Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 1 of 127

THE HON RABLE ROBERT S LAI 1 4f 1 1. 2

3 -^_ D - ENTERED __ 4 LODGED---^RECEIVED 5 APR 0 8 2002 MR 6 il11l 1111 IN w ^D157UA TSD^D"STRICT`^ RILT OF WASHINGTON CV 01- 00640 900000052 7 DEPUTY 8 UNITED STATES DISTRICT COURT 9 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 10 11 ARGENT CLASSIC CONVERTIBLE ARBITRAGE FUND, L.P., on behalf of itself 12 all others similarly situated, No C01-0640L 13 Plaintiff, COMPLAINT-CLASS ACTION 14 V. LEAD PLAINTIFF ARGENT 15 CLASSIC CONVERTIBLE 16 AMAZON.COM INC., JEFFREY P. BEZOS, ARBITRAGE FUND, L P.'S FIRST JILL COVEY, TOM A. ALBERG, SCOTT D. AMENDED CLASS ACTION 17 COOK, L JOHN DOERR, AND PATRICIA Q COMPLAINT FOR VIOLATIONS STONESIFER, OF THE SECURITIES ACT OF 1933 18 19 Defendants. JURY DEMAND 20 Lead Plaintiff Argent Classic Convertible Arbitrage Fund, L P. ("Lead Plaintiff' or 21 22 "Plaintiff'), individually and on behalf of all other persons similarly situated, by its undersigned

23 attorneys, for its first amended complaint, alleges as follows upon personal knowledge as to itself 24 and its own acts, and upon information and belief as to all other matters, based upon the 25 investigation made by and through its attorneys, which investigation included, inter alia, a review of 26 the public documents and press releases of Amazon.com, ("Amazon" or the "Company") and 27 Inc. 28 other defendants and the pleadings filed in this Court in other securities actions filed against

McKay Chadwell, C LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACT ML I , ii Avenue, Suite -1 01 (COI-0640L) - 1 U le, Washington 981 G \CLIENTSk01337\001\PLEADll{GS\FISTAMENDEDCOMPLAINT .2 PLD DOC ) 800 Fax (206) 23 -2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 2 of 127

defendants Lead Plaintiff believes that further substantial evidentiary support will exist for the

2 allegations set forth below after a reasonable opportunity for discovery NATURE OF ACTION 4 1. Plaintiff brings this action as a class action pursuant to the Securities Act of 1933 as

(the "1933 Act") to remedy defendants' negligent conduct. None of the pleadings contained 6 herein should be read to claim, invoke or assert any element of fraud against any defendant. 7

8 Plaintiff does not claim, invoke or assert any such element. Plaintiff brings this action on

9 behalf of itself and all other persons, except defendants and certain related parties, who 10 purchased the 6.875% Premium Adjustable Convertible Securities due 2010 ("PEACS") of 11 Amazon at any time from their initial offering (which was announced on February 7, 2000 12 and which closed on or about February 2000) through including October 24, 2000 13 16, and

14 (the "Class Period"), to recover damages caused by defendants' violation of the 1933 Act.

15 2 The PEACS were publicly offered pursuant to an offering that was announced on or about 16 February 7, 2000 (along with the filing of the Preliminary Prospectus) and that closed on or 17 about February 16, 2000 (the "Offering") This action arises from untrue statements and 18

19 omissions of material facts contained in the Offering Documents.1 These untrue statements 20 and omissions concern the nature and amount of revenues to be received by Amazon under

21 agreements reached between Amazon and its partners in what Amazon termed the "Amazon 22 I 23 The PEACS were issued pursuant to a registration statement on Form S-3 filed with the Securities Exchange Commission (the "SEC") on May 19, 1999, as amended on Form S-3/A filed with the SEC on June 8, 24 1999 (collectively, the "Universal Shelf Registration Statement"), providing for the issuance of up to $2 billion in various classes of equity, debt, warrants and other securities which incorporated other documents (the 25 "Offering Documents") filed with the Securities Exchange Commission, including (i) an indenture between Amazon and the Bank ofNew York, dated February 16, 2000, and 26 included as an exhibit to Amazon's Form 8-K filed with the SEC on February 16, 2000, (n) a Preliminary Prospectus Supplement on Form 424B5 filed with the SEC on February 7, 2000 27 (the "Preliminary Prospectus"), and (in) a Final Prospectus Supplement on Form 424B5 filed with the SEC on or about February 14, 28 2000 (the "Prospectus")

McKay Chadwell , PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, suite 7201 (C01-0640L) - 2 Seattle, Washington 98104 Cr\CLIENTS\O1337\0011PL EADINGSIFISTAI ENDEDCOMJ'LAINr 2 PIA DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 3 of 127

S

Commerce Network." This action also arises from defendants' sale of the PEACS in 1 2 violation of Section 5 of the 1933 Act and Section 12 of the 1933 Act. 3 3. The Amazon Commerce Network ("ACN") was the name given to a business initiative 4 developed by Amazon in late 1999 and early 2000. During this time, Amazon entered into 5 agreements with a series of other internet retailers (Amazon' s partners in the Amazon 6 Commerce Network). The agreements purportedly involved two features: (i) a minority 7 8 equity investment by Amazon in its ACN partner, and (ii) the promotion of the partner's

9 products, or the integration of the partner's products or services, on Amazon's website, in 10 exchange for a cash fee payable to Amazon. 11 4 Between January 21, 2000 and February 1, 2000, Amazon issued in quick succession four 12 13 press releases announcing such agreements with four companies : Greenlight.com, 14 drugstore coin, Audible, Inc., and living.com. Each of these press releases, as described in

15 detail below, specified the equity stake that Amazon had taken in its partner and specified the 16 fees to be paid by the partner to Amazon in exchange for the services provided by Amazon 17 In the four press releases, Amazon announced that its partners would pay to Amazon a total 18 19 of $362.5 million -- $82.5 million from Greenlight corn; $105 million from drugstore coin; 20 $30 million from Audible, Inc.; and $145 million from living coin over the next three to five

21 years. 22 5. During late January 2000, Amazon senior management communicated the terms of these 23 ACN transactions to various securities analysts at Morgan Stanley & Co , Credit Suisse First 24 25 Boston, and Donaldson Luflcin & Jenrette ("DLY'), including without limitation Mary

26 Meeker of Morgan Stanley and Jamie Kiggen of Donaldson, Lufkin & Jenrette (now Credit 27 Suisse First Boston) who were, at least as early as late January, 2000, involved in 28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 3 Seattle, Washington 98104 G LIENTS10 1 3 3 7100 11PLEADINGS\FISTAMENDEDCONIPLAINT 2 PLD.DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 4 of 127

with Amazon to underwrite a large prospective offering of Eurobonds by Amazon 1

2 According to analyst reports from these investment banks, which were underwriting the

3 PEACS Offering, these agreements were highly material "watershed" events in Amazon's 4 history and highly material to Amazon's financial condition and to investors See Exhibits A 5 - G. Further, according to analyst reports issued during the period February 1, 2000 through 6 the PEACS Offering date by these investment banks underwriting the PEACS Offering, the 7

8 ACN cash fees payable to Amazon under such agreements (1) were, in toto, actually higher

9 than $362 5 million (according to Morgan Stanley, approximately $450 million; according to 10 DLJ, "over $500 million"); (ii) would "accelerate Amazon's path to profitability" because 11 the ACN fee revenue had virtually no costs associated with it -- i.e , because ACN cash fees 12 were nearly pure profit or, as stated by Kiggen and DLJ, "a 100% gross margin revenue 13

14 stream;" and (iii) would result in $120 million of additional income to Amazon in Fiscal Y

15 2000. See Exhibits B, C, F and G. 16 6. These Underwriters also stated in these reports that they expected more ACN deals and that 17 the ACN deals would increase Amazon' s gross margins. 18

19 7. On February 7, 2000, Amazon publicly announced its intention to conduct a convertible debt

20 offering, and filed with the SEC a Preliminary Prospectus Supplement for the Offering. On

21 February 14, 2000, Amazon filed a Prospectus Supplement in final form for an offering of 22 E600 million of PEACS Both Prospectus Supplements prominently featured a section titled 23 "Recent Developments" that described the four ACN agreements -- and the $362.5 million to 24

25 be received by Amazon under those agreements

26 8 On February 16, 2000, Amazon announced the successful completion of its PEACS 27 raising E690 million from investors (including over-allotments). 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 4 Seattle, Washington 98104 G \CLIENTSID1337\0011PLEADINGSWISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 5 of 127

9 However, defendants omitted to disclose prior to the Offering -- in the Offering Documents 1

2 or elsewhere -- that nearly all of its ACN fees would be paid to Amazon not in cash but in

3 form of restricted equity of its ACN partners. Instead, defendants frequently misstated that 4 the ACN fees would be paid in cash and republished these misstatements through the 5 Underwriter' s research reports and through other public sources described herein. Such 6 republished misstatements were based on Amazon' s statements, and prepared at Amazon's 7

8 direction.

9 10. This was a material omission and/or material misstatement because, as became evident at the 10 end of the Class Period, a material portion of the purported revenue stream from the ACN 11 partners was in the form of restricted (i.e., non-saleable) equity, not cash. 12 11. The 13 purported benefits to Amazon of its ACN revenues and their high margins were

14 prominently disclosed by defendants and their agents. Nevertheless, defendants never

15 disclosed during the Class Period that Amazon's ACN fees were to be paid in anything other 16 than cash. Nor did they attach the ACN agreements themselves as exhibits to Offering 17 Documents so that the terms of such contracts could be reviewed by the public Failure to 18

19 annex such material contracts was a negligent violation of Securities Act disclosure

20 requirements.

21 12 At the time of the Offering, Amazon's ACN revenue stream was of crucial importance to 22 PEACS investors because, as represented by defendants and their underwriters, such revenue 23 stream was a source of nearly $500 million dollars of pure profit. This additional purported 24

25 profit reinforced Amazon's previous statements that it could overcome its operating losses

26 and service its debt, including its bonds. When the true nature of the ACN revenue stream 27 began to emerge, and as it became more evident that the value of the ACN stock 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI -0640L) - 5 Seattle, Washington 98104 Cr1CLIENTS10133710011PLEADINGS\FISTAMBNDEDCOMPLAINT 213LD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 6 of 127

consideration would fall drastically short of what had been disclosed in February of 2000, 1

2 Amazon's attractiveness from a debt investor's perspective diminished along with its ability

3 to make its debt payments, and the PEACS prices suffered material declines. 4 13. At no time prior to the Offering was it disclosed in the Offering Documents or otherwise that 5 the $362.5 million to $500 million purportedly to be received by Amazon under the ACN 6 agreements consisted merely of defendants' valuation of restricted equity to be distributed to 7

8 Amazon. Accordingly , at no time prior to the end of the Class Period did PEACS purchasers

9 know that Amazon's supposed ACN "high-margin revenue" actually consisted mostly of 10 speculative restricted shares of stock in a series of start-up internet companies. 11 14. Each of the Offering Documents pursuant to which the PEACS were offered omitted to 12 disclose that rather than being paid in cash under its ACN agreements, Amazon would in fact 13

14 be paid in restricted equity This omission occurred despite the fact that disclosure of the

15 material terms of the ACN agreements, including the form of payment thereunder, was 16 required pursuant to Schedule A of the Securities Act and Rule 408 of the Securities Act. 17 15. Under Item 601 of Regulation S-K, which sets forth disclosure requirements for registration 18

19 statements, all "material contracts" of an issuer must be annexed as exhibits to a registration

20 statement for the offering of securities In that the agreements between Amazon and its

21 partners in the ACN purported to provide Amazon with between $362.5 million and $500 22 million in high-margin revenues over a five year period, such agreements were "material 23 contracts" of Amazon within the meaning of Item 601 which should have been annexed to 24

25 the Registration Statements and Prospectuses for the Offerings.

26 16. Rule 408 of the Securities Act Rules requires all registration statements to contain, in 27 addition to the information expressly required to be included, all "further material 28

McKay u Su, PLLC720 Av LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth venue,, 3u 7201 (CO 1-0640L) - 6 Seattle , Washington 98104 G ICLIENTS10133711t011PLEADINGS%FISTAMENDEDCOMPLA1NT 2,P!D DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 7 of 127

information, if any, as may be necessary to make the required statements, in the light of the 1

2 circumstances in which they are made, not misleading." The fact that the lion's share of the

3 $362.5 million to $500 million claimed by Amazon as revenue commitments from its 4 partners in the ACN was to be paid in the form of restricted equity rather than cash 5 constituted such "further material information" required to be disclosed in the Offering 6 Documents for the PEACS within the meaning of Rule 408. 7

8 17 Additionally, Schedule A of the Securities Act 15 U.S C. § 77aa(28), expressly requires

9 issuers to annex copies of material contracts to a registration statement. Defendants 10 negligently failed to comply with this statutory requirement and there is no express or 11 implied exception to this statute in any SEC regulation or otherwise. 12 18. Because the agreements between Amazon and its partners in the ACN, as represented by 13

14 defendants in the Offering Documents and elsewhere, represented a significant contribution

15 to Amazon's revenue stream and provided a crucial element of high-margin revenue to shore 16 up Amazon's bottom line, defendants' statements complained of herein constituted material 17 untrue statements and omissions to purchasers of the PEACS. The ACN revenue stream was 18

19 not -- as defendants represented -- a high-margin flow of $362 5 to $500 million dollars, but

20 rather an inherently-unstable stream of restricted, speculative shares in Amazon's ACN

21 partners. 22 19. Moreover, in the subject Registration Statement, Amazon negligently misrepresented the 23 drugstore com transaction, overstating the maximum revenue to be received thereunder. In 24

25 particular, in the Registration Statement at pp S5-S6, Amazon described the transaction as

26 involving the receipt of "$105 million over a three-year period" and "a $30 million 27 investment" by Amazon in drugstore.com In fact, the transaction involved only a maximum 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 7 Seattle, Washington 98104 G 1C IENTS10133'n0011PLEADINGS\FJSTAMENDEDOOMPLAWT 2 PLD.DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 8 of 127

payment to Amazon of $75 million, not $105, million because the $30 million investment 1

2 made by Amazon was immediately repaid (i.e., returned) to Amazon by drugstore.com as

3 "prepayment" of its first five quarterly payments under its ACN agreement. Thus, in effect,

4 drugstore.com never had the obligation to pay Amazon $105 million. In recognition of 5 Amazon's disclosure error, drugstore.com made a curative disclosure with respect to this 6 transaction in its own l OQ filed June 2000, acknowledging that the deal included $30 million 7

8 of stock and only up to $75 million of cash Amazon, however, made no such curative

9 disclosure. In addition to misrepresenting the nature of its ACN revenue, Amazon also 10 specifically misrepresented the aggregate consideration to be received from drugstore.com. 11 20. At some point prior to February 2000, Amazon retained Morgan Stanley Dean Witter, 12 Donaldson Lufkin & Jenrette and Credit Suisse First Boston (and/or their affiliates) 13

14 ("Underwriters") to act as underwriters for the placement of the PEACS. After such

15 retention, and prior to Amazon's filing of the Prospectus Supplement with respect to the 16 PEACS Offenng, Amazon and the Underwriters engaged in sales activity which violated 17 Section 5 of the 1933 Act and Section 12(a)(1) of the Securities Act by publishing at least six 18

19 highly bullish research reports with respect to Amazon. See Exhibits A - G. Each such

20 report contained repetitive and bullish comments with respect to Amazon's prospects Such

21 reports did not qualify for the safe harbor provided pursuant to the 1933 Act because they 22 were not "distributed with reasonable regularity" in that they and other similar Amazon 23 reports were not published in accordance with or on a reasonably regular schedule, but 24

25 instead were published ad hoc for the purpose of conditioning the market for the PEACS

26 sale. 27

28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (Col-0640L) - 8 Seattle, Washington 98104 G 1CL1ENTS101337\0011PLEADINGSIFIS TAMENDEDCOMPLAI T 2.PLD DOC (206) 233 -2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 9 of 127

21 The reports constituted a prospectus , as defined in Section 2(a)(10) of the Securities Act, but 1

2 did not comply with the requirements of Section 10 of the Securities Act (15 U.S.C. §77j)

3 and were thus distributed in interstate commerce in violation of Section 5(b)(1) of the 1933 4 Act and Section 12(a)(1) of the 1933 Act. 5 22. Each such report was used by Amazon to "offer for sale" or to "offer to sell" the PEACS 6 within the meaning of Section 2(a)(10) of the 1933 Act and Section 5(c) of the 1933 Act, 7

8 which prohibit the making of offers to sell a security prior to the filing of a registration

9 statement with respect to such security. Because the Prospectus Supplement describing and 10 offering the PEACS was not filed until February 7, 2000, these offers, pursuant to these 11 prospectuses, constituted "gundumping" in violation of Section 5(c) of the Securities Act 12 Section 12(a)(1) of the Securities Act 13

14 23. The information published in the reports was, according to subsequent disclosures made by

15 the analysts who published them (Le , Mary Meeker), provided to the analysts by Amazon 16 itself with knowledge and direction that such information would and should be incorporated 17 into published reports 18

19 24. The fact that Amazon senior management instructed and directed Meeker and other analysts

20 to make these disclosures in violation of Section 5 of the 1933 Act and Section 12(a)(1) of

21 the 1933 Act was hidden from investors and not disclosed until Meeker admitted these facts 22 in an interview with Mark Veverka of Barron's Magazine published on or about October 30, 23 2000. See Exhibit 1, annexed hereto the "October 30 Article " 24

25 25. Prior to the October 30 Article, there was no disclosure of Amazon's role in this

26 sales activity and no factual basis upon which a plaintiff could plead gun-jumping or a 27 violation of Section 12(a)(1) by Amazon. Amazon failed to make such disclosure even 28

McKay Chadwell, PL.LC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (Cal-0640L) - 9 Seattle, Washington 98104 G 1CLIENPS10133710011PLEADINGSIFISTAMENDEDCOMPLAINr 2 PIA DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 10 of 127

though it was required pursuant to Item 508 of Regulation S-K (requiring disclosure of "Plan 1

2 of Distribution") to disclose such sales activities and plans to condition the market in the

3 Registration Statement. By failing to disclose such market conditioning activity as part of its

4 plan of distribution in the Registration Statement, Amazon affirmatively concealed it gun- 5 jumping in violation of its statutory disclosure obligations. The failure to disclose was self- 6 concealing in that, absent the October 30 Article, Plaintiff could not have known that 7

8 Amazon had directed the disclosures made by Meeker and the other analysts in violation of

9 Section 5. Accordingly, the statute of limitations for defendants' violations should be 10 equitably tolled inasmuch as in the exercise of reasonable diligence, Plaintiff could not have 11 known of defendant's violation of Section 5 until, at the earliest, October 30, 2000. Absent 12 equitable tolling, a defendant would have an improper incentive to avoid proper disclosure 13

14 under the Securities Act in order to avoid Section 5 gunjumping liability

15 26. On or about October 24, 2000, Amazon issued a press release disclosing that the SEC had 16 commenced an informal inquiry with respect to Amazon's accounting treatment and 17 disclosure for some of its initial ACN transactions 18

19 27. By the acts, transactions and courses of conduct alleged herem, defendants violated the 1933 20 Act as alleged herein.

21 JURISDICTION AND VENUE 22 28 This action arises under §§ 11, 12, and 15 of the Securities Act of 1933 (the "1933 Act"), 15 23 U.S.C. §§ 77k, 771, and 77o. 24

25 29. This Court has jurisdiction in this action pursuant to Section 22(a) of the Securities Act of

26 1933, 15 U.S.C. § 77v(a) and 28 U.S.C. §§ 1331 and 1337; and pursuant to 28 U.S.C. § 27 1367. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 10 Seattle, Washington 98104 Cr\CLIENTS10 1 3 3 7148 11PLEADINGS\FISTAMENDEDCQMPLAINT 2.PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 11 of 127

30. Venue is proper in this District pursuant to Section 22(a) of the Securities Act, and 28 U.S C I

2 §§ 1391(b) and (c)

3 31 In connection with the acts, transactions and conduct alleged herein, defendants used the

4 means and instrumentalities of interstate commerce, but not limited to, the United States 5 mails, interstate telephone communications and the facilities of national securities exchanges 6 and markets 7

8 PARTIES AND OTHER ENTITIES

9 Lead Plaintiff 10 32. Lead Plaintiff Argent Classic Convertible Arbitrage Fund, L.P, acquired Amazon's PEACS 11 issued pursuant to the Universal Shelf Registration and the Prospectuses, as attested to in a 12 Certificate of Named Plaintiff previously filed with this Court, and was injured thereby 13

14 Amazon.com, Inc.

15 33. Defendant Amazon.com, Inc. ("Amazon" or the "Company") is a Delaware corporation with 16 its principal executive offices at 12th Avenue South, Suite 1200, Seattle, Washington, 98144. 17 During the Class Period, Amazon was a prominent internet retailer of, inter alga, books, 18

19 compact and digital video discs, video games, software, toys, home improvement products,

20 and all manner of consumer electronics. In addition, during the Class Period, under the 21 rubric of the "Amazon Commerce Network," Amazon attempted to broaden its product 22 offerings, services and revenue streams through investments in and partnerships with other 23 internet retailers. Amazon's stock trades on the Nasdaq stock exchange. 24

25 The Amazon Individual Defendants

26 34. Defendant Jeffrey P. Bezos ("Defendant Bezos"), was Amazon' s founder, Chief Executive 27 Officer, and Chairman of the Board of Directors at all relevant times hereto . On June 25, 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 11 Seattle, Washington 98104 G %CLIINTS\013371001 1PLEADINGSSFISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 12 of 127

2000, upon the resignation of Joseph Galli, Defendant Bezos became Amazon's Chief 1

2 Operating Officer and President Defendant Bezos signed Amazon's Registration Statement

3 filed with the SEC by Amazon on May 18, 1999 and Amazon's Amended Registration 4 Statement filed with the SEC by Amazon on June 8, 1999 5 35. Defendant Joy D. Covey ("Defendant Covey") was Amazon' s Chief Financial Officer and 6 Vice President of Finance and Administration between December 1996 and approximately 7

8 April of 1999. From April of 1999 until the present, Defendant Covey has been employed as

9 Amazon's Chief Strategy Officer Defendant Covey signed Amazon's Registration 10 Statement filed with the SEC by Amazon on May 18, 1999 and Amazon's Amended 11 Registration Statement filed with the SEC by Amazon on June 8, 1999. 12 36 Defendant Tom A. Alberg ("Defendant Alberg") was a director of Amazon at all relevant 13

14 times hereto. Defendant Alberg signed Amazon's Registration Statement filed with the SEC'

15 by Amazon on May 18, 1999 and Amazon's Amended Registration Statement filed with the 16 SEC by Amazon on June 8, 1999. 17 37. Defendant Scott D. Cook ("Defendant Cook") was a director of Amazon at all relevant times 18

19 hereto. Defendant Cook signed Amazon's Registration Statement filed with the SEC by 20 Amazon on May 18, 1999 and Amazon's Amended Registration Statement filed with the 21 SEC by Amazon on June 8, 1999. 22 38. Defendant L. John Doerr ("Defendant Doerr") was a director of Amazon at all relevant times 23 hereto Defendant Doerr signed Amazon's Registration Statement filed with the SEC by 24

25 Amazon on May 18, 1999 and Amazon's Amended Registration Statement filed with the

26 SEC by Amazon on June 8, 1999. 27

28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 12 Seattle, Washington 98104 G 1CLIHNTS10133710011PLEADINGSIFISTAMENDLDCO MPLAINT 2YLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2 :01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 13 of 127

39 Defendant Patricia Q Stonesifer ("Defendant Stonesifer") was a director of Amazon at all 1 2 relevant times hereto . Defendant Stonesifer signed Amazon' s Registration Statement filed

3 with the SEC by Amazon on May 18, 1999 and Amazon ' s Amended Registration Statement

4 filed with the SEC by Amazon on June 8, 1999. 5 40. The defendants listed in paragraphs 34 through 39 are collectively referred to herein as the 6 7 "Individual Defendants " Each of the Individual Defendants signed the Registration

8 Statement, was a director or a person performing similar functions as a director of Amazon a

9 the time of the filing of the parts of the Registration Statement complained of herein, and/or 10 was, with his or her consent, named in the Registration Statement as a director or a person 11 performing similar functions as a director of Amazon. As such, the Individual Defendants, 12 and each of them, are liable under Section 11 of the Securities Act of 1933. 13 14 The Underwriters

15 41. a. Morgan Stanley & Co. International Ltd. ("Morgan Stanley") was lead underwriter 16 for the PEACS Offering. 17 b. Credit Suisse First Boston (Europe) Limited ("CSFB") was an underwriter for the 18 19 PEACS Offering.

20 c. Donaldson, Lufldn & Jenrette International ("DLJ") was an underwriter for the

21 PEACS Offering.2 22 42 The Underwriters listed in paragraph 41 are collectively referred to herein as "the 23 24 Underwriters." The Underwriters are investment banking houses which specialize, inter alas

25 in underwriting public offerings of securities.

26 27 28 2 CSFB and DLJ are now operated as one firm

McKayFifth u Su, PLLC720 LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 7011 Fifth Avvenenue,, Suite 7201 (Col-0640L) - 13 Seattle, Washington 98104 G ICLIENTS10 1 33 7100 11PLEADINGSIFISTAMENDEDcOMP [AINT 2 PLD Doc (206) 233 -2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 14 of 127

CLASS ACTION ALLEGATIONS 1

2 43. Plaintiff brings this action as a class action pursuant to Federal Rules of Civil Procedure 3 23(a) and (b)(3) on behalf of a class consisting of all persons and entities who purchased 4 Amazon's PEACS in their initial Offering (announced on February 7, 2000 and completed 5 or about February 16, 2000) or at any time thereafter until October 24, 2000 (the "Class 6 Period"), and who suffered damages thereby (the "Class"). Excluded from the Class are the 7

8 defendants, members of the Amazon Individual Defendants' families, any entity in which

9 any defendant has a controlling interest or is a part or subsidiary of or is controlled by the 10 Company, and the officers, directors, employees, affiliates, legal representatives, heirs, 11 predecessors , successors and assigns of any of the defendants. 12 44 The members of the Class are numerous that joinder of all members is impracticable 13 so

14 While the exact number of Class members is unknown to the Plaintiff at this time and can

15 only be ascertained through appropriate discovery, Plaintiff believes that there are, at a 16 minimum, hundreds of members of the Class who purchased PEACS during the Class 17 Period. The Company has approximately $700 million PEACS outstanding, at $1,000 par 18

19 value per PEAC. 20 45. Common questions of law and fact exist as to all members of the Class and predominate over

21 any questions affecting solely individual members of the Class. Among the questions of law 22 and fact common to the Class are whether, inter alia: 23 a. the 1933 Act was violated by defendants ' acts as alleged herein; 24

25 b. defendants negligently issued false and misleading statements during the Class Period

26 in the Registration Statements and Prospectuses' for the offerings; 27 c the market prices of Amazon PEACS during the Class Period were inflated because 28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L) - 14 Seattle, Washington 98104 Cr\CLIENTS10133710011PLEADINGS\FISTAMENDEDCOMPLAINT.2 PLD.DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 15 of 127

of the conduct complained of herein; and 1 2 d the members of the Class have sustained damages and, if so, what is the proper 3 measure of damages. 4 46. Plaintiff' s claims are typical of the claims of the members of the Class as Plaintiff and 5 members of the Class sustained damages arising out of defendants' wrongful conduct in 6 violation of the 1933 Act as complained of herein. 7 8 47. Plaintiff will fairly and adequately protect the interests of the members of the Class and has

9 retained counsel competent and experienced in class actions and securities litigation. 10 Plaintiff has no interests antagonistic to or in conflict with those of the Class. 11 48. A class action is superior to other available methods for the fair and efficient adjudication of 12 the controversy since joinder of all members of the Class is impracticable. Furthermore, 13

14 because the damages suffered by the individual Class members may be relatively small, the

15 expense and burden of individual litigation makes it impracticable for the Class members 16 individually to redress the wrongs done to them. There will be no difficulty in the 17 management of this action as a class action. 18

19 SUBSTANTIVE ALLEGATIONS 20 AMAZON BEGINS TO ANNOUNCE INVESTMENTS IN, AND STRATEGIC ALLIANCES WITH, 21 OTHER RETAILERS AND "E-TAILERS" 22 49 During 1999, Amazon announced a number of investments in and alliances with other 23 retailers (both conventional and on-line). These included, inter alia 24

25 a. as announced in an Amazon press release issued on February 24, 1999 a "minority

26 investment in and strategic alliance with drugstore.com" (an on-line retailer of 27 healthcare and pharmacy products) giving Amazon a 46% equity stake in 28

McKay Chadweq, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 15 Seattle, Washington 98104 G \CLIENTSIO1 33 7100 11PLEADINGS\FISTAMBNDEI]COMPLAINT 2 PLD OOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 16 of 127

drugstore.com; 1 2 b as announced in Amazon press releases issued on March 29, 1999 and June 14, 1999

3 an "investment in Pets.com" (an on-line retailer of pet accessories, products and

4 giving Amazon a 54% equity stake in Pets.com, 5 c. as announced in Amazon press releases issued on June 16, 1999 and during 6 November 1999, a ten-year "strategic auction alliance" between Amazon and 7

8 Sotheby's (the art auction house) pursuant to which- (a) Amazon would invest in

9 Sotheby's and (b) the two companies would launch a joint online auction site; 10 d as announced in an Amazon press release issued on July 14, 1999 a "strategic alli 11 with and minority investment in Gear.com" (an online retailer of discounted, brand- 12 name sporting goods and merchandise) giving Amazon a 49% stake in Gear com, 13

14 e. as announced in an Amazon press release issued on December 1, 1999 a "strategic

15 alliance with and minority investment in Ashford, com" (an online retailer of luxury 16 products, including jewelry, watches, sunglasses, etc) giving Amazon a 16.6% equit3 17 stake in Ashford com. 18

19 50. In some instances, such as Amazon's investment in Pets.com, nothing other than a

20 straightforward equity investment was disclosed. 21 51. In other instances, Amazon's investment in another company was paired with a "strategic 22 alliance" in which, according to the press releases: 23 a Amazon would, in the case of drugstore.com, "help introduce customers to the new 24 25 shopping experience at drugstore.com as part of its strategic alliance;"

26 b Amazon would, in the case of Gear.com, "help introduce customers to the new 27 shopping experience at Gear.com as part of a strategic alliance;" 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO 1-0640L) - 16 Seattle, Washington 98104 G 1CLMNTS10 1 337100 11PLEADINGSWISTAM NDEDCOMPLAINT 2 ?LD DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 17 of 127

c Amazon would, in the case of Sotheby' s, create jointly an auction website linked to 1

2 auction sites at Amazon.com and at Sothebys.com, bringing together Amazon's

3 customers and online experience with Sotheby' s products and seller base, and

4 d. Amazon would, in the case of Ashford com, "as part of a multi-million dollar 5 marketing initiative and strategic alliance," link its website to Ashford.com's, where 6 Amazon customers would receive "special promotions and unique benefits." 7

8 52 In the first two months of 2000, as discussed in detail immediately below, Amazon

9 to announce new agreements with other internet retailers Insofar as the new agreements 10 featured a strategic operating alliance between the companies coupled with a minority equity 11 investment by Amazon, they seemed ostensibly similar to (and perhaps identical to) the 1999 12 agreements summarized above. 13

14 53. However, the agreements that Amazon announced in January and February of 2000 featured

15 one crucial difference from those announced in 1999 The newer set of agreements, 16 according to Amazon' s press releases and 1933 Act filings, included provisions for cash 17 payments to Amazon from its partners of hundreds of millions of dollars. 18

19 AMAZON ANNOUNCES A SERIES OF STRATEGIC PARTNERSHIPS INVOLVING $362 MILLION TO $500 MILLION IN REVENUE 20 COMMITMENTS TO AMAZON OVER A FIVE YEAR PERIOD 21 54. On January 21, 2000, Amazon issued a press release announcing a "strategic investment and 22 promotional agreement''with Greenlight.com, an online retailer of automobiles. The J 23 21, 2000 press release, reproduced in full below, disclosed three distinct features of the 24

25 agreement: (i) Amazon would acquire a 5% equity stake in Greenlight.com; (ii) Amazon

26 would "help introduce Greenlight.com to Amazon.com's more than 16 million experienced 27 online shoppers;" and (iii) in return, "Amazon would receive $82.5 million over five years 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L) - 17 Seattle, Washington 98104 G \CL ENTS10 1 3 37100 11PLEADINGS\FISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 18 of 127

and receive warrants to increase its stake to as much as 30% over the five years." The

2 January 21, 2000 press release stated:

3 AMAZON COM AND ONLINE CAR-BUYING SERVICE GREENLIGHT.COM ANNOUNCE STRATEGIC 4 INVESTMENT AND PROMOTIONAL AGREEMENT 5 SEATTLE -- January 21, 2000 -- Amazon.com the leading online 6 retailer, today announced that it has agreed to acquire a stake in Greenlight.com, the only online car buying company that gives 7 consumers the convenience and control of online purchasing 8 coupled with the support of a leading network of premiere auto dealers. 9 Amazon.com has agreed to acquire 5% of the outstanding shares of 10 Greenlight.com In addition, under a promotional agreement, 11 Amazon.comn will help introduce Greenlight coin to Amazon.com's more than 16 million experienced online shoppers, 12 and, in return, Amazon.corn will receive $82 5 million over five years and receive warrants 13 to increase its stake to as much as 30% over the five years. 14 "We're delighted to join forces with Greenlight.com so that 15 customers can enjoy the benefits of online car shopping with 16 dealers committed to customer service," said Jeff Bezos, founder and CEO of Amazon.com. "Greenlight.com makes it easy for 17 dealers everywhere to participate in e-commerce and reach new customers." 18

19 "We are excited to be teaming up with the e-commerce leader," said Todd Collins, CEO of Greenlight.com. "We know that 20 Amazon.com works only with companies that offer the highest standard of customer service, and their strategic investment 21 validates the Greenlight coin way to buy new cars online. Now 22 that Greenhght.com has teamed up with Amazon.com and its customer base of 16 million experienced online shoppers, no one 23 else can deliver so many potential new-car buyers " 24 Greenlight.com is developing a network of prominent car dealers 25 throughout the United States who share a common characteristic a commitment to working with Greenlight.com to support consumers 26 before, during and after the online purchase of a new car Greenlight is currently 27 corn available to consumers in Atlanta, Ga , Greensboro, N C , as well as Jacksonville and Orlando, Fla, with 28 national expansion planned for early spring. Greenlight.com

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 18 Seattle, Washington 98104 Cr\CLIENTS\0133710011PLEADINGS\FIS TA,MENDEDCOMPLAINT 2 PLD.DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 19 of 127

continues to build its network by recruiting the most customer-service-onented dealers across the United States 2 55. On January 24, 2000, Amazon issued a press release announcing an "Important, New

Strategic Partnership" with drugstore.com. The January 24, 2000 press release, reproduced 4 in full below, disclosed three distinct features of the agreement: (i) Amazon would make an

6 additional $30 million investment in drugstore.com, (ii) Amazon would create a subsection 7 in its popular website that would allow Amazon shoppers to buy drugstore.com products; 8 (iii) "at the same time," Amazon would "receive $105 million over three years " The January 9 24, 2000 press release stated 10

11 AMAZON.COM ENTERS IMPORTANT, NEW STRATEGIC PARTNERSHIP WITH DRUGSTORE.COM, ALLOWING 12 CUSTOMERS TO BUY DRUGSTORE.COM PRODUCTS THROUGH AMAZON 13 COM

14 Amazon.com Makes Additional Minority Investment in drugstore .com and Receives 105 million for a drugstore com "Tab" 15 at Amazon com 16 SEATTLE -January 24, 2000 -- Amazon.com the leading online 17 retailer, and drugstore.com, the leading online drugstore, today announced a multi-million dollar agreement to integrate a number 18 of the companies' shopping features and create a drugstore.com 19 shopping "tab" at Amazon coin. Under the agreement, Amazon coin will receive $105 million over three years. 20 At the same time, Amazon. com will make an additional $30 21 million investment in drugstore. com, bringing its total stake in 22 drugstore coin to almost 28% of the outstanding drugstore coin common stock, upon closing of the transaction. 23 The agreement means that soon--for the first time ever--an 24 Amazon.com investment partner will be prominently featured on 25 Amazon.com as a permanent part of Amazon.com's regular navigational structure. Additional features that make shopping still 26 easier--integrated 1-Click shopping, a shared shopping basket, and more integrated search and browse capabilities--are planned for 27 later. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C41-0640L) - 19 Seattle, Washington 98104 G \CLIENTS10133?\OO11PLEADWGSIFISTAMENDEDCOMPLAINT.2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 20 of 127

The result will be greater shopping convenience and selection for Amazon corn's more than 16 million customers, who will 2 eventually be able to shop seamlessly between drugstore corn and other Amazon.com stores with equally high levels of customer 3 service.

4 "We're working to make Amazon corn the only place where you 5 can find anything and everything you might want to buy online--what you're seeing today is a completely new component 6 of that strategy," said Jeff Bezos, founder and CEO of Amazon.com. "We chose drugstore.com to be our first partner 7 with this level of tight integration because they obsess over 8 customers the way we do, and we expect more arrangements like this when it makes sense for customers." 9 "Our partnership has been so successful and so valuable for 10 customers that it makes sense for us to take it to a new and 11 enhanced level," said Peter Neupert, president and CEO of drugstore corn "This deeper integration with Amazon.com 12 demonstrates both companies' ongoing commitment to constantly evolve and improve the customer experience." 13

14 Amazon.com originally acquired a minority stake in drugstore corn in August 1998. In the past, Amazon.com has introduced 15 drugstore.com to Amazon.com customers by offering temporary 16 links on the Amazon.com home page and by distributing drugstore.com gift certificates to Amazon corn customers. 17 56. On January 31, 2000, Amazon issued a press release announcing a "Strategic Alliance" with 18

19 Audible, Inc., a company providing voice-recordings of books, magazines, radio programs, 20 lectures, etc., available for downloading into personal computers or portable digital audio

21 devices The January 31, 2000 press release, reproduced in full below, disclosed three 22 distinct features of the alliance: (i) Amazon would acquire a 5% equity stake in Audible, Inc.; 23 (ii) Amazon would be "prominently feature[d]" as an "exclusive provider" of Audible's 24

25 content and services; and (iii) "[i]n addition, in exchange for promotion of audible.com's

26 content and services," Amazon would "receive $30 million over three years." The January 27 31, 2000 press release stated- 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 20 Seattle, Washington 98104 G 1CLIENTS101337111011PLEADINGSIFISTAM ENDEDCOMPLAINT 2.PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 21 of 127

AMAZON COM TO BUY 5% OF AUDIBLE INC AND ENTERS STRATEGIC ALLIANCE ALLOWING CUSTOMERS 2 TO ACCESS SPOKEN AUDIO FROM AUDIBLE.COM THROUGH AMAZON COM 3 Audible To Be Amazon. com's Exclusive Provider of 4 Spoken-Word Programming for Downloading or Streaming via the 5 Web

6 SEATTLE and WAYNE, NJ- (BUSINESS WIRE)-January 31, 2000-Leading online retailer Amazon.com and Audible, Inc., the 7 leader in Internet-delivered spoken audio for PC-based listening or 8 playback on AudibleReadyJ portable digital audio devices, today announced a multi-million dollar agreement to prominently feature 9 content and services from www audible.com at Amazon.com 10 "We're always looking for new ways to deliver more for our 11 customers," said Jeff Bezos, founder and CEO of Amazon.com. "We've chosen Audible to be our exclusive provider because they 12 have established the new standard in the delivery of spoken-word audio via 13 the Web, and they share our core value of customer satisfaction " 14 The alliance will give Amazon.com's more than 16 million 15 customers easy access to over 20,000 hours of digital audio content 16 from audible. com Daily, audible.com features selected audio content from The Wall Street Journal and daily digests of The New 17 York Times, San Jose Mercury News, and Los Angeles Times, as well as The Economist Audio Digest, The Industry Standard, 18 Forbes and Harvard Business Review. It also offers a collection of 19 audiobook bestsellers and classics by authors such as Stephen King, John Grisham, Frank McCourt, Jon Krakauer, Scott Adams, 20 Mary Higgins Clark, James Redfield, James Patterson, William Shakespeare, Emily Dickinson, and Jane Austen. 21

22 It also provides speeches, lectures, language lessons, and on-demand radio programs, including Marketplace, Car Talk, 23 Fresh Air, and Science Friday. All of the programs at audible com are available for PC-based playback and on-the-go listening using 24 numerous AudibleReady portable digital audio players offered by 25 leading consumer electronics and computer manufacturers.

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Under the agreement, which is expected to close later this quarter, 1 Amazon.com will make a strategic investment in Audible, Inc. and 2 acquire 5% of the company In addition, in exchange for promotion of Audible.com's content and services, Amazon.com 3 will receive from Audible $30 million over three years

4 57. On February 1, 2000, Amazon issued a press release announcing a "Strategic Alliance" with 5 living.com, an online retailer of home furnishings, including furniture, bed and bath 6 7 accessories, lighting products and home textiles. The February 1, 2000 press release,

8 reproduced in full below, disclosed three distinct features of the alliance: (1) Amazon would

9 acquire an 18% equity stake in living com, as well as warrants for another 9% of living.com; 10 (iii) Amazon would exclusively feature living.com and its products under the "Home Living" 11 section of Amazon's website; and (iii) "in exchange," Amazon would "receive $145 million 12 13 from living.com over five years." As the February 1, 2000 press release stated:

14 AMAZON.COM ENTERS STRATEGIC ALLIANCE WITH LIVING.COM TO CREATE A "HOME LIVING" STORE AT 15 AMAZON COM 16 SEATTLE--(BUSINESS WIRE)--February 1, 2000--Leading 17 online retailer Amazon coin (www.amazon coin) and living.com, the leading online home products and services retailer 18 (www.living coin), today announced a multi-million dollar 19 agreement to create a Home Living store at Amazon.com. Under the agreement, Amazon.com will receive $145 million from 20 living coin over five years in exchange for being the exclusive 21 Amazon.com Home Living store, providing furniture, bedding, home textiles, decorative accessories, tabletop, window treatments, 22 and other related home categories to Amazon.com's more than 16 million customers. The Home Living store will be prominently 23 displayed with other Amazon coin stores. Simultaneously, Amazon.com will make an investment in living.com to acquire an 24 18 percent stake in the company, with warrants for another 9 25 percent, upon the transaction's closing, which is expected later this quarter. 26 The partnership between Amazon.com and hving.com will result 27 in greater shopping convenience and selection for Amazon cam 28 customers, who will eventually be able to shop seamlessly between

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701fifth Avenue, Suite 7201 (CO 1-0640L) - 22 Seattle, Washington 98104 G 1CLIENPS101 33 7104 11PLEADINGS%FISTAMENDEDCOMILAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 23 of 127

living corn and other Amazon.corn stores with similarly high levels of customer service 2 "Joining with companies that share our core value of customer 3 satisfaction is an important part of our strategy to make Amazon.com the place where you can find and discover anything 4 and everything you might be looking to buy online," said Jeff 5 Bezos, founder and CEO of Amazon.com. "By joining with living.com--and they're as concerned about customers as we 6 are--we can provide even more selection for Amazon corn customers." 7 8 "We are simply thrilled to join with the world leader in e-tailing and such a top notch organization," said Shaun Holliday, chief 9 executive officer of living.com "This agreement gives us access to Amazon.com's 16 million customers who are already sold on 10 buying online, it associates living corn with the leading brand in 11 online shopping, and it gives us a way to reach customers and build relationships that others will not be able to duplicate. It also 12 means that living corn will be the leading provider of home living 13 products--a $180 billion market--on a valuable piece of e-tail real estate Further, it puts on a fast track our plans to rapidly broaden 14 our e-tailing offerings."

15 Amazon corn will have a seat on the living corn board of directors 16 Both of the agreements relating to the Home Living store and the 17 Amazon corn investment in living corn are subject to certain closing conditions, including Hart-Scott-Rodino review. 18 19 58. On February 4, 2000, Amazon filed a Form 8-K with the SEC, reporting as material current 20 events the promotional agreements with and investments in Greenlight.com, drugstore.com,

21 and living.com. The press releases announcing the agreements with Greenlight.com, 22 drugstore.com, and living.com were included as exhibits to the Form 8-K which was 23 incorporated by reference into the subject Registration Statement. 24 25 59 Thus, according to Amazon' s press releases of January 21, January 24, January 31 and

26 February 1, 2000, Amazon had secured revenue commitments from Greenlight.com, 27 drugstore.com, Audible Inc., and living.com totaling $362.5 million for the next five years. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 23 Seattle, Washington 98104 0 ICLIENTS10133?\OQ11PLEADJNGSIFISTAMENDEDCOMPLAINT 2 PI.D DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 24 of 127

60. On February 2, 2000, Amazon issued a press release and filed such press release as an exhi 1

2 to a form 8-K filing of the same date, announcing its financial results for the fourth quarter

3 1999 In a section of the press release titled, "Recent Highlights," Amazon devoted a 4 subsection to its "Strategic Alliances." There, Amazon, in discussing its expanding list of 5 online partners, stated that "these partnerships represent more than $500 million in revenue 6 commitments to Amazon.com over the next five years." The February 2, 2000 press release, 7

8 in relevant part, stated:

9 Strategic Alliances 10 Amazon.com continued to expand the list of online partners with 11 whom it delivers an expanded set of products and services to its customers. During the fourth quarter and so far in 2000, 12 Amazon.cam has announced partnerships with NextCard, Ashford.com, Greenhght.com, Audible, and living.com, as well as 13 an expanded drugstore coin partnership In aggregate, these 14 partnerships represent more than $500 million in revenue commitments to Amazon.com over the next five years. 15

16 (Emphasis added).

17 61. This 8-K filing was incorporated by reference into the subject Registration Statement. The

18 market response to Amazon's announcements and 8-K filings of January and February 2000 19 was enthusiastic 20 62. On January 24, 2000, after Amazon had announced its "new strategic partnership" with 21

22 drugstore coin, Amazon's stock price rose 13% - increasing Amazon's market capitalization

23 by $2.75 billion - to close at $70 125 A January 24, 2000 news story, published over 24 Bloomberg News and titled "Amazon.com, Drugstore coin Form New Pact; Shares Rise," 25 reported: 26

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Amazon.com, Drugstore .com Form New Pact; Shares Rise

2 Amazon.com will receive $105 million under a three-year marketing agreement with online pharmacy Drugstore.com Inc., 3 sending shares of the biggest internet retailer up 13 percent. 4 Analysts said that the marketing alliance will provide a steady 5 stream of sales at little cost to Amazon.com, which has yet to turn a profit. This is the retailer's second arrangement in the last week. 6 On Friday, it agreed to promote a new car-shopping web site, closely-held Greenlight.com, in exchange for $82.5 million plus 7 warrants during the next five years. 8 "The gates are unlocking for a flood of many more commerce 9 partner-distribution deals in the future, thereby accelerating Amazon's path to profitability" analyst Jamie Kiggen of 10 Donaldson, Lufkin & Jenrette wrote in a report. He rates the stock 11 a "top pick."

12 Amazon com reached similar arrangements late last year with luxury retailer Ashford com Inc and Internet credit-card issuer 13 NextCard Inc. 14 "What we're really trying to do is make Amazon.com a real 15 starting point for e-commerce," said Jeff Bezos, company founder 16 and chief executive, in an interview. He said more alliances will be forged "when it makes sense for customers " 17 63 On February 1, 2000, after Amazon had announced its strategic alliance with living com, 18

19 Amazon's share price rose by approximately 4%, increasing Amazon's market capitalization 20 by $980 million. A February 1, 2000 news story, published over Bloomberg News and titled 21 "Amazon corn to Take 18% Stake in Living.com," reported: 22 Amazon.com to Take 18% Stake in Living.com 23 Amazon.com Inc. agreed to buy an 18 percent stake in closely-held 24 living.com for an undisclosed amount, and will get $145 million 25 over five years from the Internet home-furnishings retailer for marketing its site. 26 Amazon.com is forging alliances to add products to its web site 27 and boost revenue The company said yesterday that it will buy a 28 stake in Audible Inc., which delivers audio books and articles over

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L) - 25 Seattle, Washington 98104 Cr1CLIENTS10 1 33710011PLEADINGS\FISTAMENDEDCOMPLAAIT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 26 of 127

the internet, and last month signed similar pacts with online 1 pharmacy Drugstore.com Inc. and new car-shopping site 2 Greenlight.com.

3 64. The same day, DLJ analyst Jamie Kiggen issued a report reiterating Amazon as a "Top Pick"

4 and referring to the series of recently-announced strategic agreements as highly material 5 "watershed" events "accelerating Amazon's path to profitability." Stating that "[t]hese deals 6 7 represent over $500 million in total payments to Amazon over the life of the contracts, and

8 approximately $120 million to Amazon in FY 2000," Kiggen wrote in his February 1, 2000

9 analyst report: 10 The living.com agreement is the 6th "audience monetization" deal 11 Amazon has struck in just under 3 months (and the 4th in 11 days), including deals with NextCard, Ashford.com, Greenlight.com, 12 Drugstore.com, and Audible.com. These deals represent over $500 million in total payments over the life of the contracts, 13 and approximately $ 120 million to Amazon in FY 2000. 14 Importantly, these payments represent a 100% gross margin revenue stream for Amazon. 15

16 (Emphasis added) See Exhibit C. 17 65 On February 3, 2000, after Amazon had announced (on February 2, 2000) its financial results

18 for the fourth quarter of 1999, and as a result of its recently-announced strategic partnerships, 19 Amazon's shares rose 21% to $84 19 - increasing Amazon's market capitalization by more 20 than $5 billion. A February 2, 2000 news story, published over Bloomberg News and titled, 21

22 "Amazon com 4`h Qtr Loss Widens, Sees Narrower Loss," reported

23 Amazon.com 4th Qtr Loss Widens; Sees Narrower Loss 24 Amazon.com Inc. said its fourth-quarter loss widened to $323.2 25 million and that losses will start to shrink because of rising sales and lower costs. The forecast sent shares rising as much as 14 26 percent. 27 . . . The company also has signed agreements with Drugstore.com 28 Inc., Ashford.com Inc., Living.com and others to promote their

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web sites in exchange for payments

2 "This is almost pure-profit revenue flowing into the door," said fund manager Drew Cupps at Strong Funds, which owned 382,400 3 shares as of September "That goes a long way toward generating gross margins and, ultimately, profits." 4 5 Gross margin, which was 13% in the fourth quarter, should approach 20% in the first quarter and widen the rest of the year, the 6 company said. Gross margin measures the profitability of sales 7 66. On February 10, 2000, The Financial Post published an article noting a sea-change toward a 8 more favorable opinion regarding Amazon. The article, titled "Hot Stock" and featuring the 9 by-line "Suddenly Wall Street Believes Think the Worst of this Wild 10 in Amazon.com; We 11 Ride is Over, says Meeker", reported:

12 Hot Stock 13 Suddenly Wall Street Believes in Amazon.com; We Think the 14 Worst of this Wild Ride is Over, says Meeker

15 After months of grousing about Amazon.com Inc.'s escalating cost 16 structure, Wall Street has suddenly started to buy chief executive Jeff Bezos' growth-at-all-costs strategy 17 In an outpouring of opinions, Wall Street's Internet cheerleaders 18 ignored the e-tailer's massive fourth quarter losses and instead 19 gushed heartily about its vast potential. `In words that are oh so sweet for us to type, Amazon.com may have become the definitive 20 retail platform on the Internet,' offered Mary Meeker of Morgan Stanley Dean Witter. 21 22 Amazon's customer accounts grew 170% to 16.9 million -- more than most analysts expected. And that is lighting a fire under a 23 new strategy that has been filtering into investor consciousness over the past few months Now that it has spent such a bundle on 24 securing those 17 million users, the idea is that Amazon will be 25 able to sell access to them at premium prices In essence, it is stocking its own shelves at big, fat margins -- a reversal of the 26 usual retailing model. 27 Amazon has announced a flurry of cash-generating strategic 28 partnerships with other retailers. Companies such as

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NextCard, Ashford.com, drugstore.com, and greenlight.com will pay a combined $450 million in cash (according to Ms. 2 Meeker) over the next few years to sell their products on Amazon 's platform. These deals come at little incremental cost 3 to Amazon. Anthony Noto of Goldman Sachs estimates they will bring in $122 million in revenue this year, with gross margins of 4 90%. 5 All of this is helping Amazon zero in on when its massive losses 6 may narrow `In 2000, our overall operating loss will decrease significantly as a percentage of sales,' Warren Jenson, chief 7 financial officer, said. 8 Any cautionary note was all but lost in the sea of praise. "Thanks 9 to increased disclosure from management, highly profitable new partnership deals and a positive outlook for 2000, we now have 10 greater confidence in the long-term profit potential," wrote Henry 11 Blodgett of Merrill Lynch, who raised his near-term rating on the stock from "accumulate" to "buy." 12 (Emphasis added) 13

14 67 At no time did Amazon correct the statements that the ACN deals would generate $450

15 million in cash. In the period stretching from January 21, 2000 (when the first revenue- 16 generating ACN deal was announced) until February 7, 2000, Amazon's shares rose by 21% 17 - increasing Amazon' s market capitalization by $4.4 billion - while the Nasdaq market rose 18

19 by only 2.1 % (i.e., one-tenth the rate of Amazon' s growth). By increasing the price of

20 Amazon stock immediately prior to the Offering of the PEACS , defendants were able to 21 inflate the conversion price at which the PEACS would be convertible, which was set at the 22 time of the Offering. 23 AMAZON RAISES $680 MILLION FROM THE PEACS OFFERING 24

25 68. On February 7, 2000, Amazon issued a press release announcing its intention to sell E600

26 million of Euro-Denominated Convertible Subordinated Notes 27 69. The February 7, 2000 press release stated: 28

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Amazon.com, Inc. Announces Plans to Issue Convertible Subordinated Notes 2 SEATTLE--(BUSINESS WIRE)--February 7,2000--Amazon corn, 3 Inc announced today that it would file a prospectus supplement with the Securities and Exchange Commission to sell up to 4 E600MM of Euro Denominated Convertible Subordinated Notes 5 Due 2010 (excluding proceeds, if any, from the over-allotment option) The notes and shares of the common stock of the 6 company issuable upon conversion of the notes are covered by the company's existing shelf registration statement 7

8 An underwriting group led by Morgan Stanley Dean Witter will market the notes to the public. 9 70 On February 11, 2000, Amazon issued a press release announcing the pricing of its Offering 10

11 of Convertible Subordinated Notes. The February 11, 2000 press release stated

12 Amazon.com, Inc. Announces Pricing of Public Offering of 6 7/8% Convertible Subordinated Notes Due 2010 13

14 SEATTLE--(BUSINESS WIRE)--February 11, 2000--Amazon corn, Inc announced today that it has priced a 15 public offering of 690,000,000 Euros aggregate principal amount 16 of its 6 7/8% Convertible Subordinated Notes due 2010. The notes will be offered at par. 17 The notes and shares of common stock of the company issuable 18 upon conversion of the notes are covered by the company's 19 existing shelf registration statement.

20 An underwriting group led by Morgan Stanley Dean Witter and including Credit Suisse First Boston and Donaldson, Lufkin & 21 Jenrette will offer the notes. 22 71. On February 16, 2000, Amazon issued a press release announcing the successful completion 23 of the Offering. The February 16, 2000 press release stated 24

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28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L) - 29 Seattle, Washington 98104 G 1CLTENTS10133710011PLEADINGSIFISTAMENDEDCOMPLAINT 2 PLD.DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 30 of 127

Amazon. com, Inc. Announces Closing of Public Offering of 6 7/8% Convertible Subordinated Notes Due 2010 2 SEATTLE -- (BUSINESS WIRE) -- February 16, 2000 -- 3 Amazon.com, Inc. (NASDAQ: AMZN) announced today that it has closed a public offering of E690 million aggregate principal 4 amount of its 6 7/8% Convertible Subordinated Notes due 2010 5 The notes were offered at par

6 The notes and shares of common stock of the company issuable upon conversion of the notes are covered by the company's 7 existing shelf registration statement

An underwriting group led by Morgan Stanley Dean Witter and 9 including Credit Suisse First Boston and Donaldson, Lufkin & Jenrette offered the notes. 10

11 THE NEGLIGENTLY PREPARED OFFERING DOCUMENTS

12 72. On May 19, 1999, Amazon filed with the SEC a Registration Statement and Prospectus on 13 Form S-3. The filing, utilizing the "shelf' registration process, registered for sale to the 14 public up to $2 billion in different types of securities, including, inter aba, common stock, 15

16 preferred stock, debt securities, depository shares, and numerous sorts of warrants. The

17 filing provided a "general description of the securities we [Amazon] may offer " The filing

18 went on to state that: 19 [e]ach time we offer securities, we will provide you with a 20 prospectus supplement that will describe the specific amounts, prices and terms of the securities we offer. The prospectus 21 supplement may also add, update or change information contained 22 in this prospectus.

23 73. The May 19, 1999 Registration and Prospectus was signed by each of the Individual 24 Defendants. 25 74 In connection with such Registration Statement, each of the Individual Defendants who were 26 members of the Board of Directors of Amazon also authorized defendants Jeffrey Bezos and 27

28 Joy Covey, and Alan Caplan and Randy Tinsley and each of them as their "attorneys-in-fact"

y Su, 720 7041 PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 1 Fifth Avenue,nuenue,, Suit,e 720 1 (COI-0640L) - 30 Seattle, Washington 98104 cr\CLIENTS1013371OQ11PL EADINGsuIsTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 31 of 127

to execute in their names and on their behalf and to file any and all amendments and post-

2 effective amendments to such Registration Statement, including, without limitation, the

3 February 7 and February 14, 2000 Supplements to the Registration Statement which are the 4 subject of this action. 5 75 Specifically, the May 19, 1999 Registration and Prospectus contained a section titled "Power 6 of Attorney" stating 7

8 POWER OF ATTORNEY

9 Each person whose individual signature appears below hereby authorizes Jeffrey P. Bezos, Joy D. Covey, Alan D. Caplan and 10 Randy J. Tinsley and each of them as attorneys-in-fact, with full 11 power of substitution, to execute in the name and on behalf of such person, individually and in each capacity stated below, and to file, 12 any and all amendments to this Registration Statement, including any and all post-effective amendments, with the Securities and 13 Exchange Commission or any regulatory authority. 14 Pursuant to the requirements of the Securities Act of 1933, as 15 amended, this Registration Statement has been signed by the 16 following persons in the capacities indicated on May 19, 1999.

17 76. On June 8, 1999, Amazon filed with the SEC an Amended Registration Statement and

18 Prospectus on Form S-3/A. This filing, utilizing the "shelf' registration process, registered 19 for sale to the public up to $2 billion in different types of securities, including, inter alia, 20 common stock, preferred stock, debt securities, depositary shares, and numerous sorts of 21

22 warrants. This filing provided a "general description of the securities we [Amazon] may

23 offer." The filing went on to state that: 24 [e]ach time we offer securities, we will provide you with a 25 prospectus supplement that will describe the specific amounts, prices and terms of the securities we offer. The prospectus 26 supplement may also add, update or change information contained in this prospectus. 27

28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L)-31 Seattle, Washington 98104 G NCLMNTSW1337100i1PLEADINGS\FISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 32 of 127

77. The June 8, 1999 Amended Registration Statement and Prospectus was signed by each of the

2 Individual Defendants 3 78. On February 7, 2000, defendants filed with the SEC, on Form 4241,5, a Preliminary 4 Prospectus Supplement to the Registration Statement and Prospectus previously filed by 5 defendants on June 8, 1999. 6 79. The Preliminary Prospectus Supplement contained detailed information about the "amounts, 7 prices and terms" of the convertible subordinated notes, and contained detailed and

9 "update[d]" information about Amazon's business strategy, operations and financial results 10 80. The Preliminary Prospectus Supplement referred extensively to the series of agreements 11 announced in January and February of 2000 between Amazon and its strategic ACN 12 13 repeating and incorporating by reference the misrepresentations contained in its prior press 14 releases and 8-K filings that were incorporated by reference in the Registration Statement.

15 81 In the "Products and Services" section of the Preliminary Prospectus Supplement, located on 16 page S-37, Amazon described the recent expansion of the Amazon Commerce Network: 17 In the past, we have offered our products and services primarily 18 through two means Amazon.com's onlme retail stores and 19 Amazon.com's marketplace services (including Amazon.com Auctions, sothebys.amazon coin and zShops.) We have recently 20 entered into agreements to expand the product and services we offer by allowing selected strategic partners to sell products and 21 services under co-branded sections on the Amazon.com Web site. 22 We refer to these new arrangements as the Amazon corn Commerce Network. .. 23 Amazon corn Commerce Network. We have recently entered into 24 agreements to allow selected strategic partners to sell products 25 under co-branded sections on our Web site We believe that these arrangements will be attractive to Amazon.com customers as a 26 result of the increase in product and service selection available on our site, attractive to the strategic partners as a result of the 27 potential growth of their customer base and brand awareness, and 28 financially attractive to us. See "Summary -- Recent

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Filth Avenue, Suite 7201 (Col-0640L) - 32 Seattle, Washington 98104 G ICLIENTS10133 716011PLEADINOSIFISTAMENDEDOOMPLAINT 2_PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 33 of 127

Developments "

2 82 The section of the Preliminary Prospectus Supplement titled "Recent Developments"

3 concerned itself with the "financially attractive" ACN agreements The section, located on

4 page S-4 and reproduced in its entirety below, stated: 5 RECENT DEVELOPMENTS 6 On January 21, 2000, we announced that we had agreed to acquire 7 5% of the outstanding shares of Greenlight.com, an online car 8 buying service, and warrants to increase our stake up to 30% In connection with this investment, we also announced that we had 9 entered into a promotional agreement with Greenlight.com. This agreement provides for the payment of a minimum of $82.5 10 million to us over a five-year period. 11 On January 24, 2000, we announced that we had agreed to make an 12 additional $30 million investment in drugstore.com, an online retail and information source for health beauty, wellness, personal 13 care and pharmacy. This investment brings our total stake in 14 drugstore.com to approximately 28% of the outstanding drugstore com common stock We also agreed to create a health 15 and beauty store on the Amazon.com site. Under the commercial agreement for , $105 16 this transaction Amazon.com will receive million over a three-year period. 17 On January 31, 2000, we announced that we had agreed to acquire 18 5% of Audible, Inc., a leader in Internet-delivered spoken audio for 19 PC-based listening or playback on AudibleReady (TM) portable digital audio devices. In connection with this investment, we also 20 announced that we had entered into an agreement to feature on the Amazon. com site content and services from Audible, Inc. in 21 exchange for payments of $30 million to us over a three-year 22 period.

23 On February 1, 2000, we announced that we had agreed to acquire an 18% stake in living.com, an online retailer of products and 24 services for the home, with warrants for another 9%. In 25 connection with this investment, we also announced that we had entered into an agreement to create a home living store on the 26 Amazon.com site. Under the commercial agreement for this transaction, Amazon.com will receive $145 million from 27 living.com over a five-year period. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 33 Seattle, Washington 98104 C7-ICLIENTSIOI337,o01\PLEADINGS%FISTAMENDEDCOMPLAINT 2 PLD_DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 34 of 127

(Emphasis added) 1

2 83. Thus, the prospectus stated that Amazon had recently entered into agreements that would

3 provide it with revenues of $362.5 million over five years.

4 84. None of the ACN agreements referenced in the Preliminary Prospectus Supplement was 5 included as an exhibit to the Preliminary Prospectus Supplement, or, indeed, as an exhibit to 6 any of Amazon's SEC filings 7

8 85. In a section of the Preliminary Prospectus titled "Strategic Relationships," located at S-40

9 and reproduced in full below, defendants offered the following general summary of its 10 partnerships with other e-commerce and retailing companies- 11 STRATEGIC RELATIONSHIPS 12 We 13 have entered into a number of strategic relationships with selected e-commerce companies. These relationships generally 14 consist of our making, or having the future right to make, a minority investment in the companies, generally ranging from 15 5% to 49%, and the entry into commercial agreements which 16 vary in scope from customer promotional activities and links to recently announced deals involving the sale of products and 17 services on co-branded sections of the Amazon.com Web site Certain of our strategic relationships are listed below: 18

19 COMPANY NATURE OF BUSINESS ------20 Ashford com Online retailer of luxury and premium products 21 Audible Internet delivered spoken audio for 22 PC-based listening or playback devices Della.com Online service for gift registry, gift advice 23 and personalized gift suggestions drugstore com Online retail and information source for 24 health, beauty, wellness, personal care and 25 pharmacy Gear.com Online source for brand-name sporting 26 goods at discount prices Greenlight com Online auto purchasing in partnership with 27 local dealerships 28 HomeGrocer.com Online grocery-shopping and home-delivery

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fiflh Avenue, Suite 7201 (COI-0640L) - 34 Seattle, Washington 98104 G 1CLIENTS\013371DO1WLEADINGS\FISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 35 of 127

service I living com Online retailer of home products and 2 services Nextcard, Inc. Online issuer of consumer credit cards on 3 the Internet Pets com Online source for pet products, information 4 and services 5 Sothebys Auction house with whom we partnered to create an online auction site devoted to 6 antiques and collectibles 7 We believe that these investments and commercial 8 arrangements are attractive to us for a variety of reasons First, our customers are given access to a wider range of products and 9 services. Second, we are able to generate revenue from the strategic partners for allowing them access to the Amazon.com 10 customer base. Third, we have the opportunity to participate 11 in the future success of our strategic partners as a result of our ownership interest in such companies. We believe that our 12 strategic partners are also well served as a result of the opportunity to quickly grow their base and build brand recognition. 13 customer

14 (Emphasis added).

15 86. Thus, defendants in the Preliminary Prospectus Supplement described Amazon's alliances 16 and partnerships with other retailers in a way that distinguished Amazon's "minority 17 investment in the companies" from its "commercial arrangements" that would "generate 18

19 revenue [for Amazon] from the strategic partner."

20 87. Defendants, in the Preliminary Prospectus Supplement, did not disclose that the revenue paid I

21 by Amazon's partners in ACN, purportedly totaling at least $362 5 million, were largely 22 composed of restricted equity rather than cash, nor did they disclose the nature of the transfer 23 restrictions upon such equity positions, i.e. that they could not be sold absent an effective 24

25 registration statement.

26 88. Such disclosure was materially misleading and omitted to state facts necessary to make 27 statements contained therein not misleading in that: 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 35 Seattle , Washington 98104 01CLI6NIS10 1 337104 11PLEADINGS\FISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 36 of 127

a. It failed to disclose that its consideration from ACN transactions was not $362 1 2 million in cash but was to be received in the form of restricted equity in speculative

3 internet start-ups, and described the ACN consideration as "payments," negligently 4 causing investors to understand that the ACN consideration, designated in dollar 5 amounts, was in cash. 6 b. It failed to correct statements made (at its direction) by its underwriters including 7 8 Mary Meeker and Jamie Kiggen and by its rating agency Moody's Investor Service

9 (see Exhibits A - G and J) based upon information provided to them by Amazon 10 immediately prior to the filing of the Prospectus Supplement (which statements 11 themselves constituted a prospectus authorized by and published at the direction of 12 Amazon) indicating that the ACN network would yield between $362.5-$ 500 million 13

14 in high margin cash revenue to Amazon

15 c. In addition, in the Registration Statement Amazon negligently misrepresented the 16 drugstore.com transaction It described the transaction as involving receipt of $105 17 million together with a $30 million investment by Amazon in drugstore.com. In fact, 18

19 the transaction involved only a maximum payment to Amazon of $75 million, not

20 $105 million, because the $30 million investment made by Amazon was immediately

21 returned to Amazon by drugstore.com as "prepayment" of drugstore.com's first five 22 quarterly payments under its ACN agreement In recognition of Amazon' s disclosure 23 error, drugstore corn made a corrective disclosure with respect to this transaction in 24

25 its l OQ filed June 2000, acknowledging that the deal involved $30 million of stock

26 and up to $75 million of cash Amazon made no such curative disclosure during the 27 Class Period 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 36 Seattle, Washington 98104 G 1CLIENTS10133710011PLEADINGSIFJSTAMENDEDCOMPLAINT 1 PLD DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 37 of 127

89 On February 14, 2000, defendants filed with the SEC, on Form 424b5, a Prospectus 1

2 Supplement to the Registration Statement and Prospectus filed by defendants on June 8, 3 1999 This Prospectus Supplement contained the same material misrepresentations and 4 omissions as the February 7, 2000 Supplement. 5 90. Schedule A of the Securities Act of 1933, 15 U.S C. § 77aa(28), expressly requires issuers to 6 annex copies of material contracts to a registration statement. Defendants failed to comply 7

8 with this statutory requirement in failing to annex copies of the ACN agreement to the

9 Offering Documents and there is no express or implied exception to this statute in any SEC 10 regulation or otherwise. 11 91. Rule 408 of the 1933 Act Rules requires that registration statements contain, in addition to 12 the information expressly required to be included, all "further material information, if any, as; 13

14 may be necessary to make the required statements, in the light of the circumstances in which

15 they are made, not misleading." The fact that a material portion of Amazon's purported 16 revenue stream to be generated from its ACN partners would be paid to Amazon not in cash 17 but in restricted equity of Amazon' s partners, constituted such "further material information" 18

19 required to be disclosed in the Offering Documents for the PEACS within the meaning of

20 Rule 408. Nevertheless, the agreements Amazon reached with its ACN partners were not

21 annexed as an exhibit to any of the Registration Statements, Prospectuses and Prospectus 22 Supplements filed with the SEC for the Offering. Nor was the fact that the majority of 23 Amazon's $362.5 million of revenue commitments from its partners would be paid with 24

25 restricted equity -- rather than cash -- of those partners, disclosed in the Offering Documents

26 or in any other public disclosures of Amazon during the Class Period. 27 92 It was highly reasonable for PEACS investors to believe that the revenue described in the 28

McKay Chadweq, PLIC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L)-37 Seattle, Washington 98104 G \CLIENTSIOI33710011PLEADINGSkFISTAMENDEDCOMPLAINT 2 PLDDOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 38 of 127

prospectus was cash On or about January 18, 2002, Morgan Stanley Dean Witter and Mary 1

2 Meeker filed in this Court a motion to dismiss the amended complaint in Marcus v

3 Amazon com et al, No C-01-0358-L. In that motion, Morgan Stanley, the lead underwriter 4 for the PEACS Offering, and Meeker, conceded that "a review of [Amazon's] SEC filings 5 made contemporaneously with Meeker 's statements [i.e., prior and subsequent to the PEACS 6 Offering] supports the fact that Meeker and Morgan Stanley reasonably believed that 7

8 payments by certain ACN parties were to be in cash (emphasis added), and further that

9 [Amazon's] publicly available information. . was consistent with Meeker's and Morgan 10 Stanley ' s statements . ." Id. If it was reasonable for the lead underwriter of the PEACS 11 Offering - which conducted extensive due diligence in connection therewith - to believe that 12 the ACN revenues were cash, then it was reasonable for investors to believe that they were 13

14 cash, too. As stated by Barron's on February 4, 2002, "If the lead underwriter, one of the

15 world' s biggest investment banks, thought a multimillion-dollar revenue stream was to be 16 paid in cash instead of risky dot.com stocks, don't you suppose that bond investors and 17 shareholders thought so, too?" See Exhibit K. 18

19 93. There was a substantial likelihood that a reasonably prudent investor in PEACS would

20 consider the nature and amount of the revenue stream to be paid to Amazon from its partners

21 in the ACN important in making a decision as to whether or at what price to acquire the 22 PEACS. The materiality of these statements was attested to in the February 4, 2002 issue of 23 Barron's "We have long asserted that Amazon gave investors every reason to believe that 24

25 revenues from its much-touted commerce network partners were to be collected in cash, as

26 opposed to stock. We also believe this was especially important because these 27 announcements were made days and weeks before Morgan Stanley trotted out a major 28

McKay ChadwellSu, 72 1 LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue,, Suite 7201 (CO1-0640L) - 38 Seattle, Washington 98104 0-\CLIENTS\0133710011PLEADINGS\FISTAMENDEDCOMPLAINT 2 FLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 39 of 127

European bond offering The fact that Amazon was running critically low in cash (lower 1

2 than many of us will ever know) at the time of the offering made the PEACS Offering

3 to its long-term survival ." Id at p. T3 4 94 Defendants and their agents represented that Amazon would be receiving from its partners a 5 sum between $362.5 million and $500 million in high-margin revenues over five years This 6 revenue stream which, due to its high margins, would be almost pure profit, compared to 7

8 between 53% and 73% of the debt which Amazon was incurring in the PEACS Offering

9 Disclosure of the true nature of the agreements pursuant to which Amazon would be paid by 10 its partners -- agreements specifying payments in restricted stock -- would have materially 11 altered the total mix of information made available to PEACS investors who would depend 12 upon cash flow to repay principle and to pay interest on the PEACS bonds. 13

14 THE TRUTH GRADUALLY EMERGES

15 95 On September 25, 2000, an article entitled, "Is it Amazon.com? Or Obfuscation com," was 16 published by Barron's. The article, reporting on Amazon's analyst briefing and "break-out" 17 session held at the Banc of America Securities stock conference on or about September 20, 18

19 2000, reported that investors and analysts were: (i) concerned about Amazon's ACN 20 revenues; (ii) mystified by what exactly, and how much, Amazon was receiving from its

21 ACN partners; and (iii) unable to get Amazon simply to disclose the exact and real nature 22 and amount of its ACN revenues (i e , so many shares of drugstore com stock and so many 23 millions from drugstore.com) The September 25, 2000 Barron 's article reported 24

25 Of primary concern was the underperformance of Amazon's commerce network, or ACN, partners and the extremely aggressive 26 accounting of revenues from these partners, including living.com, which recently filed for bankruptcy, as well as drugstore.com, 27 Ashford and Audible. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 39 Seattle, Washington 98104 Cr1CLIENTS16133710011PLEADINGs1FISTAMENDEDCOMPLAINT 2 PLO DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 40 of 127

What we find fascinating is that commerce network revenues were the favorite topic of brokerage analysts several months 2 ago, when most of them touted in research-note headlines that Amazon would reap upwards of $450 million in revenues from 3 commerce partners over time. It appears that Amazon may easily fall at least $350 million short of that projection. 4

5 (Emphasis added).

