Form 10-Q (File No. 000-22513) for the quarter
ended March 31, 1998).
4.2 Form of 10% Senior Discount Notes due 2008.
4.3 Registration Rights Agreement dated May 8, 1998, between the
registrant and Morgan Stanley & Co. Incorporated
(incorporated by reference to Exhibit 4.3 of the
registrant's Quarterly Report on Form 10-Q (File No.
000-22513) for the quarter ended March 31, 1998).
5.1 Opinion of Perkins Coie LLP, counsel to the registrant, as
to legality of the 10% Senior Discount Notes due 2008.
8.1 Opinion of Perkins Coie LLP, counsel to the registrant, as
to certain federal income tax matters.
12.1 Computation of ratio of earnings to fixed charges.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Perkins Coie LLP (included in Exhibit 5.1).
23.3 Consent of Perkins Coie LLP (included in Exhibit 8.1).
24.1 Power of Attorney (contained on signature page).
25.1 Form T-1 Statement of Eligibility of The Bank of New York to
act as trustee under the Indenture.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Brokers.
99.4 Form of Exchange Agent Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 4.2
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.
AMAZON.COM, INC.
10% Senior Discount Note due 2008
[CUSIP] [CINS] __________
No. $__________
The following information is supplied for purposes of Sections 1273
and 1275 of the Internal Revenue Code:
Issue Date:
Yield to maturity for period from Issue Date to May 1, 2008: 10.0%,
compounded semi-annually on May 1 and November 1, commencing May 1, 1998.
<PAGE> 2
Original issue discount under Section 1273 of the Internal Revenue
Code (for each $1,000 principal amount): $884.93
Issue Price (for each $1,000 principal amount): $615.07
AMAZON.COM, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to __________, or its registered assigns, the
principal sum of ($) on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November 1,
2003.
Regular Record Dates: April 15 and October 15.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
AMAZON.COM, INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 10% Senior Discount Notes due 2008 described in
the within-mentioned Indenture.
Date: ____________________
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------------
Authorized Signatory
-2-
<PAGE> 3
[REVERSE SIDE OF NOTE]
AMAZON.COM, INC.
10% Senior Discount Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Note on May 1, 2008.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of
the Notes at the close of business on the April 15 or October 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 1, 2003; provided that no interest will accrue on the principal amount
of this Note prior to May 1, 2003 and no interest will be paid on this Note
prior to November 1, 2003.
From and after May 1, 2003, interest on the Notes will accrue from
the most recent date to which interest has been paid or, if no interest has been
paid, from May 1, 2003; provided that, if there is no existing default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest will accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
2. Method of Payment.
The Company shall pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each May 1 and November 1 to
the persons who are Holders (as reflected in the Note Register at the close of
business on such April 15 and October 15 immediately preceding the Interest
Payment Date), in each case, even if the Note is canceled on registration of
transfer or registration of exchange after such record date; provided that, with
respect to the payment of principal, the Company shall make payment to the
Holder that surrenders this Note to a Paying Agent on or after May 1, 2008.
The Company shall pay principal, premium, if any, and as provided
above, interest in money of the United States that at the time of payment is
legal tender for payment of public and private debts. However, the Company may
pay principal, premium, if any,
-3-
<PAGE> 4
and interest by its check payable in such money or by wire transfer of
immediately available funds to the accounts of Holders which have provided wire
transfer instructions to the Company. It may mail an interest check to a
Holder's registered address (as reflected in the Note Register). If a payment
date is a date other than a Business Day at a place of payment, payment may be
made at that place on the next succeeding day that is a Business Day and no
interest will accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee shall act as authenticating agent, Paying
Agent and Registrar. The Company may change any authenticating agent, Paying
Agent or Registrar without notice. The Company, any Subsidiary or any Affiliate
of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of May 8,
1998 (the "Indenture"), between the Company and The Bank of New York (the
"Trustee").
Capitalized terms herein are used as defined in the Indenture unless
otherwise indicated. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms, and Holders are referred
to the Indenture and the Trust Indenture Act for a statement of all such terms.
To the extent permitted by applicable law, in the event of any inconsistency
between the terms of this Note and the terms of the Indenture, the terms of the
Indenture shall control.
The Notes are general unsecured obligations of the Company.
5. Redemption.
The Notes shall be redeemable, at the Company's option, in whole or
in part, at any time on or after May 1, 2003 and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's last address as it appears in the Note Register, at the following
Redemption Prices (expressed in percentages of their principal amount at
maturity), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is prior to the
Redemption Date) if redeemed during the 12-month period commencing on May 1 of
the applicable year set forth below:
-4-
<PAGE> 5
REDEMPTION
<TABLE>
<CAPTION>
YEAR PRICE
- --------------------- ---------
<S> <C>
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
</TABLE>
In addition, at any time prior to May 1, 2001, the Company may redeem
up to 35% of the aggregate principal amount at maturity of the Notes with the
Net Cash Proceeds of one or more sales of Capital Stock of the Company (other
than Disqualified Stock) at any time as a whole or from time to time in part, at
a Redemption Price (expressed as a percentage of Accreted Value on the
Redemption Date) of 110%, plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date);
provided that at least 65% of the aggregate principal amount at maturity of
Notes remains outstanding after each such redemption and notice of such
redemption is mailed to Holders of the Notes within 60 days after the related
sale of Capital Stock.
At any time prior to May 1, 2003, the Company may redeem all, but not
less than all, of the Notes at a Redemption Price equal to the sum of (i) the
Accreted Value on the Redemption Date, plus (ii) accrued and unpaid interest, if
any, to the Redemption Date (subject to the right of Holders of record on the
relevant Regular Record Date that is prior to the Redemption Date to receive
interest due on an Interest Payment Date), plus (iii) the Applicable Premium.
Notice of any optional redemption shall be mailed at least 30 days
but not more than 60 days before the Redemption Date to each Holder of Notes to
be redeemed at such Holder's last address as it appears in the Note Register.
Notes in original denominations larger than $1,000 may be redeemed in part. On
and after the Redemption Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon Change in Control.
Upon the occurrence of any Change of Control, the Company will be
obligated to make an offer to purchase all outstanding Notes pursuant to the
offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment").
A notice of such Change of Control shall be mailed within 30 days
after any Change of Control occurs to each Holder at such Holder's last address
as it appears in the
-5-
<PAGE> 6
Note Register. Notes in original denominations larger than $1,000 in principal
amount at maturity may be sold to the Company in part. On and after the Change
of Control Payment Date, interest ceases to accrue and the original issue
discount ceases to accrete on Notes or portions of Notes surrendered for
purchase by the Company, unless the Company defaults in the payment of the
Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount at maturity and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before the mailing of a notice of redemption of Notes to be redeemed is made.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent shall pay the
money back to the Company at its written request. After that, Holders entitled
to the money must look to the Company for payment, unless an abandoned property
law designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company shall be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to redemption or the Stated
Maturity, the Company shall be discharged from certain covenants set forth in
the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of
-6-
<PAGE> 7
the Notes then outstanding, and any existing default or compliance with any
provision may be waived with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding. Without notice to or the
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or inconsistency
and make any change that does not materially and adversely affect the rights of
any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the obligations
of its predecessor under the Notes and the Indenture, the predecessor person
shall be released from those obligations.
14. Defaults and Remedies.
The following events constitute "Events of Default" under the
Indenture:
(a) default in the payment of principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the
same becomes due and payable, and such default continues for a period of 30
days;
(c) default in the performance or breach of the provisions
of Article Five or the failure to make or consummate an Offer to Purchase in
accordance with Section 4.10 or Section 4.11 of the Indenture;
(d) the Company defaults in the performance of or breaches
any other covenant or agreement of the Company in this Indenture or under the
Notes (other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate principal
amount at maturity of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an outstanding
principal amount of
-7-
<PAGE> 8
$10 million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, (i) an event
of default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 60 days of such acceleration and/or (ii) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 60 days of such
payment default;
(f) any final judgment or order (not covered by insurance)
for the payment of money in excess of $10.0 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be rendered
against the Company or any Significant Subsidiary and shall not be paid or
discharged, and there shall be any period of 60 consecutive days following entry
of the final judgment or order that causes the aggregate amount for all such
final judgments or orders outstanding and not paid or discharged against all
such Persons to exceed $10.0 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 30 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences
a voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for relief
in an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Company occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture.
