Exhibit 3
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
This Series B Convertible Preferred Stock Purchase Agreement (together
with the schedules and exhibits hereto, the "Agreement") dated as of March 25,
2002, is entered into by and among Audible, Inc. a Delaware corporation (the
"Company") and Random House, Inc., a New York corporation ("Investor").
In consideration of the premises, mutual promises and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follow:
1. Authorization and Sale of Series B Preferred Shares
1.1 Authorization. The Company has, or before the Closing (as defined
in Section 2) will have, duly authorized the issuance of 1,250,000 shares of its
Series B Convertible Preferred Stock, $0.01 par value per share (the "Series B
Shares"), having the rights, restrictions, privileges and preferences set
forthin the Certificate of Designation of the Designations, Limitations,
Restrictions and Relative Rights of the Series B Convertible Preferred Stock,
attached hereto as Exhibit A (the "Designation").
1.2 Sale of Shares. Subject to the terms and conditions of this
Agreement, at the Closing (as defined in Section 2), the Company will sell and
issue to Investor, and Investor will purchase from the Company 1,250,000 Series
B Shares. As full and complete consideration for such shares, at Closing
Investor will execute and deliver to Company that certain Letter Agreement in
substantially the form attached hereto as Exhibit B (the "Letter"), which Letter
provides, among other things, for the waiver of $1.25 million in imprint fees
owed by Company to Investor and other benefits to Company.
2. The Closing. The closing (the "Closing") of the sale and purchase of
Series B Shares under this Agreement shall take place at the offices of Xxxxx
Xxxxxxx Xxxxxxx & Xxxxx LLP, 0000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, XX 00000
at 10 a.m., local time, on the date which is five (5) days following the
satisfaction (or waiver) of the conditions to Closing set forth in Sections 5
and 6 below, or at such other place, time, and date as are mutually agreeable to
the Company and the Investor. At the Closing, the Company will deliver to
Investor a certificate for the number of Series B Shares being purchased by
Investor, registered in the name of such Investor, against payment to the
Company through delivery of the executed Letter. The date of the Closing is
hereinafter referred to as the "Closing Date."
3. Representations of the Company. The Company hereby represents and
warrants to Investor, at and as of the date of this Agreement, as follows:
3.1 Organization. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.
The Company has all requisite corporate power and authority to own, operate and
lease its property and to carry on its business as now being conducted. The
Company is duly qualified or licensed as a foreign corporation to do business
and is in good standing in each jurisdiction in which the character of
properties occupied, owned or held under lease by the Company, or the nature of
the business conducted by the Company, makes such qualification or license
necessary, except where the failure to be so qualified or licensed would not
have a material adverse effect on the business, operations, assets, liabilities
or financial condition of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect").
3.2 Valid Issuance. The Series B Shares, when issued and paid for in
accordance with this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable, not subject to any preemptive or other similar rights
and, assuming the accuracy of Investor's representation set forth in Section 4.5
hereof, issued in compliance with all applicable U.S., state and foreign
securities laws.
3.3 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement, to sell and issue the Series B Shares
and to consummate the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement, the issuance and sale of the Series B
Shares and the consummation of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company ,
and constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent limited by (i) the effect of
bankruptcy, insolvency, reorganization, receivership, conservatorship,
arrangement, moratorium, fraudulent transfer or other laws affecting or relating
to the rights of creditors generally, (ii) the rules governing the availability
of specific performance, injunctive relief or other equitable remedies and
general principles of equity, regardless of whether arising prior to, or after,
the date hereof or considered in a proceeding in equity or at law, or (iii) the
effect of federal and state securities laws and principles of public policy on
rights of indemnity and contribution.
3.4 No Conflict. The execution and delivery by the Company of this
Agreement does not, and the sale and issuance of the Series B Shares and
consummation of the other transactions contemplated by this Agreement will not,
conflict with, or result in any violation or breach of any provision of, (a) the
charter documents of the Company, or (b) any material contract to or commitment
to which the Company is a party.
