AUDIBLE, INC.
SERIES A INVESTOR RIGHTS AGREEMENT
THIS SERIES A INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered
into as of the 1st day of August, 2003, by and among AUDIBLE, INC., a Delaware
corporation (the "COMPANY") and Apax Excelsior VI Partners, L.P., Apax Excelsior
VI-A C.V., Apax Excelsior VI-B C.V. and Patricof Private Investment Club III,
L.P. (collectively, the "INVESTOR").
RECITALS
WHEREAS, pursuant to that certain Stock Purchase Agreement of even date
herewith by and between Investor and Microsoft Corporation, Investor is
acquiring from Microsoft Corporation 100% of the issued and outstanding shares
of the Company's Series A Convertible Preferred Stock, $0.01 par value per share
(the "SERIES A STOCK");
WHEREAS, in connection with its acquisition of the Series A Stock, the
Investor has agreed to make certain changes to the rights and preferences of the
Series A Stock; and
WHEREAS, in connection with its acquisition of the Series A Stock and
the changes to the rights and preferences of the Series A Stock, Company and
Investor have agreed to enter into this Agreement in order to provide certain
rights to Investor.
NOW, THEREFORE, in consideration of the foregoing recitals, premises
and the covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. No Assumption of Prior Agreement. Investor specifically
acknowledges and agrees that while it is acquiring 100% of the outstanding
Series A Stock from Microsoft Corporation, it is not acquiring, and will not
acquire, any of the rights or obligations of Microsoft Corporation under that
certain Series A Convertible Preferred Stock Purchase Agreement dated as of
February 8, 2001 by and among the Company and Microsoft Corporation (unless such
rights or obligations are otherwise set forth in this Agreement).
Section 2. Participation Right. If at any time on or before the fifth
(5th) anniversary of this Agreement, the Company shall sell and issue equity
securities for financing purposes (a "NEW ISSUANCE"), the Company shall offer to
Investor (for so long as Investor continues to own 100% of the Series A Stock
acquired on the date hereof (or shares of the Company's common stock, par value
$0.01 (the "Common Stock") issuable upon conversion of the Series A Stock)), by
written notice at least ten (10) days prior to the proposed New Issuance, the
opportunity to purchase its pro rata share of such equity securities upon the
same terms and conditions as the other participants in such New Issuance, as set
forth in the Company's written notice. Investor's pro rata share shall be equal
to the ratio of (a) the number of shares of the Common Stock (including all
shares of Common Stock issued or issuable upon conversion of all Company
preferred stock held by Investor) of which such Investor is deemed to be a
holder immediately prior to the date of the New Issuance to (b) the total number
of shares of the Company's outstanding Common Stock (including all shares of
Common Stock issued or issuable upon conversion of the Company's preferred stock
or upon the exercise of any outstanding warrants or
options) immediately prior to the date of the New Issuance. Investor may accept
the Company's offer as to the full number of shares offered to it, or any lesser
number, by written notice thereof given by it to the Company within five (5)
days after the delivery to Investor of Company's notice regarding the New
Issuance. In such event, the Company shall sell and Investor shall buy, upon the
terms and conditions specified in the notice, the number of shares agreed to be
purchased by Investor. The purchase rights of Investor set forth in this Section
2 may not be transferred other than to Affiliates of Investor. For the purposes
of this Agreement, "Affiliate" shall have the meaning set forth in Rule 405
promulgated under the Securities Act of 1933, as amended.
Section 3. Board of Directors. For so long as Investor continues to
hold at least fifty percent (50%) of the Series A Stock (or shares of Company
common stock issuable upon conversion of the Series A Stock) acquired by such
funds on the date hereof, Investor shall be entitled to designate one person for
election to the Company's Board of Directors (the "INVESTOR REPRESENTATIVE"),
which Investor Representative shall be selected by Investor. The Investor
Representative shall be elected to the Board of Directors as of the date hereof
as a Class II director by a resolution of the Board of Directors. At the time of
each annual meeting of stockholders at which Class II directors are elected, the
Company agrees to take all such action as may be required under applicable law:
(a) to include the Investor Representative in the slate of nominees for the
class of directors in which the Investor Representative is designated to be
recommended by the Board of Directors for election by the Company stockholders,
and (b) to use its best efforts to cause the election of the Investor
Representative to the Board of Directors, including nominating such individual
to be elected as a director. In the event that a vacancy is created on the Board
of Directors at any time by the death, disability, retirement, resignation or
removal of the Investor Representative, the Company and the remaining directors
will cause the vacancy created thereby to be filled by a new designee of
Investor as soon as possible.
Section 4. Registration of Shares.
4.1 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 A Stock (the "CONVERSION
SHARES") having an anticipated aggregate offering price (net of
discounts and commissions) of at least $5,000,000. The Company shall
have no obligation to file more than two (2) registration statements
under the Securities Act with respect to such requests; provided,
however, that if the Conversion Shares may be registered on Form S-3
(or any successor form with similar "short form" disclosure
requirements), the Investor shall have unlimited rights to request
registration of its Conversion Shares on Form S-3 (or such successor
form), provided, however, that each such registration of Conversion
Shares shall have an anticipated aggregate offering price (net of
discounts and commissions) of at least $500,000. 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 Securities and Exchange Commission (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 4.1 is deemed not to
have been effected or (ii) the registration requested pursuant to this
Section 4.1 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 4.1. 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.
4.2 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) or a Demand Registration pursuant to Section 4.1), 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 use its best efforts to 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 4.2(c), Investor shall have the right to
withdraw its request for inclusion of its Conversion Shares in any
registration statement pursuant to this Section 4.2 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
4.2(c). The Company may withdraw a Piggy-Back Registration at any time
prior to the time it becomes effective.
No registration effected under this Section 4.2, and
no failure to effect a registration under this Section 4.2, shall
relieve the Company of its obligation to effect a registration upon the
request of Investor pursuant to Section 4.1, and no failure to effect a
registration under this Section 4.2 and to complete the sale of
Conversion Shares in connection therewith shall relieve the Company of
any other obligation under this Section 4.
(b) Notwithstanding anything to the contrary
contained herein, if the managing Underwriter or Underwriters of any
underwritten offering described in Section 4.2 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 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 aggregate 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 4.2(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.
4.3 Registration Procedures. Whenever the Company is required
to effect or cause the registration of Conversion Shares pursuant to Section
4.1, the Company will use its best efforts to effect the registration and the
sale of such Conversion Shares in accordance with the intended method of
disposition thereof as quickly as practicable, and in connection with any such
request:
(a) The Company will prepare and file with the
Commission a registration statement (which, in the case of an
underwritten public offering, shall be on Form S-3 (unless the Company
does not qualify for use of Form S-3 in a registration involving only a
secondary offering as provided in the General Instructions to Form S-3
in such registration, in which case such registration statement shall
be a Form S-1) or other form of general applicability satisfactory to
the managing underwriter selected as therein provided) with respect to
such securities and use 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 registration statement effective at least ninety (90) days.
(b) The Company will prepare and file with the
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for the period
specified in Section 4.3(a) and as to comply with the provisions of the
Securities Act with respect to the disposition of all Conversion Shares
covered by such registration statement in accordance with the intended
method of disposition set forth in such registration statement for such
period.
(c) The Company will, as far in advance as practical,
prior to filing a registration statement or prospectus or any amendment
or supplement thereto, furnish copies of such registration statement as
proposed to be filed, together with exhibits thereto, to (i) Investor,
(ii) not more than one counsel representing Investor, and (iii) each
Underwriter, if any, of the Conversion Shares covered by such
registration statement, which documents will be subject to review and
approval by the foregoing within five (5) days after delivery, and
thereafter as far in advance as practical, furnish to Investor, counsel
and Underwriters, if any, for their review and comment such number of
copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents or information as Investor, counsel or Underwriters may
reasonably request in order to facilitate the disposition of the
Conversion Shares owned by the participating Investor.
(d) After the filing of the registration statement,
the Company will promptly notify Investor of any stop order issued or
threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
(e) The Company will use its best efforts to (i)
register or qualify the Conversion Shares under such other securities
or blue sky laws of such jurisdictions in the United States as Investor
reasonably (in light of Investor's intended plan of distribution)
requests, and (ii) cause such Conversion Shares to be registered with
or approved by such other governmental agencies or authorities in the
United States as may be necessary by virtue of the business and
operations of the Company and do any and all
other acts and things that may be reasonably necessary or advisable to
enable Investor to consummate the disposition of the Conversion Shares;
provided, however, that the Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (B)
subject itself to taxation in any jurisdiction where it would not be
subject to taxation but for actions taken pursuant to this Section 4.3
or (C) consent to general service of process in any such jurisdiction.
(f) 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.
(g) The Company and 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
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.
(h) The Company will make available to Investor (and
its counsel) and each Underwriter, if any, subject to restrictions
imposed by the United States federal government or any agency or
instrumentality thereof, copies of all correspondence between the
Commission and the Company, its counsel or auditors and will also make
available for inspection by Investor, any Underwriter participating in
any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained to represent
Investor (collectively, the "INSPECTORS"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers and employees to supply all information
reasonably requested by any Inspectors in connection with such
registration statement. Records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such registration statement or (ii) the
disclosure or release of such Records is requested or required pursuant
to oral questions, interrogatories, requests for information or
documents or a subpoena or other order from a court of competent
jurisdiction or other process; provided, however, that prior to any
disclosure or release pursuant to clause (ii), the Inspectors shall
provide the Company with prompt notice of
any such request or requirement so that the Company may seek an
appropriate protective order or waive such Inspectors' obligation not
to disclose such Records; and, provided further, however, that if
failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the
Inspectors may disclose that portion of the Records which counsel has
advised the Inspectors that the Inspectors are compelled to disclose.
Investor agrees that information obtained by it solely as a result of
such inspections (not including any information obtained from a third
party who, insofar as is known to Investor after reasonable inquiry, is
not prohibited from providing such information by a contractual, legal
or fiduciary obligation to the Company) shall be deemed confidential
and shall not be used by it as the basis for any market transactions in
the securities of the Company or its Affiliates unless and until such
information is made generally available to the public. Investor further
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company
and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential.
(i) In connection with an underwritten offering, the
Company will participate, to the extent reasonably requested by the
managing Underwriter for the offering or Investor, in customary efforts
to sell the securities under the offering, including, without
limitation, participating in "road shows"; provided, however, that the
Company shall not be obligated to participate in more than one such
offering in any 12-month period.
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.
Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
Section 4.3(f) hereof, Investor will forthwith discontinue disposition
of 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 4.3(f)
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. In the event
the Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective
(including the period referred to in Section 4.3(a) hereof) by the
number of days during the period from and including the date of the
giving of notice pursuant to Section 4.3(f) hereof to the date when the
Company shall make available to the Investor a prospectus supplemented
or amended to conform with the requirements of Section 4.3(f) hereof.
4.4 Registration Expenses. In connection with the Demand
Registrations pursuant to Section 4.1 hereof and any Piggy-Back Registrations
under Section 4.2 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.
4.5 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 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 the 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 the 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 any 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 4.5(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 the
Investor, but only to the extent the Company's or such person's Damages are
attributable to the information related to the 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 4.5(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 the preceding paragraph. 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 4.5(b); provided that the aggregate
recovery that the Company and any Underwriters can recover from Investor
pursuant to this Section 4.5(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 4.5(a) or 4.5(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 4.5(a) or 4.5(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 4.5 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 the
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 4.5(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 4.5(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.
5. 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. Investor may not
transfer either the Series A Stock or its rights hereunder to any party without
the prior written consent of the Company; provided, however, that no such
consent will be required with respect to a transfer of Series A Stock (or rights
hereunder) to an Affiliate of Investor.
6. 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 Investor:
c/o Apax Partners, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ Berlin Shereff ▇▇▇▇▇▇▇▇, LLP
The Chrysler Building
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Company:
Audible, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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 6.
7. 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.
8. Amendments and Waivers. 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.
9. 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.
10. 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.
11. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision.
12. 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.
{Signatures on begin on the following page}
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
AUDIBLE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chairman and Chief Executive Officer
APAX EXCELSIOR VI, L.P.
By: Apax Excelsior VI Partners, L.P.,
Its General Partner
By: Apax Managers, Inc.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
APAX EXCELSIOR VI-A, C.V.
By: Apax Excelsior VI Partners, L.P.,
Its General Partner
By: Apax Managers, Inc.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
{Signatures continued on following page}
APAX EXCELSIOR VI-B, C.V.
By: Apax Excelsior VI Partners, L.P.,
Its General Partner
By: Apax Managers, Inc.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
PARTRICOF PRIVATE INVESTMENT CLUB III, L.P.
By: Apax Excelsior VI Partners, L.P.,
Its General Partner
By: Apax Managers, Inc.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