-8-
<PAGE> 9
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
No incorporator, stockholder, director, employee or controlling
person as such, of the Company or of any successor Person, shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
18. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Amazon.com,
Inc., 1516 Second Avenue, Seattle, Washington 98101, Attention: Chief Financial
Officer.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto Insert Taxpayer Identification No.:
________________
Please print or typewrite name and address including zip code of
assignee _______________________________________________________________________
-9-
<PAGE> 10
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing ____________________ attorney to transfer said Note on the books of
the Company with full power of substitution in the premises.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.11 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.11 of the Indenture, state the amount (in
principal amount at maturity): $____________________
Date: ____________________
Your Signature: ______________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
<PAGE> 1
[Perkins Coie LLP Letterhead]
EXHIBIT 5.1
June 12, 1998
Amazon.com, Inc.
1516 Second Avenue
Seattle, WA 98101
RE: EXCHANGE OFFER RELATING TO 10% SENIOR DISCOUNT
NOTES DUE 2008
Ladies and Gentlemen:
We have acted as counsel to Amazon.com, Inc., a Delaware corporation
(the "Company"), in connection with the proceedings related to the offer (the
"Exchange Offer") by the Company to exchange its 10% Senior Discount Notes due
2008 (the "Exchange Notes"), which are being registered under the Securities Act
of 1933, as amended (the "Act"), pursuant to a Registration Statement on Form
S-4 (the "Registration Statement"), for an equal principal amount of outstanding
10% Senior Discount Notes due 2008, which were issued and sold in a transaction
exempt from registration under the Act (the "Original Notes").
In rendering the opinions set forth herein, we have examined
originals, or copies certified or otherwise identified to our satisfaction, of
(i) the Indenture dated May 8, 1998 between the Company and The Bank of New
York, as Trustee (the "Indenture"), (ii) the resolutions of the Board of
Directors of the Company adopted at a meeting held on May 28, 1998 (the "Board
Resolutions"), (iii) the form of Exchange Notes, (iv) the Registration Rights
Agreement dated May 8, 1998 between the Company and Morgan Stanley & Co.
Incorporated (the "Registration Rights Agreement") and (v) the Restated
Certificate of Incorporation and Restated Bylaws of the Company. We have also
examined originals, or copies certified or otherwise identified to our
satisfaction, of such other agreements, instruments, certificates of public
officials and corporate officers of the Company and such other documents,
certificates, records, authorizations and proceedings as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.
In rendering the opinions expressed herein, we have assumed the legal
capacity of all natural persons, the genuineness of all signatures, the
authenticity of all
<PAGE> 2
June 12, 1998
Page 2
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Company, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on such
parties. As to any facts material to the opinions expressed herein which we did
not independently establish or verify, we have relied upon oral or written
statements and representations of officers and other representatives of the
Company, the Trustee and others.
Based upon the foregoing examinations and assumptions and subject to
the qualifications stated below, we are of the opinion that:
(a) The Indenture has been duly authorized, executed and
delivered by, and is a binding agreement of, the Company enforceable in
accordance with its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity); and
(b) The Exchange Notes have been duly authorized for
issuance and sale by the Company and when (i) the Registration Statement becomes
effective, (ii) the Indenture has been qualified under the Trust Indenture Act
of 1939, as amended, and (iii) the Exchange Notes are duly executed,
authenticated and issued in accordance with the Indenture and delivered and
issued in the Exchange Offer as contemplated by the Registration Rights
Agreement and the Registration Statement, the Exchange Notes will constitute
valid and binding obligations of the Company enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by (i)
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
The opinions expressed above are subject to the following
qualifications:
<PAGE> 3
June 12, 1998
Page 3
a. Our opinions are as of the date hereof and we have no
responsibility to update this opinion for events and circumstances occurring
after the date hereof or as to facts relating to prior events that are
subsequently brought to our attention. We disavow any undertaking to advise you
of any changes in law.
b. We are qualified to practice law in the state of
Washington and do not express any opinions herein concerning any laws other than
the laws of the state of Washington, the federal laws of the United States of
America and the Delaware General Corporation Law and we express no opinion with
respect to the laws, regulations or ordinances of any county, municipality or
governmental subdivision or agency of whatever description or character, or with
respect to matters that may be affected by the laws of any other jurisdiction or
that may be affected by pending or proposed legislation. To the extent that the
Indenture, the Exchange Notes or the Registration Rights Agreement provides that
they are to be governed by the laws of any jurisdiction other than the state of
Washington, our opinions regarding such agreements are being rendered, with your
express consent, as if only the internal laws of the state of Washington were
applicable thereto, notwithstanding any governing law provisions therein to the
contrary.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments, and to the reference to our firm in the prospectus of
the Registration Statement under the heading "Legal Matters". In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
/s/ PERKINS COIE LLP
<PAGE> 1
[Perkins Coie LLP Letterhead]
EXHIBIT 8.1
June 12, 1998
Amazon.com, Inc.
1516 Second Avenue
Seattle, WA 98101
RE: EXCHANGE OFFER RELATING TO 10% SENIOR DISCOUNT
NOTES DUE 2008
Ladies and Gentlemen:
We have acted as counsel to Amazon.com, Inc., a Delaware corporation
(the "Company"), in connection with the proceedings related to the offer (the
"Exchange Offer") by the Company to exchange its 10% Senior Discount Notes due
2008 (the "Exchange Notes") which are being registered under the Securities Act
of 1933, as amended (the "Act"), pursuant to a Registration Statement on Form
S-4 filed with the Securities and Exchange Commission on June 12, 1998 (together
with the Prospectus contained therein and the amendments thereto, the
"Registration Statement") for an equal principal amount of outstanding 10%
Senior Discount Notes due 2008, which were issued and sold in a transaction
exempt from registration under the Act (the "Original Notes"). Capitalized terms
used but not defined herein shall have the respective meanings given them in the
Registration Statement.
In connection with this opinion, we have examined the Registration
Statement and such other documents as we have deemed necessary. Furthermore, we
have relied upon certain statements and representations made by officers of the
Company and others. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such other documents, certificates,
and records as we have deemed necessary or appropriate as a basis for the
opinion set forth herein.
In rendering our opinion, we have participated in the preparation of
the Registration Statement. Our opinion is conditioned on, among other things,
the initial
<PAGE> 2
June 12, 1998
Page 2
and continuing accuracy of the facts, information, covenants, and
representations set forth in the documents referred to above and the statements
and representations made by officers of the Company and others. In our
examination, we have assumed the legal capacity of all natural persons, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, the authenticity of the originals of such
documents, and that the transactions related to the exchange of the Exchange
Notes for the Original Notes will be consummated in the manner contemplated by
the Registration Statement.
In rendering our opinion, we have considered the provisions of the
Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated
thereunder, judicial decisions, and Internal Revenue Service rulings, all as in
effect on the date hereof and all of which are subject to change, which changes
may be retroactively applied. A change in the authorities upon which our opinion
is based could affect our conclusions.
Based upon and subject to the foregoing, and subject to the
discussion and limitations set forth in the Registration Statement under the
heading "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," we are of the opinion that,
although the discussion set forth in the Registration Statement under the
heading "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" does not purport to discuss
all possible United States federal income tax consequences of the Exchange Offer
and the transactions contemplated thereby, such discussion constitutes a fair
and accurate summary of the material United States federal income tax
consequences (other than consequences that are material to a Holder based on
such Holder's particular tax situation) of the exchange of the Exchange Notes
for the Original Notes.