3.5 Required Filings and Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality ("Governmental Entity") is required by or with respect to the
Company in connection with the execution and delivery of this Agreement, the
sale and issuance of the Series B Shares or the consummation of the other
transactions contemplated hereby or thereby, except for such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable U.S., state and foreign securities laws.
3.6 Commission Filings. The Company has filed all reports required to
be filed with the Securities Exchange Commission (the "Commission") since July
16, 1999 (collectively, including all exhibits thereto, the "SEC Reports"). None
of such SEC Reports, as of their respective dates (as amended through the date
hereof), contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All such SEC Reports, as of their respective dates (as amended
through the date hereof), complied in all material respects with the
requirements of the Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx").
3.7 Financial Statements. The consolidated financial statements of the
Company and its subsidiaries contained in the SEC Reports were prepared in
accordance with U.S. generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods indicated, and present fairly in
all material respects, as of the dates and for the periods indicated, the
financial position of the Company and its subsidiaries and their results of
operations and cash flows for the periods therein set forth, subject in the case
of the unaudited consolidated financial statements to later normal, recurring
audit adjustments required by GAAP that are not in the aggregate material and to
omission of certain footnotes as permitted by GAAP.
3.8 Stockholders' Consent. No consent or approval of the stockholders
of the Company is required or necessary pursuant to Rule 4350(i) of the NASD
Regulations or other applicable laws for the Company to enter into this
Agreement, to sell and issue the Series B Shares or to consummate the other
transactions contemplated pursuant to this Agreement.
3.9 Litigation. There is no litigation, governmental proceeding,
investigation or arbitration pending or, to the knowledge of the Company,
threatened against or directly involving the Company that questions the legality
or validity of this Agreement or any related agreements or any actions taken or
to be taken pursuant to or in connection with this Agreement or any related
agreements or which could reasonably be expected to have a Material Adverse
Effect.
4. Representations of the Investor. The Investor represents and warrants
to the Company as follows:
4.1 Organization. The Investor is a corporation duly incorporated and
validly existing under the laws of the State of New York.
4.2 Authority. The Investor has all requisite corporate power and
authority to enter into this Agreement, to purchase and hold the Series B Shares
and to consummate the other transactions to be consummated by the Investor
contemplated by this Agreement. The execution and delivery of this Agreement,
the purchase of the Series B Shares and the consummation of the other
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Investor. This Agreement has been
duly executed and delivered by the Investor, and constitutes the valid and
binding obligation of the Investor,
enforceable in accordance with its terms, except to the extent limited by (i)
the effect of bankruptcy, insolvency, reorganization, receivership,
conservatorship, arrangement, moratorium, fraudulent transfer or other laws
affecting or relating to the rights of creditors generally, (ii) the rules
governing the availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of whether
arising prior to, or after, the date hereof or considered in a proceeding in
equity or at law, or (iii) the effect of federal and state securities laws and
principles of public policy on rights of indemnity and contribution.
4.3 No Conflict. The execution and delivery by the Investor of this
Agreement does not, and consummation of the transactions contemplated by this
Agreement will not conflict with, or result in any violation or breach of any
provision of, the charter documents of the Investor.
4.4 Required Filings and Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Investor in connection with the
execution and delivery of this Agreement, the purchase of the Series B Shares to
be purchased by the Investor or the consummation of the other transactions to be
consummated by the Investor contemplated hereby, except for such consents,
orders, authorizations, declarations, filings, approvals and registrations
which, if not obtained or made, could not be expected to have a material adverse
effect on the Investor's ability to consummate the transactions contemplated
pursuant to this Agreement.
4.5 Investor is an "Accredited Investor". The Investor is an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Securities Act"). The Investor believes that it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series B Shares. The Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the Series B Shares and the business,
properties, prospects and financial condition of the Company; provided, however,
that the foregoing shall not diminish or detract from the Investor's ability to
rely upon any of the Company's representations or warranties. The Investor
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Series B Shares. The Investor is not acquiring the Series B Shares with a
view towards distribution in violation of the Securities Act.