6 96. On October 24, 2000, Amazon issued a press release announcing its financial results for the 7 third quarter of 2000. In the October 24, 2000 press release, Amazon further disclosed that 8 the SEC had opened an informal inquiry with respect to Amazon's accounting treatment and 9 disclosures for some of its initial Amazon Commerce Network transactions. In relevant part, 10

11 the October 24, 2000 press release stated:

12 Notes on Financial Presentation 13 Amazon.com commenced its Amazon Commerce Network 14 program in the fall of 1999 to develop new strategic relationships and expand the products and services the 15 company offers to its customers. As part of this program, 16 Amazon.com entered into a variety of relationships with third parties, including relationships where the company invested in 17 its partners and relationships where the company received securities of its partners as payment for services it provides to 18 them. These relationships, particularly those in which 19 Amazon com receives securities in payment for its services, require reporting and disclosure that involve estimates to determine 20 fair value, the recognition of revenue over time, and the ongoing accounting for the company's investments in its partners. 21 Estimates of fair value are based on the use of independent third 22 party appraisals when appropriate. Amazon.com has received informal inquiries from the SEC staff with respect to 23 accounting treatment and disclosures for some of its initial Amazon Commerce Network transactions and has responded to 24 those questions Amazon.com reviewed the accounting for the 25 transactions with its auditors and the SEC staff, and the company believes that the accounting treatment, and disclosures, were 26 appropriate. Amazon.com will continue to cooperate with the SEC staff if they have further questions. 27

28 (Emphasis added).

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97. On October 30, 2000, Barron's published an article entitled, "What Might the SEC be 2 Probing at Amazon.com9" The article, criticizing Amazon's (non)disclosure of the exact

nature and amount of its ACN revenues and Amazon's accounting for payments received 4

5 from its ACN partners, concluded that Amazon had misstated certain material facts to

6 investors who purchased the PEACS pursuant to Offering Documents As set forth in the 7 article, those Offering Documents trumpeted at least $362 . 5 million in ACN revenues but 8 neglected to disclose that only a very small fraction of this hypothetical $362 5 million was 9 to be paid in cash, while the remainder would consist of shares of stock. This omission, the 10

11 article pointed out, was a material one. For instance, the $30 million in revenues from

12 Audible (announced by Amazon in the Offering Documents, a February 4, 2000 Form 8-K, 13 and in a January 31 press release) consisted of an up-front payment of Audible stock then 14 valued at $20 million and the promise of another $10 million to be paid somehow three years 15

16 later. The $20 million in Audible stock paid to Amazon, as the article pointed out, was -- at

17 the time of the article's publication -- not worth $20 million but rather $1.3 million.

18 98. The October 30, 2000 Barron's article, in relevant part, reported: 19 What Might the SEC be Probing at Amazon.com? 20 ... [a]fter looking at filings, press releases and underwater 21 research from the past nine months or so, we find it reasonable to 22 conclude that Amazon has misled investors through insufficient disclosure of material information. 23 The prospectus for a February offering of convertible eurobonds 24 prominently promotes the financial benefits Amazon would 25 receive from its commerce partner relationships with other online retailers. Nowhere, though, does the company reveal or explain 26 that most initial payments would come in the form of stock, not cash. Yet an equity analyst of the offering's lead underwriter, 27 Morgan Stanley's Mary Meeker, published a report several days 28 before the debt offering stating that Amazon had received

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C41-0640L) - 41 Seattle, Washington 98104 G \CLIHNTS10133714011PLEADINGSIFISTAMENDEDCOMFLAINT 2 PLI) Doc (206) 233-2800 Fax(206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 42 of 127

multiyear "cash" commitments worth more than $450 million. Did Amazon, with the witting or unwitting help of its underwriter, 2 mislead investors into thinking that many commerce-partner payments were cash when they were not? (Company disclosure following the offering has revealed that much of the payments is in stock). 4

5 What's more, despite plunging prices of many commerce-partner shares (one, living com, has filed for bankruptcy protection), 6 Amazon continues to report these revenues in press releases at levels well above their current market values. 7

8 The prospect of fat commerce partner revenues was presented to European bond investors in releases and filings as evidence that 9 Amazon's debt was a better investment than it ultimately was .. . 10 ... [I]n late January and early February, Amazon announced it had 11 entered into partnerships with four other internet companies: Audible, Drugstore.com, Greenlight.com, and Living.com. 12 Analysts cheered the deals, which were supposed to pump as much as $130 million a year in high-margin marketing fees 13 into Amazon ... 14 . . The one-two punch of commerce fees and supposedly rising 15 wallet share was all Wall Street needed to hear to get back on the 16 Amazon bandwagon, including Morgan Stanley's Meeker In a February 3 research report entitled "Correction: Inflection! 17 Amazon.calm!" Meeker sings the praises of Amazon's "very strong customer metrics" and "very strong top line" that would 18 soon be bolstered by commerce-partner payments. 19 Most important, Meeker reported that the payments would be 20 made in the form of cash. In a February note published five days before Morgan Stanley lead-managed Amazon's 21 convertible eurobond offering, Meeker wrote: "These 22 partnerships are now developing into a high-margin revenue stream for Amazon. Combined, the multiyear cash 23 commitments to Amazon from its partners now total over $450 million." 24

25 While we could find no documents by Amazon stating that such payments would be made explicitly in cash, the Meeker statement, 26 coming from an analyst with the company's lead underwriter, was significant. 27

28

McKay Cbadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L)-42 Seattle, Washington 98104 G-1CLIENT51013371 I\PL.EADINGSTISTAbMNDEQCOMPLAINT 2 FLD DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 43 of 127

What's more, as yet another example of Amazon's lack of clear 1 disclosure, documents filed by the company with the SEC related 2 to the bond offering fail to make plain that some of the payments would be made in stock. 3 4 The following is an excerpt from an SEC filing by Amazon: "On January 31, 2000, we announced that we had agreed to acquire 5% 5 of Audible Inc., a leader in Internet-delivered spoken audio for PCbased listening. In connection with this investment, we also 6 announced that we had entered into an agreement to feature on the Amazon.com site content and services from Audible Inc. in 7 exchange for payments of $30 million to us over a three-year 8 period "

9 That reads to us as though Amazon would get $30 million in cash from Audible. But in fact, Amazon received $20 million in stock 10 up front with a pledge for the remaining $10 million in the third 11 year of their agreement. The reality is that the $20 million in Audible stock is now worth about $1.3 million, and Audible's 12 ability to pay the rest is in question.

13 The result of all of this is that investors could have been led to 14 believe that Amazon would reap at least $450 million in high margin cash revenues from its commerce partners as opposed to a 15 fraction of that sum, as represented by pounded-down shares. 16 Amazon, in response to telephone calls and an e-mail message, responded with an e-mailed copy of a joint press release, which 17 relates to one of their commerce partners and is dated last December 1 It states: "In exchange for the investment and the 1 g marketing relationship, Amazon.com will hold approximately 19 16 6% of Ashford.com's outstanding common stock upon the closing of the transaction." The company would not answer any 20 questions or offer any other examples. 21 Meeker's research note certainly didn't discourage European 22 investors from buying Amazon's convertibles Nor did it hurt Amazon's stock on the Nasdaq. The shares soared 21% to $84.19 23 on February 3, the first trading day after Amazon announced its 24 commerce-partner backlog.

25 Another question is whether Meeker violated SEC quiet-period rules by publishing a research note about her employer's client 26 prior to an offering. Convertible-bond offerings are covered by the same SEC rules as equity offerings, subjecting equity analysts as 27 well as bond analysts to the same restrictions, says Harvey 28 Goldschmid, a Columbia University law professor and former SEC

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 43 Seattle, Washington 98104 G 1CLIENTS1013370011PLEADINGSIFISTAM NDEDCOMPLAINT 2J'LD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 44 of 127

counsel.

2 According to a February 14 SEC filing, Amazon's eurobond deal was registered with the SEC. The rules indicate that quiet periods 3 should begin when the underwriter and client agree to initiate an offering and ends 45 days after the offering has been completed. 4 Meeker's publishing "would seem to be in sharp conflict of SEC 5 quiet-period rules," says John Coffee, a Columbia University professor of securities law. "It doesn't sound like something she 6 should have been doing. It doesn't sound kosher." 7 Meeker was in Japan and unavailable for comment, but Morgan 8 Stanley spokesman Ray O'Rourke said that the analyst "had no knowledge of the eurobond offering" when she published her note 9 "She published that note independent of the fact that our brokers were underwriting the [convertible] eurobond offering." In 10 addition, O'Rourke said, Morgan Stanley's lawyers say that under 11 their interpretation of SEC regulations, Meeker was permitted to publish a research note up to the day before the offering. What 12 made her believe that the commerce-partner marketing payments would be in the form "We checked with 13 of cash? the company," O'Rourke said, referring to Amazon. 14 Amazon could have set the record straight sooner and explained 15 the nature of the payments If early payments were not intended to 16 be made mostly in cash, it could have easily released a statement clarifying or correcting Meeker's information. 17 Amazon seems to us to be reluctant to shed light on the severely 18 impaired value of its commerce-partner stock payments. The 19 company still counts about $30 million in stock paid by Drugstore.com in marketing fees as income on its books Those 20 shares are now worth only about $3 million. Similarly, the $50 million in Ashford stock it received is now worth about $16 21 million. 22 While we have no knowledge about which of these issues might be 23 catching the eyes of SEC regulators, we suspect there's enough there to keep them busy for a while. 24

25 (Emphasis added).

26

27

28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (C01-0640L) - 44 Seattle, Washington 98104 6 \CLIENTS1013371001\PLEADINGS\FISTAMENDEDCOMPLAINT 2 J'LD DOC (206) 233 -2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 45 of 127

THE ACN SECURITIES WERE NEGLIGENTLY 1 DESCRIBED AND BOOKED AS "REVENUE" 2 99 Defendants negligently described the restricted stock they were to receive in connection with 3 the ACN transactions as "revenue," when, in fact, under Generally Accepted Accounting 4

5 Principles ("GAAP"), such transactions should have been treated as investments. Statement

6 of Financial Accounting Concepts (SFAC) No. 5, entitled Recognition and Measurement in 7 Financial Statements ofBusiness Enterprises, ¶83(a), provides specifically that 8 revenues and gains generally are not recognized until realized or 9 realizable . Revenues and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or 10 claims to cash. Revenues and gains are realizable when related 11 assets received or held are readily convertible to known amounts of cash or claims to cash. 12 Emphasis 13 added. SFAC No 5, ¶84(g), further provides that "if collectibility of assets

14 received for product, services, or other assets is doubtful, revenues and gains may be

15 recognized on the basis of cash received." 16 100. Here, the ACN restricted stock received by Amazon should not have been described or 17 recorded as "revenue" because such stock was not readily convertible to known amounts of 18

19 cash This is because the stock received in all instances was restricted stock which could not 20 be resold absent an effective registration statement, and it was unclear at the time such stock 21 was issued whether the issuers/ACN-counterparties could ever have effected a registration 22 statement in respect of the shares held by Amazon. Accordingly, under governing GAAP 23 rules, the ACN transactions could not be fairly valued because it was uncertain whether the 24

25 restricted stock could ever be sold

26

27

28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L)-45 Seattle, Washington 98104 G 1CLIENTS\01337tOO PLEADINGSWFJSTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 46 of 127

101. Additionally, Accounting Research Bulletins ("ARB") No. 43, Restatement and Revision of

2 Accounting Research Bulletins, Chapter 1, Section A, 1, states that "profit is deemed to be

3 realized when a sale in the ordinary course of business is effected, unless the circumstances 4 are such that the collection of the sale price is not reasonably assured." Here, the restricted 5 ACN stock should not have been described or recorded as "revenue" because the ACN 6 transactions were not effected in the ordinary course of business in that the "sales puce" was 7

8 paid in highly volatile restricted stock (not in cash or on credit), and collection was therefore

9 not reasonably assured 10 102 Concerns regarding Amazon's improper revenue recognition practices in connection with its 11 ACN arrangements were raised in a research report issued August 30, 2000, by the Center 12 Financial Research and Analysis. See Exhibit The report 13 L. stated:

14 CFRA believes that AMZN obtained a boost to reported earnings by recording high-margin revenue from its ACN partners. In our 15 view, the Company should treat such transactions purely as 16 investments, due to the lack of cash - even in some cases the lack of a liquid asset (as in many cases, AMZN receives the stock of 17 private companies as consideration for services rendered, which is far less liquid than and not nearly as determinable in value as cash) 18 - as payment. 19 Furthermore, in certain cases, the value of the stock received as 20 consideration for services appears to be less than the amount recorded as revenue, as the value of the stock declined from the 21 time the agreement was signed and when the revenue was actually 22 earned.

23 103. Defendants also violated GAAP in failing to disclose that significant estimates were made by 24 management in arriving at the value of the ACN "revenue" purportedly to be received. 25 Accounting Principle Board ("APB") Opinion No. 22, entitled Disclosure ofAccounting 26 Policies, 112, provides in pertinent part that disclosures "should encompass important 27

28 judgments as to appropriateness of principles relating to recognition of revenue ...."

Md(ay Chadwe[I, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 46 Seattle, Washington 99104 &1CLI&NTS10133710011PLEAD1NGSIFISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 47 of 127

Statement of Position (SOP) 94-6, Disclosure of Certain Significant Risks and Uncertainties, 1

2 ¶12, states that "this SOP requires disclosures regarding estimates used in the determination

3 of the carrying amounts of assets or liabilities or in the disclosure of gain or loss

4 contingencies . . . ." Moreover, even as to those ACN partners whose shares were publicly 5 traded, because Amazon owned controlling equity positions in many of them, it was not 6 permissible to account for such positions at the then public-trading market value 7

8 104. SEC Regulation S-X (17 C.F.R. § 210.04-1(a)(1)) states that financial statements filed with

9 the SEC, that are not prepared in accordance with GAAP will be presumed to be misleading 10 or inaccurate, despite footnote or other disclosures. The Offering Documents were thus 11 materially false and misleading and contained omissions of material facts in that in violation 12 of GAAP they improperly booked the ACN stock as "revenue" and failed to disclose the 13

14 significant estimates that were made in assigning a valuation to those supposed "revenue."

15 COUNT I 16 VIOLATION OF §11 OF THE SECURITIES ACT OF 1933 AGAINST 17 AMAZON AND THE AMAZON INDIVIDUAL DEFENDANTS

18 105 Plaintiff repeats and realleges each and every paragraph contained above as if set forth 19 herein, except insofar as such might invoke a claim or element of fraud Allegations of 20 fraudulent conduct or reckless conduct are expressly excluded from this claim. This claim is 21

22 asserted against Amazon and the Individual Defendants.

23 106. This Count is brought pursuant to § 11 of the 1933 Act, 15 U S.C. §77k, on behalf of Plainti

24 and the Class. 25 107. The Registration Statement and prospectuses referenced herein, including those prospectuses 26 published by underwriters at the direction of Amazon (which were not filed with the SEC), 27

28 for the Offerings of the PEACS were inaccurate, contained untrue statements of material fact

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (Col-0640L) - 47 Seattle, washing 98104 G 1CLIEr41S\O133'31001)PLEADINGS\F1STAM ENDEDCOMPLAINT 2 PLD DOC (206) 233-2804 Fax (206) 233-288439 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 48 of 127

omitted to state other facts necessary to make the statements made not misleading, and failed 1

2 to adequately disclose material facts as described above

3 108. Amazon was the registrant for the Registration Statement and the Prospectuses for the

4 Offerings of the PEACS. 5 109. Amazon was the issuer of the securities sold through the Registration Statement and 6 prospectuses. As issuer of the registered PEACS, Amazon is strictly liable to Plaintiff and 7

8 the Class for the material misstatements and omissions contained in the filings detailed

9 above. 10 110. The defendants named in this Count, and each of them, issued, caused to be issued and 11 participated in the issuance of materially false written statements to the investing public that 12 were contained in the Registration Statements and prospectuses referenced herein, which 13

14 statements misstated or failed to disclose, inter alia, the material facts set forth above.

15 111 The defendants named in this Count, with the exception of Amazon, the issuer (whose 16 liability for the misstatements is absolute), owed to the purchasers of the PEACS, including 17 Plaintiff and the Class, the duty to make a reasonable and diligent investigation of the 18

19 statements contained in the Registration Statement and prospectuses at the time they became

20 effective and/or were publicly distributed, and to reasonably assure that those statements

21 were true and that there was no omission of material facts required to be stated in order to 22 make the statements contained therein correct. 23 112. The Individual Defendants, and each of them, signed the Registration Statement and were 24

25 responsible for the content and dissemination of the Registration Statement and prospectuses

26 in connection with the Offering of the PEACS (as well as for Amazon's negligent conduct in 27 connection therewith) and caused such filing to be made with the SEC. In addition, each of 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 48 Seattle, Washington 98104 Cr1CL1IIVTS\0133710015'LEADINGS\FJSTAMENDEDCOMPLAINT 2 PLD.DOC (206) 233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 49 of 127

the Individual Defendants who signed the Registration Statement was a director or a person

2 performing similar functions as a director of Amazon at the time of the filing of the parts of 3 the Registration Statement complained of herein, and/or was, with his or her consent, named 4 in the Registration Statement as a director or a person performing similar functions as a 5 director of Amazon, and is therefore liable for its contents 6 113. The Individual Defendants who signed the Registration Statement and prepared the 7

8 prospectuses negligently failed to make a reasonable investigation or possess reasonable

9 grounds for the belief that the statements contained in the Registration Statement and 10 prospectus referenced herein were true, did not omit any material fact and were correct. The 11 Amazon Individual Defendants, and each of them, signed the Registration Statements and 12 Prospectuses, or were directors of Amazon at such times, and were negligent in that they 13

14 failed to exercise reasonable care in ensuring the accuracy and completeness of the

15 Registration Statement and Prospectuses. 16 114. Pursuant to Schedule A of the Securities Act, Item 408 of the Securities Act and Item 601 of 17 Regulation S-K, the defendants named in this Count were under a duty to annex copies of 18

19 Amazon' s agreements with its strategic partners in the Amazon Commerce Network to the 20 Registration Statements and Prospectuses filed with the SEC in connection with the Offering, 21 and negligently failed to do so in violation of Section 11 of the Act. 22 115. As a direct and proximate result of the defendants' acts and omissions in violation of the 23 Securities Act of 1933, the market price of the PEACS was artificially inflated in the 24

25 Offering made pursuant to the Registration Statement and Prospectuses referenced herein,

26 and Plaintiff and the Class suffered substantial damage in connection with their purchase 27 and/or acquisition of the PEACS. By reason of the conduct herein alleged, defendants 28

McKay Chadwef, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO 1-0640L) - 49 Seattle, Washington 98104 Cr1C.IENTS101337\0011PLEADINGS\FISTAMENDEDGOMPLAINT 2 PLA DQC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 50 of 127

in this Count violated and/or controlled a person who violated § 11 of the Securities Act of 1

2 1933.

3 116. At the times they purchased or otherwise acquired the PEACS, Plaintiff and the members of

4 the Class were without knowledge, and in the exercise of due diligence did not come into 5 possession of the facts concerning the false statements or omissions alleged herein and of the 6 underwriting violations alleged herein until at the earliest October 30, 2000, when the 7

8 Barron's article, annexed as Exhibit I. was published Plaintiffs compliance with the

9 applicable statute of limitations is established by the fact that at least as late as April-May 10 2000, Mary Meeker and Morgan Stanley, lead underwriter for the PEACS Offering and 11 charged with an express due diligence obligation, continued to publish research notes that 12 stated that the subject ACN transactions involved "cash commitments to Amazon [which] . . 13

14 total over $450,000,000." See Exhibit H annexed hereto. Clearly, if Amazon through its

15 underwriters (charged with a due diligence obligation) continued to inform the marketplace 16 in late April-early May 2000 that the ACN payments where "cash," then there is no basis to 17 suppose that class members were or could have been on inquiry notice that the ACN 18

19 payments were not cash prior to one year before the filing of this action in May 2001. 20 117. Less than one year has elapsed from the time that Plaintiff and the members of the Class

21 discovered or reasonably could have discovered the facts upon which this complaint is based 22 to the time that the Complaint was filed. Less than three years have elapsed from the time 23 that the securities upon which this Count is brought were bona fide offered to the public to 24

25 the time that Plaintiff has instituted this action

26

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McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 50 Seattle, Washington 98104 CrICLIENTS1O1337\0011PLEADfl GSTfSTAI4ENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 51 of 127

1 COUNT II

2 VIOLATION OF §12(a)(1) AND §12(a)(2) OF THE SECURITIES ACT OF 1933 AGAINST AMAZON 3 4 118 Plaintiff repeats and realleges each and every paragraph contained above as set forth herein,

5 except insofar as such might invoke a claim or element of fraud. Allegations of fraudulent

6 conduct or reckless conduct are expressly excluded from this claim. This claim is asserted

7 against Amazon. 8 119 This Count is brought pursuant to §12(a)(1) and § 12(a)(2) of the 1933 Act, 15 U.S.C. § 9 771(2), on behalf of Plaintiff and the Class. 10

11 120. Amazon and the Underwriters were sellers, offerors, and/or solicitors of sales of the PEACS

12 in connection with the Registration Statements and Prospectuses referenced herein and

13 exercised an active role in the sales process including publishing marketing material through 14 the Underwriters' analysts as set forth herein 15 16 121 The actions taken by the defendant named in this Count included participation in the

17 preparation and dissemination of the false Registration Statement and prospectuses issued in

18 connection with the Offering of the PEACS, which contained untrue statements of material 19 facts, which omitted to state other facts necessary to make the statements made correct and 20 which failed to disclose matenal facts. 21 22 122. The defendant named in this Count and the Underwriters solicited and/or played a substantial

23 role in the Offering of the PEACS as referred to above. But for the participation by the

24 defendant named in this Count and the Underwriters, including the solicitation as set forth 25 herein, the Offering could not, and would not, have been accomplished The defendant 26 27 named in this Count and the Underwriters did the following acts in furtherance of the sale of

28 the PEACS

701McKayFifth ve u , , 72 1 LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 1 Fifth Avenue, Suite 7201 (COI-0640L) - 51 Seattle, Washington 98104 G \CLIENTS10133710011PLEADINGSTISTAMENDEDCOMPLAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 52 of 127

a. They actively and jointly drafted, revised, and approved the Registration Statements 1

2 and prospectuses referenced herein and other written selling materials by which the

3 Offering of the PEACS was made;

4 b They finalized the Registration Statement and Prospectuses relating to the Offering 5 the PEACS and caused them to become effective. But for the defendant named in 6 this Count having drafted, filed, signed and/or authorized the signing of the 7

8 Registration Statement and Prospectuses, the Offering could not have been

9 accomplished; 10 c They conceived and planned the Offering of the PEACS and jointly orchestrated all 11 activities necessary to effect the sale of these securities by issuing the securities, 12 promoting the securities, supervising their distribution and ultimately directly selling 13

14 the securities;

15 d. They directed Meeker, Kiggen and others to publish marketing materials concerning 16 the PEACS , stating that ACN revenues were cash for the purpose of conditioning the 17 market; and 18

19 e For the purpose of conditioning the market for the PEACS sale, Amazon senior

20 management also expressly informed Moody's Investors Service in connection with

21 its rating of the PEACS on or about February 7, 2000, that ACN partner 22 compensation would be "cash payments." Amazon senior management knew and 23 intended that such statements would be repeated by Moody's in and through the 24

25 published and circulated credit analysis of the PEACS that Amazon requested

26 Moody's to perform. See Exhibit J annexed hereto. 27

28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 52 Seattle, Washington 98104 &\CLEENI S\O133710011PLEADINGS\FISTAMrNDEDCOMPLAINT 2 PLD.DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 53 of 127

123. The defendant named in this Count was obligated to make a reasonable and diligent 1 2 investigation of the written and oral statements made in the Registration Statement and

3 prospectuses related to the matters referenced herein to ensure that such statements were true 4 and that there was no omission to state a material fact required to be stated in order to make 5 the statements contained therein correct. 6 124. Plaintiff and the Class members purchased or otherwise acquired the PEACS pursuant to the 7 8 defective Registration Statement and Prospectuses referenced herein. Plaintiff and the Class

9 members did not know, or in the exercise of reasonable diligence could not have known, of 10 the untruths and omissions contained in the Registration Statements and Prospectuses 11 referenced herein. 12 13 125. At some point prior to February 2000, Amazon retained Morgan Stanley Dean Witter, 14 Donaldson Lufkin & Jenrette and Credit Suisse First Boston (and/or their affiliates) to act as

15 underwriters for the placement of the PEACS. After such retention, and prior to Amazon's 16 filing of the Prospectus Supplement with respect to the PEACS Offering, Amazon and the 17 Underwriters engaged in sales activity that violated Section 5 of the 1933 Act and Section 18 19 12(a)(1 ) of the 1933 Act through the publication of at least six highly bullish research notes 20 with respect to Amazon. See Exhibits A - G annexed hereto. Each such report contained 21 repetitive and bullish comments with respect to Amazon's prospects. Such reports did not 22 qualify for the safe harbor provided pursuant to the 1933 Act because such reports and other 23 similar Amazon reports were not "distributed with reasonable regularity" in that these reports 24 25 were not published in accordance with or on a reasonably regular schedule, but instead were

26 published at the direction of Amazon and based upon information provided by Amazon ad 27 hoc for the purpose of conditioning the market for the PEACS sale. 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO 1-0640L) - 53 Seattle, Washington 98104 Cr1CLIENNIS10 1 3 37100 11PLEADINGSIFISTAMENDEDCOMPLAINT 2 PLO DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 54 of 127

126. These reports constituted a prospectus, as defined in Section 2(a)(10) of the 1933 Act, but 1

2 not comply with the requirements of Section 10 of the 1933 Act (15 U.S.C §77j) and thus

3 were, when used in connection with the sales effort with respect to the PEACS , distributed in 4 interstate commerce in violation of Section 5(b)(1) of the 1933 Act and Section 12(a)(1) of 5 the 1933 Act. 6 127 Each such report was used by Amazon to "offer for sale" or to "offer to sell" the PEACS 7

8 within the meaning of Section 2(a)(10) of the 1933 Act and Section 5(c) of the 1933 Act,

9 which prohibit making offers to sell a security prior to the filing of a registration statement 10 with respect to such security Because the Prospectus Supplement describing and offering 11 the PEACS was not filed until February 7, 2000, these offers, pursuant to these prospectuses, 12 were in violation of Section 5(c) of the 1933 Act and Section 12(a)(1) of the 1933 Act. 13

14 128. The information printed in the research reports was provided by Amazon with knowledge

15 and consent that such information would be incorporated into the research reports. 16 129 Plaintiff, individually and representatively, hereby tenders to the defendant named in this 17 Count those PEACS which Plaintiff and the Class members continue to own, in return for the 18

19 consideration paid for those securities together with interest thereon. 20 130. By reason of the conduct alleged herein, the defendant named in this Count violated, and/or 21 controlled a person who violated, § 12(a)(1 ) and §12(a)(2) of the 1933 Act, 15 U.S C. 22 §771(a)(1) and §771(a)(2). As a direct and proximate result of these violations, Plaintiff and 23 the Class members sustained substantial damage in connection with their purchase and/or 24

25 acquisition of the PEACS. Plaintiff and Class members who purchased or otherwise

26 acquired their PEACS pursuant to the defective Registration Statement and prospectuses 27 referenced herein, but who still hold their PEACS, have the right to rescind and to tender 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L) - 54 Seatte, Washington 98104 G 1CI ]E TS\0 1 3 37100 1 1PIS'AAII'JGS\FISTAMENDEDC•OMJ'LAINT 2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2 : 01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 55 of 127

their PEACS to the defendant named in this Count and hereby reserve that right. 1 2 131. Less than one year has elapsed from the time when Plaintiff and the Class members 3 discovered or reasonably could have discovered the facts upon which this Count is based to 4 the time of the filing of this class action. Less than three years have elapsed from the sale to 5 the public of the securities upon which this Count is brought to the time that Plaintiff filed 6 this action 7 8 132. The fact that Amazon senior management instructed and directed Meeker and other analysts

9 to issue these reports in violation of Section 5 of the 1933 Act and Section 12(a)(1) of the 10 1933 Act was hidden from investors and not disclosed until Meeker admitted such fact in an 11 interview with Mark Veverka of Barron 's Magazine on or about October 30, 2000. See 12 13 Exhibit I, annexed hereto the "October 30 Article." 14 1 133 Prior to the October 30 Article, there was no disclosure of Amazon's role in this gun-j

15 activity and no factual basis upon which a plaintiff could have pled gunjumping by 16 Amazon Amazon failed to make such disclosure even though it was required to disclose 17 such sales activities and conditioning of the market in the Registration Statement pursuant to 18 19 Item 508 of Regulation S-K (requiring disclosure of "Plan of Distribution"). By failing to

20 disclose such market conditioning activity as part of its plan of distribution in the

21 Registration Statement, Amazon affirmatively concealed its gunjumping in violation of its 22 statutory disclosure obligations. Amazon's gun-jumping was also self-concealing, in that 23 absent the October 30 Article, Plaintiff could not have known that Amazon had directed the 24 25 disclosures made by Meeker and the other analysts in violation of Section 5. Accordingly,

26 the statute of limitations for defendants' violation should be equitably tolled because in the 27 exercise of due diligence Plaintiff could not have known of defendant's violation of Section 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Filth Avenue, Suite 7201 (Col-0640L) - 55 Seafe, Washington 98104 G 1CLIENT510133710OIXPLEADiNGSWFISTAMENDEDCOMPLAII4T.2 PLO DOC (206) 233 -2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 56 of 127

until, at the earliest, October 30, 2000 Absent equitable tolling, defendant would have an 1

2 incentive to avoid proper disclosure under the Securities Act in order to avoid Section 5 gun-

3 jumping liability.

4 COUNT in 5 VIOLATION OF §15 OF THE 1933 ACT 6 AGAINST THE INDIVIDUAL DEFENDANTS 7 134 Plaintiff repeats and realleges each and every paragraph contained above as if set forth 8 herein, except insofar as such might invoke a claim or element of fraud. Allegations of 9 fraudulent conduct are expressly excluded from this claim. 10

11 135 This Count is brought pursuant to §15 of the 1933 Act, 15 U.S.C. §77o, against the

12 Individual Defendants, and each of them. 13 136. Each of the Individual Defendants, by reason of his or her stock ownership, management 14 position and/or membership on Amazon's Board of Directors, and his or her signature on 15

16 participation in the preparation and distribution of the Registration Statement and

17 was a controlling person of Amazon and had the power and influence, and exercised the

18 same (through scrutiny of the Registration Statement and other filings referenced herein), to 19 cause Amazon to engage (or not engage) in the violations of law complained of herein. The 20 Individual Defendants, and each of them, are thus liable under § 15 of the Securities Act of 21

22 1933 to Plaintiff and the Class members who purchased or otherwise acquired Amazon's

23 PEACS pursuant to the defective Registration Statements and Prospectuses referenced

24 herein. 25

26

27

28

McKay Chadwell, PLLC LEAD PLAINTIFF' S FIRST AMENDED COMPLAINT -- CLASS ACTION 701 Fifth Avenue, Suite 7201 (COI-0640L) - 56 Seattle, Washington 98104 G\CLINTS10133710011PLEADINGSIFISTAMENDEDCOMPLAINT2 PLDDOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 57 of 127

PRAYER FOR RELIEF AND JURY DEMAND 1

2 WHEREFORE, Plaintiff, on Plaintiffs own behalf and on behalf of the Class, prays for

3 judgment as follows- 4 1. Declaring this action to be a proper class action and certifying Plaintiff as Class 5 representative under Rule 23 of the Federal Rules of Civil Procedure; 6 2. Awarding compensatory damages and rescission in favor of Plaintiff and the other members 7

8 of the Class against all defendants, jointly and severally, for the damages sustained as a

9 of the wrongdoings of defendants, together with interest thereon; 10 3. Awarding Plaintiff the fees and expenses incurred in this action, including reasonable 11 allowance of fees for Plaintiff's attorneys and experts, 12 4. Granting extraordinary equitable and/or injunctive relief as permitted by law, equity and 13

14 federal and state statutory provisions sued on hereunder, including attaching, impounding,

15 imposing a constructive trust upon or otherwise restricting the proceeds of defendants' 16 trading activities or their other assets so as to assure that Plaintiff has an effective remedy; 17 and 18

19

20

21

22 23 24 25 26 27 28

McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L)-57 Seattle, Washington 98104 Cr1CLIENTSlO1337100t1PLEAD1NGS\FLSTAMENDEDCONWLA1N T.2 PLD DOC (206) 233-2800 Fax (206) 233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 58 of 127

1

2 5 Granting such other and further relief as the Court may deem just and proper 3 PLAINTIFF DEMANDS A TRIAL BY JURY.

4 DATED this day of April, 2002. 5 Respectfully submitted, 6 McKAY CHADWELL, PLLC 7 8 .r_ C

9 Michael D. McKay, WSBA No 704 David E Wilson, WSBA No 11328 10 Heather S. Moore, WSBA No 2771 11

12 KIRBY McINERNEY & SQUIRE, LLP Ira M. Press 13 Richard L. Stone 14 Mark A. Strauss 830 Third Avenue 15 New York, NY 10022 16 Tel: 212.371 6600 Fax: 212 751 2540 17 SQUITIERI & FEARON 18 Lee Squitieri, Esq. 19 521 Fifth Avenue, 26th floor New York, NY 10175 20 Tel: 646 487.3049 Fax: 646 .487.3095 21

22 ATTORNEYS FOR PLAINTIFFS

23

24

25

26

27

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McKay Chadwell, PLLC LEAD PLAINTIFF'S FIRST AMENDED COMPLAINT - CLASS ACTION 701 Fifth Avenue, Suite 7201 (CO1-0640L)-58 Seattle, Washington 98104 G 1CLIENTS10133710011PLEADINGS\FISTAMENDEDCOMPLAINT 2 PLD DOC (206)233-2800 Fax(206)233-2809 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 59 of 127

Exhibit A Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 60 of 127

11:42am EST 24-Jan-00 Credit Suisse First Boston (Buyer, Lise (650) 614-5088) AMEN: The Investments Continue FEC

CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research Americas U.S./Technology/InternetNewMedia

Lise Buyer 1-6S0-614-5088 lise.buyer'csfb.com Tracey Ford 1-650-614-5157 tracey.ford5csfb.com Heath Terry 1-6S0-614-5131 [email protected]

BUY LARGE CAP LJSD 62.06 Amazon.com (AMZN) The Investments Continue

Summary

Amazon.com continues to widen its product base through investments in complimentary organizations. This morning the company announced an increase in its Drugstore.com investment and last week the company announced a 51 stake in new automotive start-up Greenlight.com

In both cases the company's aim is to offer Amazon customers easy access to a wider variety of products and services than those which directly fit the Amazon distribution model. in the case of Drugstore.com, Amazon will, for the first time, put up a tab on the top of its homepage to direct consumers to that site. In return Amazon will collect $105 million over three years.

We expect the company will continue to announce investments with other contiguous service/merchandise _supplier•s and believe that Kozmo.com, the convenience store on wheels service, will likely be next. These deals may well follow the Drugstore.com model of an initial investment by Amazon followed by a two-way, revenue generating pay-for-placement follow up. Margins an this incremental revenue should be well above the corporate average of <20%.

Amazon reports earnings on 2/2/00 and is expected to prove the profitability of the book business at that time. We continue to believe that the investments Amazon is making today will pay off in a clearly superior margin structure over the long term. We reiterate our Buy recommendation.

Price Target Mkt Value 52-Week 1/21001 (12mo.) Div. Yield (MM) Price Range USD 62.06 None NA $41.00-113.00 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 12/OOE $(1.37) NM NM 12/99E (1.07) NM NM 12/98A (0.25) NM NM March June Sept. Dec. FY Dec 2000E (0.39) (0.37) (0.33) (0.28) 1999E (0.12) (0.26) (0.26)A (0.44) 1998A (0.04) (0.06) (0.08) (0.07)

ROIL ( 09/99) Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 61 of 127

Total Debt ( 09/99 ) 1462.2M Book Value/Share ( 09/99 ) $1.30 WACC ( 09/99) Debt/Total Capital (09/99) 77 7% Common Shares 332.5 M EP Trend2 Est. 5-Yr EPS Growth Est. 5-Yr. Div. Growth

iOn 1/2100 DJIA closed at 11251.71 and S&P 500 at 1441.36 2Economic profit trend.

Amazon.com "opened its doors" on the World Wide Web in July 1995, and now offers millions of book and CD titles in addition to videos, software and other gift products. Amazon.com has quickly become a leading on-line retailer and one of the most widely used and cited commerce sites on the World wide web. Amazon.com, strives to offer its customers compelling value through broad selection, high-quality content competitive pricing, personalization and a very high level of customer service.

N.B.: CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manager or co-manager of a public offering of securities for or makes a primary market in issues of any or all of the companies mentioned.

CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION

Analyst: Buyer, L Telephone: (650) 614-5088 [email protected]

CREDIT SUIISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION

Copyright 2000 CREDIT SUISSE FIRST BOSTON CORPORATION, All rights reserved.This report is provided to you solely for informational purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments and may not be construed as such. This report may not be reproduced or redistributed to any other person, in whole or in part, without the prior written consent of the distributor listed below The information set forth herein has been obtained or derived from sources believed by Credit Suisse First Boston Corporation and its affiliates {'"CSFB" or "the firm,,) to be reliable, but CSFB does not make any representation or warranty, express or implied, as to its accuracy or completeness. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. Opinions and estimates may be changed without notice. The firm, or one or more of its partners or employees, from time to time may have long or short positions in, or buy and sell and make markets in, any of the securities discussed herein. The firm may underwrite or provide investment banking, credit and other financial services to any company or issuer of securities or financial instruments referred to herein. If CSFB makes a market in any security, there can be no assurance that CSFB will continue to do so. Additional information is available upon request. CSFB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. This report is being distributed in the United States by CSFB, and in Canada by Credit Suisse First Boston Securities Canada, Inc. ("CSFBSC") with CSFB as mailing/delivery agent. In jurisdictions where CSFB is not registered or licensed to trade in securities, any trade will be made only in accordance with applicable securities legislation which will vary from Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 62 of 127

jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. CSFBSC has approved the distribution of this memorandum. Any U.S. customer wishing to effect a transaction in any security should do so only by contacting a representative at Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, NY 10010 (212) 325-2000.

= = Amazon.com = = AMZN:BUY First Call Corporation, a Thomson Financial company. All rights reserved. 888.558.2500 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 63 of 127

Exhibit B Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 64 of 127

07:42am EST 24-Jan-00 DLJ Securities (Jamie Kiggen) AMZN EBAY AMZN.RV EBAY.RV AMAZON.COM Amazon.com Strikes Deal With Greenlight.com

DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ January 24, 2000 Jamie Kiggen (212) 892-8985 Tim Albright (212) 892-6801 Rick Valligres (212) 892-8571 Cathy Watters (212) 892-4357

AMAZON. COM (AMZN: $62) *+ Amazon.com Strikes Deal With Greenlight.com

Range: Earnings Per Share 1999 vs 2000 % Chg 41-113 Old New P/E Ratios F1Q $(0.12) vs (0.35) NM (FY:Dec.) 2000E $(1.10)$ NM' F2Q (0.26) vs (0.27) NM 1999E (1.09) NM F3Q (0.26) vs (0.23) NM 1998A (0.25) F4Q (0.46) vs (0.24) NM

Yield: % Market Cap.: $22.9 Billion 5-Yr. Growth Rate: 80% Dividend: $0 Avg. Trading Vol.(000): Book Value: $

RATING: Top Pick Change: None 12-Mo. Target: $140

SUMMARY

1. On Friday evening, Amazon.com announced a strategic investment in Greenlight.com, a privately-held online car buying site, whereby Amazon will take a 5% stake in the company, and signed a lucrative, 5-year marketing agreement with Greenlight.

2 Under the agreement, Amazon will receive $82.5 million over five years in exchange for providing Greenlight with access to its 16+ million customer base. In addition, Amazon will receive warrants to increase its stake to 30% over the five year period.

3. Greenlight.com is an online car buying site developing a network of car dealers throughout the U.S. who, like Amazon, are committed to great customer service. Greenlight's services are currently available in Greensboro, N.C., as well as Jackson and Orlando, Florida, with national reach expected in the spring of this year.

4. Similar to Amazon's agreement with NextCard (see our First Call note dated 11/10/99), these fees represents a 100% gross margin revenue stream for Amazon, and we view this as another significant milestone in Amazon's path to "audience monetization". As we've stated before, we view these agreements as the same sort of watershed events as the Tel-Save deal and other early e-commerce deals were for America online in the first half of 1997. We expect Amazon to make several more deals along these lines in separate categories in which the partnership is strategic as well as financial.

5. Reiterating Top Pick rating and $140 target price for Amazon. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 65 of 127

Copyright a Donaldson , Lufkin & Jenrette Securities Corporation, 2000. Additional information is available upon request. First Call Corporation, a Thomson Financial company. All rights reserved 888 558.2500 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 66 of 127

Exhibit C Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 67 of 127

11.48am EST 1-Feb-00 DLJ Securities (Jamie Kiggen) AMZN DSCM AMZN.RV AMAZON.COM: Announces Deal With Living.com

DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ February 1, 2000 Jamie Kiggen (212) 892-8985 Tim Albright (212) 892-6801 Rick ValliSres (212) 892-8571 Cathy Watters (212) 892-4357

AMAZON.COM (AMZN: $66.50) *+ Amazon.com Announces Deal With Living.com Creating "Home Living" Store On Amazon

Range: Earnings Per Share 1999 vs 2000 Chgg 41-113 Old New P/E Ratios F1Q $(0.12) vs (0.35) NM (FY:nec.) 2000E $(1.10) $ NM F2Q (0.26) vs (0.27) NM 1999E (1.09) NM F3Q (0.26) vs (0.23) NM 1998A (0.25) F4Q (0.46) vs ( 0.24) NM

Yield: % Market Cap.. $21.6 Billion 5-Yr. Growth Rate: 80% Dividend: $0 Avg. Trading Vol.(000): Book Value: $

RATING: Top Pick Change- None 12-Mo. Target: $140

SUMMARY 1. This morning, Amazon.com announced a strategic agreement with Living.com, a privately-held online home furnishing store, to create a "Home Living" store on Amazon.

2. Under the agreement, Amazon will receive $145 million over five years in exchange for Living.com to be the exclusive provider for Amazon's new Home Living store, which will be featured along with Amazon's other core product categories like books, music, and most recently, a drugstore via its partnership with Drugstore.com, Amazon's new Home Living store will feature furniture, bedding, window treatments, and many more related products which comprise the $180 billion home living market.

3. Amazon will take an 18% equity stake in Living.com for an undisclosed amount ( we estimate in the $50-$70 million range ), with warrants to acquire an additional 9%, after the deal closes later this quarter.

4. The Living.com agreement is the 6th "audience monetization" deal Amazon has struck in just under three months (and the 4th in it days), including deals with NextCard, Ashford.com, Greenlight.com, Drugstore.com, and Audible.com. These deals represent over $500 million in total payments to Amazon over the life of the contracts, and approximately $120 million to Amazon in FY'2000. Importantly, these payments represent a 100% gross margin revenue stream for Amazon.

5. We reiterate our view that these agreements signal the same sort of watershed events as the Tel-Save deal and other early e-commerce deals were for America Online in the first half of 1997. We expect Amazon to continue to announce similar commerce partner/distribution deals in the future, thereby accelerating Amazon's path to profitability. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 68 of 127

6. Separately, Amazon reports full Q4'99 results after the close tomorrow , after announcing preliminary results on January 5 . We look for the company to provide more detail on their individual businesses and certain customer metrics.

7 Reiterating Top Pick rating and $140 target price for Amazon.

Copyright a Donaldson, Lufkin & Jenrette Securities Corporation, 2000. Additional information is available upon request. First Call Corporation, a Thomson Financial company. All rights reserved. 888.558.2500 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 69 of 127

Exhibit D Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 70 of 127

03:17pm EST 1-Feb-00 Credit Suisse First Boston ( Buyer, Lise ( 650) 614-5088) AMZN• Announces Alliance WI Living. ccm FBC

CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research Americas U.S./Technology/XnternetNewMedia Lise Buyer, CFA 650-614-5088 [email protected] Tracey Ford 650-614-5157 [email protected] Heath Terry 650-614-5131 heath.terryocsfb.com

BUY LARGE CAP USD 64.56 Amazon.com (AMZN) Amazon Announces Alliance with Living com

Summary

Amazon announced an alliance with home furnishings site Living.com. Living will pay Amazon $145 million over five years to become the exclusive Home Living store on Amazon.com. Amazon will simultaneously take an 185 stake in Living with options for another 9%.

This is the second such agreement Amazon has announced . We expect that Amazon will continue to announce similar agreements, promoting from within its sizable stable of companies (like Pets . com, Ashford . com, and HomeGrocer. com), as it did with Drugstore . com, and from without, as with today's announced deal with Living.com.

Amazon has found a way to monetize one of its most valuable assets, traffic. By leveraging its customer base of over 16 million, Amazon is able to strengthen its overall business. We believe this deal, and the potential for more like it, are a significant long term positive for gross margins.

Amazon reports 4Q '99 results tomorrow after the close. We expect Amazon to report revenues of $650 million, gross margins at or just below our estimate of 17.3% and a loss per share of -$0.44. We reiterate our Buy opinion.

Price Target Mkt.Value 52-week 1/31/001 (12mo.) Div. Yield (MM) Price Range USD 64.56 None $21,466.2 $41.00-113 00 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 12/OOE $(1.37) NM NM 12/99E (1.07) NM NM 12/98A (0.25) NM NM March June Sept. Dec. FY Dec 2000E $ (0.39) (0.37) (0.33) (0.28) 1999E (0.12) (0.26) (0.26)A (0.44) 199BA (0.04) (0.06) (0.08) (0.07)

ROIC ( 09/99) Total Debt ( 09/99) 1462.2M Book Value/ Share ( 09/99) $1.30 WACC ( 09/99) Debt/Total Capital ( 09/99) 77.7% Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 71 of 127

Common Shares 332.5 M EP Trend2 Est S-Yr EPS Growth Eat. 5 -Yr. Div. Growth

10n 1/ 31/00 DJIA closed at 10940.53 and S&P 500 at 1394.46. 2Economic profit trend.

Amazon.com "opened its doors" on the World Wide Web in July 1995, and now offers millions of book and CD titles in addition to videos, software and other gift products. Amazon.com has quickly become a leading on-line retailer and one of the most widely used and cited commerce sites on the World Wide Web. Amazon.com, strives to offer its customers compelling value through broad selection, high-quality content competitive pricing, personalization and a very high level of customer service.

N.B.: CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manager or co-manager of a public offering of securities for or makes a primary market in issues of any or all of the companies mentioned.

CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION

Analyst: Buyer, L Telephone: (650) 614-5088 [email protected]

CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION

Copyright 2000 CREDIT SUISSE FIRST BOSTON CORPORATION, All rights reserved.This report is provided to you solely for informational purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments and may not be construed as such. This report may not be reproduced or redistributed to any other person, in whole or in part, without the prior written consent of the distributor listed below. The information set forth herein has been obtained or derived from sources believed by Credit Suisse First Boston Corporation and its affiliates ("CSFB" or "the firm") to be reliable, but CSFB does not make any representation or warranty, express or implied, as to its accuracy or completeness. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. Opinions and estimates may be changed without notice. The firm, or one or more of its partners or employees, from time to time may have long or short positions in, or buy and sell and make markets in, any of the securities discussed herein. The firm may underwrite or provide investment banking, credit and other financial services to any company or issuer of securities or financial instruments referred to herein. If CSFB makes a market in any security, there can be no assurance that CSFB will continue to do so. Additional information is available upon request. CSFB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. This report is being distributed in the United States by CSFB, and in Canada by Credit Suisse First Boston Securities Canada, Inc. ("CSPBSC") with CSFB as mailing/delivery agent. In jurisdictions where CSFB is not registered or licensed to trade in securities, any trade will be made only in accordance with applicable securities legislation which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. CSFBSC has approved the distribution of this memorandum. Any U.S. customer wishing to effect a transaction in any security should do so only by Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 72 of 127 contacting a representative at Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, NY 10010 (212) 325-2000.

= = Amozon.com = = AMZN:BUY First Call Corporation, a Thomson Financial company. All rights reserved . 888.558.2500 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 73 of 127

Exhibit E Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 74 of 127

07:10am EST 3-Feb-00 Credit Suisse First Boston (Buyer, Lise (650) 614-5088) AM CALL: AMZN• Reports Q499 FBC

CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research Americas U.S./Technology/InternetNewMedia Lise Buyer, CFA 650-614-5088 [email protected] Tracey Ford 650-614-51S7 [email protected] Heath Terry 650-614-5131 heath.terrygcsfb.com BUY LARGE CAP USD 69.44 Amazon.com (AMZN) Amazon Reports Q4 '99

Amazon reported results from Q4 '99. Revenue of $676 million was ahead of our expectations of $562 million. Gross margins of 13% were below of estimate of 17.3% due to a $39 million inventory charge. Loss per share of -$0.55 was higher than the -$0.44 we forecast.

The focus of management's comments was future profitability. The U.S. book business was profitable in 04 and is expected to be in 2000. The company believes that 04 199 represents the peak of negative operating margins, reaching single digits by year end 2000.

We have adjusted our model based on the results of the quarter and our belief that Amazon will begin reaping the operational leverage benefits of the scale economy it is building.

We continue to believe in the opportunity Amazon represents. We said at the beginning of the year that logistical skill would be a key theme in 2000 and Amazon is clearly the best example of that. The company has spent exceptionally well to put itself in the right place. We strongly reiterate our Buy opinion on AMZN.

Price Target Mkt. Value 52-Week 2/02/001 (12mo.) Div. Yield (MM) Price Range UST) 69.44 None $23,498.5 $41.00-113.00 Annual Prev. Abs. Rel. EV/ EBITDA/ TIPS EPS P/E P/E EBITDA Share 12/018 $(0.77) $(1.o1) NM NM 12/OOE (1.27) (1.37) NM NM 12/99A (1.18) (1.07) NM NM March June Sept. Dec. FY Dec 2001E $(0.25) (0.20) (0.18) (0.08) 2000E (0.36) (0.34) (0.32) (0.26) 1999A (0.12) (0.26) (0.26) (0.55)A ROIC (12/99) Total Debt (12/99) $1466M Book Value/Share (12/99) $0.79 WACC (12/99) Debt/Total Capital (12/99) 84.6% Common Shares 338.4M EP Trend2 Est. 5-Yr EPS Growth Est 5-Yr. Div. Growth Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 75 of 127

1 On 2/02/00 DJIA closed at 11003.20 and S&P 500 at 1409.12. 2 Economic profit trend.

Amazon.com "opened its doors" on the world Wide Web in July 1995, and now offers millions of back and CD titles in addition to videos, software and other gift products. Amazon.com has quickly become a leading on-line retailer and one of the most widely used and cited commerce sites on the World Wide Web. Amazon com, strives to offer its customers compelling value through broad selection, high-quality content competitive pricing, personalization and a very high level of customer service.

Amazon.com reported results from the fourth quarter of 1999. Here are the highlights:

Reported revenue for Q4 '99 was $676 million, up 1674 over Q4 '98 and ahead of our estimate of $562 million. Gross margins at 13%, were much lower than the 17.3% we had forecast, due to a $39 million inventory charge. Without the charge margins would have been 18%. The company expects gross margins to be around 20% in Q1 and rise throughout 2000. Cost of order fulfillment was 16% of sales, up from 151 in Q3 '99.

Sales and marketing expenses were $179 million in the quarter or 27% of revenue. We had forecast $15B million or 28% of revenue. Cost per new customer was $19. Total operating expenses were $263 million or 39% of revenue. We had forecast $235 million or 42% of revenue or flat with the third quarter.

Operating margins were -24.6%, better than the -27.3% we projected. This quarter is expected to represent the peak in operating losses both in dollars and as a percent of sales. The company expects negative operating margins to shrink to single digit numbers by the end of 2000. The company reported a loss per share of -$0.55, we had forecast a loss per share of -$0.44.

Cash and marketable securities fell $199 milli on. Major expenditures were $105 million in purchases of fixed assets related to the build out of distribution centers, inventory stock for the distribution centers , and $145 million in equity investments.

Days sales payable were 2, while days payable fell from 64 at the end of Q3 '99 to 54 at the end of Q4. Average inventory days fell to 26 from 28 in 03. Operating cycle was -25 day down from -33 in Q3. The spread is expected to widen. Net inventory balance was $221 million up from $119 million. The increase was due to stock to the new distribution centers and home improvement toys and electronics.

Customer count grew to 16.9 million from 13.1 million at the end of Q3 '99. 73% of the customers during the quarter were repeat customers compared to 72% in 03 '99. The average customer purchased $116 in products over the past 12 months, up from $106 at the end of '98.

The U.S. book business experienced its first quarter of profitability and is expected to be profitable for FY2000. Amazon's U.S. retail operation posted an operating margin of -20%. However, this should shrink to -2% by the end of 2000

Changes to the Model We expect 2000 to be the year that Amazon reaps the benefits of scale. As volume builds the Amazon's operating leverage will grow. We have increased Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 76 of 127 our revenue forecast for Qi '00 from $502 million to $552 million and for FY2000 from $2,473 million to $2,753 million. Our gross margin forecast has risen from 19.1% in Q1 and 19 7% for FY2000 to 20.3% and 21.11 respectively. We believe gross margin improvement will come from better operating leverage and revenue from partnership deals such as those signed with Nextcard, Drugstore.com and Living.com.

We have increased our forecast for operating expenses for Q1 from $216 million to $224 million, though as a percentage of sales it has dropped from 43% to 41%. For FY2000, our estimate of operating expenses goes from $938 million or 38% of revenue to $981 million or 36% of revenue.

Finally, we have lowered our loss per share estimate from -$0.39 to -$0.36 for Q3. For FY2000 our loss per share estimate is -$1.27. We had previously forecast -$1.37. We have also increased our revenue and gross margin estimates and lowered our operating loss and loss per share estimates for 2001.

Investment Summary As is apparent from the bullet points above the thrust of management's comments focused on future profitability. The company outlined six goals- customer growth, product expansion, operational excellence, international expansion, partnership programs, and profitability. We believe that the company is clear on the importance Wall Street is place on and improving P&L. With the company looking for negative operating margins to reach single digits by year-end 2000, profitability can actually be seen in the distance.

We believe that Amazon has built a solid platform that it will be able to layer more products onto and leverage outside of the U.S. We said at the beginning of the year that the increasing importance of logistical skill would be a major theme in the coming year. Amazon has consistently spent exceptionally well in perfecting their logistical skills and should now be able to reap the rewards of the operating leverage and maneuverability that come with it.

We expect that more partnership deals, like the one announced on Tuesday, where Amazon leverages their loyal customer base to the benefit of its gross margin line will be announced. The scale economy that Amazon is building can only improve as customers are continually drawn back to them for more and more purchases across more and more categories. We continue to believe in the Amazon story and strongly reiterate our BUY opinion on A!'ZN. N.B.: CREDIT SUISSE FIRST BOSTON CORPORATION may have, within the last three years, served as a manager or co-manager of a public offering of securities for or makes a primary market in issues of any or all of the companies mentioned. CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION Analyst: Buyer, L Telephone: (650) 614-5088 lise.buyergcsfb.com CREDIT SUISSE FIRST BOSTON CORPORATION CREDIT SUISSE FIRST BOSTON CORPORATION Copyright 2000 CREDIT SUISSE FIRST BOSTON CORPORATION, All rights reserved.This report is provided to you solely for informational purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments and may not be construed as such. This report may not be reproduced or redistributed to any other person, in whole or in part, without the prior written consent of the distributor listed below. The information set forth herein has been obtained or derived from sources believed by Credit Suisse First Boston Corporation and its affiliates ("CSFB" or "the firm") to be reliable, but CSFB does not make any representation or warranty, express or implied, as to its accuracy or completeness. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, expre-ss or implied is made Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 77 of 127 regarding future performance. Opinions and estimates may be changed without notice. The firm, or one or more of its partners or employees, from time to time may have long or short positions in, or buy and sell and make markets in, any of the securities discussed herein. The firm may underwrite or provide investment banking, credit and other financial services to any company or issuer of securities or financial instruments referred to herein. If CSFB makes a market in any security, there can be no assurance that CSFB will continue to do so. Additional information is available upon request. CSFB may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented herein. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. This report is being distributed in the United States by CSFB, and in Canada by Credit Suisse First Boston Securities Canada, Inc. ("CSFBSC') with CSFB as mailing/delivery agent. In jurisdictions where CSFB is not registered or licensed to trade in securities, any trade will be made only in accordance with applicable securities legislation which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. CSFBSC has approved the distribution of this memorandum. Any U.S. customer wishing to effect a transaction in any security should do so only by contacting a representative at Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, NY 10010 (212) 325-2000. = = AMAZON.COM = = AMZN: BUY Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 78 of 127

Exhibit F Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 79 of 127

Morning Meeting Note

} The Investext Group US and Canada 800462.7579 UK OS00-317-577 The hwestext Group Europe +44-171-369-7944 22 Thomson Place Boston, MA 02210 USA Germany 0130-918-059 France 0800-90-3759 The Nedurlands 0800-022-0919 Capgngtu 01994 The InreetexrGraup Hong Kong 852-2533-5588 94naannrr 6+-IU-MI4 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 80 of 127

07:55am EST 3-Feb-00 DLJ Securities (Jamie Kiggen) AMZN EBAY AMZN.RV EBAY.RV AMAZON.COM: Amazon.com Reports Strong December Quarter Results

DLJ ****** DONALDSON, LUFKIN & JENRETTE ****** DLJ February 3, 2000 Jamie Kiggen (212) 892-8985 Tim Albright (212) 892-6801 Rick Valligres (212) 892-8571 Cathy Watters (212) 892-4357

AMAZON.COM (AMZN: $69.38) *+ Amazon.com Reports Strong December Quarter Results; Bullish Guidance On Progress To Profitablity

Range- Earnings Per Share 1999 vs 2000 % Chg 21-221 Old New P/E Ratios F1Q $(0.12) vs (0.35) NM (FY-Dec.) 2000E $(1.10)$(1.05) NM F2Q (0.26) vs (0.27) NM 1999A (1.09)($1.19) NM F3Q (0.26) vs (0.23) NM 1998A (0.25) F4Q (0.46) vs (0.24) NM

Yield: % Market Cap. : $23.3 Bill ion 5-Yr. Growth Rate: 80% Dividend: $0 Avg. Trading Vol.(000): Book Value: $

RATING: Top Pick Change: None 12-Mo. Target: $140

SUMMARY u Very strong December quarter: $676 million in revenue ($26 million above preliminary results announced on 1/ 5/00) +90% q/q, 167.3% y/y and $89 million above our $587 million estimate; loss per share of ($0.55) vs. our ($0.46) estimate (consensus was ($0.48)), due to inventory write-downs, ($0.43) ex inventory impact. u Core U.S. book business was profitable in the December quarter, and will remain profitable throughout 2000. u Strong customer metrics: a record 3.8 million customers were added (2.2 times last year's number); repeat customer orders of 73% (up from 72% in Q3), revenue per customer of $116 (up from $108 in Q3) and customer acquisition cost of $19 indicate positive contribution margin on every customer. t. Positive forward guidance: gross margin improvement throughout FY'00 with overall operating losses expected to decrease to low single digits by Q4'00. Capital expenditures expected to decrease substantially. u Raising ' 00 revenue estimate from $2.7 billion to $2.9 billion, while loss per share declines from ($ 1.09) to ($ 1.05). We're raising '01 revenue from $4.3 billion to $4.7 billion, while decreasing loss per share from ($ 0.91) to ($ 0.46). u We reiterate our Top Pick rating and 6-12 month target of $140. Stock should strongly break out of recent trading range.

IMPORTANT POINTS Amazon Delivers A Very Strong Quarter. Amazon officially delivered yet another high quality quarter, delivering $676 million in revenue, (+90% Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 81 of 127 q/q, 167.3% y/y), $29 million above preliminary results announced in early January, and 15.2% above our $587 million projection. Loss per share came in at ($0.55), nine cents below our two-penny-above-consensus estimate of ($0.46), due to an inventory write-off of $39 million; excluding this charge, loss per share would have been ($0.43), three cents better than our estimate.

Profitability in Core U.S. Books Business. The company stated that its core U.S. books business achieved profitability in the December quarter, and expects to see continued profitability going forward. For the first time, Amazon disclosed a revenue breakdown for many of its various businesses, especially U.S. books, which generated $317 million in revenue in Q4, up 66% y/y ($1.25 billion run-rate). For all of U.S. Retail, which includes books, along with electronic, home improvement, etc. (excluding International and Services (i.e., Zshops, Auctions)), management expects operating loss to decline from 20% of revenue in Q4 to about 5% of revenue by Q4'a0.

Record Customer Growth. Customer accounts grew a record 3.8 million in the quarter to16.9 million (and have now surpassed 17 million), the largest absolute increase in Amazon's history, and well above our 15.8 million estimate. Importantly, 73% of all customer orders were repeat orders, up from 72% in Q3. This 3.8 million new customer adds is especially noteworthy considering customer acquisition costs were at an industry-low $19 per customer (calculated by taking the $72 million spent on pure marketing divided by the 3.8 million new customers). And equally impressive is the $116 in revenue generated per customer, which is up from $108 in the previous quarter, and is expected to continue its trend upward as Amazon rolls out additional products and services and gains a larger share of wallet from the customer. Importantly, the customer base is much more active than we had estimated, with approximately 84% of the total customer base purchasing in the quarter. For those of you interested in the math, we can back into this calculation by taking total FY'99 revenue/revenue per customer which gets you the number of active customers base of approximately 14.1 million, 84% of their 16.9 total customer base. The other component of the Sales and Marketing line, fulfillment, was 16% of sales (vs. 15% in Q3), but should trend down in 2000, as no distribution centers are expected to be built in the coming year.

Gross Margin Guidance Will Ramp In FY'00. As expected, Amazon's overall gross margin was down sequentially from September's 19.8% to 13%, mainly due to a $39 million inventory write down charge related to the buildup of toys and consumer electronics for the holiday season. Excluding this charge, gross margin would have been 18.8%, well above our 17.5% estimate. Gross margin dollars grew from $70.5 million to $87.8 million. Looking forward, the company indicated continued gross margin expansion throughout FY'00 (we're modeling 20.1% for the year), as Amazon achieves tighter inventory management controls and sees the impact from its numerous high- margin strategic partnerships, such as NextCard, Drugstore.com, Ashford.com, Greenlight.com, Lving.com and Audible.com.

The Model Is Working. And Now We Have The Proof. Amazon lived up to its promise this quarter of providing us with enough data to rebuff critics who said the Amazon model was inherently flawed structurally and unprofitable. Amazon currently generates $116 in revenue per customer (up from $108 in Q3), and had a per customer acquisition cost of $19 in Q4, indicating the company has a positive contribution margin of $4 20 on every customer, if we apply the 20% gross margin guidance ($116*20% = $23.20 - $19 $4.20/customer). Amazon is losing money because they are investing in an Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 82 of 127

enormous opportunity , not because of poor customer economics.

New Categories Show Strong Momentum. Amazon's investment in its new businesses is paying off, with more than 50% of total revenue in the quarter derived from new businesses, with the remainder from its U.S. books business. In our view, such success outside of the book category confirms the soundness of Amazon's strategy of expanding into additional categories throughout 2000. Amazon indicated its music business generated $78 million in revenue, up 136% y/y (a $300 million run-rate). It's 15-month old video/DVD business contributed $64 million in revenue, up 500% y/y, with DiD's generating over half that revenue. Children's products, which is primarily comprised of toys, contributed $95 million in Q4. Amazon's international business saw nice momentum, contributing over $128 million (19% of sales), with Amazon's U.K. and German sites generating $71 million of that total. Amazon's non-retail businesses (Auctions, zShops, and sothebys.amazon.com) also showed nice progress with a combined 1 million registered users and 1.5 million active listings. Sothebys.amazon.com has averaged closes rates above 50%, and average auction closing prices have been over $500.

Balance Sheet Remains Robust. Even with $220.6 million in quarter-ending inventory, Amazon's cash cycle held steady at a negative 25 days, down from 33 days in Q3. Toys and Consumer Electronics were the big drivers behind this inventory build, as stack-outs and product shortages are what separate a successful online store from a failed effort. Payable terms for both these categories are in the 90+ day range. Overall payables declined to 54 days (down from 64 days) while receivables remained at two days and average inventories moved down slightly to 26 days (from 28). The company cash balance dropped to $706 million from $905 million due to equity investments, capital expenditures related to the distribution center build, and inventories acquired at the end of the quarter.

Capital Expenditures Decreasing. Capital expenditures are expected to decline from $400 million in FY'99 to the $250 million range in FY'00, as Amazon has completed its initial distribution center buildout. Consequently the bulk of the projected cash usage over the course of 2000 is discretionary. Setting aside the amount of funds that Amazon may use to invest in partner companies, we estimate that Amazon will consume $450 million in cash. Our current projections have the company maintaining our projected $300 million operating loss which is then coupled with an incremental $150 million in incremental fixed assets resulting from the $250 million in capital expenditures.

Raising Revenue Estimates, Decreasing Operating Losses. We're raising our FY'00 revenue from $2.7 billion to $2.95 billion, while loss per share declines from ($i 09) to ($1.05), to reflect the uptick in gross margin and decline in operating losses, as the scaleablity of the model starts to be reflected. In 2001, we're raising our revenue estimate from $4.3 billion to $4.7 billion, and our dramatically decreasing our loss per share from ($0.91) to ($0.46).

Reiterating Top Pick Rating And $140 Price Target . We're reiterating our Top Pick rating on Amazon . The company has clearly reached an inflection point in its model , as visible in our eyes as AOL's inflection point was following its December quarter in 1996, when AOL emerged from a brutal year with a dominant market share and an unrivalled infrastructure . Likewise, Amazon now has an absolutely dominant share of customers and customer purchases , a full suite of retailing categories , an unrivalled fulfillment capability, and the strongest online retailing brand. No Internet company Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 83 of 127 that we cover has the combination of such a dominant and defensible leadership position over such a large opportunity. Fortunately for investors, Amazon's valuation gives it plenty of very immediate upside relative to other leading e-commerce companies. On a multiple of gross profit Amazon trades at 22 times 2001 gross profit, while an average of eBay, Commerce One, FreeMarkets, Priceline and AOL trades at 110 times 2001. No doubt investors will close that valuation gap rapidly.

Copyright Donaldson, Lufkin & Jenrette Securities Corporation, 2000. Additional information is available upon request.

# AN AFFILIATE OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION MAKES A MARKET IN THIS SECURITY, HAS PERIODIC POSITIONS IN THIS SECURITY IN CONNECTION WITH THIS ACTIVITY AND MAY BE ON THE OPPOSITE SIDE OF PUBLIC ORDERS EXECUTED ON A REGIONAL STOCK EXCHANGE WHERE IT ACTS AS A SPECIALIST.* DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION OR AN AFFILIATE MAKES A MARKET IN THIS SECURITY AND HAS PERIODIC POSITIONS IN THIS SECURITY IN CONNECTION WITH THIS ACTIVITY. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 84 of 127

Exhibit G Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 85 of 127

MORGANSTANLEYDEAN TITTER Page 1

Amazon.com Reuters' AMZN.O Bloomberg- AMZN NASDAQ, AMZN

n n i 91 i o w. M"do n n Iw7L n w n w nn r w w aIr 1= w^wnwlM _ ^w nn nn w^ w A n 0 Mary Meeker February 3, 2000 ([email protected]) (212) 761-8042 Correction: Inflection! Amazon. Calm!

• Very Strong Top Line; Books Profitable Price (February 2, 2900): $ 69 37 CQ4 revenue of $676MM, up 90% Q/Q - AMZN's strongest Q/Q Price Target NA business. 52-Week Range $ 106.69 - 42 75 growth as public co.; 1st profitable Q for U.S. books • Very Strong Customer Metrics As Well Over 17MM customers strong, with seasonal uptick in sales per customer and 73% repeat customer order level. • Operating Loss In Line, Excluding Inventory Charge $39MM mventory charge caused 580 basis point hit; operating losses should decline significantly in C2000. • Reiterate Outperform Rating AMZN emerged from make-or-break CQ4 as THE leading Web Retailer/Platform, in terms of revenue, customer base, and brand

Stock Pries Anplysia FY ending Dec 31 1958A 1989E 2000E 2669E EPS ($) (1025) (1 18) (1 10) (010) PIE NM NM NM NM Market Cap ($MM) 23 ,467 WY 19a8A 1959E 2005E EP9 actual Burr rlor curr prior Shares Outstanding (MM) 3383 Q1 (004) (012) - (0 35) (0 35) 02 (0 06) (026) - (033) (032) 03 (006) (026) - (0.29) (027) CL (0 07l (0 55IA (0 46)E (013) 10 111

E = Mnrgun Stanley Aeon WinerReseurch eartmaIe Fab Aar

Company Description Amazon.com is the leading shopping destination on the Web The company lists more than ! 8MM unique Items in categories including books, CDs, toys, electronics, videos, IIVDs, borne Improvement products, software and video gainer. As of January 2000, Amazon had over 17MM cumulative customers

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Correction: Inflection! Amazon. Calm!

INVESTMENT SUMMARY AND CONCLUSION: losses, in absolute terms and as a percent of revenue, as the benefits of scale and leverage should become increasingly • Amazon.com reported CQ4 results last night -- apparent in Amazon's model. Specifically, excluding the revenue reached S676MM 167% Y/Y, up 90% Q/Q), (up unpact of partnership/monetization deals, we anticipate the ahead of our initial estimates of $580MM (The company operating loss for Amazon's U S segments to reach 5% or had pre-released on January 5th select CQ4 results, lower by CQ4 00, and we anticipate the company's total including $650MM+ revenue.) The QIQ revenue growth in operating loss as a % of sales to reach into the single digits. was the strongest Amazon has ever experienced as a public company. Also key -- for the first time, non-U S book • We reiterate our Outperform rating on revenue accounted for more than 50% of total revenue, Amazon.com. We note that AMZN shares were up 13% in indicating a clear diversification of Amazon's revenue after-hours trading last night. We believe that investors streams were reacting positively to several factors 1) a profitable books segment, 2) the strong customer metrics --17MM * Gross margin was 13% and operating loss was loyal customers with increasing sales per head and with 5175MM primarily due to the expected $39MM rising opportunities to monetize these customers, and 3) the inventory charge. Without that charge, gross margin company's clear commitment to driving profitability and would have been 18 8% (vs. our 17% estimate) and balance sheet accountability throughout the company and to operating loss would have been $136MM ($3MM less than reducing operating losses through C2000 . We would, ust our estimate) add that at the close of the biggest e-Christmas quarter to date -- after all the hype has cleared -- one Internet retailer • Revenue growth was strong across all product has emerged as donunant in terms ofrevenues, customer categories and geographic segments. U.S:based book service, brand, and multi-product and service platform sales reached $317MM (up 66% Y/Y, accounting for 47% potential. That company is Amazon.com. of total sales), U S -based music sales reached $78MM (up • Yes, CQ4 99 was a monumental quarter in the history 136% YIY, 12% of sales), U DVD and Video sales S. ofthe Internet. Yahoos broke out, AOL announced a merger reached $64MM (up over 500% YIY), children's product with Time Warner, eBay may have become the definitive sales exceeded $95 MM (14% of sales) -- close to eToys' person-to-person trading platform on the Internet, and in CQ4 revenue of $107MM; and European store sales reached words that are oh so sweet for us to type, Amazon.comm may $71MM (up 360% Y/Y, 11% of sales) have become the definitive retail platform on the Internet These are big markets...these are big ideas . and these are ;•. Key non-financial metrics: Amazon added a record likely soon to be bigger companies customers In CQ4 and now has over 17MM customers ; sales per active customer In 1999 increased • We all try to set "stretch goals" for ourselves, well to $116 from $108 In 1998 (this is the 1st time the with Amazon,com, Jeff Bezos and team went beyond, with company has disclosed this metric), indicating an increase elastomatic goals that most sane folks wouldn't even in Amazon's share of wallet; and repeat purchasing levels consider. reached 73% (up from 72% in CQ3), the company's • Sure, Amazon.com's CQ4 wasn't necessarily pretty highest rate to date and a clear sign of customer loyalty On financially or operationally and. it was a pretty damn a quarterly basis, revenue per cumulative customer account inefficient quarter ..but ..we think the worst, yes, the worst rose from $27 in CQ3 to $40 in CQ4. of this wild ride with this Amazon is behind us. It ain't easy to get 17MM happy customers in 5 years! • We are raising our revenue estimate for CQ1:00 but maintaining a sequential decline. We are also • Call us melodramatic? Go ahead But we continue to maintaining operating loss estimates for CQI: 00 and for maintain that Amazon cam may be on its way to becoming C2000. Specifically, we are raising CQ1.00 estimates from one of the greatest companies of our day. no doubt, there's $490MM to $541MM (down 20% Q/Q in a seasonally weak still a chance that they screw the whole thing up. but after quarter), but maintaining our operating loss estimate of the CQ4 financial results and C2000 outlook, we are more $105MM. Going forward through C2000, we are looking calmed about Amazon.com's business outlook that we ever for steadily expanding gross margins -- from 19 5% in CQ1 have been. Happy New Year' to 22% in CQ4 -- as the company focuses on unproved inventory management, vendor relations, and shipping margins. We are also looking for declining operating Amazon coin - February 03, 2000

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JEFF'S VISION: while the German and UK sites combined for an aggregate 371MM in sales CQ4 On the conference call, founder, CEO, and Chairman Jeff in Bezos reflected on Amazon.com's evolution and offered an Driving revenue growth was a strong increase In interesting perspective looking into 2000 --- "Amazon.com customer accounts - a record 3.8MM accounts were can now be thought of as the large and growing global added In the quarter - and a record high repeat purchase portfolio of inter-related, mutually reinforcing level (73%) from existing customers businesses all built on a shared platform. This platform is comprised ofbrand, customers, technology, distribution, Sales from non-U.S. book categories reached approximately deep e-commerce expertise, and a great team with a passion $359MM, up an impressive 200% QIQ. Non-.corn book for serving customers well. As we exit 1999, we believe we categories include music, videos & DVDs, gifts, auctions, have reached a tipping point as a business - where this sales through Amazon.de and Amazon.co uk, etc. . -- platform allows us to launch new e-commerce businesses combined, these reached 53% of total sales in CQ4, up faster with higher quality of customer experience, lower significantly from 34% in CQ3. incremental costs, a higher chance of success, and a faster path of scale and profitability than any other company." AMZN: CQ4:99 At A Glance

Amazon continues to be "the place customers can go to CQ4-99A CQ4.99E CQ4:98A find/discover anything they might want to buy online " Revenue (1MM) $676 $580 $2S3 Jeff also outlined 6 goals for Amazon going Into 2000 1) growth in customers and enhanced relationships with Q/Q Gmwth 90% 63% 65% each of them, 2) continued rapid expansion of products and services (Jeff believes it's still land-grab time and that Gross Profit (1MM) $88 $99 $53 AMZN has the opportunity to become the most efficient e- 17% 21% commerce incubator in the world, 3) operational Grew Margin 13% excellence , measured in terms of productivity, asset Opex (SM1M) $263 $238 $71 velocity, and margin across all businesses; 4) international expansion -Jeff stated that long term international sales Op income (SWIM) (3175) ($139) ($18) could reach 50% of total sales and Amazon is focused on internationally-focused investments and partnerships in Oper EPS ($0.55) ($046) ($o 07) C2000; 5) partnerships ---AMZN has the pot tial to be Shs Out (MM) 338 336 309 the most effective platform for partners seeking to build e- commerce offerings, and 6) driving to profitability in each E -Morgan Stanley Dean WiuerResearch Estimates product line, Gross profits rose, while gross margin slipped - Gross profits rose 25% Q/Q to $88MM, while gross margin CQ4:99 FINANCIAL DETAILS: slipped almost 7 percentage points Q/Q to 13%. Note, Strong Holiday Results - CQ4 revenue rose to however, that excluding the $39MM inventory-related 3676MM, up 167% Y/Y and 90% Q/Q - substantially charge (which was primarily toys related), gross margin above our $580MM estimate While seasonal factors may would have been 18 8% and gross profits would have been have limited revenue growth, the company reported strong $127MM Key point about the gross margin slippage - Looking ahead, the main growth in sales across the whole spectrum of product lines - pricing was not a material factor shifts books, music, videos & DVDs, auctions, as well as across drivers of gross margin will remain revenue mix and sourcing efficiencies Specifically, we all geographic segments Revenue growth in U S -based and operational C2000 books increased 34% Q/Q and 66% Y/Y to 5317MM, Key anticipate a steady increase in gross margins in as improved inventory management, data point -- the $81MM QIQ growth in Amazon's U.S. the company focuses on book sales was likely greater than the entire CQ4 sales ofits vendor relations, and shipping margins nearest competitor U S. music sales reached $78MM, up Operating expenses of S263MM were up 269% Y!Y and 136% Y/Y, while U.S Video & DVD sales of $64MM was 76% Q/Q. Sales/marketing/other expenses of $179MM up 500% Y/Y (DVDs accounted for halfof these sales). were up $93MM in absolute terms Q/Q and also up from Children's products, a majority of which were toys, attained 24% to 27% of revenue Fulfillment grew to 16% of sales, $95MM in sales. International revenue, including exports up from 15% in Q3 and up from 10% in Q4 98, stemming from the U S., comprised 19% oftotal sales for Amazon, from continued rollout of the company's distribution centers. Due to possible SEC accounting changes, AMZN

Amazon cam - February 03, 2000

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MORGAN STANLEY DEAN WITTER Page a

may have to include fulfillment costs in COGS in the future details for the quarter - at the end of CQ4, average Note, however, that this would not change our operating inventory days declined from 28 in CQ3 to 26 in CQ4, loss estimates Key data point on sales & marketing -- in while average receivables days remained under 2. Average CQ4, Amazon's cost of customer acquisition was payables days declined from 64 in CQ3 to 54 in CQ4, due approximately 319. (Remove fulfillment costs from sales to a higher mix ofindirect sourcing caused by the launch of and marketing and you get $71MM Divided that by new product categories . This translates into a negative 3 8MM new customers and you get $18 68 ). A pure cash conversion cycle of 25 days, down from 33 in CQ3. apples-to-apples comparison with other online retailers is CQ4:99 METRIC DETAILS: not easy, but Amazon may very well have the lowest customer acquisition costs on the Web. Metrics Momentum -AMZN Reach Clears 25% Mark Product development expenses rose over $13MM Q/Q to In December, Amazon.com continued to demonstrate its almost $58MM or 9% of revenue (down from 9% in CQ3) ability to establish a significant presence on the Internet. And, G&A increased $7.5MM Q/Q to $26MM or 4% of This is a key development over the span of Q4, because revenue (down from 5% in CQ3). AMZN now resides in portal-like reach rankings AMZN has consistently increased Its overall Web reach as a Operating loss was greater than expectations-- consolidated property for the last three consecutive Operating loss of $175MM was higher than our expectation months according to Media Metric, as well as rising of a loss of $139MM This was primarily due to the higher 65% since January 1999 (see Table below). In December, than expected inventory write-down cost of $39MM. its reach jumped to a record 25 6%, up from 23 8% in Key point - in retrospect, CQ4 should turn out to be the November and 15 5% in January I999. In addition to high point (or the low point, depending an your perspective) reaching a record number of users, Amazon.com also posted for Amazon in terms of operating loss, both in absolute a record number of pages per user per month (24 I pages, dollar terms and as a percentage of revenue up from 13.4 in January 1999) and a record number of min Operating net income was a loss of $185MM or EPS of utes per user per month (19.8 minutes, up from 11.7 in ($0.55). Including $82MM in goodwill amortization, January 1999). $14MM in stockbased compensation, $2MM in merger, Overall, we are very encouraged by Amazon's metric acquisition and investment-related costs, and $40MM in momentum. Ranked #7 among all Web properties in terms equity in losses of equity method mvestees, reported net ofreach in December, Amazon ended up above the loss was $323MM or reported EPS of ($0.96) following portals NBC Internet (#8), About.com (#9), Alta Headcount during the quarter rose from 5,100 to 7,650. Vista(#12), Go2Net (#13), LookSmart (#17) and GoTo corn What do we make of the recently reported 150 person (#18). layoff? Not much. Amazon grew headcount from 2,100 at On the international firont, we now that Media Metrix rated the end of 1998 to 7,650 at the end of 1999. We ask, why Websites in Europe for the first time, and both Amazon.de only 150 of 7,650? and Amazon eo.uk ranked as the #1 e-commerce site and Cash and cash equivalents declined from 3906MM in the #10 most-visited site overall in their respective offerings CQ3 to S706MM in CQ4. Major uses of cash were countries During CQ4, both sites enhanced their S 105MM in fixed asset purchases (primarily the distribution by not only including music, but also launched local center network) and $145MM in equity investments, but auctions and zShop services. operating cash flow was a positive $32MM in CQ4. Also, Amazon.com's Key Destination Metrics inventories grew S102MM Q/Q to reach $221MM, Amazon's highest level ever Going fbrward into CQ1, we Sep 99 Oct 99 Nov 99 Drc99 anticipate a decline in inventories Capex for the year was Reach % 19 20 24 26 approximately $400MM, and we estimate capex in C2000 to be more in the 3250MM range. We do not anticipate any 961nereave new distribution centers being established in the U.S., but month to month (%4) 6% 18% 8% would anticipate some new ones being established overseas Unique AMZN's cash conversion cycle remained in place. As Visitors (MM) 12 13 15 17 we've mentioned in previous reports, this is a company with Ranking Aamng Top a negative cash conversion cycle - it gets cash from Websites #7 07 #6 #7 customers before it gives cash to suppliers. Here are the

Amazon corn - February 03, 2000

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Saw ce MSDW Internet Research, Media Metnx would build, rent out, buy, and Invest. In CQ4, Amazon took all four paths. Customer Accounts Build -- On November 9, Amazon announced the launch of Cumulative customer accounts grew a record 3.8MM to three new categories -home unprovement, PC software, 16.9MM -above our initial 15.9MM estimate One point and video games Key point is that these launches here -- new customer adds have increased every quarter for represented a significant expansion in Amazon's product AMZN since its inception Most recently, the numbers look offerings and market opportunity By our estimates, these like this -- quarter/new customer adds• Q 1.98/750K, three categories increased Amazon's total U S retail Q2.98/IMM. Q3.98/1 2MM, Q4.98/1 7MM, opportunity by $161 MM or 39% and Amazon's total global Q 199/2 2MM, Q2.99/2 3MM, Q19912.4MM and retail opportunity by $524MM or 48%. Amazon reported Q4 99/3 8MM. strong sales in tools and equipment in its Home We estimate that Amazon' s customer accounts now Improvement store during the holidays, but did not disclose constitute around 8-9% of total worldwide Internet users. exact amounts. Repeat Purchases constituted 73% of sales in CQ4, up from 72% in CQ3 Amazon's Growing Market Opportunity From an operational excellence perspective , note that well over 99 percent of holiday orders ware shipped m time to Date U.S. Market Global Market meet holiday deadlines, including even orders placed as late Product Category Launched Size (SB) Size ($B) Books 23 as December 23. This occurred despite obviously large sales 7/95 87 Music 6/98 14 demand, the company experienced peak shipping of up to 39 $16MM per day in the quarter Video 11198 9 16 Auctions 4/99 260 400 Basic Growth Metrics for AMZN, Toys (exci video games) 7/99 21 54 CQ1:99 - CQ4:99 Comer Electronics (excl. PCs) 7199 91 304 Home improvement 11/99 149 496 CQ1:99 CQ2:99 CQ3.99 CQ4:99 PC Soltwae 11/99 5 12 Revenue(8MM) $294 $314 5356 $676 Video Gaines 11!99 7 16 Direct Total 579 1,624 QIQ Growth 16% 70A 13% Rent Out -- On September 29, Amazon announced the Customer Accounts (000s) 8,400 10,700 13,100 16,900 launch of zShops, which are shops set up by anyone from Q/Q Gmwth 35% 27% 22% 29% individual merchants to major manufacturers to offer merchandise for sale on Amazon cam's Web site Key Customer Adds (900s) 2,200 2,300 2,400 3,800 point here, as we wrote at the time, was that this initiative had the potential to enhanced revenues and, very important, margins zSbops is a virtual business with 80°/a+ gross EXPANSION OF AMAZON'S RETAIL PLATFORM: margins, where sellers can pay an approximately $10 per month slotting fee or a $0 10 per listing fee as well as a 2- Amazon.com is not your father's retailer. What we've 5% comnussion fee Although Amazon did not provide seen over the last few years is a dramatic expansion in specific details on zShops in CQ4, registered users for the Amazon vision and retail platform. Since the end of Amazon Auctions, zShops, and sothebys amazon coin did CQ3, that expansion has accelerated Since the end of surpass a combined 1MM, with more than 1.5MM active September, Amazon has introduced three new product listings. offerings (PC software, video games, and home improvement), launched zShops, made investments in at least 5 companies (NextCard, Ashford.com, Buy -- In CQ4, Amazon acquired both Back to Basics Toys, GreenLight cam, Audible, and Living corn), and made two which expanded their toy product selection into hard-to-find direct acquisitions (Tool Crib of the North and Back to classic toys, and Tool Crib of the North, a leading tool and Basics Toys) Broad point here is that Amazon has for equipment catalog company, which helped them launch some time signaled that it could and would take several their expansion into home improvement products These different paths to become the leading online retailer - it deals constituted Amazon's 11th and 12th acquisitions to Amazon co,n - February 03, 2000

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MORGA.NSTANLEYDEAN WITTER Page 9

date (See Table I for detail) Key point here is that Amazon should become increasingly apparent in Amazon ' s model. still has a very viable M&A option, and the company has Specifically , we anticipate a significant decline in sales and made clear it expects to keep this option. marketing (which includes fulfillment costs) as a percentage of revenue, from 240A in CQ 1 to 16% in CQ4 Invest -- Since CQ3, Amazon has invested in at least 5 new companies -- NextCard, Ashfordcom, GreenLxght,com, RECENT HIGHLIGHTS: Audible, and Living corn -- and has increased its investment in another, drugstore corn. (Amazon also invested during January 31, 2000 - Amazon.com announces an the quarter in Kozmo coin, an Internet-based delivery agreement to prominently feature content and services service, although details are not publicly known) Amazon from Audible.coni Amazon.com will make a strategic gained stakes in these companies ranging from 5 to 18%. Investment in Audible and acquire 5% of the company (See Table 2 for detail) Three key points here. 1) With In addition, Amazon.com will receive from Audible $30 stakes in now 4 public companies -- drugstore coin, million over three years in exchange for promotion of Sotheby's, NextCard, and Ashford coin, Amazon now has a Audible's content and services public investment portfolio conservatively worth $500MM, January 24, 2000 - Amazon.com and drugstore.com 2) Amazon is developing into an e-commerce incubator, announce a multi-million dollar agreement to integrate a with the option to deepen its relationships with many of number of the companies ' shopping features and create these partners, and 3) these partnerships are now developing a drugstore.com shopping "tab" atAmazon.com. Under into a high-margin revenue stream for Amazon. Combined, the terms of the agreement, Amazon.com will receive $105 the multi-year cash comtnztments to Amazon from its million over three years partners now total over $450MM Drugstore coin, for example, has committed to paying Amazon $105MM over January 21, 2000 -Amazon. com agrees to acquire a 5% three years in order to be featured as a "tab" on Amazon stake In Greenlight.com, an online car buying service Website. Under the promotional agreement, Amazon corn will receive $82.5 million over five years and receive warrants The overall result of Amazon's retail platform expansion to increase its stake to as much as 30% over the five years has been the establishment ofone ofthe Web's largest gross merchandise sales platforms, second only to America January 13, 2000 -Amazon .com unveils plans to open Its Online and eBay. first customer service center on the East Coast in April in Huntington, West Virginia. Comparative Web Gross Merchandise Sales January 5, 2000 -Amazon. com announces that its 1999 Company CQ4.99 ($&IM) fourth-quarter sales totaled more than $650 million Amenca Online $3,300 Based on fourth quarter sales, Amazon.com has reached a euay $919 $2.6 billion annualized sales level less than four and one- half years after opening for business. Amazon corn $700 Yahoo+ $670 December 8, 1999 - Ataazon.com and Sprint PCS announce the availability of online shopping at priceline corn $270 Amazon.com from Internet-ready Sprint PCS Phones Sown arSDWlnwwetResearrh December 2, 1999 - A federal district judge grants Amazon,com a preliminary Injunction protecting its FINANCIAL OUTLOOK: patented 1-Click technology and barring an online We are raising our revenue estimate for CQ1:00 but competitor from copying it maintaining a sequential decline. We are also Amazon.com and Ashford.com, a maintaining operating loss estimates for CQ1:00 and for December 1, 1999 - C2000. Specifically, we are raising CQ1 00 estimates from leading Internet retailer of luxury and premium $490MM to $541MM (down 16% Q/Q), but maintaining products, enter Into a multi-million dollar marketing our operating loss estimate of $105MM Going forward initiative and a strategic alliance in a number of luxury through C2000, we are looking for steadily expanding gross product categories, including diamonds, watches, margins -- from 19 5% in CQl to 22% in CQ4 -- as the sunglasses, and writing instruments In exchange for the company focuses on improved inventory management, investment and the marketing relationship, Amazon corn vendor relations, and shipping margins We are also will hold approximately 16.6% of Ashford corn's looking for declining operating losses, in absolute terms and outstanding common stock upon the closing of the as a % ofrevenue, as the benefits of scale and leverage transaction, Amazon com - February 03, 2000

Please refer to Important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 91 of 127

MORGANSTANLEYDEAN TITTER Page 7

November 30, 1999 -- Amazon.com announces the November 9, 1999 - Amazon.com opens four new acquisition of Back to Basics Toys, a leading online and stores: Home Improvement, Software, Video Gaines, catalog retailer specializing in hard-to-find classic toys. and Gift Ideas Terms of the agreements were not disclosed. October 21, 1999 ---Amazon.com files a suit against November 19, 1999 - Sotheby's and Amazon.com launch barnesandnoble.com, saying it has illegally copied sothebys.amnazon.com Every lot is guaranteed for Amazon.com's patented 1-Click, online shopping authenticity and condition by acknowledged experts - technology. whether Sotheby's or one of the 4,500 dealers from around the world whom Sotheby's has pre-selected The site offers property at all price levels, from $100 to $100,000 and Mary Meeker (212) 761-8042/[email protected] higher, in categories including jewelry, watches, silver, Mark S. Mahaney (212) 761-4864/mahaneym@ms corn furniture, entertainment and sports memorabilia, fashion, coins, paintings, and photographs. Mark Trowbridge (212) 761-3384/trowbrim@ms coin

Amazon coin -February 03, 2000

Please refer to important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 92 of 127

MOBGAN STANLEY DEAN WITTER I Page 8

Table 1

Amazon.com - Acquisitions

Announcement lnvestmeat Amnuonnt Company Date (5MM) Transaction Type Company Detcrtptlon Boaklragea 4/27/1998 NA" Puxhase?Cag & Stack UK online booksmra Telebuch 4/2711998 NA' Puxehuo/Caah & Stock German online bookstore iacernet Movie Database 4/27/1998 NA* Putchase/Cash & Stock Rnpomtery lbr movie and television cfamatton on Web 1-glee 8/4/1998 180 Purehase/Stock Leading provider oradvamced Web-bated vital database PlanetAll 8/411998 100 Poalutg of Interests Online Address book. calendar, rennndcr snvtco LveBid coin 4/12)1999 NA NA Live bten et aucarona Exchange corn 4126!1999 200 Smelt Online Exchange Aecepe.com 4/26!1999 190 Stock o-Cwnmerea Soluuans Alaxa Internet 4/26/1999 250 Such Foe advems ng-supported Web navigation service Covergence Corp 14!411999 23 Stock Witness software Tool Crib oftlte North 11/911999 NA NA Hama unprovenunt ptoductn Back to Basics Toys 11!3(111999 NA NA Retailer oihar4tafind claque toys

* 4cgedv wn.r ufBookpagrv Teich, fiuernetM'ovfe Database comb0tecl$o an a ragate investment amount uf$iSM

Source MSDV/Inter et Ilesewch Table 2

Amazon.com - Investments

Investment Psrmses Cub AMiauement Aotnsuut Conswi(m!rt[ Company Data (SMM) (SMM) Pere ntage Tra sectionType! Payment Company Description Geowvrla 2116/1999 5 NA 7% Stock Wnelew Software Solutions Drugstarecoei 2/24/1999 45 103 28% Egattymathod sccwutmg Onimednigsmie PCatatn 3129/1999 38 NA 43% Equity method accounting OnImepecsuppbea'arore HomeGracer corn S/I811999 43 NA 28% Lquttymethod soceunnng Onltn ilo ocayStere Sotbcbyh 6/16/1999 45 NA 2% imatmmnk Watrtnta Auction Hcusa Liquid Audio 6/17/1999 NA NA 1 % Wendt Musio downloading Coat rant 7114!1999 NA NA 49% Cquitymethod accounting Online dneatnttalaaeact corm-getrshop Dellaandiamm 9/2311999 NA NA 20% Equity methodacoatntmg Online gift registry Naatcard 11110/1999 22 100 11)0% Warrants Internet wnwmer credit rand Ashford.cvm ] 2//11999 10 NA 17% Im4sonent Web neder of luxury and pranmm products GremLight cam 1/21/2000 NA 83 5% Surk tnta»etcarbuytngaarvice Audible 1131/2000 NA 30 5% Stock /mere: Audio Content Service Living con 2/112664 NA 145 18% Investment & Warrants IntnnrtHame Living

Satire .bfSDWJnternetReseardt

Amazon cam -February 03, 2000

Please refer to important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 93 of 127

MORGAN STANLEYDEAN TITTER Page 9

Amazon com - Quarterly Income Statement ($ Theo dx &c" $PS)

114&mb (dmmoacoml 306,643 22190 231,777 317,900 7471375 245,506 2611,340 440,000 294000 317 46141 Max1C week OI4Ooher 82A991 94,373 124(11(6 379,971 29745A 724,90(0 34(3,300 720,800 299M 359 1742 Nuo-0o k Rsanwe a -A *fT<(al 29% 30% 34% 53% 53% 57% 59% 60% 30% 0% CadutGnodu 229,872 246,946 285300 598,196 435,371 456D00 513,300 936,000 481x100 580,196 GwasPm4t 64,791 67,531 70,477 87,846 105,46) 114,000 136,500 264,000 90,609 87,846 Operl OR Rxpaeke 95,386 134,783 149,673 263,195 210,000 212,000 219 ,000 292,000 23R 000 263,195 91UJMar8e4h*001ir 60,744 851949 "5 179,424 120,000 119,000 120,000 198,000 160,000 179,424 14od4et DevoIpen69 23,477 34,288 44,600 57,720 60,000 63,000 66,000 69,000 55,000 57,720 Gastel & Admmstuft a 11,163 14346 18,712 26,051 22,000 30,000 73,000 33,000 23,000 26,051 Opentld In.. IBBITA 130395) (67,732) (79,198) (178,349) 104,5n (98,!00) (82,500) (28,000) (1394001 (175,344) [Pterat Eacoarlloerreel eapeeee (5,763) (15,534) (6,612) (9,336) (17,000) (19000) (19,000) (20.000) (15,0(tln (9,536) lmmn u doam m9me 10,923 12,901 14,838 8,606 8,000 TAW 6,000 5,000 10,000 8,6116 Intmgexpence(6) (16,688) (28,435) (21,410) (18,142) (25,000) (25,000) (25.000) (25,000) (23,000) (18,142) C=4*ureucvne*< (7,1791) (L ,733) (11,67(1) (8,242) (14,750) (14,730) (14,750) (14,730) (15,100) (8,242) Non-eesh 0 t n1expmue (9,507) (9700) PRO) (p 9CN) (10.250) (1(4230) (10770) (142711) (9,906) (990d) 18xb*ur&o yttemc(e) (25,309) (35,222) (111,270) (98,435) (111,000) ( 111,000) (111,000) (411,000) (111,000) (98,435) 119w(y in 4w,etof Egilty MMMIod Iev&xe - - - (39,893) - - - - (39,093) Arc-T1;[smog -Rtpaled (61,667) ( 1314,008) (197,080) (323,213) (232,537) (227,000) (212,300) ( 159,000) (263,400) (323,213) Pra'hi1n e. Operaile8 (36,3314) (112,786) (15,810) (404,983) (121,537) (116,000) (101,500) (48,000) (134,400) (184,803) proNwua ibr Inmme Tlx Reported 0 0 0 0 0 0 0 0 0 0 Pmvu^ Rr lomme Ta: - onerttmQ 0 0 0 0 0 0 0 0 0 0 'Idlnmee- Rapeeled ((.1467) ( 138,008 ) (197,050) (323,213) (232,537) (227,000) (212300) ( 159,000) (265400) (323,213) Net Idmine operetIRC (36,338) (92,786) (85,840) (104,885) (121337) (116,000) (101300) (40,000) (154,400) (I R4,893) LaenNp Per Shin - Reported (SO 20) (S0A3) (59.99) ($096) ($067) (90 65) (50,60) ($044) (=079) (SO 96) Earnings rerShare -opentin{ (5012) (50.26) ($0.26) (5433) (90.35) (80.33) (5019) (80.13) (9046) (3075) 9o39use3tou^leeletI0?S(000) 313,794 .322.340 332489 3393119 343,000 350,0110 355,000 360AW 33(000 33$3(9

Expaw- (yryr) 226 244 169 269 120 57 46 11 234 269 ExpuM (se9) 34 41 11 76 (20) 1 3 33 59 76 op-tins 'mwe(yr-yV) NM NM NM NM NM NM NM NM NM NM Oy bais Imome (u) NM NM NM NM NM NM NM NM NM NM Mne81o Amilyde (%olToesl Rev) GmsMergm 221% 213% 198% 130% 19.5% 200% 21 0% 220% 170% 130% 80 Merkarie810Iher 21 27 24 27 24 21 1s 16 28 27 Pmdmt D"gxmvt A 11 13 9 11 11 10 6 9 9 1300 1: Adm urtrelive 4 3 5 4 4 5 S 3 4 4 Opm& gMarpn -10% .21% ,22% .26% .19% -17% -13% .2% -24% -26% Not Merge: NM NM NM NM Nld NM NM NM NM NM Qparelhp Emmue ema %orRerema 32% 43% 42% 39% 39% 37% 34% 24% 41% 39% otber MMrkr Nmdeau>y 3,000 4,200 5,100 7,630 7,650 7,800 9,000 8,200 6,000 7,670 Ann Rev(tI00yfmp9o3ee $397 $299 SZ74 $353 8203 3292 $325 3705 $387 $353 A-0jwx(000y[smAwj- 127 128 117 138 110 109 110 142 139 131 Mn Opa-lAno Aer (per limp) 32% 43% 42% 39% 39% 37% 34% 24% 41% 39% cuemmv AWDUMMAt PeNW-DW 13,100)100 ,000 23,300. CLeMxmre Added in Penal 2,2 2.3 0 400 7 RO 0 2 2 2 3 00 8D %000 ]800 000 CuOR Ant in % Lukrnd U. 8% 8% R% 9% R% 9% 9% 9% R% 9% TONI W[M9dweln lnterout Umn (MM) 100 130 I fie 190 225 240 260 290 190 190 G,t.4 nfViieda Per pay 1,812,611 1,940399 2,196,154 4,173,099 3338,479 3,519,319 4,012,346 7,407,407 3,780.247 4,173,099 Roveeoe per Minuet (at Penud-end) 935 S29 $27 $40 $28 427 123 846 436 $40 Ed BeokesddIn IV (AS?-317) 12,273,118 12,944,933 13,869,235 18,647,059 14316,184 14,417,647 13,676,471 28,235,294 17,0!8,024 0 Q-ehly SKUe(1,4M) IS umaled# o4ARlluts 260,000 315,000 355, 00 ------8sti+,elod Xe Rr Pe'Ydd! 5780 it NN 51.10 31119 $160 $1411 !tan $1 No $7 40 $180 Peftext 'Orderafrwn figN&ICvrt 669 70% 72% 73% - .- - - - Ann. 8&Mper Pennd-[indCust 329 932 $26 $42 427 522 321 129 940 $42 S&M IwrnewC69 Adled $28 S37 336 $47 830 454 960 $63, 937 347 (^7 w ryeNal pe...Mly 1 1997 (lnr pNrwJ m IMenuArr 3! 1'97(6, (8J A+nsmwsuw rawp(+rniae 9117 of (prv-9941MM .04was 010 eN May !1, l997; (eJ A a..a, f w xems- M 469 ef601.t (d)leded.4. wrnlauJ,o311,9e460Mvx nfSi2JMlI ne.r.,oa1rdlw,rMMM00 iON), Nrnr.,mmm,a,e mxv^vrkfirrre,e 7A f+/hrhdu grwd„JNurwn ,da dfe Nw 4AYu,Yu6Nkwf,N 8-4,M^ Tkjw,11Al0 a^wad!a,,M e. edin4 a,9*39d,ayvla af30.4(v,ud Yfoe+L48, lwr! enni ,9gnadw'R wIfw+RiNrx m.wwibn,-wt I+Wru.,w Rd0. 0)(t, 4/2941* AMxY(needJ 75%n,x^wrtItle Awd,'.,vd a,tnhr70N9 rwFwfnrnrr,rnde, S? :7N,Cml, i^rw,nr enpreenw.Mr7ar,M mfrtk Nr xameomnkge q ,wpr aNwaWly S76WAlfwr qen nr (e1 Mw0,r a woom x tuna (444de 54 7MM L. 00,64-N "pm-*. w1R (31(X)490 cor.2l,eIYJws3vw44lflJ"en ryr9ent (1mueidf+ayf .+lnrlwh' 3(4MM I..m awoJ,cwpwntlwn, 4MY,,Y,Neck,p714._1 lee9 /I19 ifpr'l cn J1]NV„-34x1 nn 192179 h'lml^en',el(e Perener(1 Ms9p. S4Mo' lhw Miter Rw/uar6 tivlw,vw

,S.ire A&DWInternef RC497rch

Amazon com - February 03, 2000

Please refer to important disclosu res at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 94 of 127

MORGANSTANLEYDEAN WITTER Page 14

Amaxon. com -Annual income Statement (S Tbaxsan de, Fxeepi BPS)

Ua;Bwt r plwa on.mrty 0 511 15,746 147,787 532.289 981,484 1,234,975 1,850,000 2,100,000 36ss FRdunr 74& ()th - - - - 77,623 658,355 1,725,658 3.150 000 4,900,000 Nne'BnakRevenue as % n(Tatal 0% 0% L3% 40% 58% 6394 70% Cn nfO00da 0 409 12,287 L18,969 476, 156 1.349,194 2340,87L 3,750,000 5. 180,000 (IroaePwft 0 L02 3,459 28,618 133,756 290,645 619,963 1,250,000 1,820,000 Operntlrg $xpenees 52 406 9,902 61 ,4 13 L95,357 643,039 933 ,000 L,250,000 1,700,000 SWV/Markn8y(/OOmr 0 200 6,090 40,486 L32,925 412,672 555,000 750,000 1,100,000 PmduetD&.doprrr1t 38 171 2,401 13 ,916 46,660 1,0,093 258,)00 330,000 390,060 General & Adndninthve 14 35 1,411 7,011 15,772 70,274 120,000 170,000 210,000 O1erati3 Im ieIEB1TA (52) (304) (6.4431 (32595) (61.601) (352 91 (313. 037) 0 120.000 Interest Iene.nellnlereet a:penis 0 1 197 1,575 ( 12,585 ) (37,445) ( 74,000) (60.000) (20.000) LYtreataml utmt .inn 0 1 202 1,90 L 14,054 47,290 26,000 50,000 60,000 T texpene(r0 0 0 ( 5) (326) (26,639 ) (84735) ( 100,000) (90,000) (80,000) Csth AVmr1e10 a enr 0 0 (5) (3261 (7,029) (45,435) (59,600) (45,000) (30,000) Narrarthlnmrmtaryense 0 0 0 0 (24610) (3$900) (411000) (41,000) (50.000) Exuwrduaryltttne (n) 0 0 0 0 (50,360 ) (290,236 ) (444,000) (260,000) - Equit in L araafEqutlyMetltudTnvctera - .------Pre-Tax lessee . Reported (52) (303) (6,246) (3 L,020) ( 124,546 ) (719.968) (831,037) (300,000) 100,000 Pro-Tax 1l00 a .Operating (52) (303) (6,246) (3 1,020) (74,186) (389,839) (367,037) (40,000) 100.000 PmvunnfrTn=m TaxReorted 0 0 0 0 0 0 0 0 38,000 Pmvramn for 5XOM Tax Opeatm 0 0 0 0 0 0 0 0 36,000 Net In¢ame - Reported (52) (303) (6,246) (3 L,0213) (124,546) (719,968) (83 1,037) (300,000) 62,000 NatLcaal. . Opeva0nR (52) (303) (6,246) (31,020) (74, 086) (389 ,839) (387,007) (40,000) 62,000 larnhappershar - Reported (5000) (5000) (50.03 ) (5012) (50,41) (5217) (52,36) (50 ?7) 5015 8araapPerShare . Operatla2 (5000) (4000) (50.03 ) (5012) (5025) (51 18) (SL 10) (5010) SO LS Shares used bD cal.ulete EPS (000?. 161,500 L72 728. 222.531 260,679 296,343 326.753 352,500 387 ,750 426,525

Eap n l,3 ryr} - 681 2,339 S20 218 229 45 34 36

O Tnnxm (yr•yr) - NM NM NM NM NM NM NM NM Ogeram Twonr (ae1 ------Margle Aealysle (% M Taal Ray) Gmw Margin 20 0% 22.0% 193% 219% 17 7% 209% 25 0% 260% SylMMarketetglOther - 39 39 27 22 25 19 15 16 Pmductlkvalopmrt - 33 LS 9 8 10 9 7 6 CknoraMAdsuowradw - 7 9 5 3 4 4 3 3 opent3n8Mar8in NM .59 % -41% -22% .10% 2L% 1L% 0% 2% NetMarlin NM NM NM NM NU NM NM NM 09% Op raUns Exprnrtm an a % afRevenua - 79% 63 % 42% 32% 39% 32% 25% 24% Other Metric Headcaurt - - 151 614 2, 100 7,650 6,200 10,000 11,000 Ma Rev ( 900)(Ernp(o3e - - .. 5386 5449 S336 5374 5549 5667 Ma Oprx( 000)'Empl93eg - - - 200 L86 168 228 250 309 AnnOpdAnn. Rev (per )0n ) - - - 52% 4L % 50% 61% 46% 46% wtmtc Acaunta at Pcri o&EPd - - - 1 000 1 00, 35,30-%-= 000 CukametaAdded InPmW - 4,690000 10700000 9400000 9000000 900000 Gee. Acxa. aa%InoametTSana - - - 4% 8% 9% 9% 9% 9% Toml Worldwak Internet U ern (MM) - - - 40 82 190 290 400 500 FA. 4 ofVInu Per Day - - - 204,418 928,329 2,995,140 6,489,498 13,696 ,630 9,589 041 Reverua per AMuunt (att erwd-end) - - - S98 S98 S97 5113 S142 5158 Bat. Bnn0n Sald in Per (ASP - 517) - - - 8,693.353 3 1,3 L L,103 57,734,347 72,545,595 L06,823,529 123,529,412 Quarterly 9CIL (MM) Eelnmte d 0 of A3thetes ------ErNneatedlPrvvunna Par MR - - - $198 $1 80 $150 $1 25 S1 00 $201) Peoanl nfOrdaev fmp 11 set Can. Ann S&M per T4raod Htd Cunt - - - 427 521 S24 521 S21 525 S&1.{ per new Cunt Added - - - - 028 539 559 S83 5122 (a) pd1M4fnui,.Mv1, t441 (Tuwrxlaa) m De .uebve 11. 199 4 (b) 7anmrrt.c a twupln ed as 160 [f (p e.opffu4 1(4Mmanv at 516 no Mqv 15 1907 (e) 4 e saefaixuanna ln.ryrhe nfM)Lc (J Imlu[6er lmoreie rcMrmdo, 3/b9R oj6, g 0153?5W100 -^a rmnfar dbravreenev (g} lO%) lnluiw rmnrtrtn non-cwhJrvleeix l-S (r.) )..bads, Wdee" n on rrlaied » r&e 1198 mgxlm7oerq( uu rrgae T4r8nnk !MD, mwvL a!rhargnrrrlrtr,M io r6e Sr90 acQuae nfJangl^a nud Pion .4L4 laeC snore of8owfw`!land feno4lbfac rmrmarfd rnxra, , n(naxer R6() (9 Oe 117 099, IMLYlaued 475%uinven (bk arhnvdlnort! amaa dne?(1R9 v9h .w pmar4, of S! 258. Cash (memn^ egivnw uaacdnred 014 dre nrxne anivunra ro npprorlwndv Sl6M3fptrgvaurer (g)IHrgr&angWatdne serer Mehmte 3f 7,1l^ is fe01.Mwdcompa.nwtoa roes {k) C04 j^ L .{' fgdy'sS^ MIn MWttd]IS'CflP/$PF &nt09t6mer ^^h'M^^rS70^ /.l/iw aYl[ '^.^LG^ [ Hp r(^(ry/T

Amazon on - February 03, 2000

Please refer to Important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 95 of 127

MORGAN STANLEYDEAN TITTER Page 11

Amazon.com - Balance Sheet (f Thousands)

Tut lA sets 5146,100 5450,508 S619,714 5648,460 51,812,984 52,298,214 S2,239,799 52,471,551 CurreotAsseta 133,481 374,615 374,657 424.254 1,325,278 1,256,958 1,080,068 1,012,178 Cash &cash egmvalents 117,321 344,858 337,260 373.445 1,442,965 1,144,237 905,685 706,188 Q/QRea1 Cash Change (8,034) 227,537 (7,598) 36183 1,069,520 (298 728) (238,552) (199,497) lnventa tcs 11,574 17,035 19,772 29,501 45,236 59,387 118,793 220,646 QV Real Cash Change 2,703 5.361 2,737 9,729 13,735 14,131 59,406 101,853 Prepaid acpeas and other current assets 4,486 12,722 17,625 21,308 37,077 53,334 55,590 85,344 Long Term Aasela 12,619 75.893 245,057 224,206 287,706 1,041,256 1,159,731 1,459,373 Fixedasacta,net 10,275 15587 23,821 29,791 60,600 156,333 221,243 317.613 Deposits 296 286 582 626 0 0 0 0 DelazedChargea 2,048 7.622 7,590 7,412 39,912 37,038 36,239 40,154 Other Investments - - - - - 106,020 196,317 371,462 Goodwill andO1hne Intangibles - 52,398 213,064 186,377 187,194 741,865 705,932 730,144 Liabilities & Shareholders'Equ4 146,100 444,508 619,714 648,460 1,812,984 2,298,214 2,239,799 2,471,551 TotaiLLabaitles 126,278 405,079 439,950 509,715 1,735,447 1,727,168 1,819,874 2,205,273 Current Liabilities 549,576 572,673 599,455 S161,575 5201,585 5277,944 S357,671 5738,935 Accounts Payable 34,609 47,818 60,046 113,273 133.018 165,983 236,711 463,026 Accruedadvcrusuag 5,349 9,974 11,857 13,071 16,187 32,364 24,567 55,892 Current poltwnofddrt 684 684 684 684 7,186 9,873 12.776 14,322 Aoaued expanses and other liabilities 8,934 14,197 26,868 34,547 45,194 79,724 83,617 205,695 Long TermLiabillties 76,702 332,406 340,495 348,140 1,533,862 1,449,224 1,462,203 1,466338 Lomgtermdeht 76,521 332,225 340,392 348,077 1,533.862 1,449,224 1,462,203 1,466,338 Long tenet lease obligation 181 181 103 63 0 0 0 0 Shareholders' Equity 19,822 39,429 179,764 138,745 77,537 571,046 419,925 266,278 Sham Outstanding 282,636 292,554 301.405 308,778 313,794 322,340 332,488 338,389

Ratio Analysis Soak Value Per Sham 5007 S013 5060 $04.5 50.25 $177 $1,26 50.79 Casio Per $34re S042 51 18 51 12 S121 S460 S3$5 5272 5209 Inventory Turns 26 25 26 32 24 19 13 14 Inventory Days 15 17 15 13 18 22 37 34 Days A=te Payable 46 48 45 31 52 61 75 71 Long TermDehtlEgwty 386% 843% 189% 251% 1978% 254% 348% 551% Currmt Ratter 27 52 38 26 76 4.5 3 0 14 (a) On 5115197, completed IPa of3MM abates at 518 (c) On 12129!97, AMZN completed a S75MM, 3 yr credit facility at 3.5-4% oven L1BOR. (d) During CQ2 98 cash and equivalents rose due to proceeds from May 5th S326MM sale of 10•year, 10% senior discount notes (e) AMZN restated its bustoncal financial results to reliant the acquisition of Planetkll, which was accounted for as a poolwg,ofuiterests rca! year ends in December

Source Ad5'DWInternetResearch

Amazon cam - February 03, 2000

Please refer to important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 96 of 127

MORGANSTANLEYDEAN WITTER Page 12

The information and opinions in this report were prepared by Morgan Stanley & Co. Incorporated ("Morgan Stanley Dean Witter") Morgan Stanley Dean Witter does not undertake to advise you of changes in its opinion or information. Morgan Stanley Dean Witter and others associated with it may make markets or specialize in, have positions in and effect transactions in securities of companies mentioned and may also peon or seek to perform investment banking services for those compatues. This memormuk m as based on information available to the public No representation is made that it is accurate or complete This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned Within the fast three years, Morgan Stanley & Co Incorporated, Dean Witter Reynolds Inc. and/or their affiliates managed or co-managed a public offering of the securities of Amazon.cam. Meagan Stanley & Co Incorporated, Dean Witter Reynolds Inc. and/or their affiliates make a market in the securities ofAmaxms.com. Morgan Stanley & Co Incorporated, Dean Witter Reynolds Inc and/or their affiliates or their employees have or may have a long or short position or holding in the secuntses, options on securities. or other related investments of issuers mentioned herein. The investments discussed or recommended in this report y not be suitable for all investo s investors must make there own investment decisions based on their specific investment objectives and financial position and using such independent advisors as they believe necessary Where an investment is denominated in a currency other than the investor's currency, changes in rates of exchange may have an adverse effect on the value, price of, or income derived from the investment. Past performance is not necessarily a guide to future performance. Income from investments may fluctuate The price or value of the investments to Which this xepoit relates, either directly or rmdgtctly, may fal! or rise against the interest ofmvestors. To our readers in the United Kingdom. Morgan Stanley Dean Witter, regulated by the Securities and Future$ Authority Limited, and/or its affiliates may be providing or may have provided significant advice or investment services, including investment banking services, for any company mentioned in t is repoR Private investors should obtain the advice of their Morgan Stanley Dean Witter representative about the investments concerned. This publication is disseminated in Japan by Morgan Stanley Dean Witter Japan Limited and in Singapore by Morgan Stanley Dean Witter Ana (Singapore) Pte To our readers in the United States. While Morgan Stanley Dean Witter has prepared this report, Morgan Stanley & Co Incorporated and Dean Witter Reynolds Inc. are distributing the report to the US and accept responsibility for it contents. Any person receiving this report and wishing to affect transactions in any security discussed herein should do so only with a representative of Morgan Stanley & Co Incorporated or Dean Witter Reynolds Inc. To our readers in Spain AB Asesores Bursatiles Bolsa SVB, Si.,, a Morgan Stanley Dean Witter group company, supervised by the Spanish Securities Madcets Commission (CNMV), hereby states that this document has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanishregulations To our readers in Australia. This publication has been issued by Morgan Stanley Dean Witter but is being distributed in Australia by Morgan Stanley Dean Witter Australia Limited AC N 003 734 576, a licensed dealer, which accepts responsibility for its contents. Any person receiving this report and wishing to effect transactions in any security discussed in it may wish to do so with an authorized representative of Morgan Stanley Dean Writer Australia Limited. To our readers in Canada This publication has been prepared by Morgan Stanley Dean Witter and is being made available in certain provinces of Canada by Morgan Stanley Canada Landed. Morgan Stanley Canada Limited has approved of, and has agreed to take responsibility for, the contents of this information in Canada. Additional Information on recommended securities is available an request.

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Amazon com -February 03, 2000

Please refer to important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 97 of 127

Exhibit H Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 98 of 127

Comment- -. MORGAN STANLEYDEAN WITTER I '.

Amazon. com

Bloomberg. AMZN NASDAQ. AMZN

Mary Meeker April 27, 2000 (wary meeker®msdwcom) (212) 761 -8042 Mom entum Continues to (^kMS`S Mahancy , Move in the Right Direction (212) 761-4864 • AMZN Reports Solid CQ1 Price (April 26. 2000) $53 50 Revenue of $574MM (up 95% Y1Y and down 15% Q/Q) vs our Price Target. - $541 M M est., EPS of ($0 35) better than our/First Call est of ($0 36) 52-Week Range $113-4081 • Strong Metrics And Improved Customer Value 3.1 MM new customers, vs. our 2.2MM est, total of 20MM; sales per customer up Q/Q from $116 to $121, acq costs down from $19 to $13. • Raising Revenue and Operating Income Slightly C2000 Rev $2 913 to $3B, Op loss ($313MM) to ($305MM); Increased EPS loss estimates due to change in interest income estimates • Reiterate Outperform, Significant Leverage Potential THE leading Web retailerlplatform, with a very large market opportunity ahead and scale effects largely untapped.

Price, Perf. Ral to Market and Sector FY ending Doe 31 1999A 2060E ZOe1E 2002E EPS ($) (1 18) (120) (024) 008 Poor EPS Esfs ($) - (114) (013) 013 CM d^5p PIE NM NM NM 659 Market Cap ($ m) 18,404 truly 1998A 1999A 1008E Shares Outstanding (m) 344 EPS actual cum prior purr prior 01 (004) (0 12)A - (0-35) (038) 02 (0 06) (0 26)A - (036) (034) 03 (008) (0 26)A - (032) (029) 04 007 055A - (016) 014

Source H - Alargae Stanley Dean Willer Research Ekihnale Company Description Amazon cam is the leading shopping destination on the Web The company hits more than 18MM unique it= in categones including books, CDs, toys, electronics, videos, AVDs, he= improvement products, software and video games

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MORGAN STANLEYDEAN NI.TTER Page 2

Turning the Corner and Headingfor Leverage

INVESTMENT SUMMARY AND CONCLUSION: these costs are among the lowest of any major Internet commerce company and demonstrate the power of Amazon.com reported CQI results last night -- revenue Amazon's brand and first-mover advantage, Amazon's reached $574MM (up 95 % YIY, down 15% Q/Q in a position is one that few e-commerce companies will ever seasonally weak quarter), ahead of our estimate of be able to achieve. $541MM. Gross profits were $128MM, witb. gross margin of 22.3%, ahead of our estimate of 19.5%. Operating Amazon ended CQ1 with just over SIB in cash and loss was 599MM, better than our $105MVI estimate, and equivalents, in part due to S664MM in net proceeds importantly was significantly better than the S175MM from Its February convertible security offering. Key loss in CQ4. Operating EPS of a loss of ($0 35) was datapoint - Amazon expects to generate over the next better than our and the First Call mean of ($0.36). three quarters combined enough operating cash flow to more than cover Its capex requirements. It appears that We believe that CQ4:99 will prove to have been Amazon's balance sheet will support it until it reaches Amazon's worst quarter in terms of operating loss, and profitability in C2001. Further, we expect the U.S. the key thing to watch for going forward will be Books, Music and DVD/Video segment to be profitable improvement relative to that performance . That said, we on a pro forma operating basis for the full year 2000. are encouraged by the CQ I results - operating loss declining $74MM Q/Q to $99MM -- although we do not We are raising our revenue estimate for CQ2:00 (from believe Amazon is out of the woods yet. A key challenge $570MM to $600MM, up 91% Y/Y and 5% QIQ) and for Amazon going forward will be reducing operating losses lowering our operating loss estimate (from S98MM to Q/Q as a percent of revenue and in absolute terms $96MM). We are also tweaking up our customer add estimates (from 2 2MM to 2 3MM) We are increasing our New segment reporting revealed an increasingly EPS loss estimate, however, from ($0 34) to ($0.36) due diversified revenue structure. U.S. Books, Music and solely to a change in interest income estimates For H2.00, DVD/Video revenue was $401MM (up 50% Y/Y, we are maintaining our revenue and operating loss accounting for 70% of revenue) International, which estimates As before, we are also looking for declining includes sales of Amazon's German and UK divisions, was operating losses, in absolute terms and as a percent of $75MM (up 188% Y/Y, accounting for 13% of revenue) revenue for the balance of C2000, as the benefits of scale And Early-Stage Businesses and Other, which includes and leverage should become increasingly apparent in auctions, toys, consumer electronics, home unprovement, Amazon's model. Amazon's ability to demonstrate PC software, video games, and revenue from Amazon's leverage should be apparent in H2:00. Commerce Network, reached S97MM (up from practically $0 in CQ1.99 and accounted for 17% of revenue) For C2001 and C2002, we are tweaking up our revenue estimates (from $5B to $3.1B and from $7B to $7.2B, Key non-financial metrics : Amazon added 3.IMM respectively), and picking up our operating income customers in CQ1(vs. our 2.2MM estimate) and now estimates from $0 to $5MM in C2001, and from S120MM has over 20MM customers. Repeat purchasing levels to $132MM in C2002 We are lowering our BPS estimates reached 76% (up from 73% in CQ4), the company's in these out years due to a change in interest income highest rate to date and a clear sign of continued customer estimates, from ($0.13) to ($0.24) in C2001 and from $0 13 loyalty to $0 08 in C2002. We reiterate our Outperform rating on Amazoa.coni. Two customer lifetime value indicators improved nicely Amazon Is THE dominant Internet retailer in terms of in CQ1. 1) Trailing twelve-month sales per active revenues, customer service, brand, and multi-product and customer (one who purchased during the past 12 service platform potential As we anticipated, the company months) was $121, up from $116 In CQ4:99 and $107 in has just exited two of the most inefficient quarters in its CQ1:99. The success of Amazon's business model long history (in terms of operational performance), as it sought term is highly dependent on increased share of wallet, we above all else to drive revenue growth and customer believe we're starting to see the first signs of this 2) satisfaction. We believe it achieved those goals And we Customer acquisition costs (sales and marketing expenses, believe we're already seeing in the very low CQ I customer excluding fulfillment, divided by new customer adds) acquisition costs the initial fruit of that customer satisfaction declined from $19 in CQ4:99 to $13 in CQ1. Note that

Amazon cam - April 27, 2000

Please refer to important disclosures at the and of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 100 of 127

MOB GAN STANLEY DEAN TITTER Page 3

obsession. We expect to see plenty of signs going forward in customers added during the quarter Note that Amazon of rapidly improving operational performance experiences a particularly strong surge in sales during CQ4, Amazon continues to build out its Web platform through and that its sequential sales decline for seasonal factors was organic growth, investments, alliances, new product and expected. Revenue growth in U S ,based Books, Music and service introductions, and international expansion. D VD/Vldeo increased 50% Y/Y to $401MM. International Amazon's market opportunity is only getting bigger We revenue, including exports from the U S , resulted in 24% of continue to maintain that Amazon.corn may be on its way to total sales, up from 19% m CQ4, while the German and becoming one of the greatest companies of our day the U K. sites combined for an aggregate S75MM in sales in risks are high, but so are the rewards. CQI. This represents a 192% increase Y/Y from combined German and U K. revenue of $26MM NOTABLE QUOTABLES FROM JEFF: A key component of revenue growth was a substantial On the conference call, founder, CEO, and Chairman Jeff expansion of customer accounts - 3.1MM accounts were Bezos provided this commentary on recent volatility in added In the quarter, much higher than our estimate lnterrlet stocks. 2 2MM - and a record high repeat purchase level (76%) "Investors are becoming more discerning about companies from existing customers (vs. 73% in CQ4 99 and 66% in on an individual level. This is something we think will CQ1 99) result in a positive unpact on the competitive landscape Creating an environment where more rational Sales from Early-Stage Businesses and Other reached behavior by investors and by online retailers combined with $97MM, up from $402KK a year earlier. our current platform and strong balance sheet should serve Key point - Trailing twelve-month sales per active to further strengthen our position. The real business customer (one who purchased during the past 12 months) impacts of marketing this shift include, more effective was $121, up from $116 in CQ4 99 and $107 in CQ1 99. spending, less irrational pricing in the marketplace, and The success of Amazon's business model long term is better supplier relationships with companies that continue to highly dependent on increased share ofwallet, we believe separate themselves from the pack. An investment in we're starting to see the first signs of this. An zon.com represents an investment in the leading e- Commerce platform. And indeed, Amazon.com is a large AMZN Sales per Customer and growing global portfolio of interrelated and mutually reinforcing businesses built on a shared platform. This CQ1'99 cot 99 cal 99 C0 4 99 C 100 platform is comprised of a brand, customers, technology, Ravemue (SMM) 5294 S314 5356 5676 $574 Saleiper ITM Cu tamer 5107 5105 5105 5116 5121 distribution capability, e-Commerce expertise, and a great Active Customers 7,6 94 11.3 14 1 15.9 team with a passion for innovation and for serving Source. MSDW Estimates customers well " Jeff also reviewed Amazon's six goals for C2000. 1) growth in customers and enhanced relationships with AMZN: CQ1:40 At A Glance each of them; 2) continued rapid expansion of products and services, 3) operational excellence , measured m terms CQ1:00A I CQ1 00E CQ1.99A of productivity, asset velocity, and margin across all businesses , 4) international expansion - Jeffhas stated Reveoue($MM) $574 $541 $294 before that long term, international sales could reach 50% of (20%) 16% Amazon' s total sales, and 5) expanding Amazon's Q/QGrowth (15%) partnerships, and 6) driving to profitability In each Grose Profit (SMM) $128 S105 S65 product line. Gross Margin 22.3% 19 5% 221%

CQ1:00 FINANCI AL DETAILS: opex($MM) $227 $210 S95 Revenue higher tha expected - CQ1 revenue rose to Op Income (SMM) (599) ($105) ($31) S574MM, up 95% YIY but down 15% Q/Q - 6% above our $541MM estimate Prunary divers for CQI's revenue was Oper EPS ($0.35) ($0 36) ($0 12) attributed to solid growth Y/Y across all segments (Books, Music, DVD and Videos, International, and Early-Stage and Shs Out.(MM) 344 345 314 Other), as well as a substantially higher than expected rise E -Morgan Stanley Dean Witter Research Estimates

Amazon coin -April 27, 2000

Please refer to Important disclosures at the and of thIs report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 101 of 127

MO1GAN STANLEYDEAN WITTER Page 4

Gross Profits and Margins Rise - Gross profits rose 46% $104MM Going forward, the company stated that Q/Q to $128MM, and gross margin gamed 9 percentage operating lass as a percent of sales will decline each points Q(Q to 22 3%, from 13% in CQ4 winch incurred a remaining quarter of 2000, resulting in mid single digits by $39MM inventory-related charge (prunarily toys-related). year end (as of CQ 1, Amazon's operating losses were 17% The main drivers of the increase in gross margins in the of revenue). quarter were related to improvements in inventory Operating net income was a loss of $121MM or EPS of management, solid execution in customer service, and the ($0.35}. Including $83MM in goodwill amortization, impact ofsales from the Amazon Commerce Network $14MM in stock-based compensation, $2MM in merger, (ACN), which contributed 250 basis points to gross margin. acquisition and investment-related costs, and $88MM in Note the company emphasized that prices have not been a equity in losses of equity method investees, reported net pressure point on its margin performance. Looking ahead, loss was $308MM or reported EPS of ($0 90) we expect continued solid performance of gross margin during the remainder of C2000 We believe Amazon has Headcount during the quarter declined from 7,650 to 7,200 the ability to achieve this goal by further fine-tuning its m part due to natural attrition and it part due to previously operational efficiencies and expanding into new product announced layoffs. areas and services that are created organically or from Cash and cash equivalents Increased from $706MM In partnerships CQ4 to SIB in CQ1, in part due to $664MM in net Operating expenses of S227MM were up 138% Y/Y and proceeds from its February convertible security offering. down 14% Q/Q. Sales/marketing/other expenses of Major uses of cash were $203MM lnpaydown of accounts $140MM were lower by $39MM in absolute terms Q/Q and payable, $36MM in interest payments, and $99MM to fund also down from 27% to 24% of revenue Fulfillment grew operating losses . Also, inventories fell $48MM Q/Q to to 17% of sales, up from 16% In Q4 and up from 11% In S 172MM Capex for the quarter was approximately Q1.99, but was down Q/Q in absolute terms from $1 08MM $27MM. in CQ4 to $99MM in CQ 1. Key data point on sales & Amazon's cash conversion cycle remained in place. As marketing -- in CQ 1, Amazon's cost of customer we've mentioned in previous reports, this is a company with acquisition was approximately $13 down from $19 in CQ4 a negative cash conversion cycle -- it gets cash from (See table below) This number is impressive; Amazon has customers before it gives cash to suppliers. Here are the one of the lowest customer acquisition costs of any Internet details for the quarter - at the end of CQ 1, average commerce company. inventory days rose from 26 in CQ4 to 40, while average AMZN Fulfillment and Customer Acquisition receivables days remained m the 2 to 3 range Average Costs payables days declined from 54 in CQ4 to 73 in CQI This translates into a negative cash conversion cycle of 30 CQ2 99 CQ3:99 CQ4.99 days, up from 26 In CQ4.

Sales & Marketing ($MM) S86 $87 $179 FINANCIAL OUTLOOK: estimate for CQ2:00 (from Fulfillment Costs (%) 14% 15% 16% We are raising our revenue $570MM to $600MM) and lowering our operating loss Fulfi li i Costs (SMM) $44 S53 $108 estimate (from 598MM to $96MM) We are also tweaking up our customer add estimates (from 2 2MM to Customer Acq Spend (SMM) $42 S33 571 2 3MM) We are increasing our EPS loss estimate, however, from ($0 34) to ($0 36) due solely to a change in New Customers (MM) 23 24 39 interest income guidance. For H2 00, we are maintaining our revenue and operating loss estimates As before, we are Custo ner Acquisition Cost Sib $14 $19 also looking for declining operating losses, in absolute Source MSDWEsdmates terms and as a percent ofrevenue for the balance of C2000, as the benefits of scale and leverage should become Product development expenses rose over $3 5MM Q/Q to increasingly apparent in Amazon's model. almost $61 MM or 11 % of revenue (up from 9% in CQ4) And, G&A remained relatively flat Q/Q at $26MM or 5% For C2001 and C2002 , we are tweaking up our revenue of revenue (up from 4°/a in CQ4) estimates (from $5B to $5.1B and from $7B to $7.2B, respectively), and picking up our operating income Operating loss was lower than anticipated- Operating estimates from $0 to $5MM in 02001, and from $120MM loss of $99MM was below our expectation of a loss of

Amazon coin -April 27, 2000

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MORGAN STANLEY DEAN WITTER Page 5

to $132MM in C2002 We are lowering our EPS estimates Amazon.com's Key Destination Metrics in these out years, but due solely to a change in interest income guidance, from ($0 13) to ($0.24) in C2001 and Nov 99 Dec.99 1an.00 Fob 00 1 Mar 00 from $0 13 to $0 08 in C2002. Reach % 24 26 21 19 20 Where' s the upside to the model? On the top line, as %Increase Amazon successfully enters into more product segments month m month 18% 8% (18%) (9%) 2% and more geographic markets and is able to exploit numerous cross-selling opportunities. And, on the t iuque margin line, as the company brings fulfillment costs visitors (MM) 15 17 15 14 l5 down through greater operational efficiency (e.g. Ranking Among Inventory location optimization) and as the company Top Websites #6 #7 #8 #8 #8 becomes over time increasingly able to treat marketing as a fixed cost, relying more and more on the power of Source MSDWInternet Research, Media Metrix DtgetaI Med1a Reports the Amazon brand to build and sustain its customer base. Customer Accounts: CQ1:00 METRIC DETAILS: Cumulative customer accounts grew substantially by Metrics Consistency - Maintaining Solid Reach 3.1MM to 20MM -above our initial 19MM estimate After experiencing record amounts of traffic during the We estimate that Amazon' s customer accounts now 1999 holiday season with its reach climbing to 6th overall in constitute around 8-9% oftotal worldwide Internet users November, Amazon.com demonstrated its ability to Repeat purchases constituted 76% of sales in CQ1, up from maintain a significant flow of interest and utility to its 73% in CQ4 been ranked 8th Website. The company has consistently Basic Growth Metrics for AMZN, the last months We consider this to overall by reach for 3 CQI:99 - CQ1:00 be a very positive sign that Amazon has displayed strong numbers trailing a seasonal thrust in Q4 We also contend CQ1:99 CQ2.99 CQ3.99 CQ4 that AMZN has achieved a caliber of portal-like presence on the Internet Note that Amazon has increased its reach Rw uc (SMM) $294 $314 $356 $676 by 2l% since March 1999 rising from 16.4% to 19.8°/a m March 2000 (see Table below). In addition to maintatni QIQ Growth 16% 7% 13% 90% a solid amount of users, Amazon.com also posted strong CustouxrAccaunts (0009) 8 ,400 10,700 13,100 16,900 number of pages per user per month (16.5 pages, up from 14 9 in March 1999) and minutes per user per month ( 13.9 Q/Q Growth 33% 27% 22% 2991 minutes, up from 13 1 in March 1999) Customcr Adds (000s) 2,200 2,300 2,400 3,800 To put Amazon' s reach in perspective, we are encouraged by its ranking #8 among all Web properties in Source MSDW research. company reports terms of reach in March - above the following portals Go2Net (#11), Alta Vista (#12), About coin (#13), EXPANSION OF AMAZON'S RETAIL PLATFORM: LookSmart (#16) and Infospace (#22) We continue to see a dramatic expansion in the Amazon On the international front, note that Media Metrix started vision retail platform. As we have pointed out before, measuring European websrtes last fall, and recently, and Amazon for some time signaled that it could and would Amazon ranked #1, 2 and 3 respectively for online retail has different paths to become the leading online sites (Amazon.co.uk, Amazon.de and Amazon.com) and the take several rent out, buy, and rnvest. In CQ1, 13th most-visited site overall in Europe overall We find retailer -- it would build, built and nrvested. that Amazon's success overseas to be very encouraging and Amazon both expect the company to focus on building out more services and to expand its presence going forward. During CQI, Build -- On April 5th, Amazon announced the launch of its both Amazon. co uk and Amazon. de enhanced their lawn & Patio Store, with thousands of products for lawn offerings by incorporating a DVD/Video store and patio decoration, care, and enjoyment Sinular to the introduction of Amazon's Home Improvement Store,

Amazon coin -April 27, 2000

Please refer to Important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 103 of 127

MDRGANSTANLEYDEAN FYITTER Page s

shipping will initially be only $4 95 per order. We estimate ($149 25), Yahoo' (YHOG-$119.125), CNET ($32 375), that the U S market for lawn and patio products is and prlcelme.com. (PCLN-563.875) approximately $5B, with the global market being $17B Leading Web Shopping Platforms Add these to Amazon's existing market opportunities, and we tally the company's domestic market opportunity at Company Gross Merchandise Last Iteported $584B and global market opportunity at $1 6r For Sale. (S EM) Quarter G,amc perspective, in 1997, when Amazon an online book America s3,9oa CQ 11a0 was just dBay s1,150 CQ1.00 retailer, Amazon's domestic market opportunity was 523B Yahool $1000 C 1,00 and its global market opportunity was $87B Amazee corn $600 CQ1 DO CP[ET $574 CQ100 Amazon's Growing Market Opportunity ncelme. $444 CQ 1100 Source MSDW Internet Research Date US Market Global Market Product Category Launched Size $B' size (SB) We have outperfornmm ratings on each of these stocks, and Books 7195 23 - 87 we continue to believe that CQ4.99 marked an inflection Musk 6/98 14 39 point m the Internet sector, with the leaders separating from Video 11/98 9 16 the followers. Auctions 4199 260 600 Toys (excl video games ) 7199 21 54 NOTABLE EVENTS DURING THE QUARTER: Consumer Ele tramcs (excl PCs) 7/99 91 304 Enhancing Selection of Products -- Amazon launched its Home improvement 11/99 149 496 professional Tools and Equipment store, which includes PC Software 11199 5 12 products in 20 categories and is supplied by manufacturers Video Games 11/99 16 such as Boscb, Delta and Makita Tools and Equipment Lawn & Patio 4/00 5 17 contributes 10,000 more SKUs to Amazon's total product Direct Total 5$4 1,641 lineup Additionally, Amazon unveiled its new Lawn and Invest - This was a big investing quarter for Amazon. In Patio store offering extensive product lines, i e , outdoor CQ 1, the company invested in at least 7 new companies -- grills and garden tools designed by famthar brand names Ezlba corn, Kozmo.com, Basis Technology, Greg Manning manufacturers like Weber and Miracle-Gro. It took Auctions, Audible, Living corn, and GreenLight cam -- Amazon less than 3 months to develop this extension of its increased its investment in drugstore con, and disclosed its websitc, and potentially incorporates a lugh margin segment earlier investment in WuieShopper corn. By our count, that is counter-seasonal and bears little inventory risk for Amazon has investments in at least 18 companies, with the company Recently, Amazon launched its Health and stakes ranging from 1% to 61% (See Table 2 for detail ) Beauty store, which essentially is a gateway into Three key points here: 1) With stakes in now 7 public drugstore.com's website, and represents the first Amazon companies -- drugstore corn (DSCM-$8 29), Sotheby's Commerce Network (ACN) partner to be featured as a (BID-$ 17), NextCard (NXCD-S 10 875), Ashford corn, component in Amazon's navigational bar. We would (asfd-$2 81), HomeGrocer.com (HOMG-S4 375) Pets corn expect to see more ofthis type of execution in C2000 (IPET-$2 625), and GregManning Auctions ($15 19) -- Amazon now has a public investment portfolio worth Amazon Going Wireless --- the company expanded the approximately $235MM, 2) Amazon has developed into an Amazon Anywhere program with new features and e-commerce incubator, with the option to deepen its functionality for PDA users of Palm VU devices Amazon relationships with many of these partners, and 3) time also developed relationships with 11 wireless manufacturers partnerships are developing into a high-margin revenue and wireless carriers, including Nokia, Motorola, Sprint stream for Amazon. Combined., the multi-year cash PCS and Nextel commitments to Amazon from its partners now total over S450MM. Drugstore corn, for example, has committed to Amazon's QoE (quality of experience) expanded ---the paying Amazon $105MM over three years in order to be company also launched a new service for its users called featured as a `9nb" on. Amazon Website Amazon Friends and Favorites. Building upon the evangelical nature ofcertain users who meticulously review The overall result of Amazon ' s retail platform expansion Amazon's products, the company expanded the wishlist has been the establishment of one Web' largest gross of the s function to integrate reviews, wish-list items and merchandise sales platforms, along with AOL ($60), eBay recommendations into a personalized page It serves as a shortcut for people who rely upon the vast amount of

Amazon corn - Apnl 27, 2000

Please refer to Important disclosures at the end of this report. Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 104 of 127

MORGANSTANLEYDEA1Y WITTER Page 7

opinions offered by Amazon's 20MM strong member pool This represents another element Amazons customer-focus January 31, 2000 --Amazon. com announces an that could agreement to prominently feature content and services from Audible. com Amazon. cow. will make a strategic RECENT HIGHLIGHTS: investment in Audible and acquire 5% of the company April 5, 2000 - Amazon. com launches a new Lawn & In addition, Amazon.cor n will receive from Audible $30 Patio store offering thousands of products, including million over three years in exchange for promotion of outdoor grills, budfeeders, lawn mowers, and decorative Audible's content and services. ornaments. The store is comprised of 13 categories ranging January 24, 2000- Amazon. cont and drugstore.cont from clothing and gear to storage and cleanup announce a multi-million dollar agreement to integrate a number of the companies ' shopping features and create March 20, 2000 -- Amazon announces that it has a drugstore.com shopping "tab" at Amazon.com Under invested $60 million in Kozmo.com In exchange for the terms of the agreement Amazon.com receive $105 warrants to purchase additional shares in Kozmo con, , will three years. Amazon forms a three-year strategic alliance with million over Kuzmo.cam to offer a onehour delivery option to its Java ry 21, 2090- Amazaa.cam agrees to acquire a 5% customers stake in Greenlight.com, an online car buying service Under the promotional agreement, Amazoncom will February 18, 2000-- Amazon makes a minority receive $82 5 million over five years and receive warrants investment in Basis Technology, a leading provider of to increase its stake to as much as 30% over the five years internationalization technology for Internet companies and Web software developers Rick Daizell, Amazon con's January 13, 2000 Amazon.com unveils plans to open its chief information officer, will serve on the Basis first customer service center on the East Coast in April Technology Board of Directors in light of the investment in Huntington, West Virginia. January 2000 -- Amazon.com announces that its 1999 February 11, 2000 ---- Amazon.com prices a public 5, fourth-quarter sales totaled more than $650 million offering of 690 million Euros aggregate principal amount of its 6 7/8% convertible subordinated notes due Based on fourth quarter sales, Amazon.com has reached a 2010. $2 6 billion annualized sales level less than four and one- half years after opening for business February 9, 2000 - Amazon launches December 8, 1999-Amazon. com and Sprint PCS tootcrib.amazon.com, a new store that features a wade announce the availability of online shopping at selection of tools and equipment for professional tool users Amazon.com from Internet-ready Sprint PCS Phones and woodworkers.

February 3, 2000 -Amazon,com and Greg Manning Mary Meeker (212) 761-8042 / mary meekerc msdw corn Auctions, jointly announces that Amazon.com has made a minority investment in GMAI, purchasing $5 million of Mark S Mahaney (212) 761-4864 / GMAL's stock Amazon.com and GMAT. also form a mark.mahaney@ nsdw con marketing alliance whereby GMAI will provide Amaznn.eom customers with lagh-interest, quality Mark Trowbridge (212) 761-3384 collectible offerings on Amazon coin Auctions and zShops marktrowbndge@msdw corn

Amazon com-April 27, 2000

Please refer to Important disclosures at the and of this report Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 105 of 127

MORGANSTANLEYDEAN WITTER Page 8

Exhibit 1 Amazon Investments Breakdown

Anniouncenscat Investment Cart a Date Ammormt (SMM) TraoeacNor Typo' PAyatent Com y lkcriptloe

4Yn1eShopper CM Mid L999 530 Equity method aceaurrtmg Internet wine retailer Geowbrka 211611999 5 Stock Wireless Software Soluttonx

Oolitic retail and mfnrnwnun source ihr health, beauty. Drugstore.cant 174099 45 Equity method acaamnng weAaeax, personal care and pharmacy

Peta.con 3129!1999 58 Equity ost od actouotutg Online awcea for ref products, tnfncmatlon and services

Haneorocw.aam 5116(1999 43 Equity method acrounhog Online g+acery-xhapgugl and borne-del very service Auction bmwe in cooperation with Which Arrauttoncurn mwntauw an online aucaan sits devatrd to net, antiques, Sotbebys 6!16)1999 45 Tmvmtmmtt a Warrannr and rnllectibim LxpdAudw 611711999 NA Warrants Music downloading Online source far brmnd.mmestorting goode at daucunt Gear earn 7/1411999 NA E y metlrod vicewnt ng F- Galion aecvice Hr gift regueT gift advrx, and Della and lama 9123/1999 NA Equity meted accouaing personalized ga auggannnx

Nextcard 11/1611999 22 Warrants Onlineneuntofconsumntiredltcarts Axbfard.curn 121111999 to Divestment Onloxratmlarofluxuryand protmumproducts Online auto Purchasing in partnership with local Greanirgbt.cvm 1/2 112000 NA Smock dealerships Interact delrvexa

soyrce MWWRereawh Exhibit 2 Amazon Acquisitions Breakdown

Invesitaoeat Ammoont C_owm AnnoaacemeatDate (MM) Percentage Transaction Type/ Payment Caspanybeaeriprian Buukpagw 412711999 NAv Acquiation Purstnser-atp&Stock UKadmebaikxtore Telebui.h 4/2V1998 NA. Acquisition Purct aseCeth & Stock Genao anima baukatore Internet MoveDUab1tu 427! L998 NA" Acquisition PurchosdCaah & Stock Repoettory for mnvk and television mfonnanua an Web lungtee 81411998 L89 Awmition Pwdmne/Stock Leading provider of ad.'ete:ed Web-beard virtual dutabane PlanetAB 8!411998 L00 Acquisition Pooingof {rrterestr/Stock On ine Address book, calendar, ransirder service LiocEid coin 4/12/1999 40 Acquisition Stock Liveinkmetauctmna Bachange.com 4!26!1999 143 AcqurSion stock Online Exchange Amepte m 4126/1999 189 Acquisition Stock eCuumner a Solutions Akita lnternet 4/26/1999 250 Acqunbion Stock Free edvartnuag-tuppwlcd Web navigation eervtae CunvagenceCorp. 16/411999 23 Acquisition Steak Wnnkaaaoflware Tool Crib of the North 1011999 56 Acquisition Stuck Hattie unprovannnt products Bw.k to Banes Toys 11/30/1999 S6 Acquna»n Stoe S Retailer of hard-to-find elastic Wye

•Ae9a&Ufans nf8rxkpngae, Telbue& Interns Movfr Database comhlned to an aggregate rovers sent amount gf8S5MM

Source MSDWReeaarch

Amazon coon - April 27, 2000

Please refer to Important disclosures at the and of this report Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 106 of 127

MORGAN STANLEY DEAN WITTER Page 9

Exhibil 3 Amazon -- Quarterly Income Statement

($ T7mur®rr1; &a pt EPS)

3100A 6/002 9l06E IUODE

(ntarnrhunal 25,719 31, 889 39,135 71 ,000 75, 132 64,000 97, 500 192,000 - 75,132 Eulp-Stage 402 2,000 40,000 121,402 97,342 102,543 97,697 200,315 - 97,342 Cwt rf Gaeds 228,852 246,846 285,300 588, 196 445 ,755 465,600 503 ,500 928,800 435,371 445,755 Grow; Profit 64,791 67,531 70,477 67,846 128,134 134,400 146,500 271,200 105463 128,134 Operatletxxprnwt 93,386 134,783 149,675 263,195 227 ,400 230,000 229,000 299,000 210,000 227,400 Sa1n'Marketm®'Otlnr 60,744 85,949 86,555 179,424 140,1 11 136,000 130,000 192,000 128,000 140,1 L L ProductDevvebpmmr 23,477 34,288 44,608 57,720 61 ,244 64,000 66,000 70,000 60, 000 61,244 Gmet 1 & /u murutrrtrva L1.165 14,546 16,512 26,051 26,045 30,000 33 ,000 37,000 22,0013 26,045 ratingineaai.IEBTTA (30,595) ,Z2) 79,198) (175349) (99,166) (95,600) (82,501) (27,800 ) (104,537) ( 99,266) Iuterntldtaodl trrestexpew (5.763 ) (15,534) (6,612) (9,536) (22,269) (30,700) (29,950) (30,200) (21,000) (22,269) Interratanloihermowne L0,925 12,901 14,656 8,606 5,352 10,000 9,750 9,500 15,800 5,352 1niereare:pps (d) (16,688) ( 23,435) (21,470) ( 18,142) (21,621) (49,700) (39,70D) (39,700) (36,800) (27,621) Cuhvuerertpgsnw (7,168) ( 18,735 ) ( 11,670) (8,242) (17,371) (30,450) (29,450) (29,450) (2(1,550) (17,371) Nat-iw k info e i arptaxe (9,500) (9,700) (9,600) (9900) (10250) (10 250) (10250) (10,250) (10,250) (10750) Estx910r ry lens (25,309) (35.222) ( 111,270) (98,435 ) (98,626) (63,000) ( 83,000) (63,000) ( 111,000) (98,626) Equity mI,auenonNuttyModwinream - - - (39,893 ) (88,264) (90,000) ( 90.000) (90,000) M000) (88,264) Pre-TaxInemoe - Reported ( 61,667) ( 138,008) (197,080) (323 ,213) (308,425) (299,300) (285,450) (231,000) (286,537) (306,425) PritTa:Taco= - operating (36,358) ( 82,786) (85,810) ( 184,885 ) ( 121,535 ) ( 126,300) ( 112,430) (58,000) (125,537) (121,535) Provalai Srr Imotee Tax - Reported 0 0 0 0 0 0 4 0 0 0 Ptov i for 01 orne Tax Operating 6 0 0 0 0 0 0 0 0 0 Netlaewge - Reported (61,667 ) ( 138,008 ) ( 197,060) (323,213 ) (306,425) (299,300) (285,450) (231,000) (286,537) (308,425) Not[atome - Operating (36,359) (82,786) (85,810) (164,285) (121,535) ( 126,300) (112,45*) (58,000) (125,537) (121,335) EerniRPFrSWrv-]reported (S020) (SO 43) (30.59) (5096 ) (5090) (SO86) (,5081 ) (SO65) (50.83) (5090) EarniupPerMart - Operatic= (SO12) (5026) (5026) (5055) (50.35) (5036) (50..32 ) (5016) (5036) (5035) Shares used tD mIcuiare EPS ( 090) 313,794 __ 322,340 332 468 33R389 343,884 347,000 3S L 000 355000 345,000 343,884.

ExpnI (yr yt) 226 244 169 269 138 71 53 L4 120 138 Eapenxa ( ) 34 41 11 76 ( 14) I (0) 31 (20) (14) Operating Income (yr-yr) NM NM NM NM NM NM NM NM NM NM OMin8lax (M4) NM NM NM NM NM NM NM NM NM NM Marale Aeatypa (% a1Tatal Rev) OracaMargin 221% 215% 198% 130% 22.3% 224% 225% 22.6% L95% 223% SaImMarkdnyo0wr 21. 21 24 27 24 23 2D L6 24 24 Ptuduet Developnur 8 I I 13 9 11 11 10 6 11 L L General 1k Admtnartrahre 4 5 5 4 5 5 5 3 4 5 OpentingMar8in -10% -21% -22% -25% - 17% 46% -13% 2% -19% -17% NetMarlpn NM NM NM NM NM NM NM NM NM NM GperarurgExpMMAasa % u(Rnvuwx 32% 43% 42% 34% 40% 30%n 35% 25% 39% 40% Othrr Metrics Eleadcomrt 3,000 4,200 5,100 7,650 7,200 7,300 7,400 7,500 7,650 7,200 AnI Rev ('000 Employee S392 S299 5279 5353 5319 S329 5351 5640 5283 5319 Ann.0pa('O00 EnpLxyee 127 128 117 138 126 126 124 159 110 126 Ana. Opcx/A=Rev (per Emp ) 32% 43% 42% 39% 40% 38% 35% 25% 39% 40% Cwtcmnex Accounts at Perlc6EM 3,4011,000 W,711[1,000 l , 4 96-WM T1,800,005 1 9,1 00,000 Cutlwnern Added in Penad 2,200,000 2,300,000 2,400,000 3,800,000 3 , 100,000 2300,000 2,300, 000 3,200,000 2,200,000 3,100000 Cuet Ac x, as % (af natLLian 8% 8% 8% 8% 9% 8% 8% 8% 8% 9% Toed Workdwae1ntsnetveern (MM) 100 130 160 200 225 270 310 350 225 225 Cuawn rArquuahnxCuat S13 Sig 514 919 513 517 S13 Sit S13 TTMSpend perAettveCwdw er 5L07 5108 SLOB 5116 $121 5123 S125 c127 5121 Eatunaoed0ofAffiiahs 260,000 315,000 353,000 400,000 430 , 000 ------430,000 Percent of Orden frme Repeat Cues 66% 70% 72% 73% 76% - -- - 76% (e) 1r^.rpr fudfinw Jnfv 5 1994 (lntrpiint) to Dectubor11 , 1994, (6) Anemun.rom cswplwed ae NO nf'(ptt ep0xi) JAf0fa6am m S18 nn Mo 1J 1997 (d) Tntfwkt Towed rabWam S1ll94 ofj'erl^ef' S]?ld7Mxie varawrlnrddtenmt n eew (@ 10%) lndvert,arnv nee mumahfnrumra la p)Q 1/39199 AM2Ar [woad 4.75% canwtrtleaitdnrdlaabd WWArt due 2009 wkhnotptncerdrof 11 7!5, Cnt6 hWrart erpenratartucialed with the unnt^rt Jaa!{ptnvAwAdy SIOWper gta'rer (1xCQ199 C57GSfoc6:der S39MMfe (nsamnrycIrn8er EmaadNOry Prenee lac6edm i14llMfa tMrhbetrtd eomp intxt6m (1) On 2//h00 AMZNlasutd 6 71996CenrenNlt aubmn*aased normdre 2010 wIA ram prneeedt of 3464M(( Cash lnurmrarpanw o octard wee me soma nnnw.tt fi apprnrGmaly S!?MMpe,ga rte, 1MZNtlnck apfitr ] yhw! nn NJ99, 3-,9 r-1 ax h5 99 ] ^v-I at 9 1199 Ptrcnlyeew omdt in DecemAer• 5 -kappa 9faelar Dena MlAw Reemreh faeftrufat Sauna M$.0 1V 'Research

Amazon coin -April27, 2000

Please refer to Important disclosures at the end of this report Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 107 of 127

MORGAN STANLEY DEAN WITTER Page 10

Exhlplt 4 Amazon - Annual Income Statement

(8 T n wnda, 6'uaq ( CPS)

hmert tmna1 0 0 0 0 21,806 167,743 448,632 918,000 1440,000 Carty-5ta Buammes and Other 0 0 0 0 0 163,604 577,896 1,185,959 1,865,147 CettafGoads 0 409 12,237 118,969 476,136 1,349,194 2,343,655 3,325,000 5,328,000 Cron Prot11 0 102 3,459 26,818 133,756 290,645 680,234 1,275,000 1,872,000 Operat1a8 Expenaea 52 406 9,902 61,413 195.357 643,039 985,400 1,270,000 1,740,000 SakelMarKaoa /Ot ar 0 200 6,090 40,466 132,925 412,672 598,111 770,000 1,140,000 F o 0iat Devdco mera 36 171 2,401 13,916 46,660 160,093 261,244 330,000 390,000 Genral &Adfmmaterne 14 35 1,411 7,011 15,772 70,274 126,045 170,000 210,000 006radmeIpeemeIEBITA (52) (304) 6,443) (32,595) (61,6011 (352}94) (305,166) 5,000 132,000 Interest laeaeeaat esexpaue 0 1 197 1,575 (12,565) (37,445) (113, 119) (98,800) (78,800) lutermt aeal g3iet aroma 0 1 202 1,901 14,054 47,290 34, 602 50,000 60,000 Intermtatpmee (4 ) 0 0 (5) (326) (26,639) (84735) (147,721) (146,800) (138,800) Conk Morel erpex ve 0 0 (5) (326) (2,019) (451135) (106,721) (103,800) (86,800) Nrm-c arh tutezst erpreae 0 0 0 0 (24 610) (38, 900) 01.0w) 04 000) (30.000) Eauaordieary[tmu 0 0 0 0 (50,360) (290,236) (347,626) (260,000) - Cgaity m l.oaaes of Lquily Method Iawee - - - - - (39,693) (358,264) (200,000) (20(,000) Pro-Taxlacome - Reported (52) (303) (6,246) (31,020) (124,546) (719,968) (765.911) (533,600) (146,800) Pre-Taxlaceme - Operating (52) (303) (6,246) (31,020) (74,186) (389,839) (416,285) (93,800) 53,2D0 PrOwim Ibt in i Tax - Repalad 0 0 0 0 0 0 0 0 0 Pronaen for Incarm Tax - Opetata1 0 0 0 0 0 0 0 0 20,216 N,rIeceaee-R.pamd (32) (303) (6,246) (31,020) (124,546) (719,968) (7,65,911) (553,600) (146.800) Nat1acee* - Operating (52) (303) (6,246) (31,020) (74,186) (369,839) (418,285) (93,800) 32,984 [arxds a Per Share - Reparted (3000) (3000) (50(3 ) ($0 12) (3041 ) (92 17) (3322) (3144) (50.35) Earn1n i For Share - Operetia8 ($0 00) ($000) ($0.03) ($012) ($025) ($118) (51.20) ($024) $008 58wrra used to eaIeulate EPS ('000) 161,500 172.728 222,531 260,679 296,343 326,753 349,221 384,143 422,557 Growth Rate

L.w a.r l larna^a (yr7r) - 681 2.339 520 211 229 53 29 37

Cpcaungbirmae(yeyr) - NM NM NM AIM NM NM NM NM O a-SIM em (se9) - -'• ------MarIa Aialyda (% a(Tetal Rev) GMM Margin - 200% 22.0% 195% 21 9% 177% 225% 250% 2&0% SabwMarlorm/Odmr - 39 39 27 22 25 20 15 16 Prodtct Deeetgaadn - 33 15 9 8 10 9 6 5 C rwal & Mnuiaawatne - 7 9 5 3 4 4 3 3 OperetmgMargm NM -59% 41% -22% -10% -21% -10% 0% 2% Net Margin NM NM NM NM NM NM NM NM 03% Opsatafg 2xpesea as a %of Reviafua - 79% 63% 42% 32% 39% 33% 251. 24% Other Metrics Hadcamt - - 151 614 2,100 7,650 7,510 10,000 11,000 Aim Rev ('000YGnp1oyee - - - x386 $449 $336 5399 $583 5686 Am 01mf(1000ytmployae - - - 200 166 168 263 254 316 Ann. OpeilAeat. Rev (per Cagi) - -- - 32% 41% 50% 66% 44% 461 Customer Amin "a at Pwmd-End - - -- 1,510. 0 6,24000 16,900,000 ,800. 37,160,00(8 4ZZO,060 Cuumnera Added m Penod - - 4,690.000 10,700,000 100900,000 9,300.000 9,300.600 Cum Accm as % lnamaY users - - - 4% 8% 8% 8% 7% 7% Tda1 Waldmda 1rtm et Usara (MM) - 40 82 200 330 500 650 Coataner Acgwseian Coot ------TTMSpaidperAatevaCaat«ae ------Canrrated#ofAft halm - Peteeet arordets from Repeat Cuuat (.) Fina prrladfraw July S, 1494 (l a at1*e) w Deamber 31, 1991. (hI U^we rnwpINml as IFO of(pra,Tp6ia) 3MM+4aree mSiR nn Meer 13. 1991 00 hrdrdea f leeni1 rdaled la SF5199 uo+iig af$32JMM erayes' wWur at aetm (010* mfereet termr are xw-aaah faryeara !d (I) nn !119/99, AMLV teeaed 175% eewvuii84 .r ho,d(eea& rom ^t MIN adOh eetRrncvd^ a) 31356 Caah (emced rspeaem ecraC(afed with the #&a eaouat to gW=Imatdr Sl RMM pergeealt rn CV499 COGS Giclodl 339Mi11a MvWrtnrv ehuigaa. Extrewd w'p ftwa Iee1ed s 5141(M to dlnth- re f caeepe aa4oe. {q Qn?l11100 4MZN trneai47/M%conrer6b le.iakerdlaefednaIe due3010 w1Nl CCptncua 19'56646/M Csrh Intense teL'eea clahadwIth ilm nnfar e^nnww to uppi,ddeaea'v S12Wpr+ guar AMZN IToh q&br 3 (er-f on 40/g$ 3 (hr4 nn (/5199 20r! na 943/99 FUad veer eadc Ia Dwwwhv E = Morgan Sunlit Dean W(ttar Raxwch Fvdmaiat Source MSDWResearch

Amazon coin - April 27, 2000

Please refer to Important disclosures at the end of this report Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 108 of 127

MORGAN STANLEYDEAN WITTER Page 17

Exhibit 5 Amazon - Balance Sheet ($ z ds) 1998 1999 2000 B 5/98 ) 903 1 99 e) ToW Assets 5146,100 $450,508 $619,714 3648,460 31,812,984 32,298,214 32,239,799 52,478.551 32,791,743 CaxrestAascN 133,481 374,615 374,657 424,254 1,325,278 1,256,958 1,060,068 1,012,178 1,270,949 Cash & cash egomla to 117,321 344,855 337,260 373,443 1,442,965 1,144,237 905,685 706,188 1,008,881 Q/QReal Cw4Change (8,054) 227537 (7598) 36185 1069,520 (298,728) (238,3!2) (199497) (361,307) ]mnattonea 11,674 17,035 19,772 29,501 45.236 59,337 118,793 220,646 172,247 Q/QInventory Change 1,703 5,361 1737 9,729 15735 14,151 59.406 101,853 (44,389) (arermotes wa %ofsal" 13% 13% 13% 12% 15% 19% 33% 33% 30% Ptzpatd Qtp wan and ocher wrt tt asem 4,486 12,722 17.625 21,308 37,017 53,334 55,590 85,344 89,811 [mg TermAauft 12,619 75,843 245,057 224,206 267,706 1,041,256 1,159,731 1.459,373 1,520,794 Fxddmatt, rw 10,273 15,387 23,821 29,791 60,600 156,333 221,243 317,613 334,396 bepoeed 296 286 592 626 0 0 0 0 0 Def reed Merps 2,048 7,622 7,590 7,412 39.912 37,038 36.239 40,154 54,882 othwhWo m * - - - - - 106,020 196,387 371.462 484,324 Coodw81 and Other 1ntan5ibles - 52,398 213,064 186,377 187,194 741,865 705,932 730,144 647,192 Llabt7 ilea & S4ateb 1den' Eqy 146,100 444,505 619,714 648,460 1,812,984 2,298,214 ' 2,239,799 2,471,551 2,791,743 Toot 11ab111t8n 126,278 405,079 439,950 509,715 1,735,447 1,727,168 1,819,874 2,203,273 2,786,126 £¢rre.tllah1[Wes $49,576 $72,673 899,455 $161,575 8201,585 5277,944 $357,671 6738,933 $629,165 Ac= MS Payable 34,609 47 818 60,046 113,273 133,015 165,983 236,711 463.026 235,797 Aacmadudsctgtng 5,349 9,974 11,857 13,070 16,157 22,364 24,567 35,892 29,004 Cutrmtpettionofdebt 684 684 684 684 7,156 9,873 12,776 14,322 15,983 Aomued ecpazza wd other abibuts 8,934 14,197 26,863 34,547 45,194 79,724 83,617 205,695 328,381 LoogTerm Lfablltta 76,702 332,406 340,495 348,140 1,533,862 1,449,224 1,462,203 1,466,338 2,136,961 Langtamdtbt 76,521 332,225 340,392 346,077 1,533,862 1,449,224 1,462203 1,466,338 $136,961 Lang term luau a61tpum 181 181 103 63 0 0 0 0 0 8A;reks0d rs' SgWty 19,822 39,429 179,764 138,745 77,537 571,046 419,925 266,278 25,617 Shares 08fat*dng 282,636 292,354 301,405 308,778 313,794 322,340 337,488 338,389 343,884

15a11a Analysis Hoak Vahic Per Spate $0.07 $013 SO 60 $045 30.25 $177 S126 3079 $007 Cosh Ps Share $042 $119 $1 12 $1.21 $460 S355 3272 $209 $293 1n ttc y 71mtu 26 25 26 32 24 19 13 14 9 Awrvv1R aeuxyllq % 14 14 14 11 15 19 28 26 40 Avenge Days Aeots Payable 45 41 41 39 48 is 64 54 73 Long TamDtht/Eg sty 386% 84346 189% 251% 19785E 254% 348% $51% 8342% Currat Ratio 2.7 5.2 39 2.6 76 4.5 30 14 2.0 (d) During CQ2,98 eseh and eqmvalatn men due to pracecda from May 5th 3326MM sale of l0. r, 10% senior &saaw notes (e) On 2111(00, AMZN owed 6 718% oan'utitIe tubwdinated nett due 2010 with net lroco ds o&S661MI& F3rca1ymr ends leDaceniher Sotoms MSDW Research

Amason com -- Apn127, 2000

Please refer to important disclosures at the and of this report Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 109 of 127

MDRGAN STANLEY DEAN WITTER

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The information and optnwns to this report were prcparedby Morgan Stanley & Co. Licorporated ('' Morgan Stanley Dean Water") Morgan Stanlcy Dean Witter does not undertake to advise you of changes in its opinion or information. Morgan Stanley Dean Witter and others associated with it may make markets or specialize in, have positions in and effect transactions at securities of companies mentioned and may also perform or seek to perform investment banking services for those companies This memorandum is based on information available to the public No representation is made that it is accurate or complete This mancnranduxa is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. Within the last three years, Morgan Stanley & Co Incorporated, Dean Witter Reynolds Inc. and/or their affiliates managed or co-managed a public offering of the securities of XXXX Morgan Stanley & Co Incorporated, Dean Water Reynolds Inc and/or their affiliates tusks a market in the securities of X)fX Morgan Stanley & Co Incorporated, Dean Witter Reynolds be. and/or their affiliates or their employees have or may have a long or short position or holding m the securities, options on securities , or other related investments of issuers mentioned hereon. An employee or director of Morgan Stanley & Co. Ltcorporated, Dean Witter Reynolds Inc. and/or their affiliates is a director of7iJQ£',Y The investments discussed or recomi ended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advisors as they believe nr cessary Where an tnvestmeot 4s detwmuiated in a currency other than the investor' s cu changes in rates of exchange may have an adverse effect on the value, price of. or income derived from the tnvestmeat. Past performance is not neces^y a guide to future performance Income from investments may fluctuate. The price or value of the investmaats to which this report relates , either directly or indirectly, may fall or rise against the interest of investors To our readers in the United Kingdom This publication has been issued by Morgan Stanley Dean Witte and approved by Morgan Stanley & Co International Limited, regulated by the Securities and Futures Authority Limited. Morgan Stanley & Co Internati onal Limited and/or its afhates may be providing or may have provided significant advice or investment services, including mve5tment banking services , for any company mentioned m this report Private urvastors should obtain the advice of their Morgan Stanley & Co. International Lunited representative about the investments concerned This publication is disseminated m Japan by Morgan Stanley Dean Witter Japan Limited and in Singapore by Morgan Stanley Dean Witter Asia (Singapore) Pte. To our readers to the United States. While Morgan Stanley Dean Witter has prepared this report, Morgan Stanley & Co. Incorporated and Dean Wetter Reynolds Inc. are distributing the report in the US and accept responsibility for it contents Aerson receiving this report and wishing to effect transactions in any security discussed herein should do so only with a representative of Morgan Stanley & Coo Incorporated or Dean Witter Reynolds Inc To our readers to Spain AS Asesores Morgan Stanley Dean Witter, SV, SA, a Morgan Stanley Doan Witter group company , supervised by the Spanish Securities Markets Commission (CNMV), hereby states that this document has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations To our readers to Australia This publication has been Lssued by Morgan Stanley Dean Witter but is being distributed at Australia by Morgan Stanley Dean Witter Australia Ltrnted A.C N 003 734 576, a licensed dealer, which accepts responsibility for its contents Any person receiving this report and wishing to effect transactions in any security discussed to it may wish to do so with an authorized representative of Morgan Stanley Dean Witter Australia Limited To our readers in Canada This publication has been prepared by Morgan Stanley Dean Witter and is being made available in certain provinces of Canada by Morgan Stanley Canada Limited. Morgan Stanley Canada Limited has approved of and has agreed to take responsibility for, the contents of this information in Canada Additional Information on recommended securities is available an request

C Copyright 2000 Morgan Stanley Dean Witter & Co.

C 2000 Morgan Stanley Dean Witter Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 110 of 127

Exhibit I Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 111 of 127

10/30/00 BARRONS 61 Page 30 10/30/00 Barron's 61 2000 WL-BARRONS 28967058

Barron's the offering's lead underwriter, Morgan Stanley's Copyright (c) 2000, Dow Jones & Company, Inc. Mary Meeker, published a report several days before the debt offering stating that Amazon had received Monday, October 30, 2000 multiyear "cash" commitments worth more than $450 million. Did Amazon, with the witting or unwitting TECHNOLOGY help of its underwriter, mislead investors into thinking that many commercepartner payments were cash Plugged In when they were not' (Company disclosure following the offering has revealed that much of the payments is What Might the SEC Be Probing at Amazon? in stock.) By Mark Veverka What's more, despite plunging prices of many Amazon corn last week slipped a nugget into its commerce-partner shares (one, Lrving.com, has filed quarterly financial press release revealing that the for bankruptcy protection), Amazon continues to Securities and Exchange Commission has begun an report these revenues in press releases at levels well "informal " inquiry into accounting practices related to above their current market values. revenues from its online commerce partners The prospect of fat commerce-partner revenues was Without getting into great detail, Amazon's chief presented to European bond investors in releases and financial officer, Warren Jenson, explained that the filings as evidence that Amazon's debt was a better SEC was merely going over some arcane accounting investment than it ultimately was. The convertibles treatments. Spokesman Tim Stone went on to were sold immediately after the company reported its underscore the message, telling the Dow Jones fourth-quarter 1999 results, and they were essential Newswires that Amazon had "been doing the for Amazon to maintain comfortable cash balances accounting on these deals for a while now," that "this through the winter and spring of this year It was the is a New Economy-Old Economy problem, and it's third high-yield debt offering for Amazon in as many good that the SEC is addressing it ' years.

We suspect, however, that the regulators' queries The fact that the Eurobonds were sold at all, let night, in fact, be far more serious and broader alone at favorable terms, was surprising; the company Specifically , in addition to accounting treatments, had been under heavy criticism from Wall Street and Amazon stated in its release that the SEC is also had suffered a number of downgrades from looking at " disclosure " issues And they could prove brokerage-firm analysts Fourth- quarter gross far more problematic margins were extremely weak and net losses were far larger than investors expected just a few months Of course, the cops at the SEC aren't saying. It is before. their policy not to comment on any investigation the agency may be conducting, or even whether one is But in late January and early February, Amazon under way, a spokesman declares announced it had entered into partnerships with four other Internet companies: Audible, Drugstore.com, But after looking at filings, press releases and Greenlight corn and Livmg.com. Analysts cheered the underwriter research from the past nine months or so, deals, which were supposed to pump as much as $130 we find it reasonable to conclude that Amazon has million a year in high-margin marketing fees into misled investors through insufficient disclosure of Amazon material information On top of that, Amazon had introduced a new The prospectus for a February offering of metric, "trailing 12-month revenue per active convertible eurobonds prominently promotes the customer," during its conference call with analysts to financial benefits Amazon would receive from its discuss fourthquarter results. The company says this commerce-partner relationships with other online number shows repeat customers spending more over retailers Nowhere, though, does the company reveal time, giving the company higher "wallet share " We or explain that most initial payments would come in have since argued in this space that the company's the form of stock, not cash Yet an equity analyst of methodology is flawed, and have demonstrated why

Copr C West 2002 No Claim to Ong U S Govt Works Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 112 of 127

10/30/00 BARRONS 61 Page 31

we think active customers actually had been spending agreement. The reality is that the $20 million in less Audible stock is now worth about $1.3 million, and Audible's ability to pay the rest is in question Many analysts, however, cheered, declining to challenge the company on the validity of the new The result of all of this is that investors could have metric. (Since then, at least two brokerage-house been led to believe that Amazon would reap at least analysts, Banc of America Securities' Tom Courtney $450 million in highmargm cash revenues from its and Sanford C. Bernstein's Faye Landes, have commerce partners as opposed to a fraction of that criticized the metric.) sum, as represented by pounded-down shares Amazon, in response to telephone calls and an e-mail The one-two punch of commerce fees and message, responded with an s-mailed copy of a joint supposedly rising wallet share was all Wall Street press release, which relates to one of their commerce needed to hear to get back on the Amazon partners and is dated last December 1 It states: "In bandwagon, including Morgan Stanley's Meeker. in a exchange for the investment and the marketing February 3 research report entitled "Correction. relationship, Amazon.com will hold approximately Inflection! Amazon.calml" Meeker sings the praises 16 6% of Ashford coin's outstanding common stock of Amazon's "very strong customer metrics" and upon the closing of the transaction " The company "very strong top line" that would soon be bolstered by would not answer any questions or offer any other commerce-partner payments. examples.

Most important, Meeker reported that the payments Meeker's research note certainly didn't discourage would be made in the form of cash In a February European investors from buying Amazon's note published five days before Morgan Stanley lead- convertibles Nor did it hurt Amazon's stock on the managed Amazon's convertible eurobond offering, Nasdaq The shares soared 21% to $84.19 on Meeker wrote: "These partnerships are now February 3, the first trading day after Amazon developing into a high-margin revenue stream for announced its commercepartner backlog. Amazon Combined, the multiyear cash commitments to Amazon from its partners now total over $450 Another question is whether Meeker violated SEC million " quiet-period rules by publishing a research note about her employer's client prior to an offering While we could find no documents by Amazon Convertible-bond offerings are covered by the same stating that such payments would be made explicitly in SEC rules as equity offerings, subjecting equity cash, the Meeker statement, coming from an analyst analysts as well as bond analysts to the same with the company's lead underwriter, was significant restrictions, says Harvey Goldschmid, a Columbia University law professor and former SEC counsel What's more, as yet another example of Amazon's lack of clear disclosure, documents filed by the According to a February 14 SEC filing, Amazon's company with the SEC related to the bond offering eurobond deal was registered with the SEC The rules fail to make plain that some of the payments would be indicate that quiet periods should begin when the made in stock underwriter and client agree to initiate an offering and ends 45 days after the offering has been completed. The following is an excerpt from an SEC filing by Meeker's publishing "would seem to be in sharp Amazon: "On January 31, 2000, we announced that conflict of SEC quietperiod rules," says John Coffee, we had agreed to acquire 5% of Audible Inc., a leader a Columbia University professor of securities law. "It in Internet-delivered spoken audio for PCbased doesn't sound like something she should have been listening. In connection with this investment, we also doing. It doesn't sound kosher." announced that we had entered into an agreement to feature on the Amazon coin site content and services Meeker was in Japan and unavailable for comment, from Audible Inc in exchange for payments of $30 but Morgan Stanley spokesman Ray O'Rourke said million to us over a three-year period " that the analyst "had no knowledge of the eurobond offering" when she published her note "She published That reads to us as though Amazon would get $30 that note independent of the fact that our brokers were million in cash from Audible. But in fact, Amazon underwriting the [convertible] eurobond offering " In received $20 million in stock up front with a pledge addition, O'Rourke said, Morgan Stanley's lawyers for the remaining $ 10 million in the third year of their say that under their interpretation of SEC regulations,

Copr C West 2002 No Claim to Ong U S Govt Works Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 113 of 127

I ,

10130100 BARRONS 61 Page 32

Meeker was permitted to publish a research note up to Projections , Earnings Projections , High-Yield Issuers; the day before the offering What made her believe Dow Jones Total Market Index; English language that the commerce-partner marketing payments would content, Performance , Corporate and Industrial News be in the form of cash9 "We checked with the (CAC EPP C152 HIY WEI ENGL C15 CCAT) company," O'Rourke said, referring to Amazon. MARKET SECTOR. Consumer Cyclical (CYC) Amazon could have set the record straight sooner and explained the nature of the payments. If early INDUSTRY Limited Product Specialty payments were not intended to be made mostly in Retailers ; All Specialty Retailers (OTS RTS) cash, it could have easily released a statement clarifying or correcting Meeker's information. PRODUCT Corporate Earnings; Retailing (DEU DRE) Amazon seems to us to be reluctant to shed light on the severely impaired value of its commerce-partner GOVERNMENT Securities and Exchange stock payments The company still counts about $30 Commission (SEC) (SEC) million in stock paid by Drugstore corn in marketing fees as income on its books Those shares are now REGION North America, North America worth only about $3 million. Similarly, the $50 (Regional Focus), Pacific Rim; United States; United million in Ashford stock it received is now worth States, Western U.S.; Washington (State); United about $16 million States - Washington, North American Countries, While we have no knowledge about which of these Pacific Rim Countries (NME NAM PRM US USA issues might be catching the eyes of SEC regulators, USW WA USWA NAMZ PACRMZ) we suspect there's enough there to keep them busy for a while. LAYOUT CODES. Unplugged (PLG)

- INDEX REFERENCES ---- Word Count 1519

COMPANY (TICKER) Amazon.Com Inc (AMZN) 10/30/00 BARRONS 61

NEWS SUBJECT Corporate Actions; Earnings END OF DOCUMENT

Copr 0 West 2002 No Clain to Ong, U S. Govt Works Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 114 of 127

Exhibit J Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 115 of 127

Fundanwntii Cr.dd Research 0 Mo> psr Iffirvstori Service Ratlng Aatlen GfiobmI CAW11 Reacarch P+abiished 1' Fab 2oao

Now York Newyork Robert Kon»fa! Marls MlSflwndez M"" DhucCtor V3ea PTCSnieet • Ssmor Analyst Garprsrata Finance CorpofiI$ Flnanc. MoWv'b ktvestora Service Mood?% leNestais Servke Clams,, 1,212-50 1853 Clams; 121Z35. 103 MOODY'S ASSIGNS Caa3 TO CONVERTIBLE SUBORDINATED NOTES OF AMAZON,COM, INC.; RATES SHELF; CONFIRMS OTHER RATINGS •ppraaimatrdy $2.a SZI11on of petit 9ecuritlas Aftemisd.

Mo,Qya Inveatots 3w-mm has asslgri*d a Casa W Am*&on.wm, (ores prapased suro 800 rm'tiiiw camsAbif subOrdinatad notes due 2010. Meadfa has a

S.*or unssewed discount noton duo 2008 at Caa1

Senior "lied and senior unsecured [suer ratsyps at Gal

4.75% Conve14 subavdnaite notes due 2902 at Cae3

The ialaw" roUngs were ssstgned:

Prospo hve isnIor drbt ra* 9 of (P) Cii1

Prospective subordinated debt raortg of (P) Cae3

Pranpoc4we rrefarrsd clock raft of (P) e

Via rating oudaok an all debt >s Wale,

The Werth;a continue to re toot Pie uncednn Iinrndal suuass er N azon.eem's Changing lfusineas strategy, the equity-t s Kt.* ,lsswrvid by dii 7 ot4ari as the awnpapy's horizon to schiavi p pashivo eanunpss, and ceeh Itow contlmwt to be pushed eul, Mowdy s begaves the 4offlWy`e teconi eneaurwernent of 1*99 reeiiia arc d[!lkull to ktwrprst, Mvenues sad aarsdalfra cust m era both grew by sbeul 170 % du^^g 1 tip The year.ovor-year rata of ytpvrtp was act a1Qr*4nty different dur1Hg 04 fourl}I quarter than h the Wt nine roafli is of the year, despie ilia empedaUort that the rdiout at four now %laree at Jwr+ezoe and holiday shop-ok+d sctixty would have toasted the grave th rate in the last quWar. Amem's pioduetlvity measures. int"Ing gross msrgk1, sales Ind $Pass profh par auston>ar, serum bprralMg espanxes to revaeuea, and mitritsbng .Ypense to nei custafnem ecgwred, appeared to fait IoW both the fua year 1999 and IM mouth quartet of 11199 release to prior Year pair tlowavar, Amazoa.carn is sill In the development stage In wh ich Overeat mepemarm may relate to 9xwu which will be rocked in *Mae poriods-

The ratings eonilnue to be to pperted by A an.roifls strand name rsogndloh. which could all its continued duct dwersdinuon . and by its vary pond reptdation for k ftImeM anwrg at mars. Howarmr, AnW-on is Wing in="sing Gemp.thloc from other otaUe s as w.11 ps from trad8{onpl retailers winch can leverage their •3dshr g franchise to strict and keep custamorn through a "bricha and dcka" strategy . Aa IntetnM-based rstttiiieg matu res, Moody'a espeda that Amazons of that market wive fall.

Arnexon cam w highly Fwered Cafe. Whose baianw:steal v5l5 was *cLd $1 4 billion es of (rear e"d, raprassnls about 9344 of the cempafy a esplial srructai. Much of rho equity on /Vriszons betenca sheet represents stack ieaued m payment tar saquisillana. GandwIU etas grown to $534 naaian at year and 1989, from 3174 nr'lrian in 1955 The nOit-0$ ih u CR al rapid 9ae404 amer scion WIN by Wooded In retained *Smoot. Iurazan had a net sass $720 reYton r 1499, of which about $330 MOM repreounlod amoritzat+on or intangbles mild other cha,gaa related to merest oetnrilffes, equity tnveattnenle. and stodnbas.d emnpensatIon,

.amareu. spent heavily in tad* an tntrasb'udur% &nd wa4ing Csp(tal Moody's teat haid that those xwooftan J ware both eeperted and neceaaary for ARmason to aduove its growth ablecMs and servnox to graving arstanwr ease. The company Mss made cape weals sequisdlons for a con+olnitran of elsA AN Stook. and has Wad invested abw $7ht3 m ilitgn of eaa11 to other eanpanleS, Including PM cam. t IameGrocer in arupatara cast, Geer ,oen, and Ashtvmd coin. Recently, came OF dm*., car fu ,.a have

r aw =Ao-j 1IuFJar ' I 7f1_ IUw_07 r+,Oiv a ['n in v r /4R -mat Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 116 of 127

entered into "partr+arslnp' agr nq. whereby Amazon -0 i In and advarli:a this Carpanlaa on to *Ito in nipnl, Ihs P4rh!ars hwo agraW to mats buttII4 cai payrnarlls Ss avw a pwloe of years- The prru v. havr gener&# been n oporst,pn kw a Imo' panod of imava Brie back '.card, aT dnp G'1+ a 4nur^iawn a+wwnre^nl as ,Rnwren rei+uR Maoo' x anlwt ascor$ain'UW Ake mat ths. payments %sda.

Amataa.aan hsr alga Cnlerad Into Wang parties %ut^ ea SolhabYa and its =-atop ponnars v hi * may nnnq r+ incartle aver tires to oftat the wet of 3l*8 doyotopment

w+nrxon.eorrk Inc, beanqueeterod ui Seen* Washingtoo, bah We not aasd stellar of books, enterWnment and rartfputar Iaftwais, and toys. Aar. tdpravoniant produr2s. ilerenuae were %I.a Wan to IM,

a CgpyrI M 2000 by Moody's Investors 5eMco, 98 Gswdt Sree1. Nei' Yale, NY 1000'1' 1111 nghfa reserved

ALL INPOPMATTG1i CONTAINED HER=14 IS CO YRM479D IN TW ItANIE O MOODT'3 1 dVESTOR3 5ERVICA INC. ("MOCDY'$"). AND MON19 OP SUCH IN ORMATiON MAY U COPIED OR OTHERWISE REPROI CI:D, D, FURTHER TRAX$Wr SD, TRANSFSRRm. C(53601MATM RCDt3TR I = OR OWSOf.O. CR STORED FOR $U SZQUVI v$E FOR ANY SUCH PU PO$L IN OR IN PARE, IN AMY FORM OR MANNER OR BY ANY MEANS W14ATSCRV . oY ANY PERSON v 1'HVUT MOODYs PRIOR ftrr N CON .NT. An kdarmalfon matalned haa$1 Is *"mod by M0ODrS Rent Noureaa be1'ierad by a to be *c usta and rNabl& Socausr of the passibgiky of Nuunan or m.disnlisl w+» gas WON as other fatten. ho+iorar, turn Woamrilon a provided as imp wMujut wanarty of .any land .* dNOCUrL, in pax, rnakrs rim reprsssnfaUon or wom4 y, express of hvfmd, as to the aaWriay, dirre*Ms, eamplalaneM moreANntabilky or 2nesa car any }artkular propose of any such InbMwir1an uft* no drarmataffurs N! MOODrs have any NNtil111r to a y Pavia" of entity for (a) any teas or d M..* In wP, or in port ausa4 by, rag Ww4 ham, s rebdnp to. illy error (n*Q5grlnl of ethlrww) or other drwmstance or owtWgonvy *kWh or outside this wnlrol of MOODY'1 or snit of to afraclars, aMeara, rtmpfayear or meets Fr, anArtetitto with The proctnei1 ant rallaetlan, oembhaltan, anahrat, fterwstMlon. oomrnunieatla . eabfcaflon or dailvary of any such iniwrmation, or (b) ahy db'nd.1ndhe t, spacksk COnsequerld.L sompansaWry or nddsMa1 damages rwMtioe (Indud3ng without loot oreft), was 11 MOODY'% is advtaad to adviseea of the po a of audh d; tar sa. rwWkfng barn the veer of or Inability to use, any suds Info nnak& The efadlt r*tstgs. 4 any, carMtuting part of me info' nation CCritiiri#d 11Qt*In are. and muo b 6cn*Iit ad sC10fy as. sh"ninift of apirth n 1 aot 3 Mi*ola of fact or :eornnrndallona to purghss+. sort or Acid any oo urtE e. NO WARRAl&TY. 1r P$ S OR IMPUED. As TO THE ACCURACY, ?7M9trNESS, coWtEr9MMI, MEACHAKTABNJTY 09 FITMES& FOR ANY PAItT$CtUR PURPOJ* OF ANY SUCH R11TWC OR OTHER OPri1xN1 OR IS OVEN OR MADE BY MOCOY'$ IN ANY FORM OR MANNER WaIATSOEV R. Each red" or b hsr apfesien mud be Ighid solely as oriiiiiii fodor in any Ipvsani ri decision mad, by or on bahsl at any now of the Information wnialned hero, and arieh such user 'mered aamrdhgly mat a qs own shsiy and svahislioa of Sall s*CUF app at Oman Issue.( and guarantor at, and each prawdar of =a* Iupp t for. sraanly that 4 May cornWer parohaihi , hoNing of sqM*g. Pi,su*ne to sawn 11(b) of me Sanunbes Act at 1133. MOODY`S berasby diacLas.. that most issues of deiit sacurlllaa (iedudkn corporate ,end n unklp& bonds, deoentwva, riotm an craw +Qal paper) and pra(Sired *Nick retad by MOOD" Aiw, prior sa nssignr h.M of any rawV, agreed to pay to MOCDY'S for appraisal and r Ling ieMcee r nd+ned by It fews ranging from St.000 to $1.500,004.

MAW IN u.S.A

cr1c- ;IAP j twir_n• 1 7n- JPW - 07 ii741C RIQCco :AQ luac Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 117 of 127

Exhibit K Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 118 of 127

2/4102 BARRONS T3 Page 1 2/4102 Barron's T3 2002 WL-BAItRONS 7653666

Barron's Copyright (c) 2002, Dow Jones & Company, Inc In its filing, Amazon basically states that it never said that commerce- partner payments would be made Monday, February 4, 2002 in cash But it provides very little support of this The whole question boils down to whether a dollar sign TECHNOLOGY WEEK implies cash, especially when the word "stock" is nowhere to be found, in press releases and federal Technology filings To wit, Amazon states in its motion to dismiss "Nowhere in the class-action complaint do Plugged in Can You Put Stock in Amazon's Clainss9 plaintiffs identify a single statement made by Amazon By Mark Veverka that described the payments as 'cash' " Of course, press releases and filings by Amazon spoke of a Where is the Securities and Exchange Commission "multimillion-dollar initiative" and in most commerce- when you really need its With the SEC ultimately partner cases touted "payments" of hundreds of found missing in action on the Amazon coin front millions of dollars over periods of several years under former chief Arthur Levitt, after reports that it was investigating the e-tailer, it seems only fair to "Stock taken in exchange for services may be assume that the agency is even less likely to take considered 'revenue,' and terms such as 'revenue,' action against the company under our new auditor- 'payment,' or 'fee' do not solely mean 'cash'," argues friendly SEC boss, Harvey Pitt Amazon in its filing

We hope we are wrong in our assumption, but we What is more, Amazon's strongest specific example aren't holding our breath Consequently, that leaves of disclosing "stock" transactions in an SEC filing is unhappy bondholders and investors, who have sued weak at best. Buried in the company's 1999 10K, the company charging lack of disclosure, to rely which was filed on March 29, 2000, was this vague primarily on the courts for any close inspection of disclosure "Because we often take a portion of our some of Amazon's business practices in the past few fees for establishing a co-branded store in shares of years capital stock of the other company, we may never fully realize the full value of that portion of our fee " And with the bondholders apparently eager to settle their case (their deadline was last Friday), that leaves The disclosure came nearly two months after us with the class-action lawsuit filed by the Amazon floated the critical bond offering Do you shareholders at this particular time But that suppose buyers of those bonds might have liked to proposition is better than nothing, as it has compelled know of that cryptic tidbit? Amazon and its lead bond underwriter, Morgan Stanley, to articulate their positions on certain critical Yet that really is the least of Amazon's worries issues that have been raised over time in this column when it comes to the question of cash versus stock In fact, both parties recently filed motions to dismiss The weakest link in the company's "a dollar-sign securities fraud charges filed by shareholders And in doesn't mean cash" defense is that Amazon's lead so doing, they provide contradictory versions of a underwriter disagrees, unequivocally Morgan Stanley potentially damaging story. and Mary Meeker, its lead Internet analyst, who covers Amazon, contend in their filing that "Meeker We have long asserted that Amazon gave investors and Morgan Stanley reasonably believed that revenue every reason to believe that revenues from its much- payments by certain Amazon Commerce Network touted commerce network partners were to be partners were to be in cash " collected in cash, as opposed to stock We also believe this was especially important because these There you have it If the lead underwriter, one of the announcements were made days and weeks before world's biggest investment banks, thought a Morgan Stanley trotted out a major European bond multimillion-dollar revenue stream was to be paid in offering The fact that Amazon was running critically cash instead of risky dot coin stocks, don't you low on cash (lower than many of us will ever know) suppose that bond investors and shareholders thought at the tune of the offering made it crucial to its long- so, toot term survival

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What could be most important is what Morgan to do it Stanley did not say in its filings, but has told Barron's Twice In an effort to avoid poor form and We ventured to the Emerald City of glass and steel totally finger its client, Morgan Stanley did not that is Oracle's headquarters in Silicon Valley for the explain in its legal filings where Meeker received her software giant's annual analyst day last week, incorrect information that the commerce partner deals wondering how the man behind the curtain at Oracle would be paid in cash hopes to climb out of this economic funk

As we have cited in previous columns, Meeker's But first we were treated to a mea culpa or two by research note, published February 3, 2000, Chief Financial Officer Jeff Henley, who admitted specifically stated that revenue from the commerce that by some measures Oracle had lost some market partner deals would come in the form of cash On two share mr both its core database business and its separate occasions, several months apart, we asked fledgling e-business software application division. "It Morgan Stanley spokesman Ray O'Rourke is certainly possible that we have lost some relative specifically where Meeker received that information share over the past 12 months, [but] the key word is and his response was "We checked with the temporary," Henley says. "We are working through company " this "

So Amazon's basic defense is Our underwriter got No news was good news for the analysts on the it wrong Why didn't Amazon issue a release or file a Oracle beat. Guidance would remain unchanged. report with the SEC making a correction? Why did License revenue growth would be negative in the third company officials wait until the 10K was filed to even quarter but imnprovmg-to-flat in the fourth quarter address the issue, and even then not totally clarify that After such housekeeping was out of the way, Ellison the leading Internet analyst in the world made a took the stage to bash his fallen disciple and arch-rival mistake? That is, of course, if she made a mistake Tom Siebel, and to give reason to believe that Oracle would rise again In addition to any momentum that the staggered announcements of four commerce partner deals may The always-loquacious Ellison explained how his have given the European convertible bond offering, company's database stronghold will be parlayed into the partnership deals certainly seemed to give Amazon e-business software success What's more, the equity shares quite a lift as well, In its filings, supersalesman explained how clusters of inexpensive Amazon says its shares during the time in question server stacks would one day replace big computers, climbed and declined "in virtual lock step with the such as UNIX machines, which would spur growth rest of the Nasdaq sector " for his Internet-based software applications

Furthermore, Amazon argues that its accusers fail to But what was most entertaining was Larry being show how any of Amazon's alleged misleading Larry When asked about the importance of World statements caused any "material price inflation" in its Wide Web services, a buzzword for the software of shares On the first day of trading after each of the the moment that is supposed to connect Internet four deals were announced in January, Amazon's functions within an enterprise, Ellison was at his shares popped by anywhere from 4 5 % to 13 % (see sarcastic best chart) "Hey, you can't get invited to a good party in San To put that in perspective, on January 24, 2000, the Francisco if you are not hip to Web services And first day of trading after the Greenhght and when you go to parties, all anyone wants to talk about drugstore cam deals, the Nasdaq composite fell 3 3 % is Enron and Web services," Ellison cracked Meantime, on that day, Amazon's market value soared as much as $2 8 billion During less heady As for Larry? "I prefer to stay home and watch tunes, when Amazon shares have sunk below $7, the ultimate fighting on cable," he quipped company's entire market capitalization was not that much If that is not material, what is?

No Moe or Curly E-MAIL mark veverka@barrons coin

It isn't easy being Larry Ellison, but somebody has

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For Barron's subscription information call (CYC TEC TPX NND) 1-800-BARRONS ext 685 or inquire online at http 1/ www barronsmag com/reader html INDUSTRY. Limited Product Specialty Retailers, All Specialty Retailers, Software, Islamic - INDEX REFERENCES ---- Index, NASDAQ 100 components, Dow Jones Sector Titans Index - Technology (OTS RTS SOF XISL COMPANY (TICKER) Amazon Com Inc , Oracle _ XNQ1 XSTX) Corp. (AMZN ORCL) GOVERNMENT Securities and Exchange NEWS SUBJECT Analysts' Comments & Comm,ssion (SEC), U S Government Agencies (SEC Ratings of Stocks, Analyst Comment/ USG) Recommendation , Bond News , Debt/Bond Markets, Barron ' s; Corporate Bonds; Convertible Debt REGION California; North America, Pacific Securities , Corporate Debt Instruments, Eurobonds, Rim, United States , United States , Western U S , High-Yield Issuers, Lawsuits , Legal/Judicial, Washington (State), North American Countries (CA Securities Regulations, Regulation/Government NME PRM US USA USW WA NAMZ) Policy; Stock News, Dow Jones Total Market Index, English language content; Earnings Projections; LAYOUT CODES Unplugged , Technology Week Performance , Corporate/Industrial News, Market (PLG TEK) News, FundinglCapital (ANL C1521 BON M12 BRNS COB CVT C172 EBD HIY LWS C12 RGU Word Count 1374 C13 STK WEI ENGL C152 C15 CCAT MCAT C17) 214/02 BARRONS T3 MARKET SECTOR. Consumer Cyclical, Technology, Clip Routing Code; Newswire End Code END OF DOCUMENT

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Exhibit L Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 122 of 127

120012`" Avenue South, Suite 1200 Seattle, Washington 98144-2734 (206) 266-1000 Ticker Symbol AMZN 8/29/00 Close. $39.63 Exchange Nasdaq/NMS 52-Week: $27 88 -113.00 Website. www. amazon corn Price/Earnings. NA 1999 Fiscal Year-End- 12/31/99 Price/Sales. 6.1 Auditor - Ernst & Young Mkt. Cap $14.1 billion

Amazon.com, Inc ("AMZN") is an online retailer that directly offers for sale millions of distinct items in categories such as books, music, DVDs, videos, toys, ele ctronics, software, video games, and home improvement products.

FINANCIAL SUMMARY

(S mils , except BPS & %) 6 Mos. 6/00 6 Mow. 6/99 % Change Year 12/99 Year 12/98 % Change

Revenue 1,1518 6080 89% 1,6398 6098 169%

Gross Profit 2642 1323 100% 2906 133 7 117%

Operating Income (378 3) (164 9) NM (605 8) (109 I) NM

Net Income (6256) (199 7) NM (720 0) (124 5) NM

EPS (Diluted) ($ 1 80) ($0 63) NM (S220) (80 42) NM

Cash & Mkt. Securities 907 6 1,1442 (21%) 706 2 373 4 89%

Inventory 1724 594 190% 220 6 295 648%

Total Assets 2,460 7 2,2992 7% 2,471 6 6485 281%

Total Debt 2,1493 1,459 1 47% 1,480 7 348 9 324%

Stockholders' Equity (278 4) 5710 NM 266 3 138 7 92%

CFFO (3907) (46 8) NM (909) 320 NM

Depreciation & Amort. 202 2 71 4 183% 251 5 52 0 384%

Capital Expenditures 55 5 t i t 1 (50%) 287 1 28 3 NM

02000 by the Center for Financial Research and Analysis, Inc (CFRA) Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 123 of 127

Amazon.com, Inc. ("AMZN"), 8/30/00: Earnings Boost from Affiliated Entities and Operating Concerns Possible Earnings Boost, Income from Affiliated Entities

AMZN may have obtained a boost to reported earnings during the June and March 2000 quarters as a result of recording high-margin revenue from affiliated entities in return for their stock. Specifically, the Company made equity investments in certain Internet companies while simultaneously entering into agreements to provide such entities with various services in exchange for a fee. However, the amount AMZN ultimately receives from such agreements may materially differ from the amount recorded as revenue, thereby providing the Company with a boost to earnings.

Background AMZN made a series of equity investments in either private or public companies over the past year, accounting for them under either the cost or equity method. In certain instances, the Company simultaneously entered into agreements that permit such companies to promote their products on AMZN's website and receive other types of services in exchange for a fee These entities are part of the Amazon.com Commerce Network ("ACN"). During the June and March periods, AMZN recorded $24.3 million and $19.9 million, respectively, as revenue from its ACN parti=ships, and $23.6 million and $19.5 million, respectively, as gross profit.

Although AMZN initially agreed to receive payment for the services performed to ACN partners either in cash or in common stock, the Company revealed in its June 2000 10-Q that it has begun accepting lower future cash payments and shorter agreement terms. Moreover, in the event that the stock received as payment either appreciates or depreciates, the amount the Company records as revenue does not change from what was previously determined, unless AMZN deems that the investment has been impaired (such as in the case of Living.com, in which AMZN used to hold a significant equity stake, and which filed for Chapter 7 bankruptcy in August 2000).

Accountingfor ACN Investments. When AMZN makes an investment in an ACN company, it increases its investments (an asset account) and records unearned revenue (a liability account) in an identical amount. Over the period of the agreement, the Company reduces the unearned revenue account and records revenue When the stock received as consideration for services is sold, AMZN classifies the resulting loss or gain as a non-operating item on its income statement. In the event that the Company deems an ACN-type investment to be impaired, it simply reduces the value of the investment on its balance sheet and the associated unearned revenue account.

CFRA Commentary CFRA believes that AMZN obtained a boost to reported earnings by recording high margin revenue from its ACN partners. In our view, the Company should treat such transactions purely as investments, due to the lack of cash - even in some cases the lack of a liquid asset (as in many cases, AMZN receives the stock ofprivate companies as consideration for services rendered, which is far less liquid than and not nearly as determinable in value as cash) - as payment

Furthermore, in certain cases, the value of the stock received as consideration for services appears to be less than the amount recorded as revenue, as the value of the stock declined from the time the agreement was signed and when the revenue was actually earned. For example, the stock price of Ashford corn (an

02000 by the Center for Financial Research and Analysis, Inc (CFRA), 6001 Montrose Road, Suite 902, Rockville, MD, 20852, Phone (301) 984-1001, fax (301) 984-8617 ALL RIGHTS RESERVED. This research report may not be reproduced, stored in a retrieval system, or transmitted, in whole or in part, in any form or by any means, without the prior written permission of CFRA. The utfotmation in this report was based on sources believed to be reliable and accurate, principally consisting of required filings submitted by the Company to the Securities and Exchange Commission, but no warranty can be made No data or statement is or should be construed to be a recommendation for the purchase, retention, or sale of the securities of the company mentioned

Amazon.com, Inc. (8130/00) 02000 by the Center for Financial Research and Analysis , Inc (CFRA) Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 124 of 127

ACN partner) closed at approximately $2 75 on August 29, 2000 - near its all time low of $2 50, and significantly lower than its 1PO price of $13 00 per share By failing to adjust the amount of recorded revenue for the decline in stock price, AMZN obtains a boost to its revenue and earnings.

Decelerattna Sales Growth

AMZN' s sales growth has decelerated both on a sequential and year-over-year basis in recent periods. As shown in Table 1, sales merely increased by 0 7% in June on a sequential basis, after having decreased by 15 1% in March. Moreover, the Company' s year-over-year sales growth fell to 83.8% in June compared to 95.4% in March and at least 131.6% dunng the three preceding penods

Table 1: Sequential and Year-Over-Year (YOY) Sales Growth, Quarterly

Q2, 6/00 Q1 , 3/00 Q4,12/99 Q3, 9/99 Q2, 6/99 Sequential 07% (15,1%) 90.0% 132% 71% YOY 838% 95.4% 167 40A 131.60/9 171 1%

Gross Margin Decline

AMZN's gross margin declined year-over-year in recent periods. Specifically, the gross margin, winch has been adjusted to exclude activity from the Amazon Commerce Network ("ACN"}, fen by 120 basis points in June to 20 3%, after decreasing by 250 points in March, 810 points in December, and 290 points in September. (See Table 2.)

Table 2: Quarterly Gross Marg#n', Year-Over-Year

6/00* 6/99 3/00* 3/99 12/99 12/98 9/99 9/98

GM (%) 203% 215% 196% 221% 13 0% 211% 19.8% 227% Change** (120 b p) (250 b p) 11 (Slo b p) • (290 b.p ) * Gross margin adjusted to exclude income from ACM deals •' b p. - basis points

Increased Inventory Level

AMZN's inventory level jumped year-over-year in recent penods. As shown in Table 3, inventory jumped to 30% of sales in June, or 34 days, from 19% in the year-ago penod, or 22 days Similarly, inventory rose to 30% of sales in March (or 34days), and 33 % (or 34 days) in December 1999.

Amazon. com, Inc. (8130/00) 02000 by the Center for Funancial Research and Analysis, Inc (CFRA) Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 125 of 127

Table 3: Inventory vs. Quarterly Sales and Cost of Goods Sold (COGS) Q2 Q1 Q¢ Q3 ($ mils , except DSI) 6100 6199 3100 3199 12/99 12198 9199 9/98 Inventory 1724 59.4 1723 45.2 2206 29 5 1188 198 Sales 577.9 3144 5739 293.6 6760 252.8 355.8 153.6 COGS 460.6 246.8 461.4 228.9 5882 1995 2853 188.9

Inventory / Sales 30% 19% 30% 15% 33116 12°% 33% 13% DSI 34 22 34 18 34 13 38 10

Deteriorating Ov Cash Flows

AMZN's operating cash flow position weakened significantly on a year-over-year basis during the past two periods As shown in Table 4, cash flows from operations (CFFO), declined by $40 6 million to negative $70.2 million in June, and by $303.3 million to negative $320 5 melon m March. Snarly, for the twelve months ended June 2000, CFFO also declined to negative $434.8 meson from negative $7.6 million in the year-ago period. The CFFO decline was primarily due to increased operating losses, and decreases in accounts payable and accrued expenses.

Table 4: Cash Flows from Operations (CFFO), Year-Over-Year

Q2, 6100 Q2, 6/99 Q2, 3/00 Q2, 3199 12 Mos., 6/00 12 Mos., 6/99 (70.2) (296) (3205) (17 2) (4349) (8.7)

Higher Debt Level

AMZN's debt level has increased steadily in the past year as a result of the Company's acquisition activity As shown in Table 5, the Company's total debtto-assets ratio reached 87% at June 2000, up from 79% in March and 64% in the prior-year period.

Table 5: Total Debt and Debt-to-Equity Ratio, Quarterly Trend

($ mils. except °/a) Q2, 6100 Q1, 3/00 Q4,12/99 Q3, 9/99 Q2,6/99

Total Debt 2,149.3 2,152.9 1,480.7 1,4750 1,4591 Total Assets 2,4607 2,729.7 2,4716 2,2398 2,298.2 Total Debt /Total Assets 87% 79% 60% 66% 64%

Amazon.com, Inc. (8/30/00) ®2000 by the Center for Financial Research and Analysis, Inc (CFRA) Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 126 of 127

THE HONORABLE ROBERT S. 1 2 3 4 ^^ F/QED ^ (pp^F^ ^fNTf 5 RFp 4 6 8V 7 *r 8 r^ UNITED STATES DISTRICT COURT 9 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 10 11 ARGENT CLASSIC CONVERTIBLE ARBITRAGE FUND, L.P, on behalf of itself 12 all others similarly situated, No C01-0640L 13 Plaintiff, CERTIFICATE OF SERVICE 14 v 15 16 AMAZON.COM INC, JEFFREY P. BEZOS, TOM A. ALBERG, SCOTT D. COOK, L. JOHN 17 DOERR, AND PATRICIA Q. STONESIFER,

18 Defendants. 19 I HEREBY CERTIFY that on this 8th day of April, 2002,1 caused to be served copies of. 20 (1) LEAD PLAINTIFF ARGENT CLASSIC CONVERTIBLE ARBITRAGE FUND, L P.'S 21 FIRST AMENDED CLASS ACTION COMPLAINT FOR VIOLATIONS OF THE 22 SECURITIES ACT OF 1933

23 addressed to each of the following and served as indicated: 24 Mr. Barry M. Kaplan 25 Mr. Douglas W. Greene PERKINS COIE, LLP 26 1201 Third Avenue, Suite 4800 Seattle, WA 98101-3099 27 SERVED VL9 MESSENGER 28 [COUNSEL FOR DEFENDANTS Amazon corm, Jeffrey P Bezos, Tom A Alberg, Scott D Cook L John Doerr, and Patricia Q Stonesifer] McKay Chadwell, PLLC 701 Fifth Avenue, Suite 7201 CERTIFICATE OF SERVICE (CO1-0640L) - 1 0 ` G I Seats Washington 98104233 C7-1CLIENl'510133710011PLEADINGS\CER'FSERVEO40402 PLD DOC 1 1\1 Fax (206) 233-2809 R AL206233 2800 Case 2:01-cv-00640-RSL Document 52 Filed 04/08/2002 Page 127 of 127

1 Mr. Jonathan C. Dickey, Esq. 2 Gibson, Dunn & Crutcher, LLP 1530 Page Mill Road 3 Palo Alto, CA 94304-1125 SERVED VIA OVERNIGHT FEDERAL EXPRESS 4 [COUNSEL FOR DEFENDANTS Amazon com, Jeffrey P Bezos, Tom A Alberg, Scott D Cooly L John Doerr, and Patricia Q Stonesfer] 5

6 Ms. Meryl L. Young Gibson, Dunn & Crutcher, LLP 7 Jamboree Center 4 Park Plaza 8 Irvine, CA 92614-8557 9 SERVED VIA OVERNIGHT FEDERAL EXPRESS [COUNSEL FOR DEFENDANTS Amazon com, Jeffrey P Bezos, Tom A Alberg, Scott D Cook, L John 10 Doerr, and Patricia Q Stonesifer]

11 Mr. Rick Stone 12 c/o 123 Australian Ave. Palm Beach, FL 33480 13 SERVED VIA OVERNIGHT FEDERAL EXPRESS [COUNSEL FOR PLAINTIFF Argent Classic Convertible Arbitrage Fund, L P J 14

15 Mr. Mark A. Strauss KIRBY MCINERNEY & SQUIRE, LLP 16 830 Third Avenue New York, NY 10022 17 SERVED VIA OVERNIGHT FEDERAL EXPRESS [COUNSEL FOR PLAINTIFF Argent Classic Convertible Arbitrage Fund, L.P J 18

19 DATED this 8"' day of April, 2002

20 McKAY CHADWELL, PLLC 21 22 4 ^ vt:6^^' 23 Alissa M Viertel Legal Assistant 24

25

26

27

28

McKay Chadwell, PLLC 701 Fifth Avenue, Suite 7201 CERTIFICATE OF SERVICE (CO1-0640L) - 2 Seattle, Washington 98104 G\CLMWTSW1337\OOITLEAD INGS\CERTSEP,VE0404OZ PLD DOC (206) 233-2800 Fax(206)233-2809