Except as set forth above, we express no opinion to any party as to
the tax consequences, whether federal, state, local or foreign, of the exchange
of the Exchange Notes for the Original Notes or the tax consequences of owning
or transferring the Exchange Notes.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and any amendment thereto, including any and all
post-effective amendments, and to the reference to our firm under the heading
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "LEGAL MATTERS" in the
Registration Statement. In giving such consent, we do not thereby admit that we
are
<PAGE> 3
June 12, 1998
Page 3
included in the category of persons whose consent is required under Section
7 of the Act. We disclaim any undertaking to advise you of subsequent changes of
the facts as assumed herein or any subsequent changes in applicable law.
Very truly yours,
/s/ PERKINS COIE LLP
<PAGE> 1
EXHIBIT 12.1
AMAZON.COM, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
THREE MONTHS JULY 5, 1994
ENDED (INCEPTION) TO
MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense, including
amortization of debt expense $ 2,025 $ 279 $ -- $ -- $ --
Assumed interest element
included in rent expense 167 666 85 4 --
-------- -------- -------- -------- --------
Total Fixed Charges $ 2,192 $ 945 $ 85 $ 4 $ --
======== ======== ======== ======== ========
EARNINGS:
Income (loss) from continuing operations
before income taxes $ (9,259) $(27,590) $ (5,777) $ (303) $ (52)
Fixed charges per above 2,192 945 85 4 --
-------- -------- -------- -------- --------
Total Earnings $ (7,067) $(26,645) $ (5,692) $ (299) $ (52)
======== ======== ======== ======== ========
DEFICIENCY OF EARNINGS AVAILABLE TO
COVER FIXED CHARGES $ (9,259) $(27,590) $ (5,777) $ (303) $ (52)
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" in the Registration Statement (Form S-4) and related
Prospectus of Amazon.com, Inc. for the registration of $530,000,000 aggregate
principal amount at maturity of 10% Senior Discount Notes due 2008 and to the
incorporation by reference therein of our report dated January 19, 1998, with
respect to the financial statements and schedule of Amazon.com, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 1997, filed with
the Securities and Exchange Commission.
Seattle, Washington
June 10, 1998
<PAGE> 1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
AMAZON.COM, INC.
(Exact name of obligor as specified in its charter)
Delaware 91-1646860
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1516 Second Avenue
Seattle, Washington 98101
(Address of principal executive offices) (Zip code)
----------------------
10% Senior Discount Notes Due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
<TABLE>
<CAPTION>
Name Address
- ----------------------------------------------------- ---------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to
Form T-1 filed with Registration Statement No. 33-6215, Exhibits
1a and 1b to Form T-1 filed with Registration Statement No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 29th day of May, 1998.
THE BANK OF NEW YORK
By: /s/ LUCILLE FIRRINCIELI
--------------------------------------
Name: Lucille Firrincieli
Title: Vice President
<PAGE> 5
Exhibit 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................................... $ 5,742,986
Interest-bearing balances ............................ 1,342,769
Securities:
Held-to-maturity securities .......................... 1,099,736
Available-for-sale securities ........................ 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell .................... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ............................................. 35,019,608
LESS: Allowance for loan and
lease losses ....................................... 627,350
LESS: Allocated transfer risk
reserve ............................................ 0
Loans and leases, net of unearned
income, allowance, and reserve ..................... 34,392,258
Assets held in trading accounts ........................ 2,521,451
Premises and fixed assets (including
capitalized leases) .................................. 659,209
Other real estate owned ................................ 11,992
Investments in unconsolidated
subsidiaries and associated
companies ............................................ 226,263
Customers' liability to this bank on
acceptances outstanding .............................. 1,187,449
Intangible assets ...................................... 781,684
Other assets ........................................... 1,736,574
------------
Total assets ........................................... $ 56,153,587
============
LIABILITIES
Deposits:
In domestic offices .................................. $ 27,031,362
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
Noninterest-bearing .................................. 11,899,507
Interest-bearing ..................................... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ..................... 13,794,449
Noninterest-bearing .................................. 590,999
Interest-bearing ..................................... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase .................. 2,338,881
Demand notes issued to the U.S. ........................
Treasury ............................................. 173,851
Trading liabilities .................................... 1,695,216
Other borrowed money:
With remaining maturity of one year
or less ............................................ 1,905,330
With remaining maturity of more than
one year through three years ....................... 0
With remaining maturity of more than
three years ........................................ 25,664
Bank's liability on acceptances exe-
cuted and outstanding ................................ 1,195,923
Subordinated notes and debentures ...................... 1,012,940
Other liabilities ...................................... 2,018,960
------------
Total liabilities ...................................... 51,192,576
------------
EQUITY CAPITAL
Common stock ........................................... 1,135,284
Surplus ................................................ 731,319
Undivided profits and capital
reserves ............................................. 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ........................................... 36,866
Cumulative foreign currency transla-
tion adjustments ..................................... (36,184)
------------
Total equity capital ................................... 4,961,011
------------
Total liabilities and equity
capital .............................................. $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
<PAGE> 7
EXHIBIT 7
Thomas A. Renyi |
Alan R. Griffith | Directors
J. Carter Bacot |
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR OFFER TO EXCHANGE 10% SENIOR DISCOUNT NOTES DUE 2008
FOR ALL OUTSTANDING
10% SENIOR DISCOUNT NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED , 1998
------------------------
AMAZON.COM, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998 UNLESS EXTENDED BY AMAZON.COM, INC. (THE "EXPIRATION
DATE")
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
By Registered or Certified Mail, by Overnight Courier or by Hand:
The Bank of New York
Reorganization Section
101 Barclay Street, Floor 7 East
New York, New York 10286
Attention:
or
By Facsimile:
The Bank of New York
Attention:
Facsimile Number: (212) 815-6339
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via facsimile transmission to a
number other than as set forth above will not constitute a valid delivery. The
instructions contained herein should be read carefully before this Letter of
Transmittal is completed.
This Letter of Transmittal is to be used either if certificates of Original
Notes are to be forwarded herewith to the Exchange Agent or if delivery of
Original Notes is to be made by book-entry transfer to an account maintained by
the Exchange Agent at The Depository Trust Company, pursuant to the procedures
set forth in the section of the Prospectus entitled "The Exchange
Offer -- Book-Entry Transfer." Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Original
Notes according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures."
The undersigned must check the appropriate boxes below and sign this Letter
of Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
<PAGE> 2
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Amazon.com, Inc. (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange $1,000
in principal amount at maturity of 10% Senior Discount Notes due 2008 (the
"Exchange Notes"), for each $1,000 in principal amount at maturity of
outstanding 10% Senior Discount Notes due 2008 (the "Original Notes"). The terms
of the Exchange Notes are substantially identical in all respects (including
principal amount at maturity, rate of accretion, interest rate and maturity) to
the terms of the Original Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes are freely transferable by
holders thereof (except as provided herein or in the Prospectus) and are issued
without any right to registration under the Securities Act of 1933, as amended
(the "Securities Act"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Original
Notes indicated in Box 1 below. The undersigned is the registered owner of all
the Original Notes being tendered by it, and the undersigned represents that it
has received from each beneficial owner of tendered Original Notes ("Beneficial
Owner(s)") a duly completed and executed form of "Instructions to Registered
Holder from Beneficial Owner" accompanying this Letter of Transmittal,
instructing the undersigned to take the action described in this Letter of
Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Original
Notes tendered herewith, the undersigned hereby irrevocably exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Original Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent acts as the agent of the Company in connection with the Exchange Offer) to
cause the Original Notes to be assigned, transferred and exchanged. The
undersigned agrees that acceptance of any and all validly tendered Original
Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Exchange Offer and has full power and authority
to tender, exchange, assign and transfer the Original Notes tendered hereby and
to acquire Exchange Notes issuable upon the exchange of such tendered Original
Notes, and that, when such tendered Original Notes are accepted for exchange,
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned and each Beneficial Owner will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned represents that it and each Beneficial Owner acknowledge
that the Exchange Offer is being made in reliance on an interpretation by the
staff of the Securities and Exchange Commission (the "SEC"), not issued to the
Company or in connection with the Exchange Offer, to the effect that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Original Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder that is (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) a broker-dealer
who acquired Original Notes directly from the Company or (iii) a broker-dealer
who acquired Original Notes as a result of market-making or other trading
activities) without compliance with the registration and prospectus delivery
provisions of the Securities Act; provided that such Exchange Notes are acquired
in the ordinary course of such holders' business and such holders are not
engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such Exchange
Notes and as to broker-dealer prospectus delivery requirements, subject to the
provisions of the paragraph below. See "Shearman & Sterling," SEC No-Action
Letter (available July 2, 1993).
Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. See "Morgan Stanley & Co., Inc." SEC No-Action
Letter (available June 5, 1991), and "Exxon Capital Holdings Corporation," SEC
No-Action Letter (available May 13, 1988).
2
<PAGE> 3
The undersigned hereby represents and warrants that (i) the Exchange Notes
or interests therein received by the undersigned and any Beneficial Owner(s)
pursuant to the Exchange Offer are being acquired by the undersigned and any
Beneficial Owner(s) in the ordinary course of business of the undersigned and
any Beneficial Owner(s) receiving such Exchange Notes, (ii) neither the
undersigned nor any Beneficial Owner(s) is participating, intends to participate
or has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) the undersigned and any Beneficial
Owner(s) acknowledge and agree that any person who is a broker-dealer under the
Exchange Act or is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes and any interest therein acquired by such person
and cannot rely on the position of the staff of the SEC set forth in the
no-action letters that are discussed above, (iv) the undersigned and each
Beneficial Owner understand that a secondary resale transaction described in the
preceding clause (iii) and any resale of the Exchange Notes and any interest
therein obtained by the undersigned and in exchange for the Original Notes
originally acquired by the undersigned directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 and 508, as applicable of Regulation S-K
of the SEC, and (v) neither the undersigned nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company, or
if either the undersigned or any Beneficial Owner(s) is an affiliate, that the
undersigned and any such Beneficial Owner(s) will comply with the prospectus
delivery requirements of the Securities Act in connection with the disposition
of any Exchange Notes to the extent applicable. If the undersigned or any
Beneficial Owner(s) is a broker-dealer, the undersigned further represents that
(x) it and any such Beneficial Owner(s) acquired Original Notes for the
undersigned's and any such Beneficial Owner's own account as a result of
market-making activities or other trading activities, (y) neither the
undersigned nor any Beneficial Owner(s) has entered into any arrangement or
understanding with the Company or any "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes
to be received in the Exchange Offer and (z) the undersigned and any Beneficial
Owner(s) acknowledge that the undersigned and any Beneficial Owner(s) will
deliver a copy of a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with the resales of Exchange Notes
received in exchange for Original Notes where Original Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company intends to make the Prospectus (as it may be amended or
supplemented) available to any broker-dealer for use in connection with any such
resale for a period of 180 days after the expiration date of the Exchange Offer.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of the Original Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable securities law. The undersigned hereby
represents and warrants that the information set forth in Box 2 is true and
correct.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Original Notes tendered hereby, and in such event, the Original Notes not
exchanged will be returned to the undersigned at the address indicated below.
The undersigned acknowledges that, prior to the Exchange Offer, there has
been no public market for the Original Notes or the Exchange Notes. The Company
does not intend to list the Exchange Notes on a national securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop or as
to the liquidity of or the trading market for the Exchange Notes. The
undersigned understands and acknowledges that the Company reserves the right in
its sole discretion to purchase or make offers for any Original Notes that
remain outstanding subsequent to the Expiration Date and, to the extent
permitted by applicable law, purchase Original Notes in the open market, in
privately negotiated transactions or otherwise.
The undersigned understands that tenders of the Original Notes pursuant to
any one of the procedures described in the Prospectus under the caption "The
Exchange Offer" and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company in accordance with the terms
and subject to the conditions of the Exchange Offer.
3
<PAGE> 4
All questions as to the validity, form, eligibility (including time of
receipt), and withdrawal of the tendered Original Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Original
Notes not properly tendered or if, in the sole judgment of the Company, the
Exchange Offer would violate any law, statute, rule or regulation or an
interpretation thereof of the SEC staff. The Company also reserves the right to
waive any irregularities or conditions of tender as to particular Original
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects are final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Original Notes must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notification of defects or irregularities with respect to
tenders of Original Notes, nor shall any of them incur any liability for failure
to give such notification. Tenders of Original Notes will not be deemed to have
been made until such irregularities have been cured or waived. Any Original
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned without cost to such holder by the Exchange Agent to the tendering
holder of the Original Notes, as soon as practicable following the Expiration
Date.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned and
any Beneficial Owner(s), and every obligation of the undersigned or any
Beneficial Owner(s) shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned and any Beneficial Owner(s). The
undersigned also agrees that, except as provided in the Prospectus and set forth
in Instruction 3 below, the Original Notes tendered hereby cannot be withdrawn.
Certificates for all Exchange Notes delivered in exchange for tendered
Original Notes and any Original Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned, unless otherwise
indicated on page 6.
4
<PAGE> 5
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL
NOTES TENDERED HEREWITH" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE ORIGINAL NOTES AND MADE THE REPRESENTATIONS DESCRIBED HEREIN AND IN
THE PROSPECTUS.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
Signature(s) of Holder(s)
Date:
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Original Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 4.
Name(s):
(PLEASE PRINT)
Capacity (full title):
Address:
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
Taxpayer Identification No.:
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 4)
Authorized Signature:
Name:
Title:
Address:
Name of Firm:
Area Code and Telephone No:
Date:
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________________ [ ] The
Depository Trust Company
Account Number:
Transaction Code Number:
5
<PAGE> 6
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
Name of Eligible Institution that Guaranteed Delivery:
If Delivered by Book-Entry Transfer:
Account Number:
[ ] CHECK HERE ONLY IF EXCHANGE NOTES OR UNEXCHANGED ORIGINAL NOTES DELIVERED
HEREWITH ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Notes to:
Name:
(PLEASE PRINT)
Address:
Taxpayer Identification Number:
Social Security No.:
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
Address:
6
<PAGE> 7
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A holder that is a participant in The Depository Trust Company's system may
utilize The Depository Trust Company's Automated Tender Offer Program to tender
Original Notes.
List in Box 1 the Original Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, information should be listed
on a separate signed schedule affixed hereto.
7
<PAGE> 8
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
BOX 1 DESCRIPTION OF ORIGINAL NOTES TENDERED HEREWITH
- ----------------------------------------------------------------------------------------------------------------------
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
AGGREGATE PRINCIPAL
AMOUNT AT MATURITY
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY ORIGINAL NOTES TENDERED**
- ----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
- --------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Original Notes. See
Instruction 3.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BOX 2 BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------------------------
COLUMN 1 COLUMN 2
STATE OF PRINCIPAL RESIDENCE OR
PRINCIPAL PLACE OF BUSINESS OF PRINCIPAL AMOUNT OF TENDERED
EACH BENEFICIAL OWNER OF ORIGINAL NOTES HELD FOR ACCOUNT
TENDERED ORIGINAL NOTES OF BENEFICIAL OWNER
- --------------------------------------------------------------------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
- ------------------------------------------------------------
</TABLE>
8
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES
Certificates for all physically delivered Original Notes or confirmation of
any book-entry transfer to the Exchange Agent's account at a book-entry transfer
facility of Original Notes tendered by book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth on
the front page of this Letter of Transmittal on or prior to the Expiration Date
(as defined in the Prospectus).
The method of delivery of this Letter of Transmittal, the Original Notes
and any other required documents is at the election and risk of the holder, and
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that holders use an overnight or hand delivery service, properly
insured. In all cases, sufficient time should be allowed to ensure delivery to
the Exchange Agent before the Expiration Date. No Letter of Transmittal should
be sent to the Company.
Holders who wish to tender their Original Notes but whose Original Notes
are not immediately available or who cannot deliver their Original Notes and all
other required documents to the Exchange Agent on or prior to the Expiration
Date or comply with book-entry transfer procedures on a timely basis may tender
their Original Notes pursuant to the guaranteed delivery procedure set forth in
the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures."