5. Conditions to the Obligations of the Investor. The obligation of
Investor to purchase the Series B Shares at the Closing is subject to the
fulfillment, or the waiver by Investor, of the following conditions on or before
the Closing Date:
5.1 Accuracy of Representations and Warranties. Each representation
and warranty of the Company contained in Section 3 shall be true and complete on
and as of the Closing Date with the same effect as though such representation
and warranty had been made on and as of that date.
5.2 Performance. The Company shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the Closing.
5.3 Filing of Designation. The Designation shall have been filed with
the Secretary of State of the State of Delaware and shall continue to be in full
force and effect as of the Closing Date.
5.4 Blue Sky Approvals. The Company shall obtained all necessary Blue
Sky Law permits and qualifications, or secured an exemption therefrom, required
by any state for the offer and sale of the Series B Shares.
5.5 Certificates and Documents. The Company shall have delivered to
counsel to the Investor:
(a) The Company's Certificate of Incorporation, including the
Designation, as in effect immediately prior to the Closing;
(b) Certificates, dated within 10 days of the Closing, as to the
corporate good standing of the Company issued by the Secretary of State of
the State of Delaware and any place where the Company is qualified to do
business as a foreign corporation;
(c) By-Laws of the Company certified by its Secretary or
Assistant Secretary as being in effect as of the Closing Date; and
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and
the transactions contemplated hereby, certified by the Secretary or
Assistant Secretary of the Company as of the Closing Date.
6. Conditions to the Obligations of the Company. The obligations of the
Company under Section 1.2 of this Agreement are subject to fulfillment, on or
before the Closing Date, of each of the following conditions:
6.1 Accuracy of Representations and Warranties. Each representation
and warranty contained in Section 4 shall be true and complete on and as of the
Closing Date with the same effect as though such representation and warranty had
been made on and as of that date.
6.2 Letter. Investor shall have executed and delivered delivered to
Company the Letter.
6.3 Blue Sky Approvals. The Company shall have obtained all necessary
Blue Sky Law permits and qualifications, or secured an exemption therefrom,
required by any state for the offer and sale of the Series B Shares.
7. Registration of Shares.
7.1 Demand Registration.
(a) At any time and from time to time, Investor may make written
requests on the Company for the registration under the Securities Act of the
shares of Company common stock (the "Common Stock") issuable upon conversion of
the Series B Shares (the "Conversion Shares") having an anticipated aggregate
offering price (net of discounts and commissions) of at least $1,000,000. The
Company shall have no obligation to file more than two (2) registration
statements under the Securities Act with respect to such requests. Each such
request described in the preceding two sentences shall be hereinafter referred
to as a "Demand Registration." Any Demand Registration will specify the number
of Conversion Shares proposed to be sold and will also specify the intended
method of disposition thereof.
(b) A registration will not be deemed to have been effected as a
Demand Registration unless it has been declared effective by the Commission and
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto; provided, however, that if, after it has
become effective, the offering of shares of Common Stock pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the Commission or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
the shares of Common Stock pursuant to the registration at any time within one
hundred eighty (180) days after the effective date of the registration
statement, such registration will be deemed not to have been effected. If (i) a
registration requested pursuant to this Section 7.1 is deemed not to have been
effected or (ii) the registration requested pursuant to this Section 7.1 does
not remain effective for a period of at least one hundred eighty (180) days
beyond the effective date thereof or, with respect to an underwritten offering
of Conversion Shares, until ninety (90) days after the commencement of the
distribution by the Investor of the Conversion Shares included in such
registration statement, then the Company shall continue to be obligated to
effect such registration pursuant to this Section 7.1. The Investor shall be
permitted to withdraw all or any part of the Conversion Shares from a Demand
Registration at any time prior to the effective date of such Demand
Registration.
(c) If the Investor so elects, the offering of Conversion Shares
pursuant to Demand Registration shall be in the form of an underwritten
offering. The Investor shall select one or more nationally recognized firms of
investment bankers reasonably acceptable to the Company to act as the lead
managing underwriter (the "Underwriter") in connection with such offering and
shall select any additional investment bankers and managers to be used in
connection with the offering.
