Document:

ex10-36

 

Exhibit 10.36

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (the “Agreement”) is made and entered
into as of this 15th day of February, 2002 by and among Audible, Inc., a
Delaware corporation (the “Company”), and the “Investors” named in that certain
Purchase Agreement by and among the Company and the Investors (the “Purchase
Agreement”).

     The parties hereby agree as follows:

     1.     Certain Definitions.

     
        
       As used in this Agreement, the following terms shall have the following
meanings:

     
        
     “Affiliate” means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.

     
        
     “Business Day” means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.

     
        
     “Closing Price” as of any date means (a) the closing bid price of one
share of Common Stock as reported on The Nasdaq Stock Market, Inc. National
Market System (“Nasdaq”) on such date, (b) if no closing bid price is
available, the average of the high bid and the low asked price quoted on Nasdaq
on such date, or (c) if the shares of Common Stock are not then quoted on
Nasdaq, the value of one share of Common Stock on such date as shall be
determined in good faith by the Board of Directors of the Company and the
Required Investors (as defined in the Purchase Agreement), provided, that if
the Board of Directors of the Company and the Required Investors are unable to
agree upon the value of a share of Common Stock pursuant to this subpart (c),
the Company and the Required Investors shall jointly select an appraiser who is
experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne one half by the
Company and one half by the Investors.

     
        
     “Common Stock” shall mean the Company’s common stock, par value $.01 per
share.

     
        
     “Investors” shall mean the Investors identified in the Purchase Agreement
and any Affiliate or permitted transferee of any Investor who is a subsequent
holder of any Warrants or Registrable Securities.

     
        
     “Prospectus” shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.

 

 

     
        
     “Register,” “registered” and “registration” refer to a registration made
by preparing and filing a Registration Statement or similar document in
compliance with the 1933 Act (as defined below), and the declaration or
ordering of effectiveness of such Registration Statement or document.

     
        
     “Registrable Securities” shall mean the shares of Common Stock issuable
(i) pursuant to the Purchase Agreement, (ii) upon the exercise of the Warrants,
and (iii) pursuant to the provisions of Sections 2(a) and 2(c) below, and any
other securities issued or issuable with respect to or in exchange for
Registrable Securities; provided, that, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a Registration Statement or Rule
144 under the 1933 Act, or (B) such security becoming eligible for sale by the
Investors pursuant to Rule 144(k).

     
        
     “Registration Statement” shall mean any registration statement of the
Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.

     
        
     “SEC” means the U.S. Securities and Exchange Commission.

     
        
     “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

     
        
     “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

     
        
     “Warrants” means, the warrants to purchase shares of Common Stock issued
to the Investors pursuant to the Purchase Agreement, the form of which is
attached to the Purchase Agreement as Exhibit A.

     2.     Registration.

     
        
        
     (a)     Registration Statements.

     
        
        
     (i)      Promptly following the closing of the purchase and sale of shares of
Common Stock and Warrants contemplated by the Purchase Agreement (the “Closing
Date”) but no later than April 2, 2002, the Company shall prepare and file with
the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then
available to the Company, on such form of registration statement as is then
available to effect a registration for resale of the Registrable Securities,
subject to the Investors’ consent), covering the resale of the Registrable
Securities in an amount at least equal to the number of shares of Common Stock
issued to the Investors on the Closing Date plus the number of shares of Common
Stock necessary to permit the exercise in full of the Warrants. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Registrable
Securities. The Company shall

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use its reasonable best efforts to obtain from
each person who now has
piggyback registration rights a waiver of those rights with respect to the
Registration Statement. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors and their
counsel prior to its filing or other submission. If a Registration Statement
covering the Registrable Securities is not filed with the SEC on or before
April 2, 2002, the Company will make pro rata payments to each Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.0% of the
aggregate amount paid by such Investor on the Closing Date to the Company for
any 30-day period or pro rata for any portion thereof following the date by
which such Registration Statement should have been filed for which no
Registration Statement is filed with respect to the Registrable Securities.
Such payments shall be in partial compensation to the Investors, and shall not
constitute the Investors’ exclusive remedy for such events. Such payments
shall be made to each Investor in cash or, at the option of such Investor, in
additional fully paid and non-assessable shares of Common Stock not later than
three Business Days following the end of each 30-day period. For this purpose,
each share of Common Stock shall be deemed to have a value equal to the
arithmetic mean of the Closing Prices for the ten (10) trading days beginning
twenty (20) trading days prior to the issuance of such shares.

     
        
        
     (ii)     Additional Registrable Securities. Upon the written demand of any
Investor and upon the issuance or deemed issuance by the Company of shares of
Common Stock such as to trigger the anti-dilution provisions contained in the
Warrants regarding issuances or deemed issuances by the Company of shares of
Common Stock at a price per share less than the then effective Warrant Price
(as defined in the Warrant), or any other change in the Warrant Price such that
additional shares of Common Stock become issuable pursuant to the Warrants, the
Company shall prepare and file with the SEC one or more Registration Statements
on Form S-3 (or, if Form S-3 is not then available to the Company, on such form
of registration statement as is then available to effect a registration for
resale of such additional shares of Common Stock (the “Additional Warrant
Shares”), subject to the Investors’ consent) covering the resale of the
Additional Warrant Shares, but only to the extent the Additional Warrant Shares
are not at the time covered by an effective Registration Statement. Such
Registration Statement also shall cover, to the extent allowable under the 1933
Act and the rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from stock
splits, stock dividends or similar transactions with respect to the Additional
Warrant Shares. The Company shall use its reasonable best efforts to obtain
from each person who now has piggyback registration rights a waiver of those
rights with respect to such Registration Statement. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Warrant Shares is required to be
filed under this Section 2(a)(ii) and is not filed with the SEC within twenty
Business Days of the request of any Investor, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the aggregate amount paid by such Investor on the
Closing Date to the Company for 30-day period or pro rata for any portion
thereof following the date by which such Registration Statement should have
been filed for which no