Such holders' tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as
defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has
received from such Eligible Institution (i) either a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) or a properly
transmitted Agent's Message and (ii) a Notice of Guaranteed Delivery,
substantially in the form included herewith (by facsimile transmission,
mail or hand delivery), setting forth the name and address of such holder
of Original Notes and the amount of Original Notes tendered, stating that
the tender is being made thereby and guaranteeing that within five New York
Stock Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery, a Book-Entry Confirmation or the certificates relating
to the Original Notes in registered form and all other documents required
by this Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent; and
(c) a Book-Entry Confirmation or the certificates relating to the
Original Notes, and all other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Original Notes for exchange.
2. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS
Only a holder in whose name tendered Original Notes are registered on the
books of the registrar (or the legal representative or attorney-in-fact of such
registered holder) may execute and deliver this Letter of Transmittal. Any
Beneficial Owner of tendered Original Notes who is not the registered holder
must arrange promptly with the registered holder to execute and deliver this
Letter of Transmittal on his or her behalf through the execution and delivery to
the registered holder of the "Instructions to Registered Holder from Beneficial
Owner" form accompanying this Letter of Transmittal.
3. PARTIAL TENDER; WITHDRAWALS
If less than the entire principal amount of Original Notes evidenced by a
submitted certificate is tendered, the tendering holder must fill in the
principal amount tendered under heading "Principal Amount Tendered." A newly
issued certificate for the principal amount of Original Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Original Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
9
<PAGE> 10
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal (sent by facsimile, registered or certified mail,
or overnight courier or by hand) must be timely received by the Exchange Agent.
Any such notice of withdrawal (a) must (i) specify the person named in the
Letter of Transmittal as having tendered Original Notes to be withdrawn
(including the principal amount of such Original Notes), (ii) specify the
certificate numbers of the Original Notes to be withdrawn, (iii) specify the
principal amount of Original Notes delivered for exchange, and (iv) specify the
name of the registered holder of such Original Notes, and (b) must be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal (including any required signature guarantees) or be accepted by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. If Original Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at The Depository Trust Company be credited
with the withdrawn Original Notes. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices shall be
determined by the Company in its sole discretion and whose determination shall
be final and binding on all parties. Any Original Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Properly withdrawn Original Notes may be retendered by following
one of the procedures described above at any time on or prior to the Expiration
Date.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES
If this Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature must correspond with the name(s)
as written on the face of the certificates without alteration or any change
whatsoever. If any of the Original Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Original Notes tendered hereby are registered in several
names, it will be necessary to complete, sign and submit as many separate copies
of this Letter of Transmittal as there are different registrations of Original
Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include a
book-entry transfer facility whose name appears on a security listing as the
owner of the Original Notes) of Original Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Original Notes listed, such Original Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
holder, in either case signed exactly as the name or names of the registered
holder or holders appear(s) on the Original Notes.
If this Letter of Transmittal or any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporation or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 4 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal or notice of withdrawal need not
be guaranteed by an Eligible Institution, provided the Original Notes are
tendered: (i) by a registered holder of such Original Notes; or (ii) for the
account of an Eligible Institution.
For purposes of this Letter of Transmittal, an "Eligible Institution" shall
mean any firm that is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the United States.
5. TRANSFER TAXES
The Company shall pay all transfer taxes, if any, applicable to the
transfers and exchange of Original Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Original Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory
10
<PAGE> 11
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Original Notes listed in this Letter of
Transmittal.
6. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES
Any holder whose Original Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
7. ACCEPTANCE OF TENDERED ORIGINAL NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF ORIGINAL NOTES
Upon satisfaction or waiver of all of the conditions of the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue Exchange Notes promptly after acceptance of the
Original Notes. For purposes of the Exchange Offer, the Company shall be deemed
to have accepted tendered Original Notes when, as and if the Company has given
oral or written notice thereof (oral notice being promptly confirmed in writing)
to the Exchange Agent. If any tendered Original Notes are not exchanged pursuant
to the Exchange Offer for any reason, such unexchanged Original Notes will be
returned, without expense, to the undersigned at the address indicated above.
Book-entry interests in Original Notes will be credited to an account maintained
with The Depository Trust Company as promptly as practicable.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Original Notes are
accepted for exchange is required by law to provide the Exchange Agent with such
holder's correct taxpayer identification number ("TIN") on the Substitute Form
W-9 included herein or otherwise establish a basis for exemption from backup
withholding. If such holder is an individual, the TIN is his or her social
security number. If the Exchange Agent is not provided with the correct TIN, the
Internal Revenue Service may subject the holder or transferee to a $50 penalty.
In addition, delivery of such holder's Exchange Notes may be subject to backup
withholding. Failure to comply truthfully with the backup withholding
requirements also may result in the imposition of severe criminal and/or civil
fines and penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Exchange Agent. A foreign person, including entities, may qualify as
an exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that holder's foreign status. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder or other transferee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Original
Notes exchanged in the Exchange Offer, the holder is required to provide the
Exchange Agent with either: (i) the holder's correct TIN by completing the form
included herein, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such holder is awaiting a TIN) and that (a) the holder has not
been notified by the Internal Revenue Service that the holder is subject to
backup withholding as a result of failure to report all interest or dividends or
(b) the Internal Revenue Service has notified the holder that the holder is no
longer subject to backup withholding; or (ii) an adequate basis for exemption.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period
11
<PAGE> 12
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent with its TIN within 60 days after the date of the Substitute Form
W-9, the amounts retained during the 60-day period will be remitted to the
holder and no further amounts shall be retained or withheld from payments made
to the holder thereafter. If, however, the holder has not provided the Exchange
Agent with its TIN within such 60-day period, amounts withheld will be remitted
to the Internal Revenue Service as backup withholding. In addition, 31% of all
payments made thereafter will be withheld and remitted to the Internal Revenue
Service until a correct TIN is provided.
NUMBER TO GIVE THE EXCHANGE AGENT
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Original Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Original Notes. If the Original Notes are held in more
than one name or are held not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
12
<PAGE> 13
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
PAYOR'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX
AT RIGHT AND CERTIFY BY SIGNING AND Social Security Number or
DATING BELOW. Employer
Identification Number
TIN:
---------------------------------------------------------------------------------------------
PART 2 -- AWAITING TIN [ ]
---------------------------------------------------------------------------------------------
CERTIFICATION -- UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
(1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR AM WAITING
FOR A NUMBER TO BE ISSUED TO ME) AND
(2) I AM NOT SUBJECT TO BACKUP WITHHOLDING EITHER BECAUSE (i) I AM EXEMPT FROM BACKUP
WITHHOLDING, (ii) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS")
THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST
OR DIVIDENDS, (iii) OR THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP
WITHHOLDING.
(3) ANY OTHER INFORMATION PROVIDED IN THIS FORM IS TRUE AND CORRECT.
CERTIFICATION INSTRUCTIONS -- YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN NOTIFIED
BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING
INTEREST OR DIVIDENDS ON YOUR TAX RETURN. HOWEVER, IF AFTER BEING NOTIFIED BY THE IRS
THAT YOU WERE SUBJECT TO BACKUP WITHHOLDING YOU RECEIVED ANOTHER NOTIFICATION FROM THE
IRS THAT YOU ARE NO LONGER SUBJECT TO BACKUP WITHHOLDING, DO NOT CROSS OUT SUCH ITEM (2).
SIGNATURE....................................................... DATE........................
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUBSTITUTE
FORM W-9
Department of the Treasurer
Internal Revenue Service
Payer's Request For
Taxpayer Identification Number
("TIN") and Certification
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been
issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the time of payment,
31% of all reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within 60 days.
SIGNATURE................................................... DATE.................... , 1998
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 14
INSTRUCTIONS TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF AMAZON.COM, INC.
10% SENIOR DISCOUNT NOTES DUE 2008
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Amazon.com, Inc. (the "Company"), and
the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount at maturity of its 10% Senior Discount Notes due 2008
(the "Exchange Notes") for each $1,000 in principal amount at maturity of its
outstanding 10% Senior Discount Notes due 2008 (the "Original Notes").
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Original Notes held by
you for the account of the undersigned.
The aggregate face amount of the Original Notes held by you for the account
of the undersigned is (fill in amount):
$
- ------------------------ of the 10% Senior Discount Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Original Notes held by you for the account
of the undersigned (insert principal amount of Original Notes to
be tendered, *if any):
$
- ------------------------ of the 10% Senior Discount Notes due 2008.
* The minimum permitted tender is $1,000 in principal amount at
maturity of Original Notes. All other tenders must be in integral
multiples of $1,000 of principal amount at maturity.
[ ] NOT to TENDER any Original Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender the Original Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including, but not
limited to, representations to the effect that (i) the undersigned's principal
residence or principal business office is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes or
interests therein in the ordinary course of business of the undersigned, (iii)
the undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Notes, (iv) the undersigned acknowledges and agrees that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Exchange Notes
or any interest therein acquired by such person and cannot rely on the position
of the staff of the Commission set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange
Offer -- Resales of the Exchange Notes" and the Letter of Transmittal; (v) the
undersigned understands that a secondary resale transaction described in clause
(iv) above and any resale of the Exchange Notes and any interest therein
obtained by the undersigned in exchange for the Original Notes originally
acquired by the undersigned directly from the Company should be covered by an
effective registration statement containing the selling security holder
information required by Items 507 and 508, as applicable, of Regulation S-K of
the Commission, and (vi) except as otherwise disclosed in writing herewith, the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, (b) to agree, on behalf of the undersigned, as set forth in
the Letter of Transmittal; and (c) to take such other action as may be necessary
under the Prospectus or the Letter of Transmittal to effect the valid tender of
such Original Notes. If the undersigned is a broker-dealer, the undersigned
further (x) represents that it acquired Original Notes for the undersigned's own
account as a result of market-making activities or other trading activities, (y)
represents that it has not entered into any arrangement or understanding with
the Company or any "affiliate" of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) acknowledges that it will deliver a copy of a Prospectus
meeting the requirements of the Securities Act in connection with any resale of
Exchange Notes.
14
<PAGE> 15
SIGN HERE
Name of Beneficial Owner(s):
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Taxpayer Identification or Social Security Number:
Date:
15
<PAGE> 16
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<S> <C>
- -----------------------------------------------------------
Give the
SOCIAL
For this type of account: SECURITY
number of--
- -----------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account1
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
5. Sole proprietorship account The owner(3)
===========================================================
Give the EMPLOYER
IDENTIFICATION number
For this type of account: of--
- -----------------------------------------------------------
6. A valid trust, estate, or Legal entity (Do not
pension trust furnish the identifi-
cation number of the
personal representa-
tive or trustee unless
the legal entity itself
is not designated in
the account title.)(4)
7. Corporate account The corporation
8. Association, club, religious, The organization
charitable, educational
organization or other
tax-exempt organization ac-
count
9. Partnership account The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district, or prison)
that receives agricultural
program payments
- -----------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also list the name of the business. You
may use either the social security or employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE:If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 17
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9*
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN") or you don't know
your number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding and information reporting
on MOST payments include the following:
1. A corporation.
2. A financial institution.
3. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
4. The United States or any agency or instrumentality thereof.
5. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
6. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
7. An international organization or any agency or instrumentality thereof.
8. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
9. A real estate investment trust.
10. A common trust fund operated by a bank under section 584(a).
11. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
12. An entity registered at all times under the Investment Company Act of 1940.
13. A foreign central bank of issue.
14. A futures commission merchant registered with the Commodity Futures Trading
Commission.
15. A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
For interest and dividends, a futures commission merchant registered with the
Commodity Futures Trading Commission is NOT exempt. For broker transactions,
payees listed in items (11) and (15) are NOT exempt. Payments subject to
reporting under sections 6041 and 6041A are exempt only if made to payees listed
in items (1), (3), (4), (5), (6), (7) and (13), except a corporation that
provides medical and health care services or bills and collects payments for
such services. Only payees listed in items (3) through (7) are exempt from
backup withholding for barter exchange transactions, patronage dividends and
payments by certain fishing boat operators.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not provided
your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments of mortgage interest.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. Nonresident aliens and foreign entities not
subject to backup withholding should also furnish a completed Form W-8.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give TINs to payers who must report the payments
to IRS. TINs also must be given to persons who must report to the IRS on
mortgage interest paid, the acquisition or abandonment of secured property and
contributions to an individual retirement account. IRS uses TINs for
identification purposes and to verify the accuracy of tax returns. Payers must
be given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividends, and certain
other payments to a payee who has not furnished a TIN to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.-- If you fail
to furnish your correct TIN to a requester, you are subject to a penalty of $50
for each such failure unless your failure is due to reasonable cause and not to
willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.-- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE IRS
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
AMAZON.COM, INC.
10% SENIOR DISCOUNT NOTES DUE 2008
This form must be used by a holder of the 10% Senior Discount Notes due
2008 (the "Original Notes") of Amazon.com, Inc. (the "Company") who wishes to
tender Original Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in "The Exchange Offer -- Guaranteed Delivery Procedures"
of the Prospectus dated , 1998 (the "Prospectus") and in Instruction 1 to
the Letter of Transmittal. Any holder who wishes to tender Original Notes
pursuant to such guaranteed delivery procedures must ensure that the Exchange
Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date
of the Exchange Offer. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
To: THE BANK OF NEW YORK, EXCHANGE AGENT
By Registered or Certified Mail,
by Overnight Courier or by Hand:
The Bank of New York
Reorganization Section
101 Barclay Street, Floor 7 East
New York, New York 10286
Attention:
or
By Facsimile:
The Bank of New York
Attention:
Facsimile Number: (212) 815-6339
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Original Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 1 of the Letter of Transmittal.
The undersigned hereby tenders the Original Notes listed below:
Certificate Numbers(s) (if known)
Aggregate Principal of Original Notes
Amount Tendered
Certificate No.(s) (if available)
Name of Tendering Holder:
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Date:
2
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal, together with the Original Notes tendered hereby in proper form for
transfer and any other required documents, all by 5:00 p.m., New York City time,
before the fifth business day following the Expiration Date.
SIGN HERE
Name of firm (please print):
Authorized Signature:
Name (please print):
Address:
Telephone Number:
Date:
DO NOT SEND TENDERED ORIGINAL NOTES WITH THIS FORM. ACTUAL DELIVERY OF
TENDERED ORIGINAL NOTES MUST BE MADE IN ACCORDANCE WITH, AND BE ACCOMPANIED BY,
AN EXECUTED LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY
A properly completed and duly executed copy of this Notice of Guaranteed
Delivery and any other documents required by this Notice of Guaranteed Delivery
must be received by the Exchange Agent at its address set forth herein prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and any other required documents to the Exchange Agent is at the
election and risk of the holder, and the delivery will be deemed made only when
actually received by the Exchange Agent. If delivery is by mail, registered mail
with return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. Facsimile transmission is permissib1e, provided, however, that
receipt is confirmed by telephone and an original is delivered by guaranteed
overnight courier. In all cases, sufficient time should be allowed to ensure
timely delivery. For a description of the guaranteed delivery procedure, see the
section set forth in the Prospectus entitled "The Exchange Offer -- Guaranteed
Delivery Procedures" and Instruction 1 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY
If this Notice of Guaranteed Delivery is signed by the registered holder(s)
of the tendered Original Notes referred to herein, the signature must correspond
with the name(s) written on the face of the tendered Original Notes without
alteration or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any tendered Original Notes listed, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered holder(s) appears on the tendered Original Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, office of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders also may contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
4
<PAGE> 1
EXHIBIT 99.3
[LETTERHEAD OF AMAZON.COM, INC.]