7.2 Piggy-Back Registration
(a) If at any time the Company proposes to file a registration
statement under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of its respective security holders
(other than a registration statement on Form S-4 or S-8 (or any substitute form
that may be adopted by the Commission)), then the Company shall give prompt
written notice of such proposed filing to the Investor as soon as practicable
(but in
no event less than 20 days before the anticipated filing date), and such notice
shall offer Investor the opportunity to register such number of Conversion
Shares as Investor may request (which request shall specify the Conversion
Shares intended to be disposed of by Investor and the intended method of
distribution thereof) (a "Piggy-Back Registration"). The Company shall cause the
managing Underwriter or Underwriters of a proposed underwritten offering to
permit the Conversion Shares requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions as any similar
securities of the Company or any other security holder included therein and to
permit the sale or other disposition of such Conversion Shares in accordance
with the intended method of distribution thereof. Except as set forth in Section
7.2(c), Investor shall have the right to withdraw its request for inclusion of
its Conversion Shares in any registration statement pursuant to this Section 7.2
by giving written notice to the Company of its request to withdraw, provided,
however, that in the event of such withdrawal, Investor shall be responsible for
all fees and expenses (including fees and expenses of counsel) incurred by
Investor prior to such withdrawal except as set forth in Section 7.2(c). The
Company may withdraw a Piggy-Back Registration at any time prior to the time it
becomes effective.
(b) Notwithstanding anything to the contrary contained herein, if the
managing Underwriter or Underwriters of any underwritten offering described in
Section 7.2 have informed, in writing, the Investor that it is their opinion
that the total number of shares which the Company, the Investor and any other
persons desiring to participate in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the number of shares to be offered shall be reduced or limited in
the following order of priority: (x) first, the number of shares to be offered
by all other holders of securities of the Company other than the Investor or
others who have registration rights to the extent necessary to reduce the total
number of shares as recommended by such managing Underwriters; and (y) second,
if further reduction or limitation is required, the number of shares to be
offered for the account of the Investor shall be reduced or limited to the
extent necessary to reduce the total number of shares as recommended by such
managing Underwriters; provided, however, that the reduction for the account of
the Investor shall not result in the number of shares of the Investor included
in the offering to be less than 25% of the total number of shares offered.
(c) Withdrawal Election. If, as a result of the proration provisions
of Section 7.2(b), Investor shall not be entitled to include at least 50% of the
Conversion Shares in a Piggy-Back Registration that Investor has requested to be
included, Investor may elect to withdraw its request to include Conversion
Shares in such registration (a "Withdrawal Election") without incurring any
liability for its fees and expenses; provided, however, that a Withdrawal
Election shall be irrevocable and, after making a Withdrawal Election, Investor
shall no longer have any right to include Conversion Shares in the Piggy-Back
Registration as to which such Withdrawal Election was made.
(d) Effectiveness. With respect to a registration statement pursuant
to this Section 7.2, the Company will use its best efforts to cause such
registration statement to become and remain effective until the completion of
the distribution; provided, however, that the Company shall be required to keep
any such registration statement effective for at least ninety (90) days.
(e) Exclusion. Notwithstanding anything herein to the contrary,
Investor shall have no right to a Piggy-Back Registration in connection with the
filing of a registration statement by the Company under the Securities Act with
respect to an offering for the account of Special Situations Funds (and its
affiliated entities).
7.3 Registration Procedures. Whenever the Company is required to
effect or cause the registration of Conversion Shares pursuant to Section 7, the
following shall apply:
(a) The Company and the Investor will enter into customary agreements
including, if applicable, an underwriting agreement in customary form and which
is reasonably satisfactory to the Company (which shall not require the Investor
to indemnify the underwriter with respect to misstatements or omissions in the
registration statement other than such misstatements or omissions in written
material supplied by Investor). The Company and Investor will also take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Conversion Shares; and the Investor may, at its option,
require that any or all of the representations, warranties and covenants of the
Company made to or for the benefit of such Underwriters also be made to and for
the benefit of Investor.