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Registration Statement is filed with respect to the
Additional Warrant Shares. Such payments shall be in partial compensation to
the Investors, and shall not constitute the Investors’
exclusive remedy for such events. Such payments shall be made to each
Investor in cash or, at the option of such Investor, in additional fully paid
and non-assessable shares of Common Stock not later than three Business Days
following the end of each 30-day period. Each share of Common Stock shall be
deemed to have a value equal to the arithmetic mean of the Closing Prices for
the ten (10) trading days beginning twenty (20) trading days prior to the
issuance of such shares.

     
        
        
     (b)     Expenses. The Company will pay all expenses associated with each
registration, including filing and printing fees, counsel and accounting fees
and expenses, costs associated with clearing the Registrable Securities for
sale under applicable state securities laws, listing fees and the Investors’
reasonable expenses in connection with the registration, but excluding
discounts, commissions, fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals with respect to the Registrable
Securities being sold.

     
        
        
     (c)     Effectiveness.

     
        
        
     (i)      The Company shall use commercially reasonable efforts to have the
Registration Statement declared effective as soon as practicable. If (x) a
Registration Statement covering the Registrable Securities is not declared
effective by the SEC on or prior to June 2, 2002, or (y) a Registration
Statement covering Additional Warrant Shares is not declared effective by the
SEC within 60 days following the demand of an Investor relating to the
Additional Warrant Shares covered thereby, then the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.0% of the aggregate amount invested by such Investor in the
Initial Securities and/or the Remaining Securities, as applicable, for any
month or pro rata for any portion thereof following the date by which such
Registration Statement should have been effective (the “Blackout Period”).
Such payments shall be in partial compensation to the Investors, and shall not
constitute the Investors’ exclusive remedy for such events. The amounts
payable as liquidated damages pursuant to this paragraph shall be paid monthly
within three (3) Business Days of the last day of each month following the
commencement of the Blackout Period until the termination of the Blackout
Period. Such payments shall be made to each Investor in cash or, at the option
of such Investor, in additional fully paid and non-assessable shares of Common
Stock. Each share of Common Stock shall be deemed to have a value equal to the
arithmetic mean of the Closing Prices for the ten (10) trading days beginning
twenty (20) trading days prior to the issuance of such shares.

     
        
        
     (ii)     For not more than twenty (20) consecutive days or for a total of not
more than forty-five (45) days in any twelve (12) month period, the Company may
delay the disclosure of material non-public information concerning the Company,
by suspending the use of any Prospectus included in any registration
contemplated by this Section containing such information, the disclosure of
which at the time is not, in the good faith opinion of the Company, in the best
interests of the Company (an “Allowed Delay”); provided, that the Company shall
promptly (a) notify the Investors in writing of the existence of (but in no
event, without the prior written consent of an Investor, shall the Company
disclose to such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay, and

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(b)  advise the
Investors in writing to cease all sales under the Registration Statement until
the end of the Allowed Delay.

     
        
        
     (d)     Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering,
the Company shall have the right to select an investment banker and manager to
administer the offering, which investment banker or manager shall be reasonably
satisfactory to the Required Investors.

     3.     Company Obligations. The Company will use commercially reasonable
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:

     
        
        
     (a)     use commercially reasonable efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement as amended from time to time,
have been sold, and (ii) the date on which all Registrable Securities covered
by such Registration Statement may be sold pursuant to Rule 144(k);

     
        
        
     (b)     prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the period specified in
Section 3(a) and to comply with the provisions of the 1933 Act and the 1934 Act
with respect to the distribution of all of the Registrable Securities covered
thereby;

     
        
        
     (c)     provide copies to and permit counsel designated by the Investors to
review each Registration Statement and all amendments and supplements thereto
no fewer than three (3) days prior to their filing with the SEC and not file
any document to which such counsel reasonably objects;

     
        
        
     (d)     furnish to the Investors and their legal counsel (i) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company (but not later than two (2) Business Days after the filing date,
receipt date or sending date, as the case may be, one (1) copy of any
Registration Statement and any amendment thereto, each preliminary prospectus
and Prospectus and each amendment or supplement thereto, and each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than any portion of any thereof
which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as each Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor that are
covered by the related Registration Statement;

     
        
        
     (e)     in the event the Company selects an underwriter for the offering, the
Company shall enter into and perform its reasonable obligations under an
underwriting

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agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter of such offering;

     
        
        
     (f)     if required by the underwriter, or if any Investor is described in the
Registration Statement as an underwriter, the Company shall furnish, on the
effective date of the Registration Statement (except with respect to clause (i)
below) and on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement
(including any Investor deemed to be an underwriter), (i) (A) in the case of an
underwritten offering, an opinion, dated as of the closing date of the sale of
Registrable Securities to the underwriters, from independent legal counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors participating in such
underwritten offering or (B) in the case of an “at the market” offering, an
opinion, dated as of or promptly after the effective date of the Registration
Statement to the Investors, from independent legal counsel representing the
Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in a public offering, addressed to the
Investors, and (ii) a letter, dated as of the effective date of such
Registration Statement and confirmed as of the applicable dates described
above, from the Company’s independent certified public accountants in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters (including any Investor deemed to be an underwriter);