RE: AMAZON.COM, INC. 10% ORIGINAL NOTES DUE 2008 IN EXCHANGE FOR
AMAZON.COM, INC. 10% EXCHANGE NOTES DUE 2008
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Amazon.com, Inc. (the "Company") is offering, upon and subject to the terms
and conditions set forth in a prospectus dated , 1998 (the
"Prospectus"), and the enclosed letter of transmittal (the "Letter of
Transmittal"), to exchange (the "Exchange Offer") its 10% Senior Discount Notes
due 2008 (the "Exchange Notes") for its outstanding 10% Senior Discount Notes
due 2008 (the "Original Notes"). The Exchange Offer is being made in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement, dated May 8, 1998, between the Company and Morgan Stanley & Co.
Incorporated. As set forth in the Prospectus, the terms of the Exchange Notes
are identical in all material respects to the Original Notes, except that the
Exchange Notes have been registered under the Securities Act of 1933, as
amended, and therefore will not be subject to certain restrictions on their
transfer and will not be entitled to registration rights. The Exchange Offer is
subject to certain conditions that are described in the Prospectus under "The
Exchange Offer -- Conditions of the Exchange Offer."
We are requesting that you contact your clients for whom you hold Original
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Original Notes registered in your name or in the
name of your nominee, or who hold Original Notes registered in their own names,
we are enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information (or
the use, where relevant) of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Original Notes are not immediately available or
time will not permit all required documents to reach the Exchange Agent
prior to the Expiration Date (as defined below) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A form of letter that may be sent to your clients for whose account
you hold Original Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to The Bank of New York, the Exchange
Agent for the Original Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED BY THE COMPANY
(THE "EXPIRATION DATE"). THE ORIGINAL NOTES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. PLEASE FURNISH
COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD
ORIGINAL NOTES IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO HOLD ORIGINAL
NOTES REGISTERED IN THEIR OWN NAMES AS QUICKLY AS POSSIBLE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Original Notes should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and in the Prospectus under "The Exchange
Offer -- Procedures for Tendering." The Exchange Offer is not being made to, nor
will tenders be accepted from or on behalf of, holders of Original Notes
residing in any jurisdiction in which the making of an Exchange Offer or the
acceptance hereof would not be in compliance with the laws of such jurisdiction.
If holders of Original Notes wish to tender, but it is impracticable for
them to forward their certificates for Original Notes prior to the expiration of
the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer -- Guaranteed
Delivery Procedures."
<PAGE> 2
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of the Original Notes held by them as nominee or in a
fiduciary capacity. The Company will pay or cause to be paid all stock transfer
taxes applicable to the exchange of Original Notes pursuant to the Exchange
Offer, except as set forth in Instruction 5 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials, should be directed to The Bank
of New York, the Exchange Agent for the Original Notes, at its address and
telephone number set forth on the front of the Letter of Transmittal.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Very truly yours,
Amazon.com, Inc.
Enclosures
2
<PAGE> 3
[FORM OF LETTER FOR CLIENTS OF BROKER-DEALERS]
RE: AMAZON.COM, INC. 10% ORIGINAL NOTES DUE 2008 IN EXCHANGE FOR
AMAZON.COM, INC. 10% EXCHANGE NOTES DUE 2008
To Our Clients:
Enclosed for your consideration is a prospectus dated , 1998
(the "Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of Amazon.com, Inc.
(the "Company") to exchange its 10% Senior Discount Notes due 2008 (the
"Exchange Notes") for its outstanding 10% Senior Discount Notes due 2008 (the
"Original Notes"), upon the terms and subject to the conditions described in the
Prospectus. The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement, dated
May 8, 1998, between the Company and Morgan Stanley & Co. Incorporated.
This material is being forwarded to you as the beneficial owner of the
Original Notes carried by us in your account but not registered in your name. A
TENDER OF SUCH ORIGINAL NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Original Notes held by us for your account, pursuant to the
terms and conditions set forth in the enclosed Prospectus and Letter of
Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Original Notes on your behalf in accordance
with the provisions of the Exchange Offer. The Exchange Offer will expire at
5:00 p.m., New York City time, on , 1998, unless extended by the
Company (the "Expiration Date"). Any Original Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Original Notes, of which
$530,000,000 aggregate principal amount at maturity was outstanding as of
, 1998.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section entitled "The Exchange Offer -- Conditions to
the Exchange Offer."
3. Any transfer taxes incident to the transfer of Original Notes from
the holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on
, 1998, unless extended by the Company.
5. The Exchange Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Original Notes residing in any
jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
If you wish to have us tender your Original Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER ORIGINAL NOTES.
<PAGE> 4
INSTRUCTIONS TO REGISTERED HOLDER FROM BENEFICIAL OWNER OF AMAZON.COM, INC.
10% SENIOR DISCOUNT NOTES DUE 2008
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of Amazon.com, Inc. (the "Company"), and
the accompanying Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount at maturity of its 10% Senior Discount Notes due 2008
(the "Exchange Notes") for each $1,000 in principal amount at maturity of its
outstanding 10% Senior Discount Notes due 2008 (the "Original Notes").
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Original Notes held by
you for the account of the undersigned.
The aggregate face amount of the Original Notes held by you for the account
of the undersigned is (fill in amount):
$
------------------------ of the 10% Senior Discount Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Original Notes held by you for the account
of the undersigned (insert principal amount of Original Notes to be
tendered, *if any):
$
------------------------ of the 10% Senior Discount Notes due 2008.
*The minimum permitted tender is $1,000 in principal amount at maturity
of Original Notes. All other tenders must be in integral multiples of
$1,000 of principal amount at maturity.
[ ] NOT to TENDER any Original Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Original Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including, but not
limited to, representations to the effect that (i) the undersigned's principal
residence or principal business office is in the state of (fill in state)
, (ii) the undersigned is acquiring the Exchange Notes or
interests therein in the ordinary course of business of the undersigned, (iii)
the undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Notes, (iv) the undersigned acknowledges and agrees that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale of the Exchange Notes
or any interest therein acquired by such person and cannot rely on the position
of the staff of the Commission set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange
Offer -- Resales of the Exchange Notes" and the Letter of Transmittal, (v) the
undersigned understands that a secondary resale transaction described in clause
(iv) above and any resale of the Exchange Notes and any interest therein
obtained by the undersigned in exchange for the Original Notes originally
acquired by the undersigned directly from the Company should be covered by an
effective registration statement containing the selling security holder
information required by Items 507 and 508, as applicable, of Regulation S-K of
the Commission, and (vi) except as otherwise disclosed in writing herewith, the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, (b) to agree, on behalf of the undersigned, as set forth in
the Letter of Transmittal; and (c) to take such other action as may be necessary
under the Prospectus or the Letter of Transmittal to effect the valid tender of
such Original Notes. If the undersigned is a broker-dealer, the undersigned
further (x) represents that it acquired Original Notes for the undersigned's own
account as a result of market-making activities or other trading activities, (y)
represents that it has not entered into any arrangement or understanding with
the Company or any "affiliate" of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) acknowledges that it will deliver a copy of a Prospectus
meeting the requirements of the Securities Act in connection with any resale of
Exchange Notes.
<PAGE> 5
SIGN HERE
Name of Beneficial Owner(s):
Signature(s):
----------------------------------------------------------------------
----------------------------------------------------------------------
Name(s) (please print):
Address:
------------------------------------------------------------------------
------------------------------------------------------------------------
Telephone Number:
Taxpayer Identification or Social Security Number:
Date:
2
<PAGE> 1
EXHIBIT 99.4
______________, 1998
EXCHANGE AGENT AGREEMENT
The Bank of New York
Corporate Trust Trustee Administration
101 Barclay Street - 21st Floor
New York, New York 10286
Ladies and Gentlemen:
Amazon.com, Inc., a Delaware corporation (the "Company"), proposes to
make an offer (the "Exchange Offer") to exchange its 10% Senior Discount Notes
due 2008 (the "Original Notes") for its 10% Senior Discount Notes due 2008 (the
"Exchange Notes"). The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated ____________, 1998 (the
"Prospectus"), proposed to be distributed to all record holders of the Original
Notes. The Original Notes and the Exchange Notes are collectively referred to
herein as the "Securities."
The Company hereby appoints The Bank of New York to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company on or
about _______, 1998. The Letter of Transmittal accompanying the Prospectus (or
in the case of book entry securities, the ATOP system) is to be used by the
holders of the Original Notes to accept the Exchange Offer and contains
instructions with respect to the delivery of certificates for Original Notes
tendered in connection therewith.
The Exchange Offer shall expire at 5:00 P.M., New York City time, on
_________, 1998 or on such later date or time to which the Company may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions
set forth in the Prospectus, the Company expressly reserves the right to extend
the Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (confirmed in writing) or written notice to you before 9:00 A.M., New York
City time, on the business day following the previously scheduled Expiration
Date.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Original Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer
<PAGE> 2
specified in the Prospectus under the caption "The Exchange Offer--Conditions of
the Exchange Offer." The Company will give oral (confirmed in writing) or
written notice of any amendment, termination or nonacceptance to you as promptly
as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Original Notes
at The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of the
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Original Notes by causing the Book-Entry Transfer Facility to transfer such
Original Notes into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Original Notes (or confirmation of book-entry transfer into
your account at the Book-Entry Transfer Facility) and any other documents
delivered or mailed to you by or for holders of the Original Notes to ascertain
whether (i) the Letters of Transmittal and any such other documents are duly
executed and properly completed in accordance with instructions set forth
therein and (ii) the Original Notes have otherwise been properly tendered. In
each case where the Letter of Transmittal or any other document has been
improperly completed or executed or any of the certificates for Original Notes
are not in proper form for transfer or some other irregularity in connection
with the acceptance of the Exchange Offer exists, you will endeavor to inform
the presenters of the need for fulfillment of all requirements and to take any
other action as may be necessary or advisable to cause such irregularity to be
corrected.
4. With the approval of the President, Senior Vice President,
Executive Vice President or any Vice President of the Company (such approval, if
given orally, to be confirmed in writing) or any other party designated by such
an officer in writing, you are authorized to waive any irregularities in
connection with any tender of Original Notes pursuant to the Exchange Offer.
-2-
<PAGE> 3
5. Tenders of Original Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer--Procedures for Tendering," and Original Notes shall be
considered properly tendered to you only when tendered in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Original Notes
which the President, Senior Vice President, Executive Vice President or any Vice
President of the Company shall approve as having been properly tendered shall be
considered to be properly tendered (such approval, if given orally, shall be
confirmed in writing).
6. You shall advise the Company with respect to any Original Notes
received subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Original Notes.
7. You shall accept tenders:
(a) in cases where the Original Notes are registered in two
or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of
Original Notes provided that customary transfer requirements, including any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Original Notes where so indicated
and as permitted in the Letter of Transmittal and deliver certificates for
Original Notes to the transfer agent for split-up and return any untendered
Original Notes to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be confirmed
in writing) of its acceptance, promptly after the Expiration Date, of all
Original Notes properly tendered and you, on behalf of the Company, will
exchange such Original Notes for Exchange Notes and cause such Original Notes to
be cancelled. Delivery of Exchange Notes will be made on behalf of the Company
by you at the rate of $1,000 principal amount at maturity of Exchange Notes for
each $1,000 principal amount at maturity of the corresponding series of Original
Notes tendered promptly after notice
-3-
<PAGE> 4
(such notice if given orally, to be confirmed in writing) of acceptance of said
Original Notes by the Company; provided, however, that in all cases, Original
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Original Notes (or confirmation
of book-entry transfer into your account at the Book-Entry Transfer Facility), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other required
documents. You shall issue Exchange Notes only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Original Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Original Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Original Notes
tendered shall be given (and confirmed in writing) by the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Original Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer--Conditions of the Exchange Offer," or
otherwise, you shall as soon as practicable after the expiration or termination
of the Exchange Offer return those certificates for unaccepted Original Notes
(or effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Original Notes, unaccepted Original
Notes or Exchange Notes shall be forwarded with a bond surety or by registered
mail, return receipt requested, by first-class mail.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
-4-
<PAGE> 5
(b) will be regarded as making no representations and
having no responsibilities as to the validity, sufficiency, value or genuineness
of any of the certificates or the Original Notes represented thereby deposited
with you pursuant to the Exchange Offer, and will not be required to and will
make no representation as to the validity, value or genuineness of the Exchange
Offer;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in acting
in reliance upon any certificate, instrument, opinion, notice, letter, telegram
or other document or security delivered to you and reasonably believed by you to
be genuine and to have been signed by the proper party or parties;
(e) may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also as to the
truth and accuracy of any information contained therein, which you shall in good
faith believe to be genuine or to have been signed or represented by a proper
person or persons;
(f) may rely on and shall be protected in acting upon
written or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the advice or opinion of such counsel; and
(h) shall not advise any person tendering Original Notes
pursuant to the Exchange Offer as to the wisdom of making such tender or as to
the market value or decline or appreciation in market value of any Original
Notes.
15. You shall take such action as may from time to time be requested
by the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery (as defined in the Prospectus), or such other
forms as may be approved from time to time by the Company, to all persons
requesting such documents and to accept and comply with telephone requests for
information relating to the Exchange Offer, provided that such information shall
relate only the procedures for accepting (or withdrawing from) the Exchange
Offer. The Company will furnish
-5-
<PAGE> 6
you with copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the Company,
Attention: Secretary.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to the Chief Financial Officer of the
Company and such other person or persons as it may request, daily (and more
frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the number
of Original Notes which have been tendered pursuant to the Exchange Offer and
the items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date of such other information as it or he
or she reasonably requests. Such cooperation shall include, without limitation,
the granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that, immediately prior to the Expiration Date, the Company
shall have received information in sufficient detail to enable it to decide
whether to extend the Exchange Offer. You shall prepare a final list of all
persons whose tenders were accepted, the aggregate principal amount of Original
Notes tendered, the aggregate principal amount of Original Notes accepted and
deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall
be stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation as set forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal and further acknowledge that you have examined each of them. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the
-6-
<PAGE> 7
Letter of Transmittal (as they may be amended from time to time), on the other
hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
21. The Company covenants and agrees to indemnify and hold you
harmless in your capacity as Exchange Agent hereunder against any loss,
liability, cost or expense, including attorneys' fees and expenses, arising out
of or in connection with any act, omission, delay or refusal made by you in
reliance upon any signature, endorsement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Original Notes reasonably believed by you in good
faith to be authorized, and in delaying or refusing in good faith to accept any
tenders or effect any transfer of Original Notes; provided, however, that the
Company shall not be liable for indemnification or otherwise for any loss,
liability, cost or expenses to the extent arising out of your gross negligence
or willful misconduct. In no case shall the Company be liable under this
indemnity with respect to any claim against you unless the Company shall be
notified by you, by letter or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or notice of
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not be liable for the fees and expenses of any
additional counsel thereafter retained by you so long as the Company shall
retain counsel satisfactory to you to defend such suit, and so long as you have
not determined, in your reasonable judgment, that a conflict of interest exists
between you and the Company.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Taxpayer
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver, or cause to be delivered, in a timely manner
to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Original Notes, your check in the amount of all
transfer taxes so payable,
-7-
<PAGE> 8
and the Company shall reimburse you for the amount of any and all transfer taxes
payable in respect of the exchange of Original Notes; provided, however, that
you shall reimburse the Company for amounts refunded to you in respect of your
payment of any such transfer taxes, at such time as such refund is received by
you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, at its
address or telecopy number set forth below:
If to the Company:
Amazon.com, Inc.
1516 Second Avenue
Seattle, Washington 98101
Facsimile: (206) 694-2082
Attention: Chief Financial Officer
-8-
<PAGE> 9
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee Administration
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Securities, funds or property then held by you
as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
AMAZON.COM, INC.
By:
-------------------------------------
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
-----------------------------------
Name:
Title:
-9-