(b) The Company may require Investor to promptly furnish in writing to
the Company such information regarding the distribution of the Conversion Shares
as the Company may from time to time reasonably request and such other
information as may be legally required in connection with such registration
including, without limitation, all such information as may be requested by the
Commission or the NASD. The Company may exclude Investor from such registration
if Investor fails to provide such information.
(c) The Company will immediately notify Investor, at any time when a
prospectus relating to Conversion Shares is required to be delivered under the
Securities Act, of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the Investor, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly make
available to Investor any such supplement or amendment.
(d) Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 7.3(c) hereof,
Investor will forthwith discontinue disposition of the Conversion Shares
pursuant to the registration statement covering such Conversion Shares until
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 7.3(c) hereof, and, if so directed by the Company,
Investor will deliver to the Company all copies, other than permanent file
copies then in Investor's possession, of the most recent prospectus covering
such Conversion Shares at the time of receipt of such notice.
(e) The Company shall furnish to Investor such number of copies of
each prospectus, including preliminary prospectuses, as Investor may reasonably
request in order to facilitate the public sale or other disposition of the
Conversion Shares.
(f) The Company shall use all reasonable efforts to register or
qualify the Conversion Shares covered by such registration statement under such
blue sky or other applicable laws of such jurisdictions as Investor shall
reasonably request to enable Investor to consummate the public sale or other
disposition of the Conversion Shares; provided that the Company shall not be
required in connection therewith to qualify to do business or to file a general
consent to service of process in any such jurisdiction.
7.4 Registration Expenses. In connection with the Demand Registrations
and Piggy-Back Registrations under Sections 7.1 and 7.2 hereof, the Company
shall pay the following registration expenses incurred in connection with the
registration thereunder (the "Registration Expenses"): (i) all registration and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Conversion Shares), (iii) processing, duplicating
and printing expenses, (iv) the Company's internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), (v) the fees and expenses incurred in connection
with the listing of the Conversion Shares, (vi) reasonable fees and
disbursements of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested but not the cost of any audit other than a year end audit), (vii) the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration, (viii) reasonable fees and expenses of one
firm of counsel for the Investor, and (ix) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities. The Company
shall have no obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Conversion Shares, or the cost of any special audit
required, such costs to be borne by the Investor.
7.5 Indemnification.
(a) The Company shall, to the full extent permitted by law, indemnify
and hold harmless Investor, its Affiliates, partners, officers, directors,
employees and agents, and each person, if any, who controls or is under common
control with such Investor within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act of 1934, together with the partners,
officers, directors, employees and agents of such controlling person
(collectively, the "Controlling Persons"), from and against any loss, claim,
damage, liability, reasonable attorneys' fees, cost or expense and costs and
expenses of investigating and defending any such claim, joint or several, and
any action in respect thereof (collectively, the "Damages") to which Investor,
its partners, officers, directors, employees and agents, and any such
Controlling Person may become subject under the Securities Act or otherwise,
insofar as such Damages (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Conversion Shares or any
amendment or supplement thereto, or arises out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or any
violation by the Company of any federal or state
securities laws or any rule or regulation thereof, except insofar as the same
are based upon information furnished in writing to the Company by Investor
expressly for use therein, and shall reimburse Investor, its Affiliates,
partners, officers, directors, employees and agents, and each such Controlling
Person for any legal and other expenses reasonably incurred by Investor, its
Affiliates, its partners, officers, directors, employees and agents, or any such
Controlling Person in investigating or defending or preparing to defend against
any such Damages or proceedings; provided, however, that the Company shall not
be liable to Investor to the extent that any such Damages (or action or
proceeding in respect thereof) arise out of or are based upon an untrue
statement or omission made in any preliminary prospectus if (i) Investor failed
to send or deliver a copy of the final prospectus with or prior to the delivery
of written confirmation of the sale by Investor to the person asserting the
claim from which such Damages arise, and (ii) the final prospectus would have
corrected such untrue statement or such omission; provided, further, however,
that the Company shall not be liable to Investor in any such case to the extent
that any such Damages arise out of or are based upon an untrue statement or
omission in any prospectus if (x) such untrue statement or omission is corrected
in an amendment or supplement to such prospectus, and (y) having previously been
furnished by or on behalf of the Company with copies of such prospectus as so
amended or supplemented, Investor thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of a
Conversion Shares to the person asserting the claim from which such Damages
arise. The Company also agrees to indemnify any Underwriters of the Conversion
Shares, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Investor provided in this Section 7.5(a).