     
        
        
     (g)     use commercially reasonable efforts to (i) prevent the issuance of any
stop order or other suspension of effectiveness and, (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible
moment;

     
        
        
     (h)     prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
Investors and their counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions requested by the Investors
and do any and all other commercially reasonable acts or things necessary or
advisable to enable the distribution in such jurisdictions of the Registrable
Securities covered by the Registration Statement;

     
        
        
     (i)      use commercially reasonable efforts to cause all Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange, interdealer quotation system or other market on which similar
securities issued by the Company are then listed;

     
        
        
     (j)     immediately notify the Investors, at any time when a Prospectus
relating to Registrable Securities is required to be delivered under the 1933
Act, upon discovery that, or upon the happening of any event as a result of
which, the Prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and at the request
of any such holder, promptly prepare and furnish to such holder a reasonable
number of copies of a supplement to or

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an amendment of such Prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; and

     
        
        
     (k)     otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934
Act, take such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available to its
security holders, as soon as reasonably practicable, but not later than the
Availability Date (as defined below), an earnings statement covering a period
of at least twelve (12) months, beginning after the effective date of each
Registration Statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the 1933 Act (for the purpose of this subsection 3(k),
“Availability Date” means the 45th day following the end of the fourth fiscal
quarter that includes the effective date of such Registration Statement, except
that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal
year, “Availability Date” means the 90th day after the end of such fourth
fiscal quarter).

     4.     Due Diligence Review; Information. The Company shall make available,
during normal business hours, for inspection and review by the Investors,
advisors to and representatives of the Investors (who may or may not be
affiliated with the Investors and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of shares of Common
Stock on behalf of the Investors pursuant to a Registration Statement or
amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company’s officers, directors and employees, within
a reasonable time period, to supply all such information reasonably requested
by the Investors or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investors
and such representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of such Registration Statement.

            The Company shall not disclose material nonpublic information to the
Investors, or to advisors to or representatives of the Investors, unless prior
to disclosure of such information the Company identifies such information as
being material nonpublic information and provides the Investors, such advisors
and representatives with the opportunity to accept or refuse to accept such
material nonpublic information for review.

     5.     Obligations of the Investors.

     
        
        
     (a)     Each Investor shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the

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registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
each Investor of the information the Company requires from such Investor if
such Investor elects to have any of the Registrable Securities
included in the Registration Statement. An Investor shall provide such
information to the Company at least two (2) Business Days prior to the first
anticipated filing date of such Registration Statement if such Investor elects
to have any of the Registrable Securities included in the Registration
Statement.

     
        
        
     (b)     Each Investor, by its acceptance of the Registrable Securities agrees
to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities from such Registration
Statement.

     
        
        
     (c)     In the event the Company, at the request of the Investors, determines
to engage the services of an underwriter, such Investor agrees to enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering and
take such other actions as are reasonably required in order to expedite or
facilitate the dispositions of the Registrable Securities.

     
        
        
     (d)     Each Investor agrees that, upon receipt of any notice from the Company
of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii)
or (ii) the happening of an event pursuant to Section 3(j) hereof, such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities,
until the Investor’s receipt of the copies of the supplemented or amended
prospectus filed with the SEC and declared effective and, if so directed by the
Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor’s possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such notice.

     
        
        
     (e)     No Investor may participate in any third party underwritten
registration hereunder unless it (i) agrees to sell the Registrable Securities
on the basis provided in any underwriting arrangements in usual and customary
form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions. Notwithstanding the foregoing, no Investor shall be
required to make any representations to such underwriter, other than those with
respect to itself and the Registrable Securities owned by it, including its
right to sell the Registrable Securities, and any indemnification in favor of
the underwriter by the Investors shall be several and not joint and limited in
the case of any Investor, to the proceeds received by such Investor from the
sale of its Registrable Securities. The scope of any such indemnification in
favor of an underwriter shall be limited to the same extent as the indemnity
provided in Section 6(b) hereof.

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     6.     Indemnification.

     
        
        
     (a)     Indemnification by the Company. The Company will indemnify and hold
harmless each Investor and its officers, directors, members, employees and
agents, successors and
assigns, and each other person, if any, who controls such Investor within
the meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, officer, director, member,
or controlling person may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof; (ii) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information
herein called a “Blue Sky Application”); (iii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; (iv) any violation by the Company
or its agents of any rule or regulation promulgated under the 1933 Act
applicable to the Company or its agents and relating to action or inaction
required of the Company in connection with such registration; or (v) any
failure to register or qualify the Registrable Securities included in any such
Registration in any state where the Company or its agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor’s behalf (the undertaking of any
underwriter chosen by the Company being attributed to the Company) and will
reimburse such Investor, and each such officer, director or member and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by such Investor or any such controlling person in
writing specifically for use in such Registration Statement or Prospectus.

