**Exhibit 10.35**
**PURCHASE AGREEMENT**
              THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 25th day ofJanuary, 2002 by and among Audible, Inc., a Delaware corporation (the“Company”), and the Investors set forth on the signature pages affixed hereto(each an “Investor” and collectively the “Investors”).
**Recitals**
              A.      The Company and the Investors are executing and delivering thisAgreement in reliance upon the exemption from securities registration affordedby the provisions of Regulation D (“Regulation D”), as promulgated by the U.S.Securities and Exchange Commission (the “SEC”) under the Securities Act of1933, as amended; and
              B.      The Investors wish to purchase from the Company, and the Company wishesto sell and issue to the Investors, upon the terms and conditions stated inthis Agreement, (i) an aggregate of 4,069,768 shares of common stock, par value$.01 per share, of the Company (the “Common Stock”), and (ii) warrants topurchase an aggregate of 1,220,930 shares of Common Stock in the form attachedhereto as Exhibit A (the “Warrants”); and
              C.      Contemporaneous with the sale of the Common Stock and Warrants, theparties hereto will execute and deliver a Registration Rights Agreement, in theform attached hereto as Exhibit B (the “Registration Rights Agreement”),pursuant to which the Company will agree to provide certain registration rightsunder the Securities Act of 1933, as amended, and the rules and regulationspromulgated thereunder, and applicable state securities laws.
              In consideration of the mutual promises made herein and for other good andvaluable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:
     1.      Definitions. In addition to those terms defined above and elsewhere inthis Agreement, for the purposes of this Agreement, the following terms shallhave the meanings here set forth:
              “Affiliate” means, with respect to any Person, any other Person whichdirectly or indirectly Controls, is controlled by, or is under common controlwith, such Person.
              “Agreements” means this Agreement, the Warrants and the RegistrationRights Agreement.
              “Business Day” means a day, other than a Saturday or Sunday, on whichbanks in New York City are open for the general transaction of business.
 

 

              “Company’s Knowledge” means the actual knowledge of the officers of theCompany, after due inquiry.
              “Control” means the possession, direct or indirect, of the power to director cause the direction of the management and policies of a Person, whetherthrough the ownership of voting securities, by contract or otherwise.
              “Intellectual Property” means all of the following: (i) patents, patentapplications, patent disclosures and inventions (whether or not patentable andwhether or not reduced to practice); (ii) trademarks, service marks, tradedress, trade names, corporate names, logos, slogans and Internet domain names,together with all goodwill associated with each of the foregoing; (iii)copyrights and copyrightable works; (iv) registrations, applications andrenewals for any of the foregoing; (v) trade secrets, confidential informationand know-how (including but not limited to ideas, formulae, compositions,manufacturing and production processes and techniques, research and developmentinformation, drawings, specifications, designs, business and marketing plans,and customer and supplier lists and related information); and (vi) proprietarycomputer software (including but not limited to data, data bases anddocumentation).
              “Material Adverse Effect” means (i) a material adverse effect on theassets, liabilities, results of operations, condition (financial or otherwise),business, or prospects of the Company and its subsidiaries taken as a whole, or(ii) a material adverse effect on the ability of the Company to perform itsobligations under the Agreements.
              “Nasdaq” means the NASDAQ Stock Market, Inc. National Market System.
              “Person” means an individual, corporation, partnership, limited liabilitycompany, trust, business trust, association, joint stock company, jointventure, sole proprietorship, unincorporated organization, governmentalauthority or any other form of entity not specifically listed herein.
              “Purchase Price” means Three Million Five Hundred Thousand Dollars andForty Eight Cents ($3,500,000.48).
              “SEC Filings” has the meaning set forth in Section 4.6.
              “Securities” means the Shares, the Warrants and the Warrant Shares.
              “Shares” means the shares of Common Stock being purchased by the Investorshereunder.
              “Warrant Shares” means the shares of Common Stock issuable upon exerciseof or otherwise pursuant to the Warrants.
              “1933 Act” means the Securities Act of 1933, as amended, and the rules andregulations promulgated thereunder.
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              “1934 Act” means the Securities Exchange Act of 1934, as amended, and therules and regulations promulgated thereunder.
     2.      Purchase and Sale of the Shares and Warrants. Subject to the terms andconditions of this Agreement, on the Closing Date, each of the Investors shallseverally, and not jointly, purchase, and the Company shall sell and issue tothe Investors, the Shares and Warrants in the respective amounts set forthopposite the Investors’ names on the signature pages attached hereto inexchange for the Purchase Price as specified in Section 3 below.
     3.      Closing. Upon confirmation that the conditions to closing specifiedherein have been satisfied, the Company shall deliver to Lowenstein Sandler PC,in trust, a certificate or certificates, registered in such name or names asthe Investors may designate, representing the Shares and Warrants, withinstructions that such certificates are to be held for release to the Investorsonly upon payment of the Purchase Price to the Company. Upon receipt byLowenstein Sandler PC of the certificates, each Investor shall promptly cause awire transfer in same day funds to be sent to the account of the Company asinstructed in writing by the Company, in an amount representing such Investor’spro rata portion of the Purchase Price as set forth on the signature pages tothis Agreement. On the date (the “Closing Date”) the Company receives suchfunds, the certificates evidencing the Shares and Warrants shall be released tothe Investors (the “Closing”). The purchase and sale of the Shares andWarrants shall take place at the offices of Lowenstein Sandler PC, 1330 Avenueof the Americas, 21st Floor, New York, New York, or at such other location andon such other date as the Company and the Investors shall mutually agree.
     4.      Representations and Warranties of the Company. The Company herebyrepresents and warrants to the Investors that, except as set forth in theschedules delivered herewith (collectively, the “Disclosure Schedules”):
              4.1      Organization, Good Standing and Qualification. The Company is acorporation duly incorporated, validly existing and in good standing under thelaws of the jurisdiction of its incorporation and has all requisite corporatepower and authority to carry on its business as now conducted and to own itsproperties. The Company is duly qualified to do business as a foreigncorporation and is in good standing in each jurisdiction in which the conductof its business or its ownership or leasing of property makes suchqualification or leasing necessary unless the failure to so qualify has not andcould not reasonably be expected to have a Material Adverse Effect. TheCompany does not have any direct or indirect subsidiaries or any other equityinterest in any other firm, corporation, partnership, joint venture,association or other business organization.
              4.2      Authorization. The Company has full power and authority and has takenall requisite action on the part of the Company, its officers, directors andshareholders necessary for (i) the authorization, execution and delivery of theAgreements, (ii) authorization of the performance of all obligations of theCompany hereunder or thereunder, and (iii) the authorization, issuance (orreservation for issuance) and delivery of the Securities. The Agreementsconstitute the legal, valid and binding obligations of the Company, enforceableagainst the Company in accordance with their terms, except to the extentlimited by (i) the effect
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of bankruptcy, insolvency, reorganization, receivership, conservatorship,arrangement, moratorium, fraudulent transfer or other laws affecting orrelating to the rights of creditors generally, (ii) the rules governing theavailability of specific performance, injunctive relief or other equitableremedies and general principles of equity, regardless of whether arising priorto, or after, the date hereof or considered in a proceeding in equity or atlaw, or (iii) the effect of federal and state securities laws and principles ofpublic policy on rights of indemnity and contribution..
              4.3      Capitalization. Schedule 4.3 sets forth (a) the authorized capitalstock of the Company on the date hereof; (b) the number of shares of capitalstock issued and outstanding; (c) the number of shares of capital stockissuable pursuant to the Company’s stock plans; and (d) the number of shares ofcapital stock issuable and reserved for issuance pursuant to securities (otherthan the Shares and the Warrants) exercisable for, or convertible into orexchangeable for any shares of capital stock of the Company. All of the issuedand outstanding shares of the Company’s capital stock have been duly authorizedand validly issued and are fully paid, nonassessable and free of pre-emptiverights and were issued in full compliance with applicable law. Except asdescribed on Schedule 4.3, no Person is entitled to pre-emptive or similarstatutory or contractual rights with respect to any securities of the Company.Except as described on Schedule 4.3, there are no outstanding warrants,options, convertible securities or other rights, agreements or arrangements ofany character under which the Company is or may be obligated to issue anyequity securities of any kind and except as contemplated by this Agreement, theCompany is not currently in negotiations for the issuance of any equitysecurities of any kind. Except as described on Schedule 4.3 and except for theRegistration Rights Agreement, there are no voting agreements, buy-sellagreements, option or right of first purchase agreements or other agreements ofany kind among the Company and any of the securityholders of the Companyrelating to the securities of the Company held by them. Except as described onSchedule 4.3, the Company has not granted any Person the right to require theCompany to register any securities of the Company under the 1933 Act, whetheron a demand basis or in connection with the registration of securities of theCompany for its own account or for the account of any other Person.
              Schedule 4.3 sets forth a true and complete table setting forth the proforma capitalization of the Company on a fully diluted basis giving effect to(i) the issuance of the Shares and the Warrants, (ii) any adjustments in othersecurities resulting from such issuance, and (iii) the exercise or conversionof all outstanding securities. Except as described on Schedule 4.3, theissuance of the Securities hereunder will not trigger any outstandinganti-dilution rights.
              4.4      Valid Issuance. The Shares have been duly and validly authorized and,when issued and paid for pursuant to this Agreement, will be validly issued,fully paid and nonassessable free and clear of all encumbrances andrestrictions, except for restrictions on transfer set forth in this Agreementor imposed by applicable securities laws. The Warrants have been duly andvalidly authorized. Upon the due exercise of the Warrants, the Warrant Sharesissuable upon such exercise will be validly issued, fully paid andnon-assessable free and clear of all encumbrances and restrictions, except forrestrictions on transfer set forth in this Agreement or imposed by applicablesecurities laws. The Company has reserved a sufficient number of shares ofCommon Stock for issuance upon the exercise of the Warrants, free and clear ofall
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encumbrances and restrictions, except for restrictions on transfer set forth inthis Agreement or imposed by applicable securities laws.
              4.5      Consents. The execution, delivery and performance by the Company ofthe Agreements and the offer, issuance and sale of the Securities require noconsent of, action by or in respect of, or filing with, any Person,governmental body, agency, or official other than filings that have been madepursuant to applicable state securities laws and post-sale filings pursuant toapplicable state and federal securities laws which the Company undertakes tofile within the applicable time periods. The Company has taken all actionnecessary to exempt (i) the sale of the Securities, (ii) the issuance of theWarrant Shares upon due exercise of the Warrants, and (iii) the othertransactions contemplated by this Agreement from the provisions of anyanti-takeover or business combination law or statute binding on the Company orto which the Company or any of its assets and properties may be subject.
              4.6      Delivery of SEC Filings; Business. The Company has provided or madeavailable to the Investors with copies of the Company’s most recent AnnualReport on Form 10-K for the fiscal year ended December 31, 2000 (the “200010-K”), and all other reports filed by the Company pursuant to the 1934 Actsince the filing of the 2000 10-K and prior to the date hereof (collectively,the “SEC Filings”). The SEC Filings are the only filings required of theCompany pursuant to the 1934 Act for such period. The Company is engaged onlyin the business described in the SEC Filings and the SEC Filings contain acomplete and accurate description in all material respects of the business ofthe Company.
              4.7      Use of Proceeds. The proceeds of the sale of the Common Stock and theWarrants hereunder shall be used by the Company for working capital and generalcorporate purposes.
              4.8      No Material Adverse Change. Since December 31, 2000, except asidentified and described in the SEC Filings or on Schedule 4.8, there has notbeen:
                          (i)      any change in the consolidated assets, liabilities, financialcondition or operating results of the Company from that reflected in thefinancial statements included in the 2000 10-K, except for changes in theordinary course of business which have not and could not reasonably be expectedto have a Material Adverse Effect, individually or in the aggregate;
                          (ii)     any declaration or payment of any dividend, or any authorization orpayment of any distribution, on any of the capital stock of the Company, or anyredemption or repurchase of any securities of the Company;
                          (iii)    any material damage, destruction or loss, whether or not covered byinsurance to any assets or properties of the Company;
                          (iv)      any waiver, not in the ordinary course of business, by the Company ofa material right or of a material debt owed to it;
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                          (v)      any satisfaction or discharge of any lien, claim or encumbrance orpayment of any obligation by the Company, except in the ordinary course ofbusiness and which is not material to the assets, properties, financialcondition, operating results or business of the Company (as such business ispresently conducted and as it is proposed to be conducted);
                          (vi)      any change or amendment to the Company’s Certificate of Incorporationor by-laws, or material change to any material contract or arrangement by whichthe Company is bound or to which its assets or properties is subject;
                          (vii)    any material labor difficulties or labor union organizing activitieswith respect to employees of the Company;
                          (viii)    any transaction entered into by the Company other than in theordinary course of business;
                          (ix)      the loss of the services of any key employee, or material change inthe composition or duties of the senior management of the Company;
                          (x)      the loss or threatened loss of any customer which has had or couldreasonably be expected to have a Material Adverse Effect; or
                          (xi)      any other event or condition of any character that has had or couldreasonably be expected to have a Material Adverse Effect.
              4.9      SEC Filings; S-3 Eligibility.
                          (a)      At the time of filing thereof, the SEC Filings complied as to form inall material respects with the requirements of the 1934 Act and did not containany untrue statement of a material fact or omit to state any material factnecessary in order to make the statements made therein, in the light of thecircumstances under which they were made, not misleading.
                          (b)      During the preceding two years, each registration statement and anyamendment thereto filed by the Company pursuant to the 1933 Act and the rulesand regulations thereunder, as of the date such statement or amendment becameeffective, complied as to form in all material respects with the 1933 Act anddid not contain any untrue statement of a material fact or omit to state anymaterial fact required to be stated therein or necessary in order to make thestatements made therein, in light of the circumstances under which they weremade, not misleading; and each prospectus filed pursuant to Rule 424(b) underthe 1933 Act, as of its issue date and as of the closing of any sale ofsecurities pursuant thereto did not contain any untrue statement of a materialfact or omit to state any material fact required to be stated therein ornecessary in order to make the statements made therein, in the light of thecircumstances under which they were made, not misleading.
                          (c)      The Company meets the registrant requirements for use of Form S-3 setforth in General Instruction I.A. of Form S-3. As of the Closing, the sale bythe Investors
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of the Registrable Securities (as such term is defined in the RegistrationRights Agreement) meets the transaction requirements for use of Form S-3 setforth in General Instruction I.B.3. of Form S-3.
              4.10      No Conflict, Breach, Violation or Default. The execution, deliveryand performance of the Agreements by the Company and the issuance and sale ofthe Securities will not conflict with or result in a breach or violation of anyof the terms and provisions of, or constitute a default under (i) the Company’sCertificate of Incorporation or the Company’s Bylaws, both as in effect on thedate hereof (copies of which have been provided to the Investors before thedate hereof), or (ii)(a) any statute, rule, regulation or order of anygovernmental agency or body or any court, domestic or foreign, havingjurisdiction over the Company or its assets or properties, or (b) any agreementor instrument to which the Company is a party or by which the Company is boundor to which its assets or properties is subject, except, in the case of clause(ii), for such conflicts, breaches or violations which could not reasonably beexpected to have a Material Adverse Effect, individually or in the aggregate.The Company has received irrevocable waivers of any rights of first offer,rights of first refusal or other preemptive or other subscription rights thatmay apply to the issuance and sale of the Securities as contemplated hereby,the Company has complied with the terms of any such rights and any such waiverswith respect thereto, and such waivers are in full force and effect. Suchwaivers do not require the Company or any other Person to take or refrain fromtaking any action. True and complete copies of such waivers have been providedto the Investors prior to the execution and delivery of this Agreement.
              4.11      Tax Matters. The Company has timely prepared and filed all taxreturns required to have been filed by the Company with all appropriategovernmental agencies and timely paid all taxes shown thereon or otherwise owedby it. The charges, accruals and reserves on the books of the Company inrespect of taxes for all fiscal periods are adequate in all material respects,and there are no material unpaid assessments against the Company nor, to theCompany’s Knowledge, any basis for the assessment of any additional taxes,penalties or interest for any fiscal period or audits by any federal, state orlocal taxing authority except for any assessment which is not material to theCompany. All taxes and other assessments and levies that the Company isrequired to withhold or to collect for payment have been duly withheld andcollected and paid to the proper governmental entity or third party when due.There are no tax liens or claims pending or, to the Company’s Knowledge,threatened against the Company or its assets or property. Except as describedon Schedule 4.11, there are no outstanding tax sharing agreements or other sucharrangements between the Company or any other Person.
              4.12      Title to Properties. Except as disclosed in the SEC Filings, theCompany has good and marketable title to all real properties and all otherproperties and assets owned by it, in each case free from liens, encumbrancesand defects that would materially affect the value thereof or materiallyinterfere with the use made or currently planned to be made thereof by them;and except as disclosed in the SEC Filings, the Company holds any leased realor personal property under valid and enforceable leases with no exceptions thatwould materially interfere with the use made or currently planned to be madethereof by them.
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              4.13      Certificates, Authorities and Permits. The Company possessesadequate certificates, authorities or permits issued by appropriategovernmental agencies or bodies necessary to conduct the business now operatedby it, and the Company has not received any notice of proceedings relating tothe revocation or modification of any such certificate, authority or permitthat, if determined adversely to the Company, could reasonably be expected tohave a Material Adverse Effect, individually or in the aggregate.
              4.14      No Labor Disputes. No material labor dispute with the employees ofthe Company exists or, to the Company’s Knowledge, is imminent.
              4.15      Intellectual Property.
                          (a)      All Intellectual Property of the Company is currently in compliancewith all legal requirements (including timely filings, proofs and payments offees), except for such instances of noncompliance as would not have a MaterialAdverse Effect, individually or in the aggregate. No Intellectual Property ofthe Company which is necessary for the conduct of Company’s business ascurrently conducted or as currently proposed to be conducted has been or is nowinvolved in any cancellation, dispute or litigation, and, to the Company’sKnowledge, no such action is threatened. No patent of the Company has been oris now involved in any interference, reissue, re-examination or oppositionproceeding.
                          (b)      All of the licenses and sublicenses and consent, royalty or otheragreements concerning Intellectual Property which are necessary for the conductof Company’s business as currently conducted or as currently proposed to beconducted to which the Company is a party or by which any of their assets arebound (other than generally commercially available, non-custom, off-the-shelfsoftware application programs having a retail acquisition price of less than$10,000 per license) (collectively, “License Agreements”) are valid and bindingobligations of the Company and, to the Company’s Knowledge, the other partiesthereto, enforceable in accordance with their terms, except to the extent thatenforcement thereof may be limited by bankruptcy, insolvency, reorganization,moratorium, fraudulent conveyance or other similar laws affecting theenforcement of creditors’ rights generally, and there exists no event orcondition which will result in a material violation or breach of or constitute(with or without due notice or lapse of time or both) a default by the Companyunder any such License Agreement.
                          (c)      The Company owns or has the valid right to use all of the IntellectualProperty necessary for the conduct of the Company’s business substantially ascurrently conducted or as currently proposed to be conducted and for theownership, maintenance and operation of the Company’s properties and assets.
                          (d)      The Company owns the owned Intellectual Property that is necessary forthe conduct of Company’s business as currently conducted or as currentlyproposed to be conducted, free and clear of all liens, encumbrances, adverseclaims or obligations to license all such owned Intellectual Property, otherthan licenses entered into in the ordinary course of the Company’s business.The Company has a valid and enforceable right to use all other IntellectualProperty used or held for use in the Company’s business as currently conductedor as currently proposed to be conducted. The Company has the right to use allof the
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owned and licensed Intellectual Property which is necessary for the conduct ofits business as currently conducted or as currently proposed to be conducted inall jurisdictions in which it conducts its business.
                          (e)      The Company has taken reasonable steps to maintain, police and protectthe Intellectual Property which it owns and which is necessary for the conductof Company’s business as currently conducted or as currently proposed to beconducted, including the execution of appropriate confidentiality agreementsand intellectual property and work product assignments and releases. Theconduct of the Company’s business as currently conducted does not infringe orotherwise impair or conflict with (collectively, “Infringe”) any IntellectualProperty rights of any third party, and, to the Company’s Knowledge, theIntellectual Property rights of the Company which are necessary for the conductof Company’s business as currently conducted or as currently proposed to beconducted are not being Infringed by any third party. There is no litigationor order pending or outstanding or, to the Company’s Knowledge, threatened orimminent, that seeks to limit or challenge or that concerns the ownership, use,validity or enforceability of any Intellectual Property of the Company and theCompany’s use of any Intellectual Property owned by a third party, and, to theCompany’s Knowledge, there is no valid basis for the same.
                          (f)      The consummation of the transactions contemplated hereby will notresult in the alteration, loss, impairment of or restriction on the Company’sownership or right to use any of the Intellectual Property which is necessaryfor the conduct of Company’s business as currently conducted or as currentlyproposed to be conducted.
                          (g)      All software owned by the Company, and, to the Company’s Knowledge,all software licensed from third parties by the Company, (i) is free from anymaterial defect, bug, virus, or programming, design or documentation error;(ii) operates and runs in a reasonable and efficient business manner; and (iii)conforms in all material respects to the specifications and purposes thereof.
                          (h)      The Company has taken reasonable steps to protect the Company’s rightsin its confidential information and trade secrets. Each employee, consultantand contractor who has had access to proprietary Intellectual Property which isnecessary for the conduct of Company’s business as currently conducted or ascurrently proposed to be conducted has executed an agreement to maintain theconfidentiality of such Intellectual Property and has executed appropriateagreements that are substantially consistent with the Company’s standard formsthereof. Except under confidentiality obligations, there has been no materialdisclosure of any of the Company’s confidential information or trade secrets toany third party.
              4.16      Environmental Matters. The Company is not in violation of anystatute, rule, regulation, decision or order of any governmental agency or bodyor any court, domestic or foreign, relating to the use, disposal or release ofhazardous or toxic substances or relating to the protection or restoration ofthe environment or human exposure to hazardous or toxic substances(collectively, “Environmental Laws”), except for violations that could notreasonably be expected to have a Material Adverse Effect, individually or inthe aggregate. The Company does not own or operate any real propertycontaminated with any substance that is subject to any
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Environmental Laws, is not liable for any off-site disposal or contaminationpursuant to any Environmental Laws, and is not subject to any claim relating toany Environmental Laws, which violation, contamination, liability or claim hashad or could reasonably be expected to have a Material Adverse Effect,individually or in the aggregate; and there is no pending or, to the Company’sKnowledge, threatened investigation that might lead to such a claim.
              4.17      Litigation. Except as described on Schedule 4.17, there are nopending actions, suits or proceedings against or affecting the Company or anyof its properties; and to the Company’s Knowledge, no such actions, suits orproceedings are threatened or contemplated.
              4.18      Financial Statements. The financial statements included in each SECFiling present fairly, in all material respects, the financial position of theCompany as of the dates shown and its results of operations and cash flows forthe periods shown, and such financial statements have been prepared inconformity with United States generally accepted accounting principles appliedon a consistent basis (except as may be disclosed therein or in the notesthereto, and, in the case of quarterly financial statements, as permitted byForm 10-Q under the 1934 Act). Except as set forth in the financial statementsof the Company included in the SEC Filings filed prior to the date hereof or asdescribed on Schedule 4.18, the Company has not incurred any liabilities,contingent or otherwise, except those incurred in the ordinary course ofbusiness, consistent (as to amount and nature) with past practices since thedate of such financial statements, none of which, individually or in theaggregate, have had or could reasonably be expected to have a Material AdverseEffect.
              4.19      Insurance Coverage. The Company maintains in full force and effectinsurance coverage that is customary for comparably situated companies for thebusiness being conducted and properties owned or leased by the Company, and theCompany reasonably believes such insurance coverage to be adequate against allliabilities, claims and risks against which it is customary for comparablysituated companies to insure.
              4.20      Compliance with Nasdaq Continued Listing Requirements. The Companyis in compliance with applicable Nasdaq National Market continued listingrequirements. There are no proceedings pending or, to the Company’s Knowledge,threatened against the Company relating to the continued listing of theCompany’s Common Stock on the Nasdaq National Market and the Company has notreceived any currently effective notice of, nor to the Company’s Knowledge isthere any basis for, the delisting of the Common Stock from the Nasdaq NationalMarket.
              4.21      Brokers and Finders. Except for Alpine Capital Partners, Inc., thefees and expenses of whom shall be paid by the Company, no Person will have, asa result of the transactions contemplated by this Agreement, any valid right,interest or claim against or upon the Company or an Investor for anycommission, fee or other compensation pursuant to any agreement, arrangement orunderstanding entered into by or on behalf of the Company.
              4.22      No Directed Selling Efforts or General Solicitation. Neither theCompany nor any Person acting on its behalf has conducted any generalsolicitation or general advertising
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(as those terms are used in Regulation D) in connection with the offer or saleof any of the Securities.
              4.23      No Integrated Offering. Neither the Company nor any of itsAffiliates, nor any Person acting on its or their behalf has, directly orindirectly, made any offers or sales of any Company security or solicited anyoffers to buy any security, under circumstances that would adversely affectreliance by the Company on Section 4(2) for the exemption from registration forthe transactions contemplated hereby or would require registration of theSecurities under the 1933 Act.
              4.24      Questionable Payments***.***Neither the Company nor, to the Company’sKnowledge, any of its current or former shareholders, directors, officers,employees, agents or other Persons acting on behalf of the Company, has onbehalf of the Company or in connection with their respective businesses: (a)used any corporate funds for unlawful contributions, gifts, entertainment orother unlawful expenses relating to political activity; (b) made any direct orindirect unlawful payments to any governmental officials or employees fromcorporate funds; (c) established or maintained any unlawful or unrecorded fundof corporate monies or other assets; (d) made any false or fictitious entrieson the books and records of the Company; or (e) made any unlawful bribe,rebate, payoff, influence payment, kickback or other unlawful payment of anynature.
              4.25      Disclosures. The written materials delivered to the Investors inconnection with the transactions contemplated by the Agreements do not containany untrue statement of a material fact or omit to state a material factnecessary in order to make the statements contained therein, in light of thecircumstances under which they were made, not misleading. Except as describedin the Disclosure Schedule, none of the matters described on the DisclosureSchedules have had, or could reasonably be expected to have, a Material AdverseEffect, individually or in the aggregate.
     5.      Representations and Warranties of the Investor. Each of the Investorshereby severally, and not jointly, represents and warrants to the Company that:
              5.1      Organization and Existence. The Investor is a validly existingcorporation, limited partnership or limited liability company and has allrequisite corporate, partnership or limited liability company power andauthority to invest in the Securities pursuant to this Agreement.
              5.2      Authorization. The execution, delivery and performance by theInvestor of the Agreements have been duly authorized and the Agreements willeach constitute the valid and legally binding obligation of the Investor,enforceable against the Investor in accordance with their terms, subject tobankruptcy, insolvency, fraudulent transfer, reorganization, moratorium andsimilar laws of general applicability, relating to or affecting creditors’rights generally.
              5.3      Purchase Entirely for Own Account. The Securities to be received bythe Investor hereunder will be acquired for the Investor’s own account, not asnominee or agent, and
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not with a view to the resale or distribution of any part thereof in violationof the 1933 Act, and the Investor has no present intention of selling, grantingany participation in, or otherwise distributing the same in violation of the1933 Act. The Investor is not a registered broker dealer or an entity engagedin the business of being a broker dealer.
              5.4      Investment Experience. The Investor acknowledges that it can bear theeconomic risk and complete loss of its investment in the Securities and hassuch knowledge and experience in financial or business matters that it iscapable of evaluating the merits and risks of the investment contemplatedhereby.
              5.5      Disclosure of Information. The Investor has had an opportunity toreceive all additional information related to the Company requested by it andto ask questions of and receive answers from the Company regarding the Company,its business and the terms and conditions of the offering of the Securities.The Investor acknowledges receipt of copies of the SEC Filings. Neither suchinquiries nor any other due diligence investigation conducted by the Investorshall modify, amend or affect the Investor’s right to rely on the Company’srepresentations and warranties contained in this Agreement.
              5.6      Restricted Securities. The Investor understands that the Securitiesare characterized as “restricted securities” under the U.S. federal securitieslaws inasmuch as they are being acquired from the Company in a transaction notinvolving a public offering and that under such laws and applicable regulationssuch securities may be resold without registration under the 1933 Act only incertain limited circumstances.
              5.7      Legends. It is understood that, until the earlier of (i) registrationfor resale pursuant to the Registration Rights Agreement or (ii) the time whensuch Securities may be sold pursuant to Rule 144(k), certificates evidencingsuch Securities may bear the following or any similar legend:
                          (a)      “The securities represented hereby may not be transferred unless (i)such securities have been registered for sale pursuant to the Securities Act of1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or(iii) the Company has received an opinion of counsel satisfactory to it thatsuch transfer may lawfully be made without registration under the SecuritiesAct of 1933 or qualification under applicable state securities laws.”
                          (b)      If required by the authorities of any state in connection with theissuance of sale of the Securities, the legend required by such stateauthority.
              Upon the earlier of (i) registration for resale pursuant to theRegistration Rights Agreement and receipt by the Company of the Investor’swritten confirmation that such Securities will not be disposed of except incompliance with the prospectus delivery requirements of the 1933 Act or (ii)Rule 144(k) becoming available the Company shall, upon an Investor’s writtenrequest, promptly cause certificates evidencing the Securities to be replacedwith certificates which do not bear such restrictive legends, and WarrantShares subsequently issued in respect of the Warrants shall not bear suchrestrictive legends provided the provisions
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of either clause (i) or clause (ii) above, as applicable, are satisfied withrespect to such Warrant Shares. When the Company is required to causeunlegended certificates to replace previously issued legended certificates, ifunlegended certificates are not delivered to an Investor within five (5)Business Days of submission by that Investor of legended certificate(s) to theCompany’s transfer agent together with a representation letter in customaryform, the Company shall be liable to the Investor for a penalty equal to 1% ofthe aggregate purchase price of the Securities evidenced by such certificate(s)for each thirty (30) day period (or portion thereof) beyond such three (3)Business Day that the unlegended certificates have not been so delivered.
              5.8      Accredited Investor. The Investor is an accredited investor asdefined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
              5.9      No General Solicitation. The Investor did not learn of the investmentin the Securities as a result of any public advertising or generalsolicitation.
              5.10      Brokers and Finders. No Person will have, as a result of thetransactions contemplated by this Agreement, any valid right, interest or claimagainst or upon the Company or an Investor for any commission, fee or othercompensation pursuant to any agreement, arrangement or understanding enteredinto by or on behalf of the Investors.
     6.      Conditions to the Closings.
              6.1      Conditions to the Investors’ Obligations. The obligation of theInvestors to purchase the Securities at the Closing is subject to thefulfillment to the Investors’ satisfaction, on or prior to the Closing Date, ofthe following conditions, any of which may be waived by the Investors agreeinghereunder to purchase a majority of the Shares and Warrants (the “RequiredInvestors”):
                          (a)      The representations and warranties made by the Company in Section 4hereof qualified as to materiality shall be true and correct at all times priorto the Closing Date, except to the extent any such representation or warrantyexpressly speaks as of an earlier date, in which case such representation orwarranty shall be true and correct as of such earlier date, and, therepresentations and warranties made by the Company in Section 4 hereof notqualified as to materiality shall be true and correct in all material respectsat all times prior to the Closing Date, except to the extent any suchrepresentation or warranty expressly speaks as of an earlier date, in whichcase such representation or warranty shall be true and correct in all materialrespects as of such earlier date. The Company shall have performed in allmaterial respects all obligations and conditions herein required to beperformed or observed by it on or prior to the Closing Date.
                          (b)      The Company shall have obtained in a timely fashion any and allconsents, permits, approvals, registrations and waivers necessary orappropriate for consummation of the purchase and sale of the Securities all ofwhich shall be in full force and effect.
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                          (c)      The Company shall have executed and delivered the Registration RightsAgreement.
                          (d)      The Company shall have received (A) written notice from Nasdaq to theeffect that the issuance and sale of the Securities as contemplated hereby doesnot violate the shareholder approval requirements of Nasdaq Marketplace Rule4350(i), and (B) oral confirmation from Nasdaq that the Shares and the WarrantShares shall have been approved for inclusion in Nasdaq upon official notice ofissuance.
                          (e)      No judgment, writ, order, injunction, award or decree of or by anycourt, or judge, justice or magistrate, including any bankruptcy court orjudge, or any order of or by any governmental authority, shall have beenissued, and no action or proceeding shall have been instituted by anygovernmental authority, enjoining or preventing the consummation of thetransactions contemplated hereby or in the other Agreements.
                          (f)      The Company shall have delivered a Certificate, executed on behalf ofthe Company by its Chief Executive Officer or its Chief Financial Officer,dated as of the Closing Date, certifying to the fulfilment of the conditionsspecified in subsections (a), (b) and (d) of this Section 6.1.
                          (g)      The Company shall have delivered a Certificate, executed on behalf ofthe Company by its Secretary, dated as of the Closing Date, certifying theresolutions adopted by the Board of Directors of the Company approving thetransactions contemplated by this Agreement and the other Agreements and theissuance of the Securities, certifying the current versions of the Certificateof Incorporation and Bylaws of the Company and certifying as to the signaturesand authority of persons signing the Agreements and related documents on behalfof the Company.
                          (h)      The Investors shall have received an opinion from Piper MarburyRudnick & Wolfe LLP, the Company’s counsel, dated as of the Closing Date, inform and substance reasonably acceptable to the Investors and addressing suchlegal matters as the Investors may reasonably request.
                          (i)      No stop order or suspension of trading shall have been imposed byNasdaq, the SEC or any other governmental regulatory body with respect topublic trading in the Common Stock.
              6.2      Conditions to Obligations of the Company. The Company’s obligation tosell and issue the Securities at the Closing is subject to the fulfillment tothe satisfaction of the Company on or prior to the Closing Date of thefollowing conditions, any of which may be waived by the Company:
                          (a)      The representations and warranties made by the Investors in Section 5hereof, other than the representations and warranties contained in Sections5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the “Investment Representations”), shallbe true and correct in all material respects when made, and shall be true andcorrect in all material respects on the Closing
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Date with the same force and effect as if they had been made on and as of saiddate. The Investment Representations shall be true and correct in all respectswhen made, and shall be true and correct in all respects on the Closing Datewith the same force and effect as if they had been made on and as of said date.The Investors shall have performed in all material respects all obligationsand conditions herein required to be performed or observed by them on or priorto the Closing Date.
                          (b)      The Investors shall have executed and delivered the RegistrationRights Agreement.
                          (c)      The Investors shall have delivered one or more Certificates, executedon behalf of each Investor by an authorized signatory, dated as of the ClosingDate, certifying to the fulfilment of the conditions specified in subsection(a) with respect to such Investor.
                          (d)      The Investors shall have delivered to Company the Purchase Price.
                          (e)      The Investors shall have executed and delivered to the Company aVoting Agreement pursuant to which the Investors agree to vote all of theirShares in favor of an amendment to the Company’s Certificate of Incorporationto increase the authorized number of shares of Common Stock to 75,000,000.
                          (f)      The Company shall have received (A) written notice from Nasdaq to theeffect that the issuance and sale of the Securities as contemplated hereby doesnot violate the shareholder approval requirements of Nasdaq Marketplace Rule4350(i), and (B) oral confirmation from Nasdaq that the Shares and the WarrantShares shall have been approved for inclusion in Nasdaq upon official notice ofissuance.
              6.3      Termination of Obligations to Effect Closing; Effects.
                          (a)      The obligations of the Company, on the one hand, and the Investors, onthe other hand, to effect the Closing shall terminate as follows:
                                      (i)      Upon the mutual written consent of the Company and the RequiredInvestors;
                                      (ii)     Bythe Company if any of the conditions set forth in Section 6.2shall have become incapable of fulfillment, and shall not have been waived bythe Company;
                                      (iii)    Bythe Required Investors if any of the conditions set forth inSection 6.1 shall have become incapable of fulfillment, and shall not have beenwaived by the Required Investors; or
                                      (iv)      Byeither the Company or the Required Investors if the Closing hasnot occurred on or prior to March 31, 2002;
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provided, however, that, except in the case of clause (i) above, the partyseeking to terminate its obligation to effect the Closing shall not then be inbreach of any of its representations, warranties, covenants or agreementscontained in this Agreement or the other Agreements if such breach has resultedin the circumstances giving rise to such party’s seeking to terminate itsobligation to effect the Closing.
                          (b)      In the event of termination by the Company or the Required Investorsof their obligations to effect the Closing pursuant to this Section 6.3,written notice thereof shall forthwith be given to the other parties hereto andthe obligation of all parties to effect the Closing shall be terminated,without further action by any party. Nothing in this Section 6.3 shall bedeemed to release any party from any liability for any breach by such party ofthe terms and provisions of this Agreement or the other Agreements or to impairthe right of any party to compel specific performance by any other party of itsobligations under this Agreement or the other Agreements.
     7.      Covenants and Agreements of the Company.
              7.1      Limitation on Certain Actions. (a) The Company shall not offer orsell any Equity Securities (as defined below) on terms more favorable thanthose contemplated by the Agreements until 45 days after the date theRegistration Statement (as defined in the Registration Rights Agreement) isdeclared effective by the SEC; provided, however, that the restrictions in thissentence shall not apply to (i) the issuance of an Equity Security to anofficer, director, employee or consultant to the Company or any Subsidiarypursuant to any incentive or stock option plan of the Company approved by theshareholders of the Company or the Company’s Board of Directors; (ii) theissuance of Common Stock in connection with the conversion of any convertibleEquity Securities outstanding on the Closing Date; (iii) the issuance of anyEquity Securities to Random House, Inc. (or its designees); (iv) the issuanceof any Equity Securities to financial institutions or lessors in connectionwith commercial credit arrangements, equipment financings or similartransactions; (v) the issuance of any Equity Securities to strategic businesspartners (or proposed partners) in connection with strategic transactions; and(vi) the payment of semi-annual dividends on the Company’s outstanding sharesof Series A Convertible Preferred Stock (the “Series A Preferred Stock”) inadditional shares of Series A Preferred Stock in accordance with the termsthereof. The term “Equity Securities” means the Company’s capital stock,warrants, rights, and options giving the holder thereof the right to acquireshares of capital stock, and any security directly or indirectly convertibleinto or exercisable for or exchangeable into shares of the Company’s capitalstock.
              (b)      Commencing on the date hereof and continuing until such time as theInvestors no longer own in the aggregate at least 406,977 shares of CommonStock (appropriately adjusted for any stock split, reverse stock split, stockdividend or other reclassification or combination of the Common Stock occurringafter the date hereof), the Company shall not offer or sell or enter into anyagreement, arrangement or understanding to offer or sell any Equity Security ifthe Equity Security (or any agreement, arrangement or understanding enteredinto in connection therewith) provides for the future adjustment of (i) thepurchase price therefor, (ii) the number of Equity Securities to be issued, or(iii) the conversion,
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exercise or exchange rate applicable thereto (other than customaryanti-dilution provisions no more favorable to the holder than those containedin the Warrants) without the prior written consent of the Required Investors,which consent shall not be unreasonably withheld or delayed.
              7.2      Reservation of Common Stock. The Company shall at all times reserveand keep available out of its authorized but unissued shares of Common Stock,solely for the purpose of providing for the exercise of the Warrants, suchnumber of shares of Common Stock as shall from time to time equal the number ofshares sufficient to permit the exercise of the Warrants issued pursuant tothis Agreement in accordance with their respective terms.
              7.3      Reports. The Company will furnish to such Investors and/or theirassignees such information relating to the Company and its Subsidiaries as fromtime to time may reasonably be requested by such Investors and/or theirassignees; provided, however, that such Investors and/or assignees shall holdin confidence any confidential or proprietary information received from theCompany and identified as such at the time of disclosure such information andshall use any such confidential or proprietary information solely for thepurpose of monitoring and evaluating their investment in the Company and;provided, further, that the Company shall not be required to provide anyinformation to the Investors which, if disclosed to such Investors and/or theirassignees pursuant to the terms of this Section 7.3, would, in the good faithjudgment of the Company, cause the Company or any Subsidiary to violate theterms of a confidentiality undertaking binding on the Company or suchSubsidiary. Each Investor and/or assignee acknowledges that it is aware, andthat it will advise its representatives who are given access to suchinformation, that the United States securities laws may prohibit a person whohas material, non-public information concerning matters that may be disclosedto it pursuant to this Section 7.3 from purchasing or selling securities of theCompany or a company which may be, or may be affiliated with, a party to abusiness arrangement or proposed business arrangement with the Company or fromcommunicating such information to any other person under circumstances in whichit is reasonably foreseeable that such person is likely to purchase or sellsuch securities.
              7.4      No Conflicting Agreements. The Company will not take any action,enter into any agreement or make any commitment that would conflict orinterfere in any material respect with the obligations to the Investors underthe Agreements.
              7.5      Insurance. The Company shall not materially reduce the insurancecoverages described in Section 4.19.
              7.6      Compliance with Laws. The Company will comply in all materialrespects with all applicable laws, rules, regulations, orders and decrees ofall governmental authorities.
              7.7      Listing of Underlying Shares and Related Matters. Promptly followingthe date hereof, the Company shall take such action as may be required to causethe Shares and the Warrant Shares to be listed on Nasdaq no later than theClosing Date. Further, if the Company applies to have its Common Stock orother securities traded on any other principal stock exchange or market, itshall include in such application the Shares and the Warrant Shares and willtake such other action as is necessary to cause such Common Stock to be solisted. The
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Company will use commercially reasonable efforts to continue the listing andtrading of its Common Stock on Nasdaq and, in accordance, therewith, will usecommercially reasonable efforts to comply in all respects with the Company’sreporting, filing and other obligations under the bylaws or rules of suchexchange, as applicable.
              7.8      Termination of Covenants. The provisions of Sections 7.3 through 7.6shall terminate and be of no further force and effect upon the earlier of (i)the mutual consent of the Company and the Required Investors or (ii) the dateon which the Company’s obligations under the Registration Rights Agreementterminate.
     8.      Survival and Indemnification.
              8.1      Survival. All representations, warranties, covenants and agreementscontained in this Agreement shall be deemed to be representations, warranties,covenants and agreements as of the date hereof and shall survive the executionand delivery of this Agreement for a period of two (2) years from the date ofthis Agreement; provided, however, that the provisions contained in Section 7hereof shall survive in accordance therewith.
              8.2      Indemnification. The Company agrees to indemnify and hold harmless,on an after-tax and after insurance recovery basis, each Investor and itsAffiliates and their respective directors, officers, employees and agents fromand against any and all losses, claims, damages, liabilities and expenses(including without limitation reasonable attorney fees and disbursements andother expenses incurred in connection with investigating, preparing ordefending any action, claim or proceeding, pending or threatened and the costsof enforcement hereof) (collectively, “Losses”) to which such Person may becomesubject as a result of any breach of representation, warranty, covenant oragreement made by or to be performed on the part of the Company under theAgreements, and will reimburse any such Person for all such amounts as they areincurred by such Person.
              8.3      Conduct of Indemnification Proceedings. Promptly after receipt byany Person (the **"**Indemnified Person”) of notice of any demand, claim orcircumstances which would or might give rise to a claim or the commencement ofany action, proceeding or investigation in respect of which indemnity may besought pursuant to Section 8.2, such Indemnified Person shall promptly notifythe Company in writing and the Company shall assume the defense thereof,including the employment of counsel reasonably satisfactory to such IndemnifiedPerson, and shall assume the payment of all fees and expenses; provided,however, that the failure of any Indemnified Person so to notify the Companyshall not relieve the Company of its obligations hereunder except to the extentthat the Company is materially prejudiced by such failure to notify. In anysuch proceeding, any Indemnified Person shall have the right to retain its owncounsel, but the fees and expenses of such counsel shall be at the expense ofsuch Indemnified Person unless: (i) the Company and the Indemnified Personshall have mutually agreed to the retention of such counsel; or (ii) in thereasonable judgment of counsel to such Indemnified Person representation ofboth parties by the same counsel would be inappropriate due to actual orpotential differing interests between them. The Company shall not be liablefor any settlement of any proceeding effected without its written consent,which consent shall not be unreasonably withheld, but if settled with suchconsent, or if there be a final
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 judgment for the plaintiff, the Company shall indemnify and hold harmlesssuch Indemnified Person from and against any loss or liability (to the extentstated above) by reason of such settlement or judgment. Without the priorwritten consent of the Indemnified Person, which consent shall not beunreasonably withheld, the Company shall not effect any settlement of anypending or threatened proceeding in respect of which any Indemnified Person isor could have been a party and indemnity could have been sought hereunder bysuch Indemnified Party, unless such settlement includes an unconditionalrelease of such Indemnified Person from all liability arising out of suchproceeding.
     9.      Miscellaneous.
              9.1      Successors and Assigns. This Agreement may not be assigned by a partyhereto without the prior written consent of the Company or the RequiredInvestors, as applicable, provided, however, (i) an Investor may assign itsrights and delegate its duties hereunder in whole or in part to an Affiliate orto a third party acquiring some portion or all of its Securities in a privatetransaction without the prior written consent of the Company or the otherInvestors, after notice duly given by such Investor to the Company and theother Investors, provided, that no such assignment or obligation shall affectthe obligations of such Investor hereunder, and (ii) the Company may assign itsrights and delegate its duties hereunder to any surviving or successorcorporation in connection with a merger or consolidation of the Company withanother corporation, or a sale, transfer or other disposition of all orsubstantially all of the Company’s assets to another corporation, without theprior written consent of the Investors, after notice duly given by the Companyto the Investors. The terms and conditions of this Agreement shall inure tothe benefit of and be binding upon the respective permitted successors andassigns of the parties. Nothing in this Agreement, express or implied, isintended to confer upon any party other than the parties hereto or theirrespective successors and assigns any rights, remedies, obligations, orliabilities under or by reason of this Agreement, except as expressly providedin this Agreement.
              9.2      Counterparts; Faxes. This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument. This Agreement may alsobe executed via facsimile, which shall be deemed an original.
              9.3      Titles and Subtitles. The titles and subtitles used in this Agreementare used for convenience only and are not to be considered in construing orinterpreting this Agreement.
              9.4      Notices. Unless otherwise provided, any notice required or permittedunder this Agreement shall be given in writing and shall be deemed effectivelygiven as hereinafter described (i) if given by personal delivery, then suchnotice shall be deemed given upon such delivery, (ii) if given by telex ortelecopier, then such notice shall be deemed given upon receipt of confirmationof complete transmittal, (iii) if given by mail, then such notice shall bedeemed given upon the earlier of (A) receipt of such notice by the recipient or(B) three days after such notice is deposited in first class mail, postageprepaid, and (iv) if given by an internationally recognized overnight aircourier, then such notice shall be deemed given one day
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after delivery to such carrier. All notices shall be addressed to the party tobe notified at the address as follows, or at such other address as such partymay designate by ten days’ advance written notice to the other party:
                          If to the Company:
 Audible, Inc.