(b) Investor shall, to the full extent permitted by law, indemnify and
hold harmless the Company, its officers, directors, employees and agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, together with the
partners, officers, directors, employees and agents of such controlling person,
to the same extent as the foregoing indemnity from the Company to Investor, but
only to the extent the Company's or such person's Damages are attributable to
the information related to Investor, or its plan of distribution, furnished in
writing by Investor or on Investor's behalf expressly for use in any
registration statement or prospectus relating to the Conversion Shares, or any
amendment or supplement thereto, or any preliminary prospectus and the aggregate
amount which may be recovered from Investor pursuant to the indemnification
provided for in this Section 7.5(a) in connection with any registration and sale
of Conversion Shares shall be limited to the net proceeds received by Investor
from the sale of such Conversion Shares. In case any action or proceeding shall
be brought against the Company or its officers, directors, employees or agents
or any such controlling person or its officers, directors, employees or agents,
in respect of which indemnity may be sought against Investor, Investor shall
have the rights and duties given to the Company, and the Company or its
officers, directors, employees or agents, or such controlling person, or its
officers, directors, employees or agents, shall have the rights and duties given
to Investor under Section 7.5(a). Investor also agrees to indemnify and hold
harmless any Underwriters of the Conversion Shares, their officers and directors
and each person who controls such Underwriters on substantially the same basis
as that of the indemnification Investor provides to the Company provided in this
Section 7.5(b); provided that the aggregate recovery that the Company and any
Underwriters can recover from Investor pursuant to this Section 7.5(b) cannot
exceed the net proceeds received by Investor from the sale
of Conversion Shares. The Company shall be entitled to receive indemnities from
Underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above, with respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration statement;
provided, however, that if the Company does not receive such indemnities, the
Company will not be relieved of its duties and obligations hereunder.
(c) Promptly after receipt by any person in respect of which indemnity
may be sought pursuant to Section 7.5(a) or 7.5(b) (an "Indemnified Party") of
notice of any claim or the commencement of any action, the Indemnified Party
shall, if a claim in respect thereof is to be made against the Person against
whom such indemnity may be sought (an "Indemnifying Party"), notify the
Indemnifying Party in writing of the claim or the commencement of such action;
provided, however, that the failure to notify the Indemnifying Party shall not
relieve it from any liability which it may have to an Indemnified Party
otherwise than under Section 7.5(a) or 7.5(b) and except to the extent of any
actual prejudice resulting therefrom. If any such claim or action shall be
brought against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Indemnified Party shall have the
right to employ separate counsel to represent the Indemnified Party and its
controlling Persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the reasonable judgment of the Company and such Indemnified Party,
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest between them, it being understood,
however, that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (together with appropriate local counsel) at any time for all
Indemnified Parties, or for fees and expenses that are not reasonable. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any claim or pending or threatened proceeding in
respect of which the Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably withheld.
(d) If the indemnification provided for in this Section 7.5 is
unavailable to the Indemnified Parties in respect of any Damages referred to
herein, then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Damages (i) as
between the Company and Investor on the one hand and the Underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Investor on the one hand and the Underwriters on
the other from the offering of the Conversion Shares, or if such allocation is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits but also the relative fault of the Company and
the Investor on the one hand and of the Underwriters on the other in connection
with the statements or omissions which resulted in such Damages, as well as any
other relevant equitable considerations, and (ii) as between the Company on the
one hand and Investor on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and Investor in connection with such
statements or omissions, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Investor on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and the
Investor bear to the total underwriting discounts and commissions received by
the Underwriters, in each case as set forth in the table on the cover page of
the prospectus. The relative fault of the Company and the Investor on the one
hand and of the Underwriters on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Investor or by the Underwriters. The
relative fault of the Company on the one hand and Investor on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and Investor agree that it would not be just and equitable if
contribution pursuant to this Section 7.5(d) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the Damages
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7.5(b), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Conversion Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and Investor shall not be required to contribute any amount
in excess of the amount by which the total price at which the Conversion Shares
were offered to the public (less underwriting discounts and commissions) exceeds
the amount of any damages which Investor has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Covenant Regarding Nasdaq Notification. The Company hereby covenants to
file, as soon as practicable after the date of execution of this Agreement, the
Notification Form for Listing of Additional Shares with The Nasdaq Stock Market,
Inc.
9. Confidentiality. Neither the Company nor the Investor shall issue any
press release or other public announcement regarding, or otherwise disclose,
this Agreement or the transactions contemplated herein, or make any filing of
this Agreement or other agreements relating to the transactions contemplated
herein, without the consent of the other, which consent will not be unreasonably
withheld; provided, however, that if a party is required by applicable law to
provide public disclosure of this Agreement or the transactions contemplated
herein, such party shall use all reasonable efforts to coordinate the disclosure
with the other party before issuance, including, but not limited to the
submission to the Commission (and any other applicable regulatory or judicial
authority) of an application for confidential treatment of certain terms (which
terms shall be agreed upon by the Investor and the Company) of this Agreement.
Each party shall provide to the other for review a copy of any proposed
disclosure of this Agreement or its terms and any application for confidential
treatment at least five (5) business days before any such disclosure or
application is made and to comply with all reasonable requests from the other
party to minimize the extent and scope of any such disclosure.
10. Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the respective successors, assigns,
heirs, executors and administrators of the parties hereto.
11. Survival of Representations and Warranties. The representations,
warranties and agreements made herein shall survive the closing of the
transactions contemplated hereby. All statements as to factual matters contained
in any certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
12. Expenses. Each party shall pay its own costs and expenses incurred with
respect to the negotiation, execution, delivery and performance of this
Agreement.
13. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed delivered (i) two
business days after being sent by registered or certified mail, return receipt
requested, postage prepaid or (ii) one business day after being sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery, in each case to the intended recipient as set forth below:
If to the Investor:
Random House, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: President, Random House Audio and Diversified
Publishing Group
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Random House, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to Company:
Audible, Inc.
00 Xxxxxxxxxxx Xxxx.
Xxxxx, XX 00000
Attn: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxx, Esq.
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Any party may give any notice, request, consent or other communication
under this Agreement using any other means (including, without limitation,
personal delivery, messenger service, telecopy, first class mail or electronic
mail), but no such notice, request, consent or other communication shall be
deemed to have been duly given unless and until it is actually received by the
party for whom it is intended. Any party may change the address to which
notices, requests, consents or other communications hereunder are to be
delivered by giving the other parties notice in the manner set forth in this
Section 13.
14. Brokers. The Company is not subject to an existing agreement with any
finder and no fees will be paid by the Company to any such finder in regard to
the transactions contemplated herein. The Investor is not responsible for the
payment of any finder's fees in connection with the transactions contemplated
herein.
15. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
16. Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the Investor. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
17. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which, when taken
together, shall constitute one and the same instrument.
18. Headings. The headings of the sections, subsections, and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
19. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
20. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the choice
of law or conflicts of law provisions thereof.
{Signature pages follow}
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
THE "COMPANY":
AUDIBLE, INC.
By:
-----------------------------------
Name:
Title:
THE "INVESTOR":
RANDOM HOUSE, INC.
By:
-----------------------------------
Name:
Title:
