Amazon.com (AMZN)

PERFORMANCE GOALS IN THE 1997 PLAN PURSUANT TO SECTION 162(m) OF THE CODE

The Board of Directors recommends that shareholders re-approve the material terms of the performance goals for performance-based incentives in the 1997 Plan. Shareholders are not being asked to approve any amendment to the 1997 Plan or to re-approve the 1997 Plan itself. Approval of the material terms of the performance goals set forth in the 1997 Plan will allow certain awards made under the 1997 Plan to qualify as tax-deductible performance-based compensation under Section 162(m) of the Code. The affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote on the matter is required to approve these performance goals. Broker nonvotes will have no effect on the outcome of this matter. Abstentions will be counted as present at the Annual Meeting for purposes of this matter and will have the effect of a vote against the approval of these performance goals.

Section 162(m) places a limit of $1,000,000 on the amount the Company may deduct in any one year for compensation paid to a “covered employee,” which means any person who as of the last day of the fiscal year is the chief executive officer or one of the Company’s four highest compensated executive officers as determined under SEC rules. There is, however, an exception to this limit on deductibility for compensation that satisfies certain conditions for “qualified performance-based compensation” set forth under Section 162(m). One of the conditions requires shareholder approval of the material terms of the performance goals of the plan under which the compensation will be paid. While the Company’s shareholders previously approved the 1997 Plan and its material terms at the Company’s 2000 Annual Meeting, that approval satisfied the Section 162(m) requirements only through the Company’s 2005 Annual Meeting. Therefore, the Company is asking shareholders to re-approve the material terms of the performance goals under the 1997 Plan.

For purposes of Section 162(m), the material terms of the performance goals include (i) the employees eligible to receive compensation under the 1997 Plan, (ii) a description of the business criteria on which the performance goal is based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects of the 1997 Plan is discussed below.