     
        
        
     (b)     Indemnification by the Investors. In connection with any registration
pursuant to the terms of this Agreement, each Investor will furnish to the
Company in writing such information as the Company reasonably requests
concerning the holders of Registrable Securities or the proposed manner of
distribution for use in connection with any Registration Statement or
Prospectus and agrees, severally but not jointly, to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its directors,
officers, employees, stockholders and each person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expense (including reasonable attorney fees) resulting from any
untrue statement of a material fact or any omission of a material fact required
to be stated in the Registration Statement or Prospectus or preliminary
prospectus or amendment or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the extent that
such untrue statement or omission is contained in any information furnished in
writing by such Investor to the Company specifically for inclusion in such
Registration Statement or Prospectus or amendment or supplement thereto. In no
event shall the

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liability of an Investor be greater in amount than the dollar
amount of the proceeds (net of all expense paid by such Investor and the amount
of any damages such holder has otherwise been required to pay by reason of such
untrue statement or omission) received by such Investor upon the sale
of the Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.

     
        
        
     (c)     Conduct of Indemnification Proceedings. Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; provided that any person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party with
respect to such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such person); and
provided, further, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
hereunder, except to the extent that such failure to give notice shall
materially adversely affect the indemnifying party in the defense of any such
claim or litigation. It is understood that the indemnifying party shall not,
in connection with any proceeding in the same jurisdiction, be liable for fees
or expenses of more than one separate firm of attorneys at any time for all
such indemnified parties. No indemnifying party will, except with the consent
of the indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.

     
        
        
     (d)     Contribution. If for any reason the indemnification provided for in
the preceding paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any person not guilty of such fraudulent misrepresentation.
In no event shall the contribution obligation of a holder of Registrable
Securities be greater in amount than the dollar amount of the proceeds (net of
all expenses paid by such holder and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

-10-

 

     7.     Miscellaneous.

     
        
        
     (a)     Amendments and Waivers. This Agreement may be amended only by a
writing signed by the parties hereto. The Company may take any action herein
prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or omission
to act, of the Required Investors.

     
        
        
     (b)     Notices. All notices and other communications provided for or
permitted hereunder shall be made as set forth in Section 9.4 of the Purchase
Agreement.

     
        
        
     (c)     Assignments and Transfers by Investors. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Investors and
their respective successors and assigns. An Investor may transfer or assign,
in whole or from time to time in part, to one or more persons its rights
hereunder in connection with the transfer of Registrable Securities by such
Investor to such person, provided that such Investor complies with all laws
applicable thereto and provides written notice of assignment to the Company
promptly after such assignment is effected.

     
        
        
     (d)     Assignments and Transfers by the Company. This Agreement may not be
assigned by the Company (whether by operation of law or otherwise) without the
prior written consent of each Investor, provided, however, that the Company may
assign its rights and delegate its duties hereunder to any surviving or
successor corporation in connection with a merger or consolidation of the
Company with another corporation, or a sale, transfer or other disposition of
all or substantially all of the Company’s assets to another corporation,
without the prior written consent of the Investors, after notice duly given by
the Company to each Investor.

     
        
        
     (e)     Benefits of the Agreement. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

     
        
        
     (f)     Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.

     
        
        
     (g)     Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

     
        
        
     (h)     Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be

-11-

 

interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which renders any provisions hereof
prohibited or unenforceable in any respect.

     
        
        
     (i)      Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

     
        
        
     (j)      Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

     
        
        
     (k)     Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the choice of law principles thereof. Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.

-12-

 

     
        
     IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.

	 	 	 
	The Company:	 	
AUDIBLE, INC.
	 
	 	 	
By: /s/ Donald R. Katz
	 	 	
Name: Donald R. Katz
	 	 	
Title: Chairman and Chief Executive Officer
	 
	The Investors:	 	
SPECIAL SITUATIONS FUND III, L.P.
	 
	 	 	
By: /s/ Austin Marxe
	 	 	
Name: Austin Marxe
	 	 	
Title: General Partner
	 
	 	 	
SPECIAL SITUATIONS CAYMAN FUND, L.P.
	 
	 	 	
By: /s/ Austin Marxe
	 	 	
Name: Austin Marxe
	 	 	
Title: General Partner
	 
	 	 	
SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.
	 
	 	 	
By: /s/ Austin Marxe
	 	 	
Name: Austin Marxe
	 	 	
Title: General Partner
	 
	 	 	
SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.
	 
	 	 	
By: /s/ Austin Marxe
	 	 	
Name: Austin Marxe
	 	 	
Title: General Partner

-13-ex10-37

 

Exhibit 10.37

     THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS.

     SUBJECT TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID
AFTER 5:00 P.M. EASTERN TIME ON [FIFTH ANNIVERSARY OF CLOSING DATE] (the
“EXPIRATION DATE”).

No. ____________

AUDIBLE, INC.

WARRANT TO PURCHASE [___] SHARES OF

COMMON STOCK, PAR VALUE $.01 PER SHARE

     For VALUE RECEIVED, [_________] (“Warrantholder”), is entitled
to purchase, subject to the provisions of this Warrant, from Audible, Inc., a
Delaware corporation (“Company”), at any time not later than 5:00 P.M., Eastern
time, on the Expiration Date, at an exercise price per share equal to $1.15
(the exercise price in effect being herein called the “Warrant Price”),
[___] shares (“Warrant Shares”) of the Company’s Common Stock, par value
$.01 per share (“Common Stock”). The number of Warrant Shares purchasable upon
exercise of this Warrant and the Warrant Price shall be subject to adjustment
from time to time as described herein.

     Section 1.      Registration. The Company shall maintain books for the
transfer and registration of the Warrant. Upon the initial issuance of this
Warrant, the Company shall issue and register the Warrant in the name of the
Warrantholder.

     Section 2.      Transfers. As provided herein, this Warrant may be transferred
only pursuant to a registration statement filed under the Securities Act of
1933, as amended (“Securities Act”), or an exemption from such registration.
Subject to such restrictions, the Company shall transfer this Warrant from time
to time upon the books to be maintained by the Company for that purpose, upon
surrender thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer and such other documents as may be reasonably
required by the Company, including, if required by the Company, an opinion of
its counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act of 1933, to establish that such transfer is
being made in accordance with the terms hereof, and a new Warrant shall be
issued to the transferee and the surrendered Warrant shall be canceled by the
Company.

 

 

     Section 3.      Exercise of Warrant. Subject to the provisions hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time upon
surrender of the Warrant, together with delivery of the duly executed Warrant
exercise form attached hereto as Appendix A (the “Exercise Agreement”) and
payment by cash, certified check or wire transfer of funds for the aggregate
Warrant Price for that number of Warrant Shares then being purchased, to the
Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof). The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder’s
designee, as the record owner of such shares, as of the close of business on
the date on which this Warrant shall have been surrendered (or evidence of
loss, theft or destruction thereof and security or indemnity satisfactory to
the Company), the Warrant Price shall have been paid and the completed Exercise
Agreement shall have been delivered. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof within a reasonable
time, not exceeding three (3) business days, after this Warrant shall have been
so exercised. The certificates so delivered shall be in such denominations as
may be requested by the holder hereof and shall be registered in the name of
such holder or such other name as shall be designated by such holder. If this
Warrant shall have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.
As used herein, “business day” means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.

     Section 4.      Compliance with the Securities Act of 1933. The Company may
cause the legend set forth on the first page of this Warrant to be set
forth on each Warrant or similar legend on any security issued or issuable
upon exercise of this Warrant, unless counsel for the Company is of the
opinion as to any such security that such legend is unnecessary.

     Section 5.      Payment of Taxes. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Warrant Shares issuable
upon the exercise of the Warrant; provided, however, that the Company shall
not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder of this
Warrant in respect of which such shares are issued, and in such case, the
Company shall not be required to issue or deliver any certificate for
Warrant Shares or any Warrant until the person requesting the same has paid
to the Company the amount of such tax or has established to the Company’s
reasonable satisfaction that such tax has been paid. The holder shall be
responsible for income and gift taxes due under federal, state or other
law, if any such tax is due.

     Section 6.      Mutilated or Missing Warrants. In case this Warrant shall
be mutilated, lost, stolen, or destroyed, the Company shall issue in
exchange and substitution of

-2-

 

and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and for the purchase of a like
number of Warrant Shares, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or
destruction of the Warrant, and with respect to a lost, stolen or destroyed
Warrant, reasonable indemnity or bond with respect thereto, if requested by
the Company.

     Section 7.      Reservation of Common Stock. The Company hereby represents
and warrants that there have been reserved, and the Company shall at all
applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common
Stock, sufficient shares to provide for the exercise of the rights of
purchase represented by this Warrant. The Company agrees that all Warrant
Shares issued upon exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares upon the due exercise
of this Warrant, duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock of the Company.

     Section 8.      Adjustments. Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to
this Warrant shall be subject to adjustment from time to time as set forth
hereinafter.

     
     
     (a)      If the Company shall, at any time or from time to time while this
Warrant is outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares of Common
Stock into a greater number of shares or combine its outstanding shares of
Common Stock into a smaller number of shares or issue by reclassification
of its outstanding shares of Common Stock any shares of its capital stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then the number
of Warrant Shares purchasable upon exercise of the Warrant and the Warrant
Price in effect immediately prior to the date upon which such change shall
become effective, shall be adjusted by the Company so that the
Warrantholder thereafter exercising the Warrant shall be entitled to
receive the number of shares of Common Stock or other capital stock which
the Warrantholder would have received if the Warrant had been exercised
immediately prior to such event upon payment of a Warrant Price that has
been adjusted to reflect a fair allocation of the economics of such event
to the Warrantholder. Such adjustments shall be made successively whenever
any event listed above shall occur.

     
     
     (b)      If any capital reorganization, reclassification of the capital
stock of the Company, consolidation or merger of the Company with another
corporation in which the Company is not the survivor, or sale, transfer or
other disposition of all or substantially all of the Company’s assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition, lawful and adequate provision shall be made whereby each
Warrantholder shall thereafter have the right to purchase and receive upon
the basis and upon the terms and conditions herein specified and in lieu of
the Warrant Shares immediately theretofore issuable upon

-3-

 

exercise of the
Warrant, such shares of stock, securities or assets as would have been
issuable or payable with respect to or in exchange for a number of Warrant
Shares equal to the number of Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, had such reorganization,
reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of each
Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant Price) shall thereafter
be applicable, as nearly equivalent as may be practicable in relation to
any shares of stock, securities or properties thereafter deliverable upon
the exercise thereof. The Company shall not effect any such consolidation,
merger, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other
appropriate corporation or entity shall assume the obligation to deliver to
the holder of the Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of
this paragraph (b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.

     
     
     (c)      In case the Company shall fix a payment date for the making of a
distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends or distributions
referred to in Section 8(a)), or subscription rights or warrants, the
Warrant Price to be in effect after such payment date shall be determined
by multiplying the Warrant Price in effect immediately prior to such
payment date by a fraction, the numerator of which shall be the total
number of shares of Common Stock outstanding multiplied by the Market Price
(as defined below) per share of Common Stock immediately prior to such
payment date, less the fair market value (as determined by the Company’s
Board of Directors in good faith) of said assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants,
and the denominator of which shall be the total number of shares of Common
Stock outstanding multiplied by such Market Price per share of Common Stock
immediately prior to such payment date. “Market Price” as of a particular
date (the “Valuation Date”) shall mean the following: (a) if the Common
Stock is then listed on a national stock exchange, the closing sale price
of one share of Common Stock on such exchange on the last trading day prior
to the Valuation Date; (b) if the Common Stock is then quoted on the NASDAQ
Stock Market, Inc. National Market System (“Nasdaq”), the closing sale
price of one share of Common Stock on Nasdaq on the last trading day prior
to the Valuation Date or, if no such closing sale price is available, the
average of the high bid and the low asked price quoted on Nasdaq on the
last trading day prior to the Valuation Date; or (c) if the Common Stock is
not then listed on a national stock exchange or quoted on Nasdaq, the Fair
Market Value of one share of Common Stock as of the Valuation Date, shall
be determined in good faith by the Board of Directors of the Company and
the Warrantholder. The Board

-4-

 

of Directors of the Company shall respond
promptly, in writing, to an inquiry by the Warrantholder prior to the
exercise hereunder as to the Market Value of a share of Common Stock as
determined by the Board of Directors of the Company. In the event that the
Board of Directors of the Company and the Warrantholder are unable to agree
upon the Market Value in respect of subpart (c) hereof, the Company and the
Warrantholder shall jointly select an appraiser, who is experienced in such
matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne evenly by the
Company and the Warrantholder. Such adjustment shall be made successively
whenever such a payment date is fixed.

     
     
     (d)      For the term of this Warrant, in addition to the provisions
contained above, the Warrant Price shall be subject to adjustment as
provided below. An adjustment to the Warrant Price shall become effective
immediately after the payment date in the case of each dividend or
distribution and immediately after the effective date of each other event
which requires an adjustment.

     
     
     (e)      In the event that, as a result of an adjustment made pursuant to
this Section 8, the holder of this Warrant shall become entitled to receive
any shares of capital stock of the Company other than shares of Common
Stock, the number of such other shares so receivable upon exercise of this
Warrant shall be subject thereafter to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in this Warrant.

     
     
     (f)      Except as provided in subsection (g) hereof, if and whenever the
Company shall issue or sell, or is, in accordance with any of subsections
(f)(l) through (f)(6) hereof, deemed to have issued or sold, any shares of
Common Stock for a consideration per share less than the Warrant Price in
effect immediately prior to the time of such issue or sale, then and in
each such case (a “Trigger Issuance”) the then-existing Warrant Price,
shall be reduced, as of the close of business on the effective date of the
Trigger Issuance, to a price determined as follows:

	 	 	 	 	 
	 	Adjusted Warrant Price	
 = 
	(A x B) + D	 
	 	 	 	A+C	 

        
           
     where

        
           
     “A” equals the number of shares of Common Stock outstanding, including
Additional Shares (as defined below) deemed to be issued hereunder, immediately
preceding such Trigger Issuance;

        
           
     “B” equals the Warrant Price in effect immediately preceding such Trigger
Issuance;

-5-

 

        
           
     “C” equals the number of Additional Shares of Common Stock issued or
deemed issued hereunder as a result of the Trigger Issuance; and

        
           
     “D” equals the aggregate consideration, if any, received or deemed to be
received by the Company upon such Trigger Issuance.

     
     
     For purposes of this subsection (f), “Additional Shares of Common Stock”
shall mean all shares of Common Stock issued by the Company or deemed to be
issued pursuant to this subsection (f), other than Excluded Issuances (as
defined in subsection (g) hereof).

     
     
     For purposes of this subsection (f), the following subsections (f)(l) to
(f)(6) shall also be applicable (subject, in each such case, to the provisions
of subsection (g) hereof) and to each other subsection contained in this
subsection (f):

		
	 	        (f)(1) Issuance of Rights or Options. In case at any time
the Company shall in any manner grant (directly and not by
assumption in a merger or otherwise) any warrants or other rights
to subscribe for or to purchase, or any options for the purchase
of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options
being called “Options” and such convertible or exchangeable stock
or securities being called “Convertible Securities”) whether or not
such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount,
if any, received or receivable by the Company as consideration for
the granting of such Options, plus (y) the aggregate amount of
additional consideration payable to the Company upon the exercise
of all such Options, plus (z), in the case of such Options which
relate to Convertible Securities, the aggregate amount of
additional consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Warrant Price in
effect immediately prior to the time of the granting of such
Options, then the total number of shares of Common Stock issuable
upon the exercise of such Options or upon conversion or exchange of
the total amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for
such price per share as of the date of granting of such Options or
the issuance of such Convertible Securities and thereafter shall be
deemed to be outstanding for purposes of adjusting the Warrant
Price. Except as otherwise provided in subsection 8(f)(3), no
adjustment of the Warrant Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual

-6-

 

		
	 	issue of such Common
Stock upon conversion or exchange of such Convertible Securities.

		
	 	        (f)(2) Issuance of Convertible Securities. In case the
Company shall in any manner issue (directly and not by assumption
in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price
per share for which
Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus (y) the aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total number of shares
of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Warrant Price
in effect immediately prior to the time of such issue or sale, then
the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date
of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the
Warrant Price, provided that (a) except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant Price shall be
made upon the actual issuance of such Common Stock upon conversion
or exchange of such Convertible Securities and (b) no further
adjustment of the Warrant Price shall be made by reason of the
issue or sale of Convertible Securities upon exercise of any
Options to purchase any such Convertible Securities for which
adjustments of the Warrant Price have been made pursuant to the
other provisions of subsection 8(f).

		
	 	        (f)(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase
price provided for in any Option referred to in subsection 8(f)(l)
hereof, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible
Securities referred to in subsections 8(f)(l) or 8(f)(2) are
convertible into or exchangeable for Common Stock shall change at
any time (including, but not limited to, changes under or by reason
of provisions designed to protect against dilution), the Warrant
Price in effect at the time of such event shall forthwith be
readjusted to the Warrant Price which would have been in effect at
such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the termination of any
Option for which any adjustment was made pursuant to this
subsection 8(f) or any right to convert or exchange Convertible
Securities for which any adjustment was made pursuant to this
subsection 8(f) (including without limitation upon the redemption
or purchase 

-7-

 

		
	 	for consideration of Convertible Securities by the
Company), the Warrant Price then in effect hereunder shall
forthwith be changed to the Warrant Price which would have been in
effect at the time of such termination had such Option or
Convertible Securities, to the extent outstanding immediately prior
to such termination, never been issued.

		
	 	        (f)(4) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be
the net amount received by the Company therefor, after deduction
therefrom of any expenses incurred or any underwriting commissions
or
concessions paid or allowed by the Company in connection therewith.
In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by
the Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board of Directors
of the Company, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of
the Company, together comprising one integral transaction in which
no specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the Board of
Directors of the Company.

		
	 	        (f)(5) Record Date. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling
them (i) to receive a dividend or other distribution payable in
Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.

		
	 	        (f)(6) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or
held by or for the account of the Company or any of its
wholly-owned subsidiaries, and the disposition of any such shares
(other than the cancellation or retirement thereof) shall be
considered an issue or sale of Common Stock for the purpose of this
subsection (f).

     
     
     (g)      Anything herein to the contrary notwithstanding, the Company shall not
be required to make any adjustment of the Warrant Price in the case of the
issuance of (A) capital stock, Options or Convertible Securities issued to
directors, officers, employees or consultants of the Company in connection with
their service as directors of the Company, their employment by

-8-

 

the Company or
their retention as consultants by the Company pursuant to an equity
compensation program approved by the Board of Directors of the Company or the
compensation committee of the Board of Directors of the Company, (B) shares of
Common Stock upon the conversion or exercise of Options or Convertible
Securities issued prior to the date hereof, (C) shares of Common Stock issued
or issuable by reason of a dividend, stock split or other distribution on the
Common Stock (but only to the extent that such a dividend, split or
distribution results in an adjustment in the Warrant Price pursuant to the
other provisions of this Warrant), (D) any capital stock, Options or
Convertible Securities to Random House, Inc. (or its designees), (E) any
capital stock, Options or Convertible Securities to financial institutions or
lessors in connection with commercial credit arrangements, equipment financings
or similar transactions, (F) any capital stock, Options or Convertible
Securities to strategic business partners (or proposed partners) in connection
with strategic transactions, and (G) shares of Series A Convertible
Preferred Stock (the “Series A Preferred Stock”) in payment of semi-annual
dividends on the Company’s outstanding shares of Series A Preferred Stock in
accordance with the terms thereof (collectively, “Excluded Issuances”).

     Section 9.      Fractional Interest. The Company shall not be required to
issue fractions of Warrant Shares upon the exercise of the Warrant. If any
fractional share of Common Stock would, except for the provisions of the first
sentence of this Section 9, be delivered upon such exercise, the Company, in
lieu of delivering such fractional share, shall pay to the exercising holder of
this Warrant an amount in cash equal to the Fair Market Value of such
fractional share of Common Stock on the date of exercise. As used in this
Warrant, “Fair Market Value” of a share of Common Stock as of a particular date
(the “Valuation Date”) shall mean the following: (a) if the Common Stock is
then listed on a national stock exchange, the closing sale price of one share
of Common Stock on such exchange on the last trading day prior to the Valuation
Date; (b) if the Common Stock is then quoted on Nasdaq, the closing sale price
of one share of Common Stock on Nasdaq on the last trading day prior to the
Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low sales price quoted on Nasdaq on the last trading day
prior to the Valuation Date; or (c) if the Common Stock is not then listed on a
national stock exchange or quoted on Nasdaq, the Fair Market Value of one share
of Common Stock as of the Valuation Date, shall be determined in good faith by
the Board of Directors of the Company.

     Section 10.    Extension of Expiration Date. If the Company fails to cause
any Registration Statement covering Registrable Securities (unless otherwise
defined herein, capitalized terms are as defined in the Registration Rights
Agreement dated of even date herewith (the “Registration Rights Agreement”)) to
be declared effective prior to the applicable dates set forth therein and the
Blackout Period (whether alone, or in combination with any other Blackout
Period) continues for more than 60 days in any 12 month period, or for more
than a total of 90 days, then the Expiration Date of this Warrant shall be
extended one day for each day beyond the 60-day or 90-day limits, as the case
may be, that the Blackout Period continues.

     Section 11.   Benefits. Nothing in this Warrant shall be construed to give
any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right,

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remedy or claim, it being agreed that this
Warrant shall be for the sole and exclusive benefit of the Company and the
Warrantholder.

     Section 12.    Notices to Warrantholder. Upon the happening of any event
requiring an adjustment of the Warrant Price, the Company shall promptly give
written notice thereof to the Warrantholder at the address appearing in the
records of the Company, stating the adjusted Warrant Price and the adjusted
number of Warrant Shares resulting from such event and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice to the Warrantholder or any
defect therein shall not affect the legality or validity of the subject
adjustment.

     Section 13.    Identity of Transfer Agent. The Transfer Agent for the Common
Stock is American Stock Transfer & Trust Company. Upon the appointment of any
subsequent transfer agent for the Common Stock or other shares of the Company’s
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrant, the Company will mail to the Warrantholder a statement setting
forth the name and address of such transfer agent.

     Section 14.    Notices. Unless otherwise provided, any notice required or
permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed 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,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed as follows: (i) if to the
Warrantholder, at its address as set forth in the Company’s books and records
and, if to the Company, at the address as follows, or at such other address as
the Warrantholder or the Company may designate by ten days’ advance written
notice to the other:

	 	If to the Company:

	 	Audible, Inc.

65 Willowbrook Boulevard

Wayne, New Jersey 07470

Attention: Donald R. Katz

Fax: (973) 890-2442

-10-

 

	 	With a copy to:

	 	Piper Marbury Rudnick & Wolfe LLP

1775 Wiehle Avenue

Suite 400

Reston, VA 20190

Attention: Nancy A. Spangler

Fax: (703) 773-5000

     Section 15.    Registration Rights. The initial holder of this Warrant is
entitled to the benefit of certain registration rights in respect of the
Warrant Shares and the Additional Warrant Shares as provided in the
Registration Rights Agreement, and any subsequent holder hereof may be entitled
to such rights.

     Section 16.    Successors. All the covenants and provisions hereof by or for
the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.

     Section 17.    Governing Law. This Warrant shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law provisions thereof. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Warrant and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may
be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Warrant. The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to
the laying of venue in such court. The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably waives any objection to the laying of venue
of any such suit, action or proceeding brought in such courts and irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.

     Section 18.    Call Provision. Notwithstanding any other provision contained
herein to the contrary, in the event that the closing bid price of a share of
Common Stock as traded on the Nasdaq National Market (or such other exchange or
stock market on which the Common Stock may then be listed or quoted) exceeds
$2.30 (appropriately adjusted for any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof) for twenty (20) consecutive trading sessions and all of
the Warrant Shares and Additional Warrant Shares, if any, issuable hereunder
either (i) are registered pursuant to an effective Registration Statement (as
defined in the Registration Rights Agreement) or (ii) no longer constitute
Registrable Securities (as defined in the Registration Rights Agreement), the
Company, upon ten (10) days prior written notice (the “Notice Period”,

-11-

 

following such twenty (20) day period, to the Warrantholder, may demand that
the Warrantholder exercise its rights with regard to all Warrant Shares and the
Warrantholder must exercise its rights prior to the expiration of the Notice
Period or if such exercise is not made or if only a partial exercise is made,
any and all rights to further exercise rights to acquire Warrant Shares
hereunder shall cease upon the expiration of the Notice Period.

     Section 19.    No Rights as Stockholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant.

     Section 20.    Amendment; Waiver. This Warrant is one of a series of
Warrants of like tenor issued by the Company pursuant to the Purchase
Agreement, dated as of January 25, 2002, among the Company and the original
holders of Warrants, except as to the number of shares of Common Stock subject
thereto, and initially covering an aggregate of 1,220,930 shares of Common
Stock (collectively, the “Company Warrants”). Any term of this Warrant may be
amended or waived (including the adjustment provisions included in Section 8 of
this Warrant) upon the written consent of the Company and the holders of
Company Warrants representing at least 50% of the number of shares of Common
Stock then subject to outstanding Company Warrants (the “Majority Holders”);
provided, that (x) any such amendment or waiver must apply to all Company
Warrants; and (y) the number of Warrant Shares
subject to this Warrant, the Warrant Price and the expiration date of this
Warrant may not be amended, and the right to exercise this Warrant may not be
altered or waived, without the written consent of the Warrantholder.

     Section 21.    Section Headings. The section heading in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.

-12-

 

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, as of the ___day of ________, 2002.

	 	AUDIBLE, INC.

	 	By:
______________________

Name:

Title:

-13-

 

APPENDIX A

Audible, Inc.

WARRANT EXERCISE FORM

To: Audible, Inc.

     The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant (“Warrant”) for, and to purchase
thereunder by the payment of the Warrant Price and surrender of the Warrant,
__________shares of Common Stock (“Warrant Shares”) provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:

	 	______________________________

Name

______________________________

Address

______________________________

______________________________

Federal Tax ID or Social Security No.	 

	 	 	 
	     and delivered by	 	
€ certified mail to the above address, or
	 	 	
€ electronically (provide DWAC
	Instructions:__________________), or
	 	 	€ other (specify:
	
________________________________________________).

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares purchasable upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned’s Assignee as
below indicated and delivered to the address stated below.

Dated: ____________, ___

	 	 	 
	Note: The signature must correspond with	 	 
	      
            Signature:
__________________	 	 
	the name of the registered holder as written
on the first page of the Warrant in every
particular, without alteration or enlargement
or any change whatever, unless the Warrant
has been assigned	 	
________________________
Name (please print)
________________________
________________________
Address

________________________
Federal Identification or

Social Security No.

 

 

	 	Assignee:

________________________
________________________
________________________

